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

Negotiating with the Bank – Can it be done?

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 2015-12-25 12.01.00past, 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.

Just make sure you do this in 2016

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:


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 if you would like one.

Socially Responsible Investment and NZ Managed Funds

fund-source-logo30 Mar 2015 15:23

As KiwiSaver account balances grow and New Zealand investors become increasingly interested in where their savings are invested, more interest may be shown in socially responsible investment (SRI). A number of New Zealand fund managers offer SRI options. This article will look at the basic terminology used and the different kinds of options available to investors.

SRI is an investment process that considers environmental, social and governance (ESG) factors. This means that rather than simply looking at the potential return of an asset, an investor will take into account the effect their investment will have on the environment and society and whether the corporate governance of the company also considers these factors. Fund managers are able to show their engagement with ESG issues by signing the United Nations Principles for Responsible Investment. The six principles represent a voluntary commitment to take ESG factors into account during the investment process. A number of New Zealand fund managers are signatories to the principles including Devon Funds Management, Harbour Asset Management and Salt Funds Management.

A common way to invest responsibly in practice is to exclude certain industries entirely. These industries, often referred to as ‘sin stocks’, include alcohol, tobacco, pornography, gambling and armaments. A number of New Zealand managers that offer SRI funds try to exclude certain industries from these particular portfolios. For example, specific SRI funds are offered by AMP Capital, Grosvenor Investment Management, Pathfinder Asset Management and Quaystreet Asset Management. As investor appetites change, so do the industries that are considered ‘sinful’. For instance, Grosvenor and Hunter Hall (an Australian fund manager) have both recently removed direct exposure to fossil fuels in their SRI funds.

The different ways in which managers can take ESG factors into account means that definitions necessarily differ from manager to manager. At one end of the spectrum is ‘deep green’ investing. Rather than simply excluding industries that are perceived as having negative social and environmental impacts, deep green investing means actively seeking out investments that can have a decidedly positive impact. Although Hunter Hall offers a deep green fund, this investment style is relatively absent from New Zealand. Grosvenor attributes this to “hypocritical discomfort” where investors do not want to acknowledge the ways they ignore ESG factors as consumers.

Finally, there is discussion around the extent that socially responsible investing affects investment returns. Some analysts argue that limiting the investable universe of a fund can decrease fund returns and increase volatility. Others claim that actively managed SRI portfolios can offer strong returns.

There are a number of SRI options available to New Zealand investors. These include KiwiSaver funds and non-KiwiSaver unit trusts. For more information about the SRI exposure of your portfolio, talk to an Authorised Financial Adviser.

– See more at: FundSource

“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 |

TEDx – WOW now in Tauranga

TEDxTauranga.Logo_.High_.Res_.On_.Black_-300x60I’ve only just discovered TED Talks, have you seen them?

If you have an iPad there is an app, but they are easily found on YouTube as well.  I have been inspired, challenged and fascinated by the amount of amazing people there are in the world doing amazing things.

I use it learn more about the world. In these 15 minute videos experts can describe the details of what they do in a fascinating way.

I had no idea I’d be so interested in things like robots playing tennis, carnivorous insects, eye diseases, nuclear fusion, and parental happiness.

Stop what you are doing right now. Set aside 15 minutes. Go to and browse the titles of the talks featured on the home page. Choose one and watch it now.

Addicted yet?

Well, Tauranga is having it’s own TED event, it will be even more exciting to see the local talent and a New Zealand perspective, along with the No. 8 wire mentality.

Here’s the list of talks so far (8 of these will be chosen for the event):

  • Daily Bread: Can ANY human body handle gluten?
  • How can the same technology produce both rocketships and mouse kidneys?
  • Modern lives are longer lives? Why that might NOT be true for you.
  • Still a Clean/Green NZ? 3 opportunities to rescue our slipping image.
  • World not changing how you like it? Unleash your inner super-hero.
  • Learning Differently: What if words in every book leaped up and came to life?
  • Could disruption be the key to harmony in multi-cultural societies?
  • Dirty secrets about our soil, considering growing from the ground up.
  • Moments: Pay attention now? Learn from the past? Dream of the future? How to choose.
  • Wool: The potential of this complex fibre beyond textiles – medicine?
  • Forgotten grandfathers: Newly discovered stories from the men of World War 1

And here are some “Quick Facts” about TEDxTauranga 2014:

  • When?: Saturday 19 July 2014, 1pm to 8pm
  • Where?: ASB Arena, BayPark
  • How many people?: 8 live speakers + 500 in the audience
  • Ticket Price? $65 Buy TicketsTEDx Tauranga poster

The Great New Zealand Economic Bubble

By David Whyte  22 April 2014

No doubt over the next few days/weeks some advisers will receive contact from some  clients asking about the contentious article which appeared in the NZ Herald, reporting that the NZ economy was about to collapse under the weight of over-exposed domestic residential lending, weak bank financials, and rising interest rates.images

Who knows – the dude may be right, but I doubt it.

What I am absolutely certain is that markets will rise and markets will fall, bonds will look attractive at some point and equally equities will appear promising at a different point in time, interest rates will rise, fall, or stay the same. All of these movements are likely to occur at one time or another – but who knows when and by what order of magnitude?

The ability to predict movement in investment markets, categories, or sectors is impossible.

From Nick Murray’s work “The Game of Numbers”, I quote unashamedly –

The greatest equity investor the world has ever produced, or will ever produce, Warren Buffet, said “ I never met a man who could forecast the market”. Pay strict attention here, because this is the greatest investor who ever lived, telling you that not only no one (including himself) can consistently predict markets, but that the inability to predict markets is no bar – indeed, is perfectly irrelevant to successful investing. In addition to not being able to anticipate markets or the economy, you will never be able scientifically or mathematically to select investments for superior future relative performance. Again, no shame in this; neither can anyone else. There is no statistical evidence for the persistence of performance”

This is a hugely significant statement, because if it is not investment movement, selection and de-selection, which drives returns, the only remaining determinant of portfolio performance is investor behavior.

The alarm bells which were attempted to be set off by the Forbes article could well be one of those occasions when clients panic, question, or exhort advisers to take pre-emptive action by changing the mix of investments in their portfolios in order to avoid the pending collapse of the NZ economy.

Modern portfolio theory has clients acting appropriately armed with all relevant data behaving rationally and in a timely manner.

We all know that this is not the case. Investors behave quite irrationally and cause more likelihood of their portfolio returns being massacred, than anything that happens in local or international markets in whatever class of investments under consideration.

So if client behaviour is crucial to portfolio returns, it surely follows that advisers armed with a deep knowledge of their clients’ likely reaction to such articles appearing in the media, would be forewarned and forearmed to manage such events effectively?

The recent arrival of DNA Behaviour International Ltd on NZ shores provides advisers with an opportunity of analysing the client financial personality at the beginning of the proposed relationship, and creates a framework for managing clients through such media circuses as eventuate from time tom time.

By establishing a scientifically constructed profile of the clients financial DNA, the adviser has tools at his disposal to prevent inappropriate reaction from clients who are persuaded to believe that a) ‘this time it’s different’, or b) the sky is falling.

Rational analysis of even the most elementary indices suggests that this time isn’t different, and that the sky is not falling

The article in question is poorly researched and has little supporting evidence for the assertion that the collapse of the NZ economy is imminent.

This is not to claim that the economy is without issues.

It would be a strange state of affairs to find a free market entirely in balance and synchronised with every other market on the planet.

Reality dictates that there are always segments of the market lagging while others lead.

It this tension that maintains the dynamic of the free market and which ultimately creates evolutionary progress and advantage to the vast majority of the citizenry of that market. And as we have made unheralded advances from the time of the industrial revolution through to the communication age in which we now live, it is appropriate to assume that the momentum of progress is continuing and rapidly accelerating as technology takes us into an ever more imaginative and innovative era.

Here I revert back to Murray’s observation about human progress. Essentially, he ascertains that miracles becomes quickly everyday commodities, and quotes the micro-processor, computers,  and cell-phones as classic examples of inventions which appeared miraculous on arrival, but which quickly became commonplace, less expensive – and  very much smaller!

So these periodic so-called revelations by economic gurus are of no more significance than the passing of the slide rule, the ‘brick’ portable phone, or the XT computer – quaint, interesting, but certainly nothing by which to determine behaviour.


David Whyte


David Whyte has been involved in the financial services industry his entire career in the U.K., Australia, and NZ.

He was one the founding Managers of Sovereign, the General Manager of AIA, and Managing Director of AIG Life in Australia, before returning to NZ to lead the Ginger Group as CEO in its formative stages.

David has served on the board of Fidelity Life, the Insurance and Savings Ombudsman Scheme, and what is now the Financial Services Council in both Australia and NZ.

His company, DCW Management Ltd, currently contracts David services to the Board of Southern Response Earthquake Services Ltd, the Crown-owned entity established to handle the earthquake claims in Christchurch after the sale of AMI to Insurance Australia Group.

He also chairs Product Care (NZ) Ltd, a specialist insurance company established by an Australian insurance broking organisation.

DCW Management has recently signed an agreement to take DNA Behavior International Ltd into the NZ market, promoting the organisation’s research-based financial profiling initiative, aimed at producing behaviourally smart advisers.

David has a post-graduate Masters in Management, and has recently completed a post-graduate certificate in Corporate Governance & Leadership from Waikato University.

Genesis Energy – Brian Gaynors opinion

This article is well worth a read if you want to be reminded of the 27 years of state asset sales we have had and whether or not they worked (usually not).  If you are interested, click here…

Here is a taste of what you will find:

The Crown’s first privatisation was the sale of 103 million Bank of New Zealand shares, representing 12.9 per cent of the company, at $1.75 each in February 1987. The $180 million capital raising was an NZX record.

BNZ’s share price fell before the October 1987 crash as investors realised it had a huge exposure to the highly leveraged listed property and investment companies. Its share price finished 1987 at $1.30, 26 per cent below the issue price less than 12 months earlier.

The trade sale programme also had a discouraging start when New Zealand Steel was sold to Equiticorp for $327 million in March 1988.

NZ Steel was not in a strong financial position and Equiticorp was struggling to survive after the October ’87 crash and the Crown accepted payment in the form of Equiticorp shares. Equiticorp shares were worth $3.25 at the time but plunged to $1.

However, the sale contract required Equiticorp to arrange the buy-back of its shares at $3.25 on demand. Equiticorp chief executive Allan Hawkins was later jailed for illegal activities related to the repurchase of these Equiticorp shares from the Government.

The lesson from the BNZ and NZ Steel transactions was that the Crown should only consider an IPO when the SOE was in a sound financial position and it should only make a trade sale to business people with substantial financial resources and extensive industry experience.

The preferred strategy was to have a partial sharemarket float…


Brian Gaynor

Executive Director

Brian is Chairman of Milford’s Investment Committee and head of Milford’s portfolio management and investment analysis activities. Brian is one of New Zealand’s most experienced and well-known investment analysts. Brian’s career includes roles as a Partner and Head of Research at stockbrokers Jarden & Co, a member of the New Zealand Stock Exchange, Chairman of the New Zealand Society of Investment Analysts and Chairman of the Asian Securities Analysts Council. Brian is Portfolio Manager of the Milford Active Growth Fund and the Milford KiwiSaver Plan Active Growth Fund.

Is the boom here to stay? | Dr Oliver Hartwich | The National Business Review

Published: 28/02/2014

The New Zealand economy is undoubtedly in good shape but not all the factors behind the boom can or should be sustained indefinitely.

This raises two questions: How much is temporary? What are the prospects once these one-off factors disappear?

The main growth factors are:

•    the Canterbury rebuild estimated to be worth $40 billion;
•    export prices relative to import prices have risen dramatically;
•    exports to China as a percentage of GDP have more than quadrupled since 2008.
•    interest rates are still around 50-year lows;
•    net migration has returned; and
•    the housing wealth effect translates into higher confidence.

The first factor to go will be low interest rates. The rate hikes may begin in the next few months and once under way could be quite substantial. An increase of 200 basis points or more over the next couple of years is not difficult to imagine.

The next factor to fade away will be the Canterbury rebuild. This will probably peak around 2016/17. After that, the building and construction sector will return to a more normal development path.

One factor likely to remain positive for the foreseeable future are favourable terms of trade.

The Asian appetite for dairy products will continue to grow but this is no guarantee the terms of trade will stay up forever.

A similar word of caution is appropriate about trade with China. While the growth rates since the 2008 free­trade agreement have been phenomenal, the relationship will mature and the pace of growth will inevitably slow.

Finally, the housing market could also slow down. Even in severely constrained housing markets prices cannot only go one way as the UK demonstrated during the financial crisis.

As interest rates return to more normal levels, a correction remains a real possibility. The Reserve Bank’s double-whammy of macroprudential regulation and rising interest rates could take some of the steam out of the housing market.

Most booms contain the seeds of their own destruction. While I certainly do not want to spoil the party, it is evident there are elements about the upswing that do not lend themselves to being a long-term foundation of prosperity.

One would not usually build a country’s economic business model on a recovery from natural disaster, ultra-low interest rates and rising house prices.

We should use the good times to hedge bets by preparing for the time when the positive one-off factors run out. Improving our openness to trade and foreign capital, reforming public services, reducing red tape – in short everything that can make the economy more productive – are what we should do.

The other thing is to continue the path of fiscal consolidation. Finance Minister Bill English has been absolutely right with his insistence on returning the budget to surplus. He should not stop there once he has reached this goal. Repaying govern­ment debt now is the best preparation for the next downturn.