Booster's New KiwiSaver App
Booster have made checking your account so much easier! Booster NZ App is now ready for clients Booster What you can do......
One of the really positive aspects of KiwiSaver and regulation has been the attention it has created to a formerly barren landscape of intelligent journalistic investment discussion. For many years’ fund managers, banks, finance companies and insurance institutions have set their own professional protocols and standards. Products and representatives. That has changed. Returns, fees, product benefits are far more transparent. And now, with the attention being drawn to socially responsible investing, at least asset class is becoming a topic of conversation and debate.
Asset classes are the securities fund managers invest into. Fundamentally, Shares, Property, Fixed Income and Cash. The proportion of money allocated to each of these assets is disproportionate to any other investment practice as it relates to investors returns. 94% of return will be determined by asset class apportionment. The higher the allocation to growth investments (shares and property) the greater the return.
As investors become better informed they become more discerning and product suppliers must react to a changing demand. That is occurring now with issues such as fees and individual security ownership, but just as has occurred in the IT industry ‘early adopters’ can pay the price on behalf of the greater majority.
SRI or socially responsible investment is a generic term that combines the financial objectives of investors with environmental, social and governance issues. At the moment most KiwiSaver funds are reacting to the pressure of the changing demand. There are socially responsible funds but they come at a cost (at the moment) and they are not competitive.
they are small in aggregate .2% of KiwiSaver funds in total
their fees are higher
their investment returns are below average
These issues will change but just at the moment I wouldn’t recommend a morality vote on asset allocation. SRI investing is something to review however and ongoing advice should be sort when considering critical financial planning principles and practices.
The time to review all financial decisions is at least annually and those decisions should relate to goal outcomes as well as moral expectations. The investment portfolio and its incumbent securities being the servant of the overall plan. When investors react to political, environmental or economic cycles they are mostly disadvantaged. I’m absolutely supportive of investor choice and client/adviser morality however, just as one would take legal advice for a matrimonial or business decision and/or accounting advice with regard tax compliance and benchmarking – pragmatism is beneficial most of the time.
There are many reasons for changing product suppliers and professional advisers over one’s lifetime – from banks, fund managers, mortgage brokers, insurance agents and investment planners, however the rationale should seldom reflect impulse or emotion.
Money and morality are such conflicting bed mates that one’s judgement can often be influenced inappropriately. As the nuances of learning about investment; principles, practices, people and plans develop the overall capitalist system becomes intertwined with political, economic and business interaction. When one person’s morality is another’s disdain. One person’s religious beliefs another’s contempt. One person’s monetary righteousness another’s envy.
In time the market will create greater choice of products and provide a better education for its participants. It is only 10 years since the introduction of KiwiSaver and less since the empowerment of the Commerce Commission, already we have experienced leaps in knowledge and positive outcomes for all New Zealanders. If we allow politicians, journalists or self-interest to invade fundamental good practice our own interests and our own mental state will be continually in turmoil.
Choose a professional adviser with whom you register trust, respect and like – then debate your concerns or wishes on an annual basis with them and get on with living life to the full. It is their responsibility to provide direction and keep you focused to your goals and aspirations.
Written by John Killick
Chairman - FoxPlan
Image courtesy of pixabay.com