North and South, 16 June 2016

This article was originally published in the July 2016 issue of North & South

Kicking over the barriers to investment success

When you’ve worked hard all your life, paid off your mortgage and saved for your retirement, it’s only natural you’d be wary of trusting anyone with your money. Many New Zealanders know someone who lost money in the 1987 stock market crash or, more recently, made rushed and ill-considered investments in the boom-time early 2000s.

And, while we stop short of putting  money under the mattress like our  grandparents, most of us are quite  happy to let the banks take care of  it, because it’s safe. After all, that’s  what our parents did, right?

But with interest rates now so low, and inflation and taxes nibbling away  at your nest-egg, those term deposits  aren’t returning anywhere near what they used to. Even those of us who once would have bought a second property as an investment are doing it tough, with the housing market so out of control in many parts of the country it’s become nearly impossible for most of us to afford bricks-and-mortar investments.

Those are some of the catalysts that Craigs Investment Partners’ adviser Gretchen Williamson says are now motivating people – particularly those nearing retirement – to seek help with their finances.

We’re a nation of conservatives, she says, and few of us have learned much more than how to balance our bank accounts. “My generation simply wasn’t taught anything more by their parents than to pay off your house and put your money in the bank,” says Williamson.

It’s this lack of understanding which often stops people from taking the first step and asking for help. “It’s not that people aren’t educated – some may have just sold successful businesses – it’s just they haven’t had any experience outside of being in a bank fund or superannuation scheme.

“People don’t want to be embarrassed about not knowing the right language or not knowing what questions to ask. Most people think you have to be knowledgeable, or they think investing is only for the very wealthy.”

Williamson’s colleague and fellow authorised financial adviser, Jon Murie, says among the baby boomer generation there’s still a legacy of mistrust from the 1987 stock market crash, not helped by fallout from the Global Financial Crisis of 2007-2008. Yet both Craigs advisers point to the sound oversight of New Zealand’s Financial Markets Authority and the strength of listed companies.

“The stock exchange isn’t made up of fly-by-night companies – there are a lot of good, trusted brands,” says Williamson. She says Kiwi companies also attract offshore investment because we have a stable government, a good legal system and currency, and a conservative Reserve Bank. “They see New Zealand as a great place to park some money as dividends here can be five to seven per cent. In Australia they’re four to five per cent and some of the big US companies pay two to three per cent or none at all.”

At Craigs, new investors aren’t pressured into anything and meeting with an investment adviser to discuss your needs is free. During an initial visit, typically lasting 60 to 90 minutes, the company’s experts glean as much information as they can about each person’s unique situation. They impress the importance of flexibility in investments, how to balance lower risk bonds and cash with asset-growing investments to smooth out the bumps.

“It’s not like having money in the bank – your money moves up and down. You’ve got to have a bit of everything so you iron out the peaks and troughs,” says Williamson.

“People sometimes see things moving around rapidly and get scared, but it’s a long-term strategy.

She says it might take six to 12 months of staged investments to build an investment portfolio – but as long as there’s flexibility, investors will benefit. “So many people have most of their money tied up in one asset – their house – and when they retire they find they have to eat into their capital to have something to live on.”

And downsizing from that milliondollar home isn’t so easy to do any more in a red hot housing market: “How much capital can you actually free up?”

Williamson says that in retirement, even home maintenance can become a significant issue; a house-painting bill can suddenly be a crippling expense.

Murie adds that Craigs advisers encourage new investors to take a five-year view, at least: “That’s really a minimum period to lock in an investment. Investors with a balanced portfolio, who took the long view when the GFC struck, experienced a 17 per cent drop in their portfolio but saw it recover fully within three to four years. And in the past five years, those with money in a balanced fund would have seen returns of seven to eight per cent per annum. Time is your friend in investing.”

Williamson increasingly sees female clients, particularly older investors who feel more comfortable talking to another woman. “Generally, women come to investing later in life and can be very vulnerable – often their husbands were the ones who looked after the money. But now they’ve survived their husbands.

“Some have been caught with bad debentures and finance companies but didn’t understand they were risky investments when they placed their trust in someone else.”

Craigs offers not only free investment seminars and complimentary adviser consultations, they have the track record and reputation to help you build a balanced and sustainable investment portfolio.

The Ethical Market

Craigs Investment Partners adviser Jon Murie is seeing a growing number of investors who want to put their savings into socially responsible investment funds. That may mean being assured their money is not invested in companies involved in tobacco processing or armament manufacturing, for instance; conversely, these investors may simply want to see their funds diverted into companies making positive social or environmental contributions.

Craigs offers socially responsible share funds, both inside and outside KiwiSaver, says Murie.

“These ethical investment commitments form a part of our investment policy with a client. When we review these portfolios we ensure the clients’ ethical investment objectives are being met.”