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Just what the doctor ordered?

Earlier this year, we received notification from a client who wanted to cancel his cover because he thought it was too expensive. Our Adviser, Dean MacLeod, met with the client to review his policy and situation.

Dean takes up the story. “First, I completed a ‘needs analysis’ looking at his current situation which indicated some changes could be made to reduce his premiums. I also asked him if he had any health issues.”

It turned out that the client had a melanoma removed from his forehead a couple of years earlier. Thankfully, the cost of this procedure was paid by his medical insurance.

“I recommended before we made any changes to his life insurance policy, we submit a trauma claim. He was comfortable with the idea, but didn’t believe it would qualify,” says Dean.

For the next two months, Dean found himself chasing the client for the completed claim form. “He eventually told me that the surgeon was delaying the process, saying the client shouldn’t bother with the claim as he wouldn’t qualify,” says Dean.

“I pointed out to the client that while doctors are absolute experts in their field, the decision rests solely with the insurers whether a claim is paid or not, and to ask the surgeon again to complete his part of the claim form.”

Four days after submitting the claim, a full trauma claim of $165,286.27 was paid into the client’s bank account.

And after all this, the client has decided he needs to keep his policy.

It goes to show the importance of regular financial reviews and meeting with your experienced financial adviser, particularly one who specialises in this kind of situation.

You may not remember all the details of your policy, but that’s why it’s important to keep in regular contact with your financial adviser – because we know the products inside out. We know the providers. We know what the fine print really means. And we’ll be there to help you at claim time.

Give your financial adviser a call today on 0800 438 238 – we’re happy to help.

Cocksy’s story

This short video highlights the importance and value of Income Protection Insurance, with the moving story of celebrity builder Cocksy, and how his cover has given him the chance to live life to the fullest, and help his family do the same after he’s gone. Watch this must-see two and a half-minute video here.

If you’d like to speak to one of our experts about Income Protection Insurance, give your AdviceFirst adviser a call today on 0800 438 238 or click here to send an email.

Great expectations

springFrom rain on a long weekend, to the bargain-priced toaster that gave up the ghost after only a couple of months, sometimes we don’t quite get the outcome we hoped for or expected.

When it comes to insurance, we think it’s essential that the cover you pay for is right for you.

Take your home and contents cover. Does it cover everything you expect it to cover? The devil is always in the detail.

Buying a one-size-fits-all policy online with a click of a mouse can seem convenient and a time-saver, and sometimes it is. But always check the policy details ensuring you know what you are covered for, or not and, the values of your sums insured plus the excesses applying to any claims. Make sure insurance will meet your expectations now, to ensure any claims you may have to make are in line with what you expect.

Remember, it’s better to know the limits and pitfalls of your policy now, rather than at claim time.

There are an increasing number of news headlines on underinsurance in New Zealand, especially since the number of natural disasters over the last five years. Luckily, you don’t need to be underinsured. Even if you discover that you need to double your sum insured, don’t worry as this doesn’t necessarily mean your premiums will cost twice as much.

One of our experts can review your cover and help you make sure it meets your expectations. We have the knowledge and the tools that help put us ahead of the pack when it comes to reviewing your needs and the insurance solution that best suits you.

So please get in touch with us, and get the friendly, expert service that you’ve come to expect.

Click here to email us now, or give your AdviceFirst Financial Adviser a call on 0800 438 238 and they’ll put you in touch with the right expert.

Be prepared for a cyber-attack

More and more of today’s criminals don’t bother with a physical break-in. They sneak in through your computer cables, via your internet connection and steal, or corrupt, information. Another mode of operation is to lock down your server and demand a ransom to unlock it, again costing you time and money.

It can take weeks to recover data or find the cause of the breach. You may lose revenue if you can’t trade, causing cashflow problems.

Some of the most common cyber threats and digital issues include:

  • Cyber-Attacks – Hacking, Ransomware, Malware, Viruses, Phishing
  • Systems Damage – Equipment Failure, Software Corruption, Sabotage and even Human Error
  • Privacy Breaches – Legal Issues, Reputational Damage
  • Loss of Internet Connection – Unable to Operate, Loss of Business and Income

If you’re concerned that your business is vulnerable to a cyber-attack give our team a call today on 0800 438 238 to chat about your Cyber Insurance options.

Quarterly strategic outlook

The global economy remains on track this year for its highest GDP growth rate since 2011. Reflecting the cyclical improvement in economic growth, many central banks have become more hawkish recently, getting ready to either wind back their easing or start raising interest rates. The US is furthest through the monetary policy normalisation process. While the outlook there has become less certain following a number of lower than expected inflation results, we expect the Fed to continue on with gradual withdrawal of monetary stimulus.

Improving economic growth around the world will generally support equities and challenge bonds. That’s because this growth is more ‘traditional’ in nature, arising from better employment and demand, and thus allowing prices (and potentially profits) to rise. However, it is important not to chase well-developed market rallies, even when immediate risks are not apparent.

Read AMP Capital’s full outlook for the New Zealand and global economies, and across asset classes, in the July edition of Quarterly Strategic Outlook.

When your conservative portfolio is not so ‘conservative’

Element of risk enters conservative investment portfolios

The word ‘conservative’, particularly when it comes to conservative investment portfolios, usually suggests stable, defensive and steady-as-she-goes, but in these changing times, there are early warning signs that a ‘conservative investment portfolio’ may no longer be the haven that it once was.

Most people who don’t have a huge appetite for risk, often because their earnings potential is declining due to age or because they need the income from their investments, will traditionally opt for a conservative investment portfolio. A conservative portfolio may be 75% bonds and cash, and just 25% of so-called riskier growth assets or shares – but the world is a different place from what it was five or ten years ago.

We are living in times of unprecedented and historic low-interest rates, not just here in New Zealand – where the Reserve Bank of New Zealand just recently left its official cash rate unchanged at 1.75% – but also in many of the world’s major economies.

Interest rates likely to rise

Essentially this means that cash investments are currently returning next to nothing, which puts pressure on people who rely on their investments for income. Meanwhile, inflationary pressures are increasing here in New Zealand and abroad – recent moderations in inflationary growth, due to a fall in energy prices, are unlikely to be long-term as low unemployment continues to exert upward pressure on wages and, as a consequence, prices.

The New Zealand Reserve Bank also needs to keep money flowing through our economy which, as it strengthens, may lead to rising interest rates to balance inflation.

On top of this, economists are also warning that we can expect to see higher interest rates due to positive growth outlooks, possibly early or mid-2018 here in New Zealand, while the Federal Reserve in the United States has already increased interest rates twice this year.

At the moment, New Zealand’s banks are struggling to find cash to lend because the low-interest rate environment is deterring local investors from cash investments. As a result, local banks are having to source funds overseas, where rising interest rates are in turn making those funds more expensive. Ultimately, this will likely cause our banks to increase interest rates locally to attract ‘cheaper’ money.

The upshot is that interest rates are likely to rise and, while this is good for cash investment returns, it’s not so good for the other half of your income portfolio, bonds.

The Effect of Market Interest Rates on Bond Prices and Yield

Bonds can comprise around 40% to 75% of some conservative portfolios.

Traditionally part of a portfolio to offer liquidity and flexibility, bonds can be defined as a ‘debt investment’, because when you buy bonds, you are essentially loaning money to an entity like a corporate or government e.g. government bonds.

A fundamental principle of bond investing is that market interest rates and bond prices generally move in opposite directions (i.e. inversely related). This means when market interest rates rise, prices of fixed-rate bonds fall.

A seesaw, such as the one pictured below, can help you visualise the relationship between market interest rates and bond prices. Imagine that one end of the seesaw represents the market interest rate and the other end represents the price of a fixed-rate bond.

A bond’s yield to maturity shows how much an investor’s money will earn if the bond is held until it matures. For example, let’s say a 10-year bond offers a 3% interest rate, and a year later market interest rates rise to 4%. The bond will still pay a 3% interest rate, making it less valuable than new bonds paying just a 4% interest rate. If you sell the 3% bond before it matures, you will find that its price is lower than it was a year ago.

In summary, conservative investment portfolios may not be that conservative in a rising interest rate environment, as those bonds might have negative returns.

Time to challenge thinking about what's conservative

Naturally, everybody’s needs are different, and each investment portfolio should be structured according to your individual risk profile, goals and needs – based on professional investment advice – but perhaps it is time to challenge yourself with some ‘outside the square’ thinking when it comes to structuring your conservative investment portfolio.

It is possible to achieve income and liquidity (traditionally viewed as the domain of bonds) from growth assets without being locked into low-yield returning deposits. Managed funds, for example, offer ways to achieve liquidity as well as solid returns, so long as you are prepared to take a portfolio-wide view of your investments.

If you’d like to take the opportunity to review your investment portfolio, contact your financial adviser today on 0800 438 238 or click here to send us an email.

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