Decisions we make today, impact our tomorrow.
There is ALWAYS risk when investing (including term deposits), it is a matter of finding out what the risks are, and deciding if that level of risk is acceptable to you.
Knowing our risk-tolerance profile with regards our finances is very different to risk taking elsewhere. I know for myself I am perfectly happy to jump out of a plane to go tandem skydiving, but I am also personally a more conservative investor when compared to the masses.
- Do I know what investment risk is?
- Do I understand the level of risk I am taking currently?
- Am I better helping others take risk rather than taking it myself?
If you want to find out your financial/money RISK TOLERANCE you can find out here.
YES THE TEST IS FREE and with NO OBLIGATION
Finding out your risk tolerance will help you to know how to invest for your character, not your emotions on a given day. The test is pyschometric, meaning that it tests your traits (permanent) versus your disposition (emotions on the day). This is very important.
On the other hand the risk-tolerance is very different to your risk CAPACITY. Sometimes the most aggressive investors have the least capacity to invest due to their willingness to take a risk, but this is not always the case as sometimes the risk paid off.
The first step to investing is to SAVE. If you are not saving, why not? If you currently save nothing, have you ever tried setting up a bank account and having an automatic payment going in to it for $5 per week? This experiment I know will have you saving more, as you see your success it will spur you on to save more. In these days of internet banking it is easy to set up a new bank account and start saving.
Don’t put-off today those things that can change your tomorrow for the better.
Two words that are guaranteed to put you to sleep. It is a product that no-one wants, but most people need. I have a different view. If you are educated about what you are paying for and given clear, professional, unbiased advice, then surely life insurance just becomes another part of your financial plan, albeit one that you never want to use. We insure our houses, but I guarantee you that no-one wants their house to burn down.Read More
Of course it can, and it should.
One of my clients recently told me that she had been sent a notice, to say that on a particular date the mortgage would increase to a certain rate. She didn’t like the rate so rang, explained she wasn’t happy and managed to negotiate a much better result for her family. Even though interest rates are currently low, it shouldn’t stop you from trying to negotiate.
Whether it is paying down debt, or wanting to be paid a better rate of interest, you can ask. In the past, I do remember, when banks held everyone to ransom, it was not “proper” or expected to ask a bank to do a better deal.
These days banks are more flexible and fluid creatures of commerce, and as such can be negotiated with. If your bank won’t negotiate and you know you are in a good position, there is nothing stopping you from getting another bank to listen to you and change.
Don’t be afraid, all they can do is say no…
And if they do? What you do next will be your choice.
Oh, and if you do want to pay your mortgage off faster and start saving thousands, please ask.
In all my time as an adviser there is still one thing that distresses me, seeing families grieving. But, there are different kinds of grief, shock, long slow grief and short grief, but what is worse is when the person who left leaves behind a paperwork mess for someone else to clean up.
I don’t know anyone who would purposely cause extra stress or harm for those closest to them. In times of stress decision-making abilities are put under strain, amongst other things. Presuming that your family will know your wishes if you go is fraught with danger, danger of pulling families apart unnecessarily.
If you leave behind loved ones through dementia or death they be very unhappy if you haven’t done this:
FINISH YOUR ESTATE PLANNING
This includes but is not limited to:
- your Will (is it up to date?)
- your Living Will (what happens when you can’t make decisions for yourself?)
- does anyone know where this information is?
Most people I talk to say, “I started thinking about that the other day…”
If you don’t let people know what your wishes are and leave them where someone can find them, you are causing extra upheaval at a very stressful time.
Whatever you do in 2016, sort out your estate planning.
None of us know when we will go, so do it now.
I have three free copies of the book above to give away, email me firstname.lastname@example.org if you would like one.
I don’t know anyone who enjoys writing a budget for themselves, but doing so can bring financial confidence and have long-lasting positive impact. I know that when I start talking about personal finances to most people they either switch off, change the subject or walk away! But, even if this is you, don’t click away, give it a go, you may not be asleep by the end of it!
“I believe that it is better to tell the truth than a lie. I believe it is better to be free than to be a slave. And I believe it is better to know than to be ignorant.”
H. L. Mencken
Once you know where you are starting from, it is easier to know where you are going. If you earn $50,000 a year, don’t write in your budget that you earn $100,000 a year, even if that is your goal. If you spend $400 per week on groceries, don’t put in your budget that you spend $250 per week, even if that is what you would “like” to spend, it is not the truth.
Once you have the actual truth in front of you, including all your extras, you can make real choices about real situations. Doing this is not only freeing, it is also helpful when out shopping to not buy items that you don’t need, or book trips you can’t afford. See it as an opportunity to get creative, figure out a new income stream, economise on boring spending such as power and other utilities, make sure you have the best deal from your bank (yes you can and should negotiate with them).
Tip 2: Use 3 months’ of Actuals (i.e. direct from your bank statement)
You can also use a budgeting website such as www.financial.me to organise your income and spending.
Starting from your actual spending will help you identify what is going right, as well as what is going wrong, and more importantly give you an opportunity to change what is necessary to move in the right direction.
This whole process is about improvement and creating opportunity for success, so if you are not feeling this way by now, then the next tip is for you.
Tip 3: Don’t beat yourself up, practice makes perfect, or close enough
We all make mistakes, we are human, it happens.
We can also be caught out by circumstances beyond our control. If this is you, do not fret, the best path to making it back to your goals is to readdress the actuals, adjust for the interruption and figure out a way forward. If you are having trouble with this, at least you will know your actual situation when seeking help, which will save you lots of money if you are paying by the hour to sort it out.
Don’t look at unexpected detours as failures, just think of them as opportunities to practice finding your way back to the road you want to be on.
As financial advisers we are here to help, we are interested in YOUR success, because it becomes our success. If you need help, please ask, if we can’t help you we will try and find you someone who can.
It is your money, in your hands, whether or not it is sorted, is up to you.
Preparing for the end of your life is not depressing or dismal, it is saying to those you care about that you understand how you much you mean to them and you are willing to go the extra mile to make it easier for them if you leave this life before them, it is respectful and honouring to those who love you most.
Just recently I said goodbye to someone who was not technically family, but was very much family in every other sense of the word.
His passing and the attendance at the funeral reminded me of why we should always try to remember that we will all end. This man lived his life with compassion, fortitude and a crazy ability to see where others need help, then be the help.
His funeral was packed with hundreds of people, all of whom had stories about how he had touched their lives, all wanting to tell the stories. Sometimes I think we lose sight of the importance of telling stories, especially the good ones.
We must all remember that there will be trials and grief on the part of those we leave behind, be kind to them and leave all your wishes behind. Invest in a Will, and a Memorandum of Wishes, let your loved ones know that you cared enough to do this to save them the stress of not knowing all the things they are going to be asked after you go.
This person was “lucky” in that he could prepare and say goodbye before the known end, but we don’t always have this ability. Leaving a living will will also help in times that you are unable to communicate for yourself, as will having appointed Enduring Powers of Attorney.
If you have any questions about these please contact us so we can help you with some of the issues and questions that will be helpful discussing before visiting a solicitor.
BUT, what I do know is that a person’s ability to earn a dollar is their biggest asset.
You are never too young to think about it either, I met a man whose girlfriend is in her 20’s facing cancer, the kind that has ability to create a huge loss.
You are can be too old, but not until you reach retirement, or a at point where you can support yourself even if you couldn’t work again.
Income Protection insurance is one of the ways that you can protect your biggest asset, and there are other ways that complement it, which will be explained by an insurance adviser when asked.
The biggest complaint I hear about income protection, and actually personal insurance in general is the cost. Overseas i.e. not in New Zealand, there is a lot less protection for the individual provided by the Government, the USA is a good example of this, and they take for granted the need for personal insurance. Here it is a different story, between ACC and WINZ we have a lot more cover than most countries.
If you value your way of life, the amount of disposable income you have, income protection is worth a look, it will be another cost to living, but what is worst, living without your income, or sacrificing a little in the meantime…
Finding a good insurance adviser can be a tough ask, so here are some questions to ask:
- What sort of authority do you have to provide me with insurance?
- Can you provide me with options from more than one insurance provider?
- Are you going to give me balanced advice with options?
- How do you earn money from me and do you get paid year after year even if you don’t contact me for a review?
- Can I have your Disclosure Statement?
These are just a start, but a good adviser will let you know the answers to these and other questions when you meet, happily and willingly. If you think you are not being listened to, try somewhere else. You need to be able to trust them, if you can’t the relationship won’t work.
If you want to check the details of the insurance/financial/investment adviser you can check them out on the Government website: www.fspr.govt.nz or check out the Financial Markets Authority website www.fma.govt.nz.
How do you define success? What are your expectations of your life?
As financial advisers we need to be good at listening, good at listening to you. You may not know what your “goals” as such are, but if we listen hard enough we can begin to draw a picture of what you are expecting from your journey and how we may help you achieve those expectations along the way, to be successful.
Success is not always having a result that the rest of the world can see, or even achieving a goal of meeting an expectation, for most people it is an overall knowledge that they got want they wanted out of life and were able to give back what they wanted also.
Success can be all sorts of things, and often a few things in a list, such as:
- taking the holiday of a lifetime
- leaving a financial legacy to a family and/or charity
- leaving a family that know the meaning of love and are known for it
- being able to buy the motor-home and travel
- being able to provide a comfortable retirement
- being able to pay rest-home fees without destroying value in the family home
- having grandchildren/family to spoil and being able to spoil them
Whatever you define as success, make sure you are asked the right questions and then you are listened to. It is your money, to achieve your success.
The article below is available on the website of the FMA (Financial Markets Authority). There aim is to educate the general public on what you need to know, as well as monitoring the Financial Markets in NZ. If this helps you, please let us know…
Choosing your adviser is an important personal matter. Do some research and consider talking with a few advisers before you decide which one to work with.
We’ve developed some questions you can ask financial advisers, and we offer some ideas about what to listen for. If you are receiving personalised investment advice, you should be able to find some of this information in an adviser’s disclosure statement. You can compare disclosure statements from advisers.
Before choosing your adviser, ask several financial advisers as many questions as you need to until you’re confident you completely understand how they can help you.
- Advice type
- Adviser type
- Puts client’s needs first
- Reasonable fees
- Professional standards
- Professional experience
- Dispute resolution
Q: What type of advice or service do you provide?
Listen for: Whether the service is information only (information is not considered advice), class advice, or personalised advice. Personalised advice is tailored to your own situation, and class advice is suitable for most people in a group or class. See our information and the different types of advice to help give you a better understanding.
Q: What type of financial adviser are you?
Listen for: AFA (Authorised Financial Adviser) or QFE adviser if you want personalised investment advice. Both these types of advisers have been licensed, and are monitored, by the Financial Markets Authority. Ask them what types of products they are licensed to advise you on as there are different categories of AFA and QFE licence.
If they are a registered financial adviser individual, or work for a registered financial adviser entity, (but are not an AFA or QFE) they are not licensed or monitored by the Financial Markets Authority. Registered individuals can give you personalised advice on simpler products such as insurances, mortgages and term deposits. Registered individuals or entities can provide you with ‘class’ or generic advice on investment products such as KiwiSaver or managed funds.
Q: Do you have any adviser qualifications?
Listen for: A description of how their qualifications relate to the financial services they provide. For example, an AFA is required to meet a minimum level of competence set out in their Code of Professional Conduct.
Puts Client’s Needs First
If you are looking for personalised advice, consider asking:
Q: What information will you need to be able to provide me with financial advice that is tailored to suit me?
Listen for: Lots of questions about your circumstances and needs. For instance, they should ask about your income and expenses, what you own and what you owe, your dependants and your financial goals, both short and long term and your appetite for risk. They should discuss your insurance needs and things such as estate planning or business succession planning if these topics are relevant to you.
Q: How will you deal with a range of different financial objectives for my individual goals?
Listen for: Will help you prioritise your financial objectives, explain and discuss choices with you and develop a strategy to help you achieve your objectives.
Q: Am I a retail or wholesale investor?
Listen for: Wholesale investors are defined in the Financial Advisers Act and can include entities such as family trusts. Your adviser needs to explain what a wholesale investor is and whether you are regarded as one. Wholesale investors have less protection than retail clients, so you need to understand the implications of being a wholesale investor. You can opt out of being a wholesale investor if you wish.
If you are looking for generic or ‘class’ advice, consider asking:
Q: What ‘class’ or group of investors is your advice suitable for?
Listen for: A description of the general characteristics of people like you with similar circumstances and requirements. This is sometimes referred to as your ‘class’ or group that your adviser has taken into account to advise you, e.g. your age group and tolerance for risk.
Q: How are you paid – via fees or commissions? How much is your advice likely to cost?
Listen for: If the adviser charges a fee-for-service, it is easier to know how much you are paying if it is a ‘flat dollar’ fee such as a fee for service arrangement. If a ‘percentage of assets’ fee is charged, make sure you are clear on exactly how much you are paying, when this is to be paid, or if it is an on-going fee, how often it is to be paid. Make sure they give a clear explanation of how much they expect to receive, now and in future years (regular ongoing costs). If you are receiving personalised investment advice (only available from an AFA or QFE adviser), a general description of how they will be paid will be given to you in the adviser’s primary disclosure statement. Once you’ve chosen an adviser, and they’ve made financial product recommendations, they will follow up with specific payment details in a secondary disclosure statement.
Q: If they charge ongoing fees, what will I get for these fees?
Listen for: Regular reviews of your circumstances and investment portfolio. Re-balancing of your investment portfolio if necessary. If you are paying ongoing fees, you should expect to have reasonable access to your adviser when you need questions answered or want to discuss a financial issue with them, and they should schedule regular reviews with you.
Q: How do you keep up to date with changes that might affect your clients?
Listen for: Participants in regular Continuing Professional Development (CPD) or other relevant training. Is a member of an industry organisation such as: Institute of Financial Advisers (IFA), Professional Advisers Association (PAA), or SIFA.
Q: Do you have to abide by a professional code of conduct?
Listen for: AFAs should tell you about their Code of Professional Conduct. This sets out the minimum standards of competence, knowledge and skills, ethical behaviour and client care. It also specifies their continuing professional training. AFAs can be disciplined for breaches of the Code.
QFE advisers do not have to follow the Code but their QFE should have established systems and procedures at an equivalent level to the Code.
Registered financial advisers are not required to follow a code of conduct.
Q: How long have you been giving financial advice?
Listen for: If they have only been giving advice for a short time, ask whether they receive supervision or oversight from a more experienced colleague or their employer.
Q: What type of clients do you mostly see? What are the majority of your clients trying to achieve?
Listen for: It’s helpful if the adviser deals with people in a similar situation to you, for example, young families, retirees or small businesses, as they will have experience in the type of advice you are looking for.
Q: What products do you advise on? What about the products I’m currently invested in?
Listen for: Is their product range restricted to a certain type of product or is it limited to products from a small number of product providers? Are they aligned with one product provider only? Can they compare different products? A bigger range of products can mean more choice for you. This could also be important for any existing products you have, such as your KiwiSaver fund or managed funds. Can they provide advice in relation to your current funds or investments, for example, even if it is not on their approved product list? If they are recommending disinvestment from any products you currently hold, make sure they tell you what the risks and benefits are in doing this.
Q: How do you establish a client’s tolerance for risk?
Listen for: Use of a risk profiling tool, for example, a comprehensive questionnaire to assess clients’ tolerance for risk (also known as a risk profile).
Q: How do you deal with customer complaints or disputes?
Listen for: A clear description of their internal process for handling customer complaints. They must also belong to an external dispute resolution scheme if financial services are provided to retail clients, and the name of the scheme will also be in the adviser’s disclosure statement.
- Untouchable (mostly): a lot of people have issues with impulse buying or credit control, which is evident in the figures of how much we are all in debt, Kiwisaver is your opportunity to hide funds away for the long term and you can’t spend them.
- Tax effective: because Kiwisaver uses PIE tax, you don’t need to contribute to the tax payments, it is done for you, and the maximum tax you will pay is 28%, which is lower than the PAYE top payment of 33%
- Employer Contribution: for employees, your employer will be contributing to your savings, what a fantastic incentive to provide for your long term needs.
Ok, so one more, you can change providers easily and it won’t cost you the earth. You can pay an adviser for advice on who to invest with or just do it yourself, all information is readily available and reasonably easy to read.
If finances don’t interest you, pay someone to do it for you, just as you would pay someone to do other jobs you prefer not to do, like lawns!