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'TIS THE SEASON

It's that time when we get together with our families and friends, maybe head to the coast to feel the sand between our toes, go swimming, camping, or just kick back to read and relax. Naturally, we at AdviceFirst will be taking some time away from the office. We close at lunchtime on Friday 22 December and will be away until Monday 8 January 2018.

However, if you need to get hold of us in an emergency or urgent situation, we're making sure that you can.

You’ll still be able to reach us on 0800 438 238 or letstalk@advicefirst.co.nz for our on-call details during the holiday period.

kids in the tent

 

The image featured on our 'latest news' section was artwork by Starship Hospital Patient, Margara Van Wyk.  All credit to Starship Foundation

ADVICE ON GETTING THE MOST FROM YOUR ADVISER

People who engage a Financial Adviser often say that they wondered how they used to get on without one. After all, having your financial arrangements professionally organised makes life easier, and creates a confidence that you’re leaving nothing to chance, fate, or wishful thinking.

Your relationship with your Financial Adviser is unique in so far as you're entrusting them with many of your most important life matters. They're not simply working for you, but with you.

office setting from high viewpoint

As an AdviceFirst client you can benefit even more, because we’ve structured our business for our clients to get everything they want from one experienced Financial Adviser who is supported by our wider team.

The best Financial Advisers, take a 360-degree point of view - they're interested in your needs and your family's needs. They will have in-depth conversations with you about your financial situation, to help you "realise a better financial future". Effective financial advice is about your adviser seeing your bigger picture.

A Financial Adviser worth their salt is with you for the long haul, so they should consider their dealings with you as part of a long-term working relationship. They're not there to sell you products but to add value to your life, so it's important that your adviser is investing time and effort in their relationship with you.

In the end, your adviser should have a clear understanding of you, your family, your needs and goals, and should have the knowledge, experience and expertise that enables them to provide ideas and products that you know are the right fit for you. That's the real test.

AdviceFirst provides financial advice to help thousands of New Zealanders stay on track with quality advice through life. We’re the country’s largest financial advice business of our type, with offices nationwide. This means you can also talk to our wider team of specialists for advice on KiwiSaver, investments and a comprehensive range of insurance products to help you realise your financial future.

TIPS FOR THE CLEVER KIWISAVER MEMBER

KiwiSaver has been around for over ten years and incredibly, there are now over 2.6million members*.

The KiwiSaver scheme seems simple enough; if you’re employed contributions can be deducted from your wages, automatically. So, once you’ve joined KiwiSaver, and are making regular automatic contributions, you can just forget about it; right?

Well, we think it’s better to take a more hands on approach.   kid digging with dad

Instead of a 'set and forget' approach, if you want to make the most of your KiwiSaver account, it's well worth taking another look at your account armed with these helpful tips from our experts.

Increase your account balance
In addition to your regular contributions, you can make voluntary contributions any time you like, so if you've got some spare cash, you can put it into your KiwiSaver fund. Even just a few dollars helps.

The Great Escape
Many KiwiSaver members have never moved out of the Default Fund - the investment portfolio that they were automatically put in when they first joined KiwiSaver. If this includes you, could you do better by escaping, or rather transferring, to a different fund? Most probably. Talk to us to about which fund you should transfer to.

Your gift from the Government
A popular KiwiSaver feature comes to you courtesy of contributions from the New Zealand Government in the form of member tax credits. These annual Government contributions are a great way to add more to your savings each year. Again, talk to us to make sure you're getting the most member tax credits that you may be eligible for.

Pay close attention
You could adopt a 'she'll be right ' approach, and let your KiwiSaver account take its course. But it's much better to keep an eye on things every now and again to see how your funds are doing, tweak your mix of portfolios, or maybe even join a different better performing KiwiSaver scheme provider. Again, we encourage you to tap into our expertise to help get your KiwiSaver account working harder for you.

* https://fma.govt.nz/assets/Reports/161004-FMA-KiwiSaver-Report-2016.pdf

THE LAST DETAIL

They say that the devil is in the detail, and when it comes to insurance, having an expert Financial Adviser to guide you through those all-important descriptions and clauses in your insurance policy document is absolutely essential. This fact was brought dramatically home when an AdviceFirst client with Accelerated Trauma cover contacted us asking for help to make a claim on his policy. A policy that he’d had in place for 16 years.

Earlier this year, the client had been diagnosed with bowel cancer. His Financial Adviser, Dave Telfer, met with him and examined the policy in detail. Dave takes over the story.

“He told me his illness was terminal, and because I could see he had life insurance, I realised that with less than 12 months to live, he may be eligible for an early payment of the life insurance benefit under the terms of his policy for the sum insured of $500,000, instead of only the linked trauma sum insured of $150,000.* " Without an adviser to look over his policy in detail the client may not have realised that he could submit a terminal illness claim under the life cover benefit of his policy**.

Dave continues: "When someone takes out a life insurance policy many years prior to making a claim, they can lose sight of what cover they’ve got. It’s our job to help them understand the cover they have in place."

The client had been paying premiums for years and was dedicated to the concept of insurance. He thoroughly deserved to get the money, Dave says. "Although it was bittersweet, it was cool to give him the cheque."    Dave Telfer

“That early payment of the life insurance benefit has allowed our client to plan for his departure by providing for his family. The money has helped him renovate a house that he's bought for his daughter and grandchild where they can live happily and comfortably.”

*Payment of a linked/accelerated trauma benefit reduces the sum insured of the life cover benefit by the amount paid for the trauma claim.
**Life Insurance policies contain different definitions of terminal illness, so you need to refer to the relevant policy document for the criteria for a terminal illness claim, or talk to your AdviceFirst adviser.

IS TIME ON YOUR SIDE?

"Time is on my side..." sang Mick Jagger in 1964. Mind you, he was just twenty-one when he penned those lyrics and he was right, with a long life on stage ahead of him.

Personal InsuranceAs we go through our own life stages, our personal insurance needs may change. And so do things around us. Interestingly, the medical conditions or events that we claim for under our personal insurance policies may be quite different when we're under forty, compared with, say, when we're over seventy.

Now, Sovereign has thrown a spotlight on this with its Claims Statistics 2017. The company has analysed the type of claims that different age groups make. It's worth taking a closer look because there are some very useful insights and learnings.

For instance, Sovereign comments that younger people might have less need to make a claim, but by getting insurance when they're in good health means their cover may be “more affordable and inclusive in the long run.”

Remember to talk to us about having the right insurance for your stage in life.

Click here to read the Sovereign claims figures - it's an interesting read.

GOALS-BASED INVESTING – A NEW APPROACH TO AN OLD QUESTION

When discussing a client’s financial planning needs, and specifically what portfolio to establish, an adviser is required to navigate through the client’s specific needs and goals. This is with an ultimate view to provide a portfolio from within the specific discipline and processes that will meet the client’s expectations, while importantly avoiding as much risk as possible.

While focusing on the growth of a portfolio is primarily what an adviser is often engaged to do, especially with historic low bank rates as we face now, a better and more client centric approach is to ensure the clients goals are incorporated into their financial plan.

Traditionally, this has been done by aligning these clients’ needs and goals to a risk profile. In turn, this risk profile is aligned with a Strategic Asset Allocation (SAA) where a mix of asset class sectors has been applied.

For example, a balanced portfolio has 60% growth assets (shares etc) and 40% income assets (bonds and cash etc). Another layer on this is where fund managers see the market as it sits and apply tilts that underweight or overweight certain assets; this is called the Dynamic Asset Allocation (DAA). Again, for example, a Model Portfolio, for a Balanced Investor, has 57% growth assets and 43% income assets; in effect, a 3% variance.

This process has allowed financial planners and investment advisers to construct a portfolio that sits within their allowed variances of the SAA, while still trying to construct a portfolio with sub-asset classes to meet their goals. This also requires the adviser to be in tune with their client.

While many of these features can be achieved via the portfolio construction and the review / rebalance process, there is a ground swell of movement where such funds can build in the rebalancing function for the client. While these solutions may not make up the entire client portfolio, they certainly may be incorporated into the wider asset management structure.

What is also appealing for some investors, in some cases, are Absolute Return funds. Absolute Return is the return that an asset achieves over a certain period, expressed as a percentage that an asset achieves over a given period. Absolute Return differs from Relative Return because it is concerned with the return of an asset and does not compare it to any other measure or benchmark. Therefore, the saying “you can’t eat relative returns” rings true.

In practice, an Absolute Return fund invests into asset classes its sees as appropriate for the time. While it may have an SAA, its DAA may vary totally and as such, it may be a highly traded fund.

Therefore Goals-based funds tend to have a lot more focus on protecting downside risk. This is particularly important for retirees because we all saw what happened in the Global Financial Crisis with more traditional balanced funds. They followed the market straight down1. With the growth of KiwiSaver account balances to a point where they provide meaningful income levels for their clients, I see that Goal-based products will provide a natural transition out of the multi-sector funds once income is started to be drawn. This will form a part of the advice process and KiwiSaver Scheme and fund selection process.

While there has been a trend to low cost passive funds in what has been an extended bull market, we see clients now looking to better downside protection in an uncertain market.

In AMP Capital’s article – An Introduction to Goals Based Investing, they say that “The goals-based approach to investing is different as it represents a real shift in the way financial advice is given and the way investment solutions are designed. You could say it’s about turning financial advice and investment products on their head. However, it is important to note that the principles of diversification and risk management are still an important part of the portfolio construction process”.2

Investing for sustainable, long-term wealth creation in a changing investment environment requires a different way of thinking. Success in today’s market calls for a more flexible approach and the ability to respond swiftly to change. This means a more dynamic approach to asset allocation and a focus on specific outcomes so investors can achieve their investment goals.

A good adviser will seek the appropriate mix for their client based on their goals. A Goals-based approach is built around helping people accomplish their goals, rather than focusing solely on investment management and performance. Therefore, you can assume that a goal-based fund may indeed be part of the appropriate mix for clients moving forward.

Written by Tobias Taylor
Head of Wealth Management
021 286 2427
tobias.taylor@advicefirst.co.nz

Tobias SPICERS HB 027 use this 3 qaurter

1 http://www.ampcapital.com.au/goals/articles/april-2017/how-goals-based-investing-transformed-this-advice

2 AMP Capital New Zealand: An Introduction to Goals-Based Investing

A WORD FROM OUR COLLEAGUES AT AMP CAPITAL

Click here to read the latest edition of AMP Capital's Quarterly Strategic Outlook, for the latest in-depth industry news for investors.

GET BBQ-FIT FOR SUMMER

Summer means BBQs, and this article caught our eye recently. It's a handy guide to getting your place ready for the BBQ season, courtesy of Selley's.

While it may not have a financial aspect to it, it definitely offers up some good practical advice about making the most of life around the barbie this Summer. See what you think.

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