WealthDesign

At present, there are two insurance companies for sale. Both OnePath and Sovereign Life are on the market. They are owned by Australian banks (ANZ and Commonwealth Bank of Australia respectively).

It isn’t surprising the banking organisations are selling these assets as insurers don’t have the return on capital, like other parts of the banking businesses (lending for example).

Banks are in the transaction business while insurance companies are in the relationship business. Insurers rely on good relationships; products that meet the clients needs both today and in the future.  Banks specialise in transactions like lending, overdrafts and mortgages (one-off transactions).

With the potential sale of these insurance companies, we don’t know who will end up owning them, or what the outcome will be. What this will mean for their existing clients is yet to unfold.

If you want to talk over the impact of your insurer being sold, give us a call as we love to catch up for a chat.

John Barber
WealthDesign – a life well planned

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Exchange traded funds (ETFs) are the next trendy investments. World wide, there is around a trillion US dollars invested in these funds. Basically, these are funds that are listed on various stock exchanges around the world and fund/companies invest in other assets, much like a managed fund.

The portfolios held by ETFs are normally linked to different indexes and automatically rebalanced to that index, for example the NZX 50 (the top 50 New Zealand companies by size).

The problem is you could find yourself in a fund that only ever buys companies after their share prices have appreciated. For example, company A grows in value because their share value appreciates and becomes worth more than company B. An ETF automatically sells company B and buys company A. This seems slightly illogical to me.

Since 2008 every equity market around the world has appreciated and ETFs have shown reasonable returns on the back of this market recovery. The fees on ETFs are very low and they have been a ‘set and forget’ type investment. In a rising market, this has been perfect.

Unfortunately life isn’t that simple and we will see a market correction at some stage (and we are due for one any time, as they usually happen every 8-10 years). These passive, follow-the-index type products will be shown to be what they are – a proxy for the market. If the market falls by 25%, so will these ETFs.

Personally, I don’t have a problem with ETFs, however an investor must have a solid investment strategy. Some of these ETFs are better than others based on the underlying asset. They have a place in investment portfolios, but how they are used needs thought.

Give me a call to discuss your situation and your investment strategy. Let’s see if ETFs are going to be a good fit for your investment portfolio.

John Barber
WealthDesign – a life well planned

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After last night’s workshop in Wellington, focusing on millennials and their finances, John has put together a to-do list. It’s aimed at getting you on the right track, if you’re a millennial or not.

1. Do a goal setting exercise – where do you want to be in five years’ time?
2. Get a Will and an Enduring Power of Attorney (EPA).
3. Set up an insurance portfolio.
4. Start a savings programme.
5. Make sure your KiwiSaver is working as hard as you are.
6. Get ongoing advice.

John Barber
WealthDesign – a life well planned

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The NZX50 is an index of the top 50 companies on the New Zealand stock exchange. It represents 90% of the market by capital value. Today the NZX50 index sits at 7600; in 2012 this was only 3450.

This bull run is indicative of most of the financial markets around the world. Basically, a monkey should have been able to make money in this market over the past five years. Unfortunately, the financial world doesn’t stay like this, and every so often (around the eight to ten year mark) there is a market correction – a nice term for everything turning to shite and people lose money!

It seems in this part of the cycle, people start to forget the basics and they over pay for assets, and think things can only ever go up in value.

Today more than any time in the past eight years, investors need to have an investment strategy. This strategy needs to have a capital protection element built into it.

If you own shares, know how their underlying asset would handle a 20% market fall. Would the company handle people not spending, or interest rates going up by 50%? Know what the debt levels are of the companies you are investing in. Don’t just trust and follow fund managers based on past performances.

In great times, blind monkeys can lead the crowd, but when things turn south, have your eyes open and don’t be one of the crowd.

In this part of the cycle we’re putting various strategies in place for our clients, with the intent of reducing the downside when the bull run ends – not wanting to be a spoil-sport, but it will end!

Call us now to make sure you’re in a good position to benefit from the market correction when it comes.

This guy sits at our reception at WealthDesign, reminding me of the bull run that we are currently experiencing (along with a fun trip to Shanghai a few years back, where I haggled a good price for him!).

John Barber
WealthDesign – a life well planned

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This week a good friend of mine called with some tough news. She has breast cancer and will need an operation and time off work.

About four weeks prior, she had been in the bank and had been told by a bank worker that her insurance package was ‘a rip off’ and she should cancel it. Fortunately she came to see us before she did anything, and after talking to her, we found we could add the non smoker discount as she had given up smoking 12 months ago – with the reduction in premium, it didn’t alter the covers.

The outcome of this is that her trauma cover is going to provide her with much needed cash while she has time off work to get well. This is why we believe our clients need to have a good insurance schedule.  We always work from claim time backwards and design a plan accordingly.

Research shows that people often cancel their insurance at just the wrong time (and we see it all too often). This is done without coming back to talk to us (as people can feel awkward) and often it is on the spur of the moment. It can be triggered by off-the-cuff comments from people in the industry, but who are often not qualified, such as the conversation my friend had with the bank worker. 

At least once a month we see someone in a situation that insurance is going to make a huge difference to. We know how insurance portfolios should be planned and we know which companies pay the claims without causing you hassles. BEFORE you cancel your insurance, come and have a chat.  Every decision, even a decision to stop paying insurance, needs advice.

Our door is always open and we love nothing more than having a chat about what’s up in your life. We’ll listen, we won’t judge and we’ll give you good, quality advice.

John Barber
WealthDesign – a life well planned

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