CONTACT US TODAY – Ph: 06 355 5844 | E: info@wealthdesign.co.nz

Some need to know, with a bit of WealthDesign nice to know thrown in.

Ethical KiwiSaver Investments

It has been interesting to watch the debate around ethical investing within KiwiSaver. I am a believer in investors knowing where their money is, and unfortunately most managed funds don’t allow any real knowledge of where the funds eventually get invested. They will spin the line about more governance and how they are different/ better than the other bloke. The truth is, unless you can see for yourself, it’s all just marketing.

At WealthDesign we have investment clients who wouldn’t own shares in gambling or industries such as arms or tobacco or industries they believe are damaging our environment. I respect that, and am happy to design options that exclude.

You can be an ethical investor and still save for your retirement effectively. For example, you could have invested in Australasian Listed Property over the past five years and done very well. According to Morningstar, investors would have received a 16% return over this time.

Like most New Zealanders, I like property. The rent gives a stable income flow, and property tends to follow inflation. If commercial property inflation averages 3.5% for 10 years, the asset value will normally increase by 50%. Not a bad way of ethical investing in my opinion.

At WealthDesign we see there’s a need to audit investors’ KiwiSaver accounts.  So we’ve created KiwCheck. This service is independent of any KiwiSaver manager and is designed to provide personalised advice based on independent research. We believe the banks and fund managers are conflicted as they have a vested interest in keeping people paying into their schemes (and keep getting their share of the $132 million paid in fees). Our service isn’t about moving investors from one provider to another, but is about checking that KiwiSaver is working optimally for you.

We believe transparency and knowledge is vital, plus we are all about making the complicated simple.  KiwiCheck is just another way we can help our clients to live their life, on their terms.

Give us a call if you want to know more about ethical investing or KiwiCheck on 
06 3555844.  

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John Barber
WealthDesign – a life well planned

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Fun with words

If you watch the Big Bang Theory, my favourite programme ever (apart from Dukes of Hazzard –  nothing is better than that!), you’ll know about Sheldon’s cable show ‘fun with flags’.

Well recently some people have been having ‘fun with words’.  People have been talking about ‘putting clients’ interests first’.  That this was even a discussion was a bit of a revelation for the team at WealthDesign, because we never realised it was a new thing.

The basic idea is that where the outcome for the adviser and the client are in conflict, the right thing to do is ensure the outcome favours the client.  Do the right thing and so on.  Rob Everett from the FMA recently said that ‘clients’ interests first’ “can mean different things to different people, in different situations”.

No, it doesn’t.

I prefer a higher standard – ‘clients’ best interests first’.  This one can be much harder to meet if you can only sell one or two product lines, rather than compare and choose from a wide range of providers and products.

For example, if you go into a bank that sells its own KiwiSaver, and the teller suggests you change to that KiwiSaver, they are considered to be putting your interests first, because they don’t receive a commission for making that sale.  The bank product is not being chosen by the teller over another product, because they can’t sell any other product, so there is no conflict.

What if that bank’s KiwiSaver has much higher fees than the one it replaced?  It might have much poorer returns (we know which KiwiSaver schemes have consistently underperformed) than the one it replaced.  The bank teller doesn’t compare the old scheme to their one.  They won’t give a written statement of advice outlining the pros and cons of switching.  They won’t tell you that their salary-not-commission job is tied to targets, bonuses and KPIs that require them to sell things. They are having ‘fun with words’, at your expense.  That sale would not meet the standard of ‘clients’ best interests’. 

And this is the problem.

If you go to a doctor or a lawyer, and they said to you “just so we’re clear – my duty is to put your interests first, but I won’t necessarily be acting in your best interests”, would you take their advice?

At WealthDesign when we say we put our clients’ best interests first, we think it means what you think it means.

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Regan Thomas
WealthDesign – a life well planned

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Ignore your KiwiSaver at your peril!

Which fund is your KiwiSaver in?  If it’s in a conservative fund, it’s averaged 6.6% over the past five years.  In a growth fund?  Return has been more like 9.5%.  Today there is $33.4 billion of New Zealanders’ money invested into KiwiSaver schemes. The largest amount is in ANZ ($8.67 billion) followed by ASB ($6.226 billion).  ASB has 50% of their clients in their conservative fund where as ANZ only 11 % are in the conservative fund.

Here’s the problem – if you’re a long term investor (in KiwiSaver), you’re missing out on the true return you should be getting. For example, the conservative funds have averaged 6.6% for the past five years against the growth fund, that has returned 9.5% for the same period. The result could cost some investors thousands in lost gains.

We often hear of investors being told by bank tellers to move from one provider to another “so you can see your daily balance of your KiwiSaver”. What many people don’t know is that the tellers have targets and Key Performance Indicators (KPIs) to meet. If they get bonuses or any other incentives, under the FMA rules today (unlike non-bank advisers), they don’t need to disclose these benefits.

We often see people being moved from a top performing fund to a fund with a dubious performance history. For example, if you moved to the Kiwibank balanced fund last year, your return would have been 3.1% – the worst performer of all 18 funds. To make it even more disappointing, this fund has $1.064 billion invested, yet has continuously performed at the bottom of the pack.

My question is, who is benefiting from this? It seems every time I visit a Post Shop to buy mileage for my car, I’m urged to move my KiwiSaver to Kiwibank.

At WealthDesign, we buy independent KiwiSaver research, each quarter, that compares all the KiwiSaver managers and the individual fund performances. We analyse the performance of the various fund managers and help our clients make informed decisions. It isn’t about moving from one fund to another to meet targets or KPIs. It is about providing our clients with the right information, so they can make informed decisions.

KiwiSaver will eventually become one of the largest assets most of us own. How quick and how well your asset grows, will depend on how well it is managed.  There’s more to your KiwiSaver fund than just being in it.

Check your KiwiSaver – give us a call today.

 

Source: Morningstar Research 260716

 

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John Barber
WealthDesign – a life well planned

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The Financial Markets Authority (FMA) has recently released information about advisers who are allowed to give personalised financial advice – these are the Authorised Financial Advisers (AFAs).  There are only 1800 AFAs in New Zealand, and the number of these is falling every year (as the qualification isn’t easy to achieve, plus AFAs tend to be experienced advisers, who are of retirement age).  In the Manawatu, there is only one AFA for every ten thousand people.  If you take out the advisers working as Qualified Financial Entities (QFEs), like the banks etc, the number of advisers who aren’t going to only sell you their employer’s products, are few.

Private banking or personalised advice offered by banks, is only for the wealthy.  For example, you need $1,000,000 in assets to get personalised advice from the BNZ, or $2,000,000 if you are a Westpac customer.

At WealthDesign, we have been offering personalised financial advice for over 16 years, backed up by independent research.  You don’t have to be ‘wealthy’ (although we have clients who are) to get personalised advice,  as we understand that different people, at different stages of life, have different needs.  We have advisers of different ages who will work alongside you, who take the time to focus on your stage of life, and your unique life experience. 

We aren’t owned or licensed by any one insurance company or bank.  We aren’t part of the QFE telling us what and how we should manage your money.  We deal with a wide range of insurance companies in the market and back up our recommendations with independent research.  If you work with us, you have the peace of mind of knowing you have someone who works just for you.  We have your interests at heart, and will be there today and in the long term, working alongside you, to get the best outcome for you, and you alone.  You get total transparency when you work with WealthDesign. 

Give us a call and discover how easy it can be to gain peace of mind with your finances.

John Barber
WealthDesign – a life well planned

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June is upon us, so ensure you don’t miss out on the full $521.43 government contribution by confirming you have paid the minimum $1,042.86, for the previous 12 months.  If you have fallen short of the minimum contribution, you can top up prior to the end of June, to make certain you receive your government contribution.

IMPORTANT:  If you haven’t already, top up your KiwiSaver as soon as possible, as it can take a while for your KiwiSaver provider to process the payment.  Don’t wait until the last week of June, as you may well miss out on what you’re entitled to.

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