Life insurance – boring!

Life insurance.

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

New to getting financial advice? Impartial resources for New Zealanders

On my quest to find impartial advice about finding a financial adviser I have come across this fantastic website written by the FMA (Financial Markets Authority).  The government department who controls the financial markets.

Lets start with the basics:Important

Have you ever wanted to know what to say when you meet with an adviser?

What is Kiwisaver:KiwiSaver logo_RGB

And best of all, getting something for nothing!

The information above is provided by the government in a bid to build confidence in the advice area, after all, they are the monitors of it.  Please let me know if this has helped you and what it helped with.

Note of caution: this site is really for New Zealanders only

Things a Financial Adviser can help you with No. 6 – Goals

How do you define success?  What are your expectations of your life?

You wont be happy at destination if you cant be happy on the journeyGoals don’t necessarily have to be about an end, they can be about stops on the journey, and lets face it, life is more of a journey than a destination.

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:

Diamond Princess
Diamond Princess
  • 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.

What should I ask a Financial Adviser?

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

Advice Type

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.

Adviser type

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.

Find out more about types of financial advisers and kinds of financial advice.

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.

Reasonable Fees

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.

Professional Standards

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.

Professional Experience

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).

Dispute Resolution

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.

Link to original article, click here.

Competition Time!

As a financial adviser I get questions all the time about inheritances, wills vs trusts etc, this book will give you a good grounding to see a lawyer or financial adviser and be able to ask the right questions.

So, if you would like to win the book below (posted only to New Zealand addresses), please write email with your address details  and the name of a town/city we have an office in and we will draw a winner on the 3rd of November.

By Catriona Maclennan
By Catriona Maclennan

This book is an excellent guide to all sorts of issues that affect your finances, and those of people around you.  If you are in the position of having your parents nearing retirement, in retirement or you are heading that way yourself I am sure that there is lots of information you can use.

“R” is for Regulation – The NZ Initiative

ABC_s_of_economic_literacy_2_2_.1Regulations govern conduct and a well-regulated society is a well-ordered and civil society.  But bring up the topic of government regulation and expect passionately polarised responses for or against more rules or less red tape.

Government regulation can be particularly controversial when the community is deeply divided over some regulatory choice that must be made, such as the rules affecting abortion, compulsory military service at the time of the Vietnam War, or to allow or ban the Springbok tour in 1961.  But a prime role of government is to find a response that best preserves community peace and cohesion.  A society without government regulation is a fantasy.

More generally, government laws and regulations can displace, for better or for worse, rules in privately-agreed arrangements for regulating conduct, such as employment agreements, school rules and rules governing gated communities.  They can similarly displace long-accepted common law rules.

Government regulations are sometimes categorised as social (eg abortion laws), environmental, or economic.  Views about their desirability differ, particularly through time.  A major change in recent decades in New Zealand, and elsewhere, has been a rise in restrictive environmental regulation offset by major economic de-regulation.

Today much government economic regulation is ostensibly aimed at stopping businesses from exploiting or misleading suppliers, employees, customers and investors.  Yet economic research finds that businesses may support some of this regulation, perhaps judging that it most hurts competitors.  For example, the regulation of quality can raise costs disproportionately for SMEs, hurting consumers overall.  Economists call this the capture theory of regulation.  However, the theory may not explain regulations that are opposed by business.

Another proposition is that governments care not one fig about interest group pressures or contributions to political campaigns, but regulate solely for the benefit of the wider community.  This is called the public interest theory of regulation.  A major regulatory textbook dryly observes that a large amount of evidence refutes this naïve proposition.

In contrast, the mainstream economic theory of regulation proposes that interest groups lobby for changes in regulations that will particularly benefit them and politicians respond rationally to these demand since they want to get re-elected.  Political parties merely differ with respect to their favoured constituencies and ideologies.  Outcomes can be difficult to predict since they depend on the voting balance between contending considerations, but the national interest is not centre stage.

Whether a particular regulation does best serve the overall community can be difficult to determine.  Economists use cost-benefit analysis for this purpose, but it has well-known limitations.  Any analysis should anticipate the Law of Unintended Consequences – the adage that intervention in a complex system commonly creates unanticipated, often undesirable, outcomes.

The ABC of economic literacy |

10 Red Flags for Older Clients to Avoid

The article below relates to ALL investors, it is a fantastic list and well worth a read if you are thinking about investing or using your home to secure an investment…

To find more from the same writers go to

Hand waving a red flag

Wednesday, March 27, 2013

In the wake of continuing financial uncertainty and a volatile market, some older clients (and even young ones too) may find themselves too easily caught unawares. In response, the CFP Board released on Wednesday a guide that provides older clients financial self-defense.

Here are 10 red flags for avoiding scams.

1. Look beyond the letters after a financial adviser’s name.

Some designations or certifications used by advisors, brokers, insurance agents, bankers and other financial professionals can be confusing or even misleading. Make sure the designation of the person you are working with is backed up by experience, education, examination and ethics requirements. Make sure he practices by a fiduciary standard, too.

2. If you don’t understand what’s being sold, don’t buy it.

If you do not understand how a financial product works, don’t buy it. If a financial professional cannot or will not explain the product clearly, find someone else.

3. There’s no such thing as a free lunch.

There is no such thing as a “free lunch,” no matter what that fancy invitation from a local advisor might say. You may get served a good steak, but with a hefty side of sales pressure. Be cautious.

4. Just because a so-called expert recommends it, doesn’t mean it is right for you.

Just because the advice comes from an expert, does not mean it’s a good recommendation for you. The best advice takes into consideration your specific situation and circumstances.

5. If it sounds too good to be true, it’s probably not legitimate or safe.

Looking for a safe fixed-income investment that pays high yields is like looking for the fountain of youth: it does not exist. Don’t be hoodwinked.

6. Don’t confuse familiarity with trust.

Don’t confuse familiarity with trustworthiness. Just because a financial professional lives in your community or belongs to the same social or religious group does not mean he is a good choice for managing your money. Do your homework and check him out.

7. The final sign-off should always be yours.

Mind the gaps! Do not leave spaces on any account applications or contracts for an advisor to fill in without always checking and signing-off on the completed form.

8. Make sure the money others are making isn’t yours.

Make sure there is always a legitimate business activity before you invest. Using money from one investor to provide a “return” to another investor is a classic Ponzi scheme.

9. Get the full story: who gains the most – you or the financial professional?

Before you take someone’s recommendation to buy or sell, ask yourself: who stands to gain most, you or the financial professional? What is the financial professional paid as a result of the transaction?

10. Know your rights as a homeowner. 

Your home is your castle. Keep a protective moat around it by knowing your homeowner’s rights, especially if you try to tap your home equity.

Financial advisers and ones that got away – NZ Herald

11:00 AM Saturday Oct 6, 2012
Despite new laws, the public still needs to be a little wary. Hands up who knows the difference between a registered financial adviser and an authorised financial adviser? And what on earth is a QFE?

The answers matter. A registered financial adviser is someone who fills in some forms, pays some money and can hang out his or her shingle and start selling insurance, mortgages and other “category 2” financial products. Registering as a financial adviser is as easy as registering a dog or a motor vehicle.

An authorised financial adviser, on the other hand, has to pass exams, follow a code of professional conduct, which can be found at, and must be transparent in his or her dealings with an investor. Only these advisers should be providing financial plans and giving advice on investments and KiwiSaver.

At best, says Massey University’s Dr Claire Matthews, the public may know that “financial advisers” have to meet some rules. “Do they fully understand the difference?” she asks. “Probably not.” Read More

Overseas Income – Southland Times

A New Zealand tax resident is subject to New Zealand income tax on his or her worldwide income. This obligation exists irrespective of whether or not the income has been taxed overseas (usually a credit is given for tax paid overseas up to the level of New Zealand tax payable on the same income) or whether or not the income is repatriated to New Zealand.

In my experience not all New Zealand tax residents return all overseas income. Sometimes it is due to ignorance of tax laws or poor advice. Sometimes it is the result of a deliberate decision not to return the income. Often there is no time limit on Inland Revenue seeking to retrospectively impose tax on unreturned overseas income.

Types of income that are often overlooked are:

  • Foreign investment fund income including fair dividend rate income;
  • Controlled foreign corporation income;
  • Realised and unrealised foreign exchange gains; and
  • Employment income.

The fact that it may be difficult for Inland Revenue to discover undeclared overseas income is often a factor in encouraging evasion of overseas income. Inland Revenue does receive information on income from many countries.

There can be severe penalties for evading tax. These may include:

  • Shortfall penalties – 150% of the underlying tax;
  • Interest;
  • Late payment penalties; and
  • Publication of evaders’ names.

Occasionally repeat New Zealand tax evaders receive jail terms for tax evasion. Other countries, however, are more likely to imprison tax evaders.

Two Americans have been jailed for a year for concealing assets in undeclared bank accounts in Switzerland, Liechtenstein, the Isle of Man, Hong Kong, New Zealand and South Africa. The couple also have to pay the Internal Revenue Service more than USD$3 million in penalties, having failed to file foreign bank account reports while maintaining a Swiss bank account.

If you are unsure about your responsibilities and possible liabilities, contact an appropriate adviser or Inland Revenue.

Murray McClennan is the principal of Tax Central Limited, a specialist tax advisory firm. He can be contacted at The above comments are of a general nature only and are not a substitute for specific advice.