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INVEST IN YOURSELF UPSKILL, ENGAGE AND INNOVATE WOMEN, MONEY AND WHY IT MATTERS VALUE OF FINANCIAL ADVICE
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MAKE YOUR LUCK When preparedness meets opportunity
The Retirement Gap • Economic Lessons from 2022 • Northern Luxe
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Contents IN THIS ISSUE
12.
What We Like
PERSONAL FINANCE
The hottest places, products and services.
14.
Essentials Scents, colours and inspiration for the warmer months.
16.
Going Up, Going Down Economist Cameron Bagrie takes a good hard look at New Zealand and how we are doing as a nation.
20.
People Who Make Their Own Luck Martin Hawes believes luck is when preparedness meets opportunity. After all, why let a good slump go to waste?
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Women, Money and Why it Matters Women in Aotearoa make less money and have lower KiwiSaver balances compared to men. Amy Hamilton Chadwick explores the problems and the solutions.
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Gender Retirement Gap Ben Tutty explores solutions for the gender retirement gap.
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Insurance Gap Explored Partners Life looks at under-insurance in women.
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Becoming Your Own Boss Michelle Robertshaw has forged her own path in the kitchen business.
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Out of the Blue There are many opportunities in the new Blue Pacific Continent.
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Markets Always Find a Bottom CMC Markets’ Chris Smith on how the bottom of the market creates the next bull market.
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Invest in the Future NFTs and the metaverse may offer investors a new world of opportunities.
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4 Trends for 2023 Ross Verry from Syndex explores where investors are turning in these uncertain times.
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Recession Ahoy Andrew Kenningham on the possibility of a global recession, and the good news around the corner.
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Snapshot: Innovation Events shaping the world over the past three months.
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Bridging the KiwiSaver Gap David Copson from Booster on ways to reach your KiwiSaver goals.
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Why Should you use a Financial Adviser? Laine Moger discusses the value an adviser can bring to your portfolio.
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Staying on Top of Money A good insurer will help you stay on top of money even when times are tough.
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Investing Lessons from 2022 PIE Funds founder and CEO Mike Taylor on the challenging year we’ve experienced.
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Why do Women Spend Money? Lynda Moore discusses why women spend money and ways to put brakes on that spending.
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Accessible Investment Kernel Wealth founder Dean Anderson on making investment accessible.
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Taking the Pain out of Budgeting Online budgeting tools can be a vital piece of kit when tackling inflation.
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Contents PROPERTY
78.
3 Stages of Property Ed McKnight from Opes Partners discusses the stages of property and how to make them work for you.
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PMG Scott McKenzie on the storm clouds ahead, lessons he’s learned as an investor, and how to keep cool when the road gets bumpy.
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Fresh Shoots Emerging While the spring was quiet, Jen Baird CEO of REINZ says that there are signs of future growth.
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Good Advice Matters Andrew Nicol from Opes Partners on why advice matters when it comes to property.
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Commercial Opportunities In spite of market challenges commercial property presents a good investment opportunity – particularly in the industrial sector.
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Investing in an Upwards Market Catalyst’s Peter Norris on how investors can take advantage of today’s market.
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Fitouts in Focus Commercial interior design is changing with the times as we move from lockdown at home back to the office.
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Life Hacks A new board game called Hackt!cs is the brainchild of a veteran property investor with a passion for educating young people.
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Outside the Investment Box Unconventional commercial investment opportunities are Silverfin Capital's speciality.
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INVEST IN YOURSELF
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Power of Good Communication Our new columnist Miroslav Petrovic discusses how successful leaders utilise the power of communication.
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Power Dressing The new season brings some strong and bold pieces, scents and accessories.
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Unexpected Treasure Whangārei offers a new treasure and some great luxury options for New Zealand travellers.
Asteron Life. Supporters for life. Life insurance that’s here for you when it really matters.
To find an adviser, visit asteronlife.co.nz
EDITOR’S LET TER
Published by: Opes Media Informed Investor 33 Federal Street, Auckland Central, Auckland.
Investing in Yourself
www.informedinvestor.co.nz
Welcome to the summer issue of Informed Investor, as we celebrate upskilling, education and indulgence. We live in a fast-paced world and sometimes we get so caught up in the here and now we forget to invest in ourselves. In this issue of Informed Investor you will find several ways to do just that. Our lead around women and investment reveals some uncomfortable truths. Writer Amy Hamilton Chadwick explores why women are making less money, have less savings and are less represented when it comes to investment. It’s a great story for women who want to get ahead; there’s even tips for giving our daughters a head start when it comes to wealth. Ben Tutty also explores this issue, delving into women and retirement savings (there’s a big disparity here compared with men) and looks at solutions. We also chat to two women who have become their own bosses; it’s inspiring to see how they have done it and what it takes to get ahead … it’s the ultimate investment in your own potential. Our wonderful columnists will also be sharing their knowledge about everything from the lessons of the year, the property market, and thinking outside the asset class box. You will notice this issue is a bit different. In order to make the magazine more reader-
friendly we have introduced section headers: Personal Finance, Property and, finally, Invest in Yourself. The new Invest in Yourself section is the inspiration behind the overall theme of the magazine. Here you will find a new column on the power of good communication, some choice fashion picks, and ideas for deluxe travel. And this section will be growing – we want our readers to treat themselves! But overall, magazine's focus remains the same: providing the best, most up-to-date advice, inspiration, ideas and analysis around the world of investing. This is my first magazine as editor, having come from New Zealand Property Investor magazine (which I still edit) and years working as a freelance business and innovation writer for New Zealand Herald. I’m excited to take the reins. Watch this space! Happy reading.
Joanna Mathers Editor
Editor Joanna Mathers
Resident economist Ed McKnight
Art Director Mark Glover
Printer Crucial Colour
Account Manager Stephanie Bryant – 021 165 8018
Retail Distributor Are Direct
This magazine is subject to NZ Media Council procedures. A complaint must first be directed in writing, within one month of publication, to the email address, stephanie@informedinvestor.co.nz. If not satisfied with the response, the complaint may be referred to the Media Council PO Box 10-879, The Terrace, Wellington 6143; info@mediacouncil.org.nz. Or use the online complaint form at www.mediacouncil.org.nz. Please include copies of the article and all correspondence with the publication. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 8
Informed Investor is an investment magazine published quarterly by Opes Media. You need Informed Investor’s written permission to reproduce any part of the magazine. Advertising statements and editorial opinions in Informed Investor reflect the views of the advertisers and editorial contributors, not Informed Investor and its staff. Informed Investor’s content comes from sources that Informed Investor considers accurate, but we don’t guarantee its accuracy. Charts in Informed Investor are visually indicative, not exact. The content of Informed Investor is intended as general information only, and you use it at your own risk: Informed Investor magazine is not liable to anybody in any way at all. Informed Investor does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions. Informed Investor magazine does not give any representation regarding the quality, accuracy, completeness or merchantability of the information in this publication or that it is fit for any purpose. To advertise in Informed Investor, you must accept Informed Investor magazine’s advertising terms and conditions. Please contact Stephanie@informedinvestor.co.nz about advertising. Informed Investor is printed on environmentally responsible paper. The paper is produced using elemental chlorine-free pulp, sourced from sustainable and legally harvested farmed trees. The magazine is recyclable. PRINT ISSN 2744-6085 DIGITAL ISSN 2744-6093
crane-brothers.com
UP FRONT
Meet Some of Our Contributors CAMERON BAGRIE
JEN BAIRD
Cameron is the managing director of Bagrie Economics, a boutique research firm. He was previously chief economist at ANZ, a position he held for over 11 years.
Jen Baird is the CEO of the REINZ. She was previously the general manager of city growth at Hamilton City Council and led the marketing team at Barfoot & Thompson for nearly a decade.
ANDREW KENNINGHAM
LAINE MOGER
Andrew is the chief Europe economist for Capital Economics. He was previously an economic adviser for the United Kingdom Foreign Exchange.
Laine is a journalist at Opes Partners, having come from a reporting role at Stuff. She regularly writes for Informed Investor and NZ Property Investor and has a wealth of knowledge around property.
ANDREW NICOL
CHRIS SMITH
Andrew is an authorised financial adviser and the managing partner of Opes Partners. He has more than 15 years’ experience in banking, finance, and property.
Chris is the general manager at CMC Markets. He has more than 15 years’ investing experience in financial markets, global equity, commodity, and forex markets.
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C ONTRIBUTORS
MARTIN HAWES
CLARISSA HIRST
Martin is the chairman of the Summer KiwiSaver Investment Committee. He’s an authorised financial adviser and offers his services throughout New Zealand.
Clarissa is the Financial Services Council’s (FSC’s) head of content, communications and marketing, leading the council’s consumer strategy, diversity and inclusion initiatives, and research programme. She led the national It Starts With Action campaign to grow women’s financial wellbeing.
ED MCKNIGHT
LYNDA MOORE
Ed McKnight is Informed Investor’s economist. After working for the Auckland Philharmonia and Hatch, he now crunches data for Opes Partners.
Lynda Moore spent 20 years in her own accounting practice before co-founding Money Mentalist. She blends psychology and neuroscience with money coaching.
MIKE TAYLOR
BEN TUTTY
Mike is the founder and CEO of Pie Funds. He’s also portfolio manager of Pie Funds’ Chairman’s, Global Growth 2 and Conservative funds.
Ben is an Auckland-based but not Auckland-bound property investor and freelance writer. He’s travelled and worked across Asia, Europe, and Australasia, writing for some of the biggest names in property and finance.
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RE U P GFURLOANRTS
What We Like A showcase of the hottest products and places that are the talk of the town. Sangria and super yachts It’s hard to think of anything more relaxing than sipping on sangria while surveying super yachts from the lofty heights of a high-end eatery. This is the key to Saint Alice’s success: it has all bases covered when it comes to end-of-day tipples in the heart of the Viaduct Harbour precinct. When it comes to food, think casual cool, with a splash of hipster style. Ribeye steak and wood-fired pizzas are a centrepiece, with shared platters catering to all dietary needs. The wood-fired broccolini with burned lemon and saffron mascarpone cream is smoky with sweet and bitter undertones, courtesy of the lemon and a scattering of pomegranate. There are poutine-style fries to soak up the wine, and calamari rings with hot sauce mayo for a little heat. The wine list is extensive, but it’s the perfect place for a cocktail. Alice’s Famous Sangria is delightful, the Apple Cooler (apple rum, ginger, mint, peach liqueur, elderflower liqueur, fresh lime, topped with ginger beer) and the Kiwifright Smash (vodka, homemade kiwifruit puree, passion fruit liqueur, kiwifruit liqueur, coconut puree, lime) are both stars. But it’s the harbourside locale that really wins here. The floor-to-ceiling windows open up to reveal the sounds and smells of the sea: the creaking of yachts, the salty brine tang. You would be hard pressed to get a better glimpse of the luxury boats moored here, and as the only marina in Auckland providing customs clearance to boats 25 metres-plus, there’s bound to be something spectacular to view.
Saint Alice is open Monday to Thursday from noon to midnight; Friday and Saturdays from noon to 2am; Sundays noon to 10pm.
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W H AT W E L I K E
The 100-step knife Meticulously crafted, the Japanese Kai Shun Premier three-piece knife set features a paring knife, utility knife and chef’s knife. Founded in 1908, Kai Corporation started life as a small pocket knife manufacturer in Seki, the ancient sword-making capital of Japan. Today Kai manufactures, sells, exports and imports more than 10,000 types of cutlery and cutting tools. The tradition and skills handed down from the swordsmiths of ancient Japan have always been an inspiration and integral part of every Kai product since the company’s foundation. Similarly, Kai Shun kitchen knives are made using a combination of state of the art technology and long experience, and are highly esteemed across the world. Each Shun knife is handcrafted in Japan and requires at least 100 steps to complete. The knife set has a RRP of $785 and is available via www.kaishun.co.nz
Gaming tech for the office Logitech’s MX Mechanical Keyboard and MX Master 3S Mouse are designed for digital creators who want to bring the feeling of gaming to their working life. MX Mechanical offers a Tactile Quiet (Brown) key switch making it Logitech’s quietest mechanical keyboard ever with mechanical typing feel. The keyboard is designed with dual-coloured keycaps for an optimised peripheral view. Smart backlighting, in six lighting options, automatically adjusts brightness for ambient light and switches off when not needed for efficient battery consumption. The MX Master 3S features the MagSpeed electromagnetic wheel that zips through 1000 lines in one second, the side scroll wheel for faster horizontal navigation, and a unique ergonomic shape crafted for comfort. The products can connect to up to three different devices and are compatible across a variety of operating systems, including Windows, macOS, iPadOS, Android, Chrome OS, and Linux.
The MX Mechanical (RRP$349.90) and the MX Master 3S (RRP$179.90) are available at all major tech retailers.
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ESSENTIALS
Inspired Summer
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Delightful scents, colours and inspiration for the warm months.
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1. Aesop body protection – www.aesop.com, 2. 2023 Made of Tomorrow Planner – www.madeoftomorrow.com, 3. Adobe Newman touch table lamp – www.lightingdirect.co.nz, 4. Venus lounge chair – www.bauhaus.co.nz, 5. From Strength to Strength, Arthur C. Brooks – www.bookdepository.com, 6. Stash Box shaving men’s gift set – www.triumphanddisaster.co.nz, 7. Mother Made AM: morning mushroom powder – www.mothermade.co.nz S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 1 4
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Texture Meets Colour
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Resene My Pink
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Resene Soft Pink
Resene Crisp Green 13
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Resene Midnight Moss
Wrap your walls in cosy and soothing hues to brighten the dullest days.
8. Frank Green reusable water bottle in blushed – www.frankgreen.com, 9. Jo straw rancher natural fedora hat – www.floandfrankie.com, 10. The reversible mat – www.lululemon.co.nz, 11. Mate shoulder bag – www.chloe.com,
12. Humla bookshelf – www.bauhaus.co.nz, 13. Thea collagen energy blend – www.theamatcha.com, 14. Summer Solstice body oil – www.supersunny.co.nz
resene.co.nz/colorshops
UP FRONT
Going Up, Going Down Economist Cameron Bagrie takes a good, hard look at New Zealand and how we’re going as a nation.
Brutal There is no other way to describe the latest inflation figures, which have the annual rate of inflation at 7.2 per cent and domestic, or what we call non-tradable inflation, at 6.6 per cent. Core measures of inflation, which strip out volatile items such as fuel, continue to rise.
Multiple thieves Inflation is one thief. It siphons spending power. Fiscal drag or bracket creep, as inflation pushes people into higher tax brackets, is another. The government gets a cool $500 million a year from it, and more now given stronger inflation. Forget about changing tax rates, stop the tax thievery.
Bitter medicine No.1 More inflation equates to higher interest rates and fixed lending rates look set to push above 6 per cent. That is not high historically, but a big lift from the lows in interest rates. The interest rate on banks’ fixed-rate lending book was 3.8 per cent in August. Fixed rates are a lot higher than that. There is a lot of mortgage pain yet to come. Monetary policy takes time to work. Rate hikes over coming months will not fully impact the economy for 18 months.
Bitter medicine No.2 House prices are falling, down 8.1 per cent across NZ, and 11.2 per cent in Auckland on a year ago. They are down more from their late 2021 peak. Rising interest rates, rising supply, tighter credit conditions and removal of tax deductibility for some interest costs is a harsh combination. Mind you, house prices are up an average of 7.2 per cent over five years.
A pipeline Building consents remain strong with around 50,000 residential consents issued in the past year. The construction sector can build around 35,000 in a year, so that looks a strong pipeline of work. But with construction cost inflation rising more than 15 per cent in the past year, the pricing reality could see many parked. That would help contain inflation. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 1 6
MARKET INSIGHTS
Turning down? Rents were up strongly (4.6 per cent on last year) in the latest inflation figures, but Statistics NZ’s flow measure of rents has declined three months in a row and fallen for four of the past five months. Annual growth in the flow measure has dropped 1.3 per cent on a year ago. Flow measurement uses recently lodged tenancy data and is useful for showing turning points in the market. Falling rents are a sign of disappearing house shortages (although affordable housing remains a huge problem).
Hasta-la-vista Statistics NZ estimates we have had a net migration exodus of 11,000 people for the 12 months ended August 2022. We have lost 21,000 in the past two years. That dents a hole in the workforce.
The battle There are many battles to be won in the war against inflation, but one stands above all others. It’s jobs. Job demand is strong, reflecting economic strength. The Reserve Bank describes the labour market as being above maximum sustainable employment, which is a fancy way of saying we have scant people to employ, wage and job growth is too strong, the unemployment rate is too low, and it is adding to inflation. Curing one evil creates another. Cracking the back of inflation involves job losses.
A hefty price
The top-down approach for containing inflation is bludgeoning the economy by rising interest rates. The bottom-up approach involves stimulating supply which involves freeing up labour resources (i.e. better immigration policy), driving more competition to help contain prices, lowering business costs and boosting productivity. The latter is the more friendly approach, but involves being bold. If we want to mitigate job losses, then we need to improve the availability and efficiency of labour.
‘Trussonomics’ The new Prime Minister of the United Kingdom’s economic plan of spending big and tax cuts was firmly rejected by financial markets with interest rates rising and the pound dropping. Such was the reaction that the policy prescription was dropped, and the government’s credibility is in tatters. Stepping back, market forces have now sent a message. The era of sugarcandy economic prescriptions is coming to an end. Governments need to get their house in order and deliver substance.
Top of the pile The latest Ipsos Issues Monitor – a key survey on the mood of the nation – has inflation/cost of living as households’ key concern, a reflection of what inflation does to household purchasing power. Housing and healthcare are second and third. Crime/law and order is now number four. Crime/law and order is number two when people are asked what their biggest concerns are over the next five years.
While Bagrie Economics uses all reasonable endeavours in producing reports to ensure the information is as accurate as practicable, Bagrie Economics shall not be liable for any loss or damage sustained by any person relying on such work whatever the cause of such loss or damage. Data and information have been gathered from sources Bagrie Economics believes to be reliable. The content does not constitute advice. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 1 7
Correct as at 19 October 2022.
Top down or bottom up?
The Crown’s indemnity for the Reserve Bank’s money printing was $9.5 billion as at the end of September, and interest rates are still on the rise. That is a huge capital loss and price for taxpayers to pay for injecting just under $60 billion into the economy to navigate Covid.
F E AT U R E S
Invest
\in.vest\ (transitive verb) To make use of for future benefits or advantages. – Merriam-Webster Dictionary
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QUOTE & DEFINITION
‘An investment in knowledge pays the best interest.’ – Benjamin Franklin
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I NVESTM E NT
People Who Make Their Own Luck Martin Hawes believes luck is when preparedness meets opportunity. After all, why let a good slump go to waste. Wealthy people are lucky. This may seem a strange thing to say: most people would probably think that people become wealthy because they work hard, research financial options, make smart decisions and take on risk. All of these things are helpful, but in my experience, luck is a big factor for financial success. Now, before you bombard me with emails in disagreement, it is important to understand my definition of “luck”. I believe that luck is when preparedness meets opportunity. I do not think luck is simply about some kind of karma or fluke, a cosmic roll of the dice. Instead, it is being prepared for opportunities that arise. When you think of luck as being ready for opportunity, there are certainly people who make their own luck. I once read a study that showed many people became wealthy because they were cashed up and invested at the time of a major market crash. That meant they were prepared (they held some cash) and were ready to invest. Although many people see the current economic, political and market situation as a scary threat, I think it better to see it as an opportunity to buy investments cheaply. Crashes like these present great opportunities to profit. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 2 1
F E AT U R E S
‘There is an old investment saying that you should buy in gloom and sell in boom.’ At the moment and in just about every asset class, investment values have had quite major slumps. Just about everything you might invest in (shares, property, bonds, cyber currency, precious metals) are falling in value. And most of them look like they will fall more. Fear or opportunity? Different people react in different ways to these kinds of events – some endure them, and some enjoy them. Endure or enjoy depends on preparedness. This preparedness is partly about whether you have some cash to take advantage of the slump but, more importantly, it is about the way you think about and react to such a market fall. This is really about whether you see a market crash as something to fear or as an opportunity. I have lived and invested through five major market falls: the 1987 crash; the dot-com crash; the GFC; the Covid crash and now this. My experience is that markets recover in time, barring the odd, unusual event (e.g. the Japan crash of 1989). Within a few months or years, markets have risen strongly again and that makes those prepared to enjoy a crash much better off. I know that buying at a time like this is not easy – during a crash it seems like the world is going to hell in a hand basket. There is a wall of negative noise coming out through the media; noise that is dire enough to make anyone think the world is about to end. That is scary and means a lot of people are not prepared to invest. There is an old investment saying that you should buy in gloom and sell in boom. However, in my experience people commonly do exactly the opposite: they buy when markets are booming (because everyone is talking about the profits they are making) and then they sell when markets turn bad (they get frightened and are rattled out of the market). Using dollar-cost averaging However, these slumps (including the one we should be enjoying at the moment) can be seen as opportunities. If you invested through this current market fall it seems most likely that in five years’ time you would be very pleased with the outcome. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 2 2
Of course, we cannot be sure exactly when this slump will bottom out (no-one rings a bell to tell you when the absolute bottom has been reached) and those who try to invest at the very best time are likely to be disappointed. Perfect timing of a market is impossible. The answer to this timing problem is to not even dream on hitting the absolute bottom but instead use dollar-cost averaging. Dollar-cost averaging means that you drip feed money into investments over a period of time – i.e. investing for a few months when markets are generally down. Personally, for the last couple of months I have been making regular contributions into one of my investment accounts, taking
the opportunity to profit from the turmoil of the markets by buying in while they are cheap. I think you should get lucky by being prepared to take the current opportunity. In spite of what you read in the media, you should take an optimistic view of the longer term future and have the courage to invest when everyone else is selling. Don’t let a good slump go to waste. Martin Hawes is a financial author and speaker. He is not a Financial Advice provider nor a Financial Adviser. Information contained in this article is general in nature and is not intended to be financial advice. Before making any financial decisions, you should consult a professional financial adviser. Nothing in this publication is, or should be taken as, an offer, invitation or recommendation to buy, sell or retain a regulated financial product.
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Subscribe & Win Getting away on a camping (or glamping) holiday is the ultimate relaxation. To help you get into the summer camping spirit, we have a Lodge Wanderlust Camper Dual Handle Pan (RRP$99.99) and Lodge Wanderlust Cabin Combo Cooker (RRP$235.00) to give away to a lucky subscriber. Designed for cooking on all heat sources and made to last for generations, they are available at lodgecastiron.co.nz Any new two-year subscriptions go into the draw to win, and entries close on December 20, 2022. Terms & Conditions: 1. All prices for magazine subscriptions include free New Zealand delivery. 2. Please allow up to 10-13 weeks for your first delivery. 3. Your subscription will begin with the next available issue, and in most cases your magazine will be in your hands before it goes on sale in the shops. 4. Informed Investor magazine is published by Opes Media Limited, which handles delivery and stipulates the lead time shown above. 5. Offer available to New Zealand postal addresses only.
PERSONAL FINANCE
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INSIGHTS
Women, Money, And Why it Matters Women in Aotearoa make less money, have lower KiwiSaver balances, and end up with less in retirement compared to men. Amy Hamilton Chadwick explores the problems and the solutions.
In 1958, BNZ opened The Ladies Bank. Two days later, a strip cartoon in the New Zealand Herald showed men making deposits in one side of the bank, and ladies withdrawing all that money on the other side. Men make money, the cartoon implied, and all women do is spend it. Even at the time the bank pushed back and said the cartoon was outdated. But nearly 65 years later, women still haven’t yet been able to bridge the financial gap with men. Women in Aotearoa make less money, have lower KiwiSaver balances, and end up with less in retirement compared to men. They’re more likely to be in poverty in old age, and to struggle financially after a relationship break-up. The reasons are complex – a mix of behaviours and biases, choices and stereotypes. It’s impossible to untangle the interaction between the contributing factors. And ideas about roles within households, from the days when men doled out housekeeping money to their wives, still seem to cast their shadow. “Our research finds that women are really good at household budgeting, but less confident when it comes to investing and taking risk,” says Jane Wrightson, Retirement Commissioner at Te Ara Ahunga Ora. “My earliest money memory is asking my mother for pocket money, and I had to budget that to buy my own clothes. And anyone of a certain age will remember the Post Office savings books we had at
school. So I’ve always known how to budget – but do I know how to take risk? That’s been the big lesson for me: understanding risk and not being afraid of it.”
than twice as many women as men live in poverty over the age of 65, according to 2019 research by the University of Auckland.
It’s not about gender Women do take less risk in their investments, including their KiwiSaver accounts. But the reason is simple, according to the New Zealand Society of Actuaries: women have lower balances. How much risk we take with our funds isn’t about gender, it’s about how much money
All these financial gaps – in risk, KiwiSaver balances and retirement outcomes – are symptoms of women earning less over their lifetime. Women in New Zealand earn 9.1 per cent less than men per hour. On the international stage that’s very respectable; the WEF ranked us fourth on the lowest pay gap leader board, behind Iceland, Finland and Norway. Australia was 50th and its pay gap is currently 14.1 per cent.
And ideas about roles within households, from the days when men doled out housekeeping money to their wives, still seem to cast their shadow.
We’ve made great strides – in 1998 the gender pay gap was 16.2 per cent – but progress has slowed over the past five years. And even a relatively small gap accumulates over a lifetime to create a massive earnings gulf between the genders.
we have – and women tend to have less. Among men aged 45 to 64, 13 per cent have KiwiSaver balances of $100,000 or more, compared with 6 per cent of women.
“Women, over their lifetimes, earn $888,000 less than men,” says Jan Tinetti, Minister for Women. “The first time I said that out loud I was in a meeting with the Japanese Prime Minister’s chief adviser on women. I turned to one of my team and said, ‘Have I got that right?’ It’s a huge amount. I was horrified.”
Because people with more money take more risks, their gains tend to compound, and their money grows more aggressively. Those with less money take less risk, resulting in lower lifetime returns. Women retire with less, then live longer, so they need to make less money last longer. More
Many factors contribute to the pay gap, Tinetti says: “It reflects employment pathways, time-out patterns and occupational segregation. Real barriers still exist for women – they tend to take on childcare, for example, and caring for elderly parents.” S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 2 5
F E AT U R E S
The motherhood penalty Children are expensive, and childbirth is painful, but it might be the hidden costs of motherhood that hurt women most. Women experience a significant pay drop after the birth of their first child, and 10 years later their pay has not recovered. There was no impact on men’s pay when they became fathers. The gender pay gap is widest between parents – 2018 Ministry for Women research found that mums earned 12.5 per cent less across their working lifetimes than dads and non-parents. Taking time out of the workforce has knock-on effects – women may miss out on promotion, they miss out on contributing to KiwiSaver, and they’re more financially vulnerable if their partnership ends. The burden of caring, whether it’s kids or elderly relatives, can also hold women back even when they’re working full-time. Single mum Erica is 42 and lives in Auckland with her 10-year-old son, Max*. She has been with the same employer for 11 years. Erica knows she could earn a lot more at another employer because she is often approached on LinkedIn by other employers. “I have done a couple of interviews,” she says. “But I haven’t taken any of the jobs because I just couldn’t get the flexibility I have here [at her current employer]. My ex has moved in with his new partner and her kids in Whangārei, so he’s not here to pick up Max, and Max does heaps of sports, so basically I have to do all the running around and everything.” When it comes to her career, feeling selfconscious about her hours and prioritising her son means Erica is putting the brakes on. She feels sheepish about asking for pay rises because she arrives later than her colleagues and often leaves early: “I can’t risk losing this level of flexibility, so I try not to make waves.” Max lives with her full-time, and the idea that her ex might care for Max makes her laugh: “Not a chance. We never even discussed it when we broke up. In the early days my ex did a lot more with Max, but that’s tailed off since he moved. As soon as we separated, it was just assumed that I would be the one taking care of Max.” Supportive partner makes a difference The expectation that mothers will be the ones to put their careers on the back burner is damaging to women’s financial prospects, and Covid only made it worse. The lockdowns of 2020 and 2021 were particularly tough on mothers of young S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 2 6
children, with the OECD’s Caregiving in Crisis research finding mothers were three times as likely as fathers to take on unpaid childcare during lockdowns. “Working from home is a double-edged sword for women,” says Sharon Zollner, chief economist of ANZ. “In some relationships there’s an inequality of expectations – the woman will be the one to work from home if the child is sick. There’s an unequal relationship in terms of expectation of dropping work. Every couple has to work it out for themselves, but women in that kind of relationship may be feeling frustrated.” Zollner says her own career success has been supported by a series of excellent employers and a supportive husband. It’s been a team effort to bring in money and raise their children, with each person stepping up at different times in their relationship. “My husband agreed to move to working
part-time when I took on this job. He stepped up and took the lead at home – for me that was huge. Without his support it would have been much, much harder for me to agree to do this job. I worked part-time for years, and I didn’t feel bad about spending his money at all, now it’s the other way round!” Benefits potentially enormous The benefits of closing the financial gender gap are potentially enormous. Champions for Change estimates that if women made up 50 per cent of our workforce (up from the current 47 per cent), that would generate an additional $20 billion to $40 billion in GDP by 2030. At an individual level, improving financial outcomes for women keeps Kiwi women and children out of poverty. That’s one major driver of Tinetti’s Women’s Employment Action Plan, which aims to increase women’s financial security, make the labour market more inclusive, and support women in paid
DIVORCE COACH
Looking after Yourself If you are facing separation or divorce, consider a divorce coach. They become your thinking partner and will help you make key decisions through this difficult time, writes Bridgette Jackson, founder of Equal Exes. No-one wants to think about how a breakup would play out, especially at the start of a happy new relationship or in a longerterm relationship that feels fail-proof. However, most separations or divorces are extremely challenging and full of unwanted surprises and short and long-term impacts. Consider how a break-up might play out and what you would not want to happen. In this reflection, it is about looking after yourself.
and unpaid work, including caring. And the impact is inter-generational – when women have better financial outcomes they lift their children up with them. If you’re reading this it’s likely you’re already knowledgeable in the financial sphere, so don’t keep your knowledge to yourself. Talk to women in your life about money and investing. Ask them if they think they’re in the right type of KiwiSaver fund. Or do something practical; help them set up a Sharesies account or practice negotiating for a pay rise. Even for Wrightson, with a successful career in media under her belt, taking on a role with a financial focus was an eye-opener. “Before taking this job, I thought I was doing fine. It had never occurred to me that I could have done better with my money, but now I know that I’ve ended up with a little less than I could have. I’ve improved my risk profile. The earlier you start, the more you can achieve – knowledge is power.” *Names withheld.
It is always good to start how you mean to go on. At any relationship stage, it is perfectly acceptable to tell your partner you always want to stay involved in all joint decisions, including your finances. This is the area which has the biggest impact on your life beyond the relationship. When it comes to who fares worse from a divorce, both sexes are affected, but for different reasons. Women tend to be the losers financially, with approximately one in five women falling into poverty. Six top tips Here are some tips worth taking into consideration to safeguard your future, regardless of the state of your relationship. 1. Keep your own circle of close friends, people that know you as you and not as a couple. 2. Have your own hobby, one that gives you satisfaction and preferably one you leave the house for. 3. When it comes to your career/job, and children, childcare can take a huge part of your income. On the flipside, consider what it gives you: staying employed keeps your skills up to date and your independence, with a network of professional contacts. If working is not
an option, consider a voluntary role as that too can be important. 4. It is a good idea to keep an inventory of your combined assets that includes physical assets such as art, jewellery and any financial investments and keep it up to date. Financial assets include things such as KiwiSaver, Airpoints and investments. 5. Maintain your own bank account with a different bank and build your own nest egg of funds over time. 6. Be committed to staying involved and vested in the household finances and combined income. Also, aim to keep across expenses on a monthly basis such as fees, rates, insurance and school fees or tuition fees, even if you are not paying for them from your own money. If you ever find yourself in the position of facing separation or divorce, consider a Divorce Coach. They become your thinking partner and will help you make key decisions through this difficult time. A Divorce Coach will ensure you have a plan post-divorce as well as guide you, while keeping your emotions under control, so ultimately you can move on faster. This support will lead to a healthier and more positive separation process. Set your goals and intentions for postdivorce as a rainy-day precaution. Devoting the time to plan for a break-up, no matter how unexpected, will help minimise the financial and emotional impact on yourself.
Bridgette Jackson, founder of Equal Exes, is a CDCcertified Divorce/Separation Coach, a Settlement Strategist and qualified lawyer with a post-graduate dispute resolution qualification. She is also a trained divorce mediator.
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F E AT U R E S
5 ways to help your daughters As it stands, our daughters will earn less than our sons simply because they’re women. What can we do to support our daughters to close that gap?
3. Get them started in investing You could set her up with a KiwiSaver account, show her where it’s invested and how it can grow. Talk to her about risks and what the different types of funds could achieve over the long term. You could give her $50 and set her up in a share trading platform, and let her pick some investments. A managed fund is another option, or even a term deposit. The aim is to introduce her to investing and start to demystify it.
A minefield or an opportunity? In 2018, Starling Bank analysed the ways articles in men’s and women’s magazines talked about money, and the results were startling. Women’s magazines depicted financial planning as a complicated minefield and women as irrational and prone to impulse spending. Ninety per cent of the articles aimed at women were focused on ways to save money and spend less. In men’s magazines, the world of finance was painted as full of opportunity and easy to navigate with a few calculated risks. The importance of investment was mentioned in 73 per cent of articles. Women were positioned as “risky, high maintenance and unreliable”. Luckily there are fairly tight rules about providing financial advice in New Zealand, which helps keep financial messages reasonably well-aligned. But it is important to ensure our male-dominated financial services sector is doing a good job of speaking to women, says Wrightson. Research by the Te Ara Ahunga Ora Retirement Commission has found women are more reluctant to seek financial advice. It’s often hard to find female advisers, particularly in small towns, and information is often written by men from their own perspective. “The financial advice industry needs to think collectively about new opportunities – and a clear opportunity is women,” Wrightson says. “The people with the information need to present it in a different way, demystify money and show that investment is entirely doable.”
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1. Talk about money Talk to your children about money at an age-appropriate level from the time they start school, suggests Wrightson: “In a cashless society you need to explain to your kids how money works and how you earn it. As they get older, the conversations become more sophisticated. You want to go to university? Let’s cost that out. What can we afford, what will the government give you, what’s the gap and what’s the long-term cost of borrowing to fill that gap?” You might find they’re more interested than you expect. Zollner says talking about economics to non-economists is one of her favourite parts of the job: “It’s most often women who tell me, ‘I didn’t expect to enjoy this, but it was really interesting.’ Economics doesn’t need to be intimidating, it’s about behaviour and choices.”
2. Negotiate pocket money, chores Wrightson had to earn her pocket money by doing chores, and her daughter does the same. It provides opportunities for kids to negotiate pay rates and working requirements as well as reviewing the work and remuneration regularly. “The conversations I had with my daughter, bargaining to come to an agreement, were very good. They taught her to realise the value of her labour.”
4. Help them get their drivers’ licence Young women are less likely to have drivers’ licences than young men, according to the Ministry for Women. Driving gives young women access to jobs and training. Many jobs require a current licence, and it provides a handy form of ID.
5. Expand their career horizons Women are disproportionately represented in low-paid fields, and under-represented in high-level jobs. Talk to your daughter about jobs she might not have considered, particularly those traditionally dominated by men. For example, in 2020 the number of women apprenticing to become tradies grew 29.1 per cent, double the growth rate for men.
WYNN WILLIAMS
It’s all Yours Until it’s Not Don’t underestimate the consequences of not fully understanding the lay of the land when it comes to asset planning, writes Annabel Sheppard. How does the insurance ad go … one day you want it all, the next you have it all? It’s not such a bad truism for asset planning, except we’d want to add “… and then you don’t!” Asset planning is a lifetime’s work for most of us. We work hard, we accumulate, and we make plans for what we’d like to happen to our amassed belongings, however modest, when we’re gone. For many, things play out according to plan. However, for others things don’t always go as intended, all because decisions have been made on a set of flawed assumptions. Assumption 1 – it’s mine One of the biggest mistakes you can make is to assume you do indeed rightfully own a given asset. There’s no bigger surprise than to discover the assets you consider your own are in fact owned by your partner. Sometimes ownership structures you made when purchasing an asset are overlooked later on. If you own an asset jointly then on your death it will pass automatically to the surviving owner and will not form part of your estate. Joint bank accounts are an example, as generally is the family home, along with any investment property you may have accumulated with your partner or a family member (although not always). Sometimes ownership of these types of assets is share-based and that has implications of a different kind. The first step in any investment and asset planning should be to establish what assets you legally own and to consider whether the ownership structure of such assets fits your long-term intentions. Assumption 2 – no need for a will Another common assumption is that it doesn’t matter if you die without a will
because your partner and/or your children will automatically receive all your assets. This is not always the case and can result in unexpected consequences and your wishes are not able to be carried out. Assumption 3 – a trust trumps all The assumption that a trust negates the need for an up-to-date will is a common mistake. Not only is it important that you look at the trust structure, it’s also important to consider how your will provides for any conditions of the trust. For example, the trust may on your death owe your estate funds. You may wish to “forgive” the debt owed by your trustees to you by making appropriate provisions in your will to avoid the trustees being required to repay that debt. Not doing so could result in the need to sell assets which were intended to be passed on to the next generation. Assumption 4 – company assets – yours to do what you will If you have assets owned by your company, on your death you may not necessarily be able to dictate how these are dealt with. It will depend on the company constitution, shareholders’ agreements and, ultimately, on who the remaining directors of the company are.
Assumption 5 – income from shared assets continues If you have any assets that you share with your partner from which you receive a reasonable income, you may assume that if something happened to your partner that income would continue to be paid to you. This is not always the case. It’s important to understand the source of the income, who the decision makers are, and whose role it is to decide how the income is distributed. To make robust and sustainable decisions about your investments, first: •
Understand what your assets actually are
•
Check how your assets are owned and take time to understand what the correct ownership of your assets should be to ensure your wishes are carried out
•
Understand how your assets will be distributed on your death, separation or with other life changes.
Don’t underestimate the consequences of not fully understanding the lay of the land. Never assume; rather take the time to get the right advice and be fully informed to make appropriate decisions. Annabel Sheppard is a property law specialist with Wynn Williams. She advises on asset planning, including trust establishment and shareholder agreements. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 2 9
15 years of growth Fund manager Pie Funds launched in 2007 with a founder and one fund. Today the company manages $2 billion* of investments and has offices in Auckland, Sydney and London. Founder and Chief Investment Officer Mike Taylor looks back on the company’s success over the past 15 years.
Mike Taylor Founder and CIO
When Mike Taylor started Pie Funds, he had a simple goal. He wanted the investment funds to outperform the market. “I believed most fund managers were serial underperformers and saw an opportunity,” he says. There weren’t many smaller fund managers on the scene. Taylor was in his late 20s and didn’t have a huge track record behind him, so it was a risk. But he was confident. “I thought we should be able to beat them. I felt like we could achieve it and, if we achieved it, we would be able to get clients.” And they did get clients. Pie Funds first started managing the money of friends and family, but over time the client base grew to over 3,000 highly valued clients and nearly 20,000 KiwiSaver members. “Many of the investors from when we started are still with us. One of our biggest achievements is the wealth we have made over the years for our clients.”
A unique offering in the market Taylor launched Pie Funds with an active management strategy of concentrated high-growth portfolios that was unique, and still is now. Today this strategy remains at the core of the funds that Pie Funds offers. The team invests in high-quality growth companies with strong balance sheets and great management teams. These companies are usually founder-led too, like Pie Funds, as Taylor loves to see skin in the game. He is proud the company has been a pioneer in the industry. Getting started in the first place on his own was a “pretty unconventional” way to start as a fund manager, he admits.
“I learnt about how global stocks worked, built a strategy, over time launched nine funds including global ones, and set up a team in offices in Sydney and London. We were, and are still, one of the few fund managers to have an office in London.”
A culture of passion Another one of his biggest achievements has been building a passionate culture at Pie Funds, Taylor says. This comes through in their strong relationships with clients, he says. “Pie Funds’ people have been key to its success. Many of the early staff really shaped how the company is today.”
Where to from here? “There is always more to do, and we will continue to evolve,” Taylor says. “But always at our core will remain our philosophy that we exist to make money for our clients, rather than growing our client base,” he says. “We are back in a bear market now, which is challenging. We have a huge sense of duty to our clients and we won’t walk away in tough times. And the tough times do not last forever. “Looking back 15 years ago, I underestimated where we could be today. When I think about the next 15 years, I don’t know where we will be. But if we have good people, good processes, and good outcomes, then I know Pie Funds will continue to be successful.”
PIEFUNDS.CO.NZ
*As at 30 September 2022, including JUNO KiwiSaver Scheme. Past performance is not a reliable indicator of future performance. Returns can be negative as well as positive and returns over different periods may vary. View the Product Disclosure Statement plus our duties and complaints process and how disputes are resolved at www.piefunds. co.nz. Information is current as at 31 October 2022. Pie Funds Management Limited is the manager of the funds in the Pie Funds Management Scheme. Any advice is given by Pie Funds Management Limited and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Pie Funds Management Scheme investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you.
PERSONAL FINANCE
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RETIREMENT
Tackling the Gender Retirement Gap Women typically have far less retirement savings, a lower quality of life, and less independence in their golden years, but there is a solution, writes Ben Tutty. When my nana got a part-time job working in a dairy she and grandad had the fight of the century. The family needed money, but my mum says grandad was distraught. “He felt it showed he couldn’t provide for his family and thought that my nana should be at home cooking and doing the housework. Jean put her foot down and ended up loving that job.” Later in her life my mum took 15 years off to raise my sister and I, saying the expectations were a little less rigid but they were still there: “It would have been very unusual for your dad to stay home. Honestly, we never really imagined it could have been different.” Just like my mum and nana, several generations of Kiwi women have lived with the same expectations and gender roles. You may think those expectations don’t exist anymore but the numbers prove otherwise. In fact, globally women do an average of 4.2 hours of unpaid work each day while men do just over one hour, according to Asia-Pacific Economic Cooperation research. In fact, if women were to be paid minimum wage for their extra unpaid labour they would pocket almost $20 trillion a year (that’s 9 per cent of global GDP). S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 3 3
F E AT U R E S
A problem for us all The end result of these disparities is that women spend less time in paid work; they’re paid less when they are working; and they’re typically able to save much less.
women are able to save less for retirement as a result, that’s not their fault either.
This causes a gender retirement gap, meaning women typically have far lower retirement savings balances (and thus lower quality of life in retirement and less independence).
‘This is not a gender issue, this is an international, societal, cultural issue.’
Dr Pushpa Wood, Director Financial Education and Research Centre at Massey University, says this isn’t just a problem for women. “If women earn less for doing the same work it’s not their fault. If women are expected to do more unpaid labour, it’s not their fault. If S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 3 4
“This is not a gender issue, this is an international, societal, cultural issue. If it’s a problem for women, it’s a problem for all of us.”
Wood says these disparities can lead to several negative outcomes for women such as decreasing their independence and making them more dependant on their spouses.
“I’ve met many women for whom staying in a relationship isn’t conducive to growth, but financially it’s difficult to leave. This can make them more vulnerable to exploitation and abuse. “If you have two members of a household and one is constantly disadvantaged, how can that household operate in a healthy way?” We know there’s a gender retirement gap, but how big is it exactly? Statistics from Te Ara Ahunga Ora (the Retirement Commission) show that men at retirement age (60-65) typically have KiwiSaver balances that are 27.1% higher than women of the same age. A higher proportion of women also retire with no savings, according to Suzy Morrissey, Director of Policy at Te Ara Ahunga Ora.
RETIREMENT
“Around half of all women are living off their super alone in retirement compared to around one third of men. That’s why super is so important for women.” Career progression Morrissey explains that while traditional gender roles that cause these disparities are changing, they still exist. “It’s mostly women who take time off to look after a child. They take around 98 per cent of parental leave and often work parttime or don’t work at all for long periods. “On the other hand, men’s labour market participation is barely affected by having a child. That means women fall behind in career progression and often don’t contribute to KiwiSaver while they’re taking time off.”
Interestingly the gender pay gap is widest between the age of 41-45 at 16.7 per cent, which may be when many women are typically returning to work after a long break to raise children. The gender
‘While traditional gender roles that cause these disparities are changing, they still exist.’ retirement gap then rises sharply, peaking between the ages of 51-55 at 33.5 per cent and shows that the two are closely linked. The gender retirement gap isn’t something that women can solve on their own,
according to Clarissa Hirst, Head of Content, Communications and Marketing at the Financial Services Council. “We as women can take small steps, but without significant change at a policy and societal level, I don’t think we are going to shift the dial. “The way KiwiSaver is set up makes it most beneficial to those who are employed throughout their lives, and don’t take breaks to undertake unpaid work or go on parental leave.” With that said, Hirst adds there are things women can do to make improvements for themselves. “Start talking about money with friends and whānau. Look into your KiwiSaver and learn about where you’re investing and how S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 3 5
F E AT U R E S
The expectation around who takes care of a child needs to shift so that it becomes normalised that men do as much as women. much. Talk to a financial mentor (they’re free) or a financial adviser. “If you’re preparing to go on parental leave, talk to your employer about your KiwiSaver contributions. Most won’t continue to pay them during mat leave but some, like Z Energy, are starting to and asking the question might make them consider it.” As Hirst says, while women can make small changes for themselves it’s been heartening to see institutions taking this problem seriously at recent FSC conferences. “Any significant change is going to need to happen at a macro level. We’ve got KiwiSaver industry leaders talking about what potentially needs to change with KiwiSaver at the moment … I’m hopeful we can reach a point where KiwiSaver is an equitable retirement scheme for all New Zealanders.” Bigger boat, bigger ideas When a gigantic great white started attacking their vessel in the film Jaws, Martin Brody yelled, “You’re going to need a bigger boat”. The same can be said of the gender retirement gap. It’s a huge societywide problem and if we’re serious about solving it, we’re going to need bigger ideas. Morrissey says there are a few things we could change at policy level. “Independently paid parental leave for each parent is one thing. This would mean the father has leave that only they can use so that they take time off and get into the swing of that caring role.” Reducing the cost of childcare could help, as could the government or employers continuing KiwiSaver contributions when people take time off to raise children. These changes could make a real difference but ultimately, Morrissey adds, it’s our culture and society that needs to change. “These things are complementary but they don’t get to the core of the problem. Ultimately we need to be more supportive of people who make different decisions and say ‘good on you’ to men who decide to be the primary carer. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 3 6
“Employers should be just as open talking to males about reducing hours or taking time off for childcare. How that’s received and supported in the workplace and within our families plays a big part.” The expectation around who takes care of a child needs to shift so that it becomes normalised that men do as much as women. Conversations around who will be a child’s primary carer need to start on equal footing and these changes need to happen on an individual level, a household level.
could support women’s ability to choose how much they work.” Changing the very nature of our gender roles, the way our families are structured and the composition of our workforce sounds like a big job, and it is, but Morrissey reckons it’s achievable.
Remote working could also be another factor that helps bridge the gap.
“We’ve had an enormous amount of social change in the past, whether it’s legalising same sex marriage or giving women the vote. The gender retirement gap is one of those problems that seems intractable, but the past proves we are capable of making major changes.
“Flexible working and working from home allows women to participate in more paid hours of work and as we move forward it
“And if all of us don’t start thinking about making changes now this is how it will always be.”
Give your KiwiSaver savings the green light to grow with our award-winning Socially Responsible funds
Awarded the 2022 Canstar Outstanding Value 5-Star Rating for both Socially Responsible Investment High Growth & Balanced KiwiSaver Funds
The Canstar 5-Star Rating for Outstanding Value - Balanced KiwiSaver was awarded in 2022 for the Booster Socially Responsible Balanced Fund and Booster Socially Responsible High Growth Fund in the KiwiSaver profile. The Canstar 5-Star Rating for Outstanding Value - Aggressive KiwiSaver was awarded in 2022 for the Booster Socially Responsible High Growth Fund in the KiwiSaver profile. Booster Investment Management Limited is the manager and issuer of the Booster KiwiSaver Scheme (Scheme). The Scheme’s Product Disclosure Statements are available at www.booster.co.nz or by contacting your financial adviser.
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PA R T N E R S L I F E
Watch that Insurance Gap Research shows women seem more likely to underestimate their financial worth and are more heavily represented in the under-insured category.
Being a woman isn’t always easy, they’ve had to fight for a lot of their rights over the years, like the right to vote and reduction of the gender pay gap. But gender pay isn’t the only gap that affects women; they’re also affected by the under-insurance gap. In 2020, Financial Services Council (FSC) research showed that a whopping 91 per cent of New Zealanders either don’t have, or have insufficient critical illness insurance (think cover for things like strokes and heart attacks), followed closely by 89 per cent of Kiwis who have limited to no cover for protecting their income. While these statistics include men and women, research by the FSC shows women seem more likely to underestimate their financial worth and are more heavily represented in the under-insured category. Most Kiwis are under the impression they are in a better financial position than they actually are. As a general rule we are not overly worried about our financial security. But, if you were to specifically ask someone on the street if they could comfortably live off their savings for more than a month without an income, the answer would almost certainly be “no”. Valuable contributions Not every Kiwi is under this impression. In December 2021 the FSC reported on women and their financial wellbeing and found 60 per cent worry about their finances to the point that it can influence their everyday life. Traditional gender roles have changed a lot over the years; long gone are the days when a woman’s sole purpose was to stay home
and have babies. According to Statistics New Zealand women make up 47 per cent of our workforce. Women are out there making valuable contributions to their communities and society, so why are they not helping to safeguard themselves? There are many reasons women may not have adequate insurance. Maybe they aren’t the main “breadwinner” of the family and therefore don’t see protecting their own financial contributions as being as important; there could be a lack of knowledge around why it’s important to have it in place, or when thinking of insurance, the subject of mortality can be daunting and perhaps even confronting. While all these reasons can be valid, they aren’t a good reason to at least understand the financial risks you and your family might face and how you might mitigate them. We invite you to look at the below scenarios to see if they apply to you. Scenario one: You’re a stay-at-home mum, your family relies on you to keep doing the things that make you a great mum and keep the house in order (because let’s face it, you run this house). What happens if you become incapacitated and no longer able do these things? Do you have enough resources to help look after your family and run the house while you recover? Would your family incur additional costs for childcare? Would your partner need to change their working situation to accommodate this temporary change in lifestyle? Scenario two: You’re a woman who may or may not be in a long-term relationship and living life to the full on your single income. Are you prepared to cover any unexpected costs that may arise should you need to take
time off work for medical reasons? “Oh, but I have a partner” I hear some of you say. Does your partner have enough excess income to cover any medical costs that may occur on top of all the normal costs of living? And even if you do have insurance, how long has it been since you reviewed your cover? Do you have adequate coverage for your current financial situation? Having personal risk insurance is an investment in yourself to help protect you and create a safety net from financial hardship should unthinkable situations arise. So, while you may not necessarily be the primary breadwinner in your family or may not have any dependents, it doesn’t mean you aren’t worth insuring. Having a policy in place means you can help maintain the standard of living you’re used to and help create a buffer for unexpected bumps in the road. Listen to the experts We know this subject can be daunting and difficult to approach or to even know where to start, but you need to start thinking of yourself as an investment. There are experts out there who have the knowledge and time to help you. Speaking to an independent financial adviser can help you figure out exactly what protection you need and help you gain confidence to make informed financial decisions. They will provide you with tailored advice to suit you and your financial needs for the short term all the way through to the long term, meaning you’ll only be paying for exactly what you need. Make sure you get in touch with a financial adviser so you can have peace of mind that your future is protected. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 3 9
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PROFILE
Getting to be Your Own Boss Michelle Robertshaw has proved that looking to her mother for inspiration has paid off in the business world, writes Amy Hamilton Chadwick.
It’s tough being a single parent, but it’s possible all your hard work can inspire your kids to achieve more than you expected. After all, it was Michelle Robertshaw’s mother, Olga, who inspired her daughter to become a business owner. “Mum’s family came from the former Yugoslavia, and after spending two years in a refugee camp in Italy they arrived in New Zealand when she was 18, not knowing any English,” says Michelle. Olga started out working in a department store, then became the first female fabric buyer in New Zealand. Ultimately, she started her own business as a fashion agent, grasping her destiny with both hands. “Mum had goals she wanted to tick off: own home, nice car and her own business,” Michelle says. “I watched her, and I knew I wanted to be independent. I knew I was never going to be a doctor or a lawyer, so if I was going to make my own way I wanted to own a business.” Finding the right bones In the early part of her career Michelle worked in various corporate roles, and it was while working as a business development manager that she met her now-husband, Ian. He shared her passion for business and together they had a long-term plan to run a company. The couple supported each other in their careers and Ian studied for his MBA. For some time Michelle thought she might take over her mother’s business and run a fashion agency, but as online shopping and fast fashion took off the company wasn’t profitable enough to support their growing family. Instead, Michelle and Ian scoped out businesses to buy, starting with industries they already knew something about and had a bit of experience in. But soon they realised they were limiting themselves.
“We stopped and decided, ‘Any business is good if it has the right bones’. Once we opened our minds to that there were a lot more businesses to consider. There are a lot of average businesses for sale, or ones that seem fun, and you get to be your own boss, but it’s more about the dream and the romance of it than actually a sustainable business.” When Stylehouse Kitchens came up for sale in 2018, Ian and Michelle met the owners and immediately felt they’d found an ideal investment. The business had an excellent reputation, built up over 20 years, and it was profitable. Plus, they felt it had massive potential for growth. A rough diamond The Robertshaws used a combination of savings, equity from their home, and family support to buy the business. It was a substantial investment, with the potential to go badly, but the couple were confident they could grow the business into something even more valuable. “Investing in a business was risky, but it was an educated risk. I know that some people couldn’t get their heads around why we’d buy a business in an industry we weren’t working in. But it was a rough diamond. The owners made it clear that Stylehouse didn’t need another cabinet maker, it needed a business head.” Ian is the general manager while Michelle takes care of finance, HR and marketing. When they bought the business there were three incumbent full-time employees. Now, four years later, the rebranded Stylehouse Design team has grown to 24. It’s no longer a basic kitchen cabinetry business: now they do high-end kitchens, wardrobes, vanities and laundries. Lockdown meant a temporary pause, followed by a period of massive expansion.
‘I knew I was never going to be a doctor or a lawyer, so if I was going to make my own way I wanted to own a business.’ S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 4 1
F E AT U R E S
“We did have to restructure thanks to Covid, but the post-lockdown period was very kind to our business in terms of growth. We didn’t have much choice but to grow fast. We don’t advertise either, it’s all just word of mouth.” Uncalled returns Michelle and Ian could have put their money into a rental property or into some other alternative investment, but a business has quite a different risk-reward matrix. According to Stats NZ, small and medium businesses don’t have great survival rates. Latest data finds that around 45 per cent of enterprises last five years, and the survival rate keeps dropping as the years go on. If that happens you might not just lose the money you’ve invested, but owe money that you used to fund a company that no longer exists. As with any investment, a big risk can mean a big payoff, and the returns on owning a business are effectively uncapped. And if you manage your cash flow effectively, you won’t need to keep putting your hand in your pocket to fund the company. A vital factor in the success of Stylehouse Design was the way Michelle carefully set up their terms of payment. It meant that, with jobs flowing through from the previous owner, they haven’t had to dip into their revolving credit since three weeks after they S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 4 2
bought the business. Michelle also credits team work as essential: support from her accountant Manisha Kesha (at SME Financial) and lawyer Tracey Edmonds has been invaluable. “People just don’t understand how much you can leverage off a business – you can’t do that with any other investment. It’s exponential. If you have the balls to buy a good business and set it up right, it’s the best.”
Experiences, particularly those shared with friends or family, tend to deliver much more long-lasting happiness than any purchases of possessions. Work ethic the key Does that mean business ownership could be the perfect investment for you? As a nation of small business owners, plenty of people like the idea of saying goodbye to their boss and grabbing their own future, but it’s risky and requires a huge amount of work. “Since Covid I’ve heard about a lot more people who are looking to buy businesses,” Michelle says. “They can be a bit clueless. They think, ‘I’m going to live the dream
and be my own boss, it will all be sweet’. But you need to go in with your eyes wide open … you’ll never work as hard. Owning something that’s yours can feel like a noose around your neck. I’m responsible for all these people putting food on their tables each week. “But I would never go back to a job again. I’m in charge of my own destiny and I love helping people and seeing them grow. It gives me a lot of enjoyment to see all the new people growing in their roles, especially how many more women we have employed in roles right across the business. Hearing how much they love their jobs gives me a lot of enjoyment.” Building a business takes all your time and energy in the early days. Michelle and Ian still need to be able to take holidays, and eventually claw back their own time. That’s when the investment in Stylehouse will start to pay off in financial and lifestyle terms. Recently, Michelle and Ian took a five-day holiday in Fiji, which was the first time since 2018 they had taken a break from running the business. It will be several years before they can really sit back and relax, but when that day comes Michelle says she won’t feel guilty about enjoying her hard-earned freedom.
We’re covering… …the uncovered. Some Kiwis may feel held back from getting the private health insurance they need when they need it, due to existing health conditions. With nib, you can now get even more comprehensive health insurance with many pre-existing conditions covered after 3 years on our Ultimate Health plans. Now’s the time to invest in your future by covering your past.*
Contact your financial adviser about this limited time offer and find out if it’s right for you before 28 February 2023.* To find an adviser visit nib.co.nz/adviser-plans. *Many pre-existing conditions covered after 3 years. Offer only available to new customers. Terms and conditions, eligibility criteria and exclusions apply. Offer ends 28 February 2023.
F E AT U R E S
The Wide and Deep Potential on our Doorstep In a post-Covid world the Pacific offers investors solid economic growth opportunities and inspirational social progress projects, writes Glynis Miller.
There are many investment opportunities to be found in the waters and green islands of the blue Pacific, right on New Zealand and Australia’s doorstep.
Aquaculture too. The remarkable, sustainably-farmed blue prawns of New Caledonia are destined for restaurant plates (and then the supermarkets) of the world.
professional rugby coaching with the learning of entrepreneurial and farming skills, based around a fast-growing taro, ginger and cassava export operation.
The blue Pacific is an area of great growth potential; and offers opportunities for savvy Kiwi, Australian, South-East Asian (and international) investors across a wide range of industries and enterprises.
The possibilities of increasing, yet sustainable harvesting of oceanic products would seem an entirely expected development. But beyond these natural resources, the countries of the blue Pacific continent have more – and some surprising – investment avenues to offer.
Or projects with the goal to provide clean bore-hole water or high-tech solar energy systems to remote villages across all the island archipelagos.
In the post-Covid world economy the Pacific can offer investors much in the form of solid economic growth opportunities and inspirational social progress projects. Some examples. International production of coffee is predicted to crash as highland farmers of the existing industry face the effects of climate change. This will reduce the area suitable for growing coffee by up to 50 per cent by 2050. But cultivars developed for Pacific islands and their farmers will enjoy the opposite scenario: ever-increasing production, and great quality coffee brands, each with intriguing back stories to help with marketing. The tropical agriculture and horticulture of the Pacific islands has great future potential. Take, for example, gluten-free flour produced from breadfruit and cassava. Unusual products, sure, but with a growth trajectory into a burgeoning niche market. The industries for high-value crops, such as vanilla, can surely also expand. All-natural skincare products Or consider the extraordinary potential from this vast blue space, of harvesting and production of a new vegan seafood sourced from marine algae. Or all-natural skincare products made from seaweed sourced from the lagoons of all Pacific islands. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 4 4
Take the human resources potential of 30 million people, all English-speaking. The potential for growth in the services sector is remarkable. Fiji, for instance, with its developed internet infrastructure, is close to the international dateline, and with a population who speak English, Indian and South-East Asian languages, is well-placed to become a dynamic hub for the call centre industry. Indeed, there has been a significant recent investment from a British-based multinational. These people-centred investments are the way of the future. Resurgence of travel industry In the tourism sector there are many real estate investment opportunities to explore in the way of re-commissioning lodges and resorts that were affected by Covid closures. They all stand to benefit from anticipated international resurgence of the leisure travel industry. Many investment opportunities in the blue Pacific combine solid financial return with the inspirational, positive impact of social progress projects. Like the Agrorugby project established by Fijian rugby superstar Seremaia Bai; where he combines
Then there’s all the opportunities of new e-commerce or boutique manufacturing enterprises in the Pacific. It is following a tried-and-tested trajectory that employs those skilled in traditional crafts (especially Pacific island women), and is a sure indicator of business success. As an added bonus, a focus on the potential of e-commerce at a stroke does away with the dated notion in export-oriented business, of “the tyranny of distance”. Cultural contribution This should matter to all New Zealand investors. For, added to our deep overlay of English and Christian culture, NZ is still primarily a Pacific island nation. We all know that Auckland is the greatest Polynesian city in the world. We all see the Pacific as our vast blue neighbourhood – a place for holidays to get away from the winter. We are all keenly aware of the cultural contribution Pacific islanders make to our nation, from poet laureate Selina Tusitala Marsh and Professor Yvonne UnderhillSem, to the Naked Samoans, to all the All Blacks of Pacific island origin, and to many other iconic personalities and organisations. And that the NZ Government – through
I NVESTM E NT
treaties of friendship, formal governance associations with some Pacific island states, and foreign aid programmes – plays a pivotal role in the sustainable development of the blue Pacific. This last descriptor means the 16 sovereign nation states of the south-west Pacific, comprising members of the Pacific Islands Forum (PIF). So it is timely and topical to introduce a new concept, one which should enter and influence New Zealand and all of the Pacific’s public discourse, and one with great implications for our collective economic prospects. At the PIF Leaders’ Summit held in Fiji in July 2022, PIF member nations ratified a strategic plan to 2050, with this great new concept as its foundation, its driver. The Pacific island nations will position themselves and work together as the Blue Pacific Continent. This changes everything. This is a radically positive conceptual shift. From previously being considered by the wider world (and even to some extent by ourselves) as separate, small, scattered islands, the Blue Pacific Continent should now be appreciated as a vast global area, and one brim-full of valuable, nay essential, resources. These include natural, technological and human
resources in equal measure. The Blue Pacific Continent is the largest geographical entity on Earth. And we, especially New Zealanders (citizens, Pacific Island residents, and those from further afield) are all an important part of it. Considering this vast continent we find ourselves looking anew at all its possibilities – including the extraordinary business and investment opportunities it presents. ‘Strength, unity and solidarity’ This from the 2050 Strategy for the Blue Pacific Continent: “To leverage this strategic and economic value and at the same time address our most significant threats, including climate change, we are deeply committed to working together whilst ensuring that our regional efforts complement the national interest of our members. As the Blue Pacific Continent we engage with our partners from a position of strength, unity and solidarity on matters of collective interest.” The 2050 Strategy for the Blue Pacific Continent brings together seven connected thematic areas based on “comprehensive consultation with Members, CROP [Council of Regional Organisations of the Pacific] and other regional organisations, non-state actors and regional exports”.
Those seven thematic areas are: political leadership and regionalism; people-centred development; peace and security; resource and economic development; climate change and disasters; ocean and environment; technology and connectivity. The last two thematic areas are important in the new normal, post-Covid world, with many Pacific island exporters investing in technologies of the future to overcome the anachronistic handicaps of isolation and remoteness and with an ever-greater understanding of the enormous resource the Blue Pacific Ocean itself is. It doesn’t take much expansion of thought to see this as a blueprint, on an unprecedentedly expansive scale, for the sustainable development of exports from the Blue Pacific Continent and inbound investment in the region. And to understand our (NZ and Australia’s) pivotal place in this. With the Blue Pacific Continent, we stand on the edge of great economic potential and a new era of prosperity for all Pasifika people. It is up to us to grasp this opportunity. Glynis Miller is Trade Commissioner of Pacific Trade Invest New Zealand.
OCEANS OF OPPORTUNITY The Blue Pacific Continent is made up of the 16 nation states of the Pacific Islands Forum and their Economic Exclusion Zones. It’s the largest geographical entity on earth, and we are an integral part of it. Naturally, it’s brimming with extraordinary resources.
42 million sq km 30% of the world’s EEZ’s 16 countries of the Pacific Islands Forum & other territories
Pacific Trade Invest NZ has access to investment growth opportunities from tourism, real estate, renewable energy, heathcare, outsourcing, social progress projects, aquaculture, tropical agriculture, to e-commerce and boutique manufacturing. Pacific Trade Invest NZ a not-for-profit agency of the Pacifc Islands Forum and supported by MFAT, can match you up with the blue-sky, blue-water or inspirational investment project you’re looking for.
We have the experience, the band-width, the local on-the-ground intellligence, Please contact and work with government Investment Facilitation Manager and private enterprise Rohan Parekh 09 529 5165 rohan.parekh@pacifictradeinvest.com stakeholders.
www.pacifictradeinvest.com
CMC MARKETS
Markets Always Find a Bottom Market corrections are inevitable in the lifetime of an investor and bottoms will always form to create the next bull market. Chris Smith, of CMC Markets, shines a spotlight on signs of a lull, some 2022 bright spots, and why patience is so important. The year 2022 is on track to be the third time since WWII the S&P 500 will be down 20 per cent, signalling the rarity of the decline and 10-month sell-off to date. Investors have been dealt a tough adjustment with interest rates rising at the fastest pace we have seen by central banks, and global inflation remaining stubbornly high. The S&P 500 is down more than 22 per cent since the beginning of the year with just two months left, putting it firmly in bear market territory and on track to battle several more rate hikes to close out the year and United States mid-term elections.
When it comes to these periods the headline doesn’t always tell the full story. Some market darlings are down over 50 per cent from peak and recession risk debates now centre on whether we’re seeing a soft or hard landing for economies. One quote used by Warren Buffett in his shareholder letter helps summarise periods in the market when fundamentals just don’t matter and weak investor sentiment or fear takes over. “In the short run, the market is a voting machine, but in the long run it’s a weighing machine.” Benjamin Graham
Since WWII, S&P 500 has fallen more than 20 per cent only three times. Will 2022 be the fourth? Annual per cent change 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50%
1950
1956
1962
1968
1974
1980
1986
1992
1998
2004
2010
2016
2022
Source: Bloomberg, U.S. Global Investors
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2022 Asset Performance Year-to-date 2022
Data as of most recent close Source – Thomson Reuters
2021 same period performance
CRB commodities index Dollar index Brent crude oil Euro vs U.S. dollar ML Global high yield bonds US 10Y Treasury JPM GBI EM local currency debt MSCI developed equities S&P 500 ML global corporate bonds Japanese yen vs. U.S. dollar JPM EMBI emerging dollar debt Copper MSCI all-country stocks Shanghai A shares Japan Nikkei 225 MSCI emerging equites MSCI frontier stocks German 10Y Bund Euro zone STOXX Italy 10Y gov. bonds Gold -100
Household names crushed Leading global businesses in the S&P 500 down over 50 per cent or more from alltime highs (as of Oct 24, 2022). •
Facebook -66 per cent
•
Tesla -50 per cent
•
Nvidia -65 per cent
•
Disney -51 per cent
•
Nike -52 per cent
•
Netflix -62 per cent
Share markets do have a way of looking ahead and pricing in macro issues, and 2022 has been no different. There is truth in the saying that “stocks look six months out” as the peak of the stock markets back on January 3, 2022 were well ahead of the 25 per cent drop in S&P 500. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 4 8
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0
Importantly, history has shown us with decades of data that companies with strong businesses and profits can survive and prosper. Just look at Apple and Amazon and the cycles they’ve been through as evidence of the highs and lows of investor sentiment.
‘In the short run, the market is a voting machine, but in the long run it’s a weighing machine.’ – Benjamin Graham Closer to the bottom We have seen a dramatic adjustment in valuations from the major S&P 500 index that covers the largest 500 US-listed companies. The S&P currently trades for 15.5x of Wall Street’s forward 12-month
50
100%
estimates. This may be too optimistic still, but it’s down dramatically from the highs of 2021 and much closer to the long run average. History indicates that once central banks move from their aggressive tightening of real rates, US stocks tend to do well and bottoms will form well in advance. Expect to see the stock market investors forecast the peak in real rates over the next six months, and rally in anticipation of declines. Some bright spots The US dollar has proven its status as king once again in 2022. Any position long USD has rallied very strongly, while locally the NZ dollar is down 20 per cent YTD and no different vs the AUD, JPY and EUR. Local holdings in US share markets have been somewhat buffeted by the strength of the USD.
CMC MARKETS
Short technology companies and long energy has seen a very strong trade with geopolitics and rebounds following global lockdowns supporting demand. Term deposit rates have surged from the lows of 2021, giving investors a more respective return on cash holdings. The search for yield has supported companies paying solid and reliable dividends, such as Spark in 2022. Looking ahead “The intelligent investor is a realist who sells to optimists and buys from pessimists.” Benjamin Graham As we near the end of 2022, here are some useful signs to watch for. •
Central Banks signal pause in current cycle and communicate this.
•
Inflation reports decline each quarter.
•
Earnings for S&P 500 stabilise.
•
US dollar declines from extended levels.
•
GDP growth stabilises from declines.
My personal outlook for the next 12 months is that the S&P 500 will rise higher than
‘The intelligent investor is a realist who sells to optimists and buys from pessimists.’ – Benjamin Graham today’s levels, but recession pain from the speed of interest rates moving from 0 per cent to 5 per cent+ will create distortions. The attraction of cash will become a larger part of investor portfolios after 10 years of low term deposit rates; inflation will pull
back (we’ve already seen some evidence of this); and central banks will have put rates on hold in the major economies. The US dollar will have peaked in 2022 and normalised to a level where importers and exporters are happier and no longer lopsided. I expect Benjamin Graham’s quotes will prove true once again, both in guiding companies and the right mindset for us all to have.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The author does own shares in some of the securities mentioned.
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Investing in the Future In the frontier land of the metaverse, NFTs purchased today may become the most prized (and expensive) collectables of tomorrow, writes Joanna Mathers.
Beneath the surface of the everyday, there exists a new world. An alternate reality created by tech savvy entrepreneurs and dreamers, individuals keen to capitalise on the limitless opportunities posed by technology. This new realm, the metaverse, is no flight of fancy. In fact, it’s so huge Facebook changed its name last year to Meta Platforms and is channelling vast resources into creating virtual realms into which it hopes humans will flock. While Meta hasn’t had a promising start (Mark Zuckerberg’s personal wealth plummeted by over $US70 billion since the beginning of 2022, according to Bloomberg) there’s plenty who believe money can be made in the metaverse. And those keen to invest in their future may want to start investigating for a slice of this brave new world. Bryan Ventura, senior associate at law firm MinterEllisonRuddWatts, is a financial services and investment funds lawyer who specialises in financial technology and digital assets. He is also the chair of BlockchainNZ, a membership group for the blockchain and crypto community. Ventura has worked alongside several extremely successful NFT (non-fungible token) start-ups and other crypto asset ventures, helping to launch and grow their projects, raise capital, and act as an adviser around legal issues. He says the metaverse may allow investors to further capitalise on NFTs; that emergent metaverses may offer NFT owners entrance to a world that few can access but many desire. And scarcity in capitalism, as we know, equals value. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 5 0
Unique, a one-off To understand the potential of the metaverse, and the role NFTs may play in it, we need to understand what NFTs actually are. “Non-fungible tokens” may sound like gobbledegook, but it means something that is unique, a one-off. People often use the Mona Lisa as an analogy for NFTs – you may see reproductions everywhere, but the only real one exists in the Louvre. Anything digital file can be an NFT: a song, an image, a video clip, but it’s not the song, image or video clip that is valuable in itself (indeed they can be “stolen” with a right click and a save). It’s the “token” behind them that is valuable; a unique code created on a blockchain (think bitcoin) that only the owner has access to. NFTs exist on distributed ledgers, which use cryptography and blockchain technology (anyone with a passing knowledge of crypto will know the term “blockchain”). Bitcoin is its own blockchain, but most NFT projects use another popular blockchain called Ethereum. Blockchain technology is used to create digital art and there are a few New Zealand outfits doing just this, right now. “Non-Fungible Labs and Altered State Machine are New Zealand projects using NFTs to build digital game characters, which can be seen on FLUF World or AIFA All-Stars NFTs,” Ventura says. “Another NZ project, VeVe, is using NFT and augmented reality technology to digitise the billion dollar physical statue, comic book and pop art industries,” he says. “VeVe has partnered with Disney, Marvel, DC and over 100 world renowned licences.”
Hype boosts return But how does the metaverse fit into this? Well, many creators of NFTs also have their eyes on the metaverse. Take Bored Ape Yacht Club for example. These NFTs (cartoonish images of bored apes) were created on the Eretheum blockchain. From a starting price of around $US190 in early 2021, they were purchased by the likes of Paris Hilton (an NFT evangelist) and Jimmy Fallon. The hype surrounding them pushed them over $US400,000, but the cryptomarket crashed in mid-2022 and they have dropped to around $US150,000 at the time of writing. (Still not bad for an under $US200 outlay.) There are also claims that the company behind them, Yuga Labs, is involved in the far-right, a claim they vehemently deny. Yuga Labs is now developing a metaverse,
P E R S OCNRAYLP F T ION/ANNF C TE S
Otherside. They released 55,000 purchased deeds (Otherdeeds) in 2022, for $US5,800 each (they all sold). Otherdeeds give owners the rights to their own “plot” of (virtual) land with distinctive characteristics and resources. Owners of BAYC NFTs were able to access them for free within 21 days. Given the celebrity status of BAYC, Otherside may be a great success. Original Bored Ape NFTs could become prized artefacts in decades to come. Or maybe not. It’s still the Wild West. But investment is often about risk. And those who are drawn to new technology, and the potential of the metaverse, may be keen to dip their toes in this (virtual) pool. Still a work in progress NFTs may be used in several ways in a metaverse: to purchase digital land; as tickets to exclusive virtual concerts; or as
avatars for games. The “profile picture” art works may offer owners special benefits in their related metaverse. It’s still a work in progress. And it’s all about finding the right NFTs to invest in. When it comes to NFT art, personal aesthetic preference is likely to play a role. It’s important to do research, find out a bit about the developer’s history and aims. Ventura explains that BlockchainNZ provides free educational articles “on blockchain topics like NFTs, DeFi [decentralised finance] and what a blockchain is".
whether it might be a good project. A trend worth investigating It’s important to note that the NFT market is highly volatile. NFTs are purchased with cryptocurrency, which did plummet in value this year. As crypto payments are all anonymous, transactions between users cannot be verified – it may just be associated parties transferring NFTs between two accounts in order to create hype and escalate prices.
He says that when researching an NFT, googling basic information about any projects is also worthwhile.
And according to a Reuters' story early this year, the top 27 most expensive sales (totalling $US1.3 billion), came from just two wallets. There’s no way of knowing who owned these wallets and if the sales were genuine.
“Joining a NFT project community, like Discord, and following their social media might also give people a good steer on whether the NFT project is genuine, and
Having said this, NFTs are still being generated, and purchased, with fervour. It’s certainly a trend worth investigating, but definitely a case of “buyer beware”. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 5 1
M A R K E T U P D AT E
Where Investors are Turning in Uncertain Times: 4 trends for 2023 Downturns are times of opportunity for investors – so what types of investments are savvy people turning to in the face of the current economic uncertainty? We spoke to Ross Verry, Chief Executive of Syndex, about four significant trends he’s seeing in the capital markets. 1. Agri business and agri tech opportunities are in high demand When inflation is high, consumers can eliminate spending in many areas of their lives – but they will always need to buy food. Investment opportunities in agricultural businesses are proving extremely popular right now, as investors look for ways to secure reliable long-term returns in uncertain times. “If you look back in history, productive land has been a really good inflation-proof asset,” says Verry. “In the 1970s there was a sustained period of inflation and during that time agri land was one of the bestperforming assets.” Investors are not only interested in primary production businesses themselves, but also in companies that are developing new technology in the sector, aiming to increase food production and efficiency. “With increasing pressure on the world’s food supply, investment in agri-tech is helping create smarter, more sustainable ways for producing food, which is fundamental for the world. New Zealand has been world class at farming and growing, and adopting new technology has made us even more productive. This is an area where we have a lot of underlying capability and opportunities.” 2. Investors are optimistic about deep-tech solutions to global challenges The planet faces some huge, complex challenges – we need to find sustainable ways to run our economies, feed the world’s population and tackle climate change. Investors are keenly interested in innovative businesses which are seeking deep-tech solutions to these massive problems. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 5 2
SYN D E X
‘There’s a growing interest in private debt and fixed income credit products.’
“There’s some pretty heavy innovation in areas like agri-tech, med-tech and engineering – and investment in those sectors is directed at solving big problems,” says Verry. “We work with partners like Icehouse Ventures and Pacific Channel, so we have seen investors’ interest in these deeptech solutions. That might be investing directly, or through a fund to get exposure to a number of those businesses.” 3. Private debt products are filling the gaps left by the banks, and investors are on board New responsible lending regulations mean banks no longer lend like they used to – so the nonbank market is rapidly growing to fill those gaps. Investors are now able to put their money into a wide range of private debt products, from many different providers. Non-bank lending is now proving vital to both business growth and personal finance, here in Aotearoa and worldwide, so opportunities abound. “There’s a growing interest in private debt and fixed income credit products,” Verry says. “We’re seeing very capable and experienced organisations bringing products to private investors that focus on income yield, as opposed to equity. Right now that is fitting into people’s portfolios more readily. We’re also seeing innovation – spotting gaps in the
Invest in the ideas you like and the people of your community. Invest for value and impact in the fastest-growing asset class. Invest in the private markets.
www.syndex.exchange
market where the banks were traditionally lending, and using non-bank expertise to fill those gaps. Credit is the oil in the engine of the economy, and as long as investors understand the risks, private debt can be a good investment.” 4. Greater liquidity is making private market investment more attractive In the past, investors in private businesses, funds and syndicates have often had to grapple with being locked into their investments for fixed periods. Now Syndex is solving this problem, using its digital platform to increase liquidity and boost investor confidence. “One of the reasons we started Syndex was that we wanted to solve the liquidity problem for investors in private markets. We created a marketplace to make it easier to invest in private investment opportunities and alternative assets,” Verry explains. “Existing investors can exit their investments if they need to; new investors can be cautious and watch an investment’s progress, then come in at a later date. Having greater liquidity is driving more confidence in the private markets and making it more appealing for every type of investor.” For regular market commentary from Syndex, or to learn more, visit www.syndex.exchange
making private assets investible
GLOBAL RECESSION
Clouds Loom, but Clear Skies may not be Far Away We are heading for a global recession, says Andrew Kenningham of Capital Economics, but there is good news on the horizon.
At the beginning of this year the world economy appeared to be on the mend, just as the pandemic was fading. The United States and Chinese economies had already regained their pre-pandemic levels and Europe looked on course to catch up. However, things have changed drastically over the past few months and it is now clear we are in the middle of another global downturn. That downturn is taking different forms around the world. In the US the main cause of the slowdown is that the Federal Reserve – the country’s central bank – has raised interest rates quite sharply in an effort to contain inflation. Its main policy interest rate was zero at the end of 2021 and is now over 3 per cent and expected to rise further in the coming months. Higher interest rates are seen as necessary to slow the economy in order to bring inflation down from its current level of around 8 per cent. This has already had a big impact. US households have cut back on property purchases, which in turn has led to a slump in the number of new houses and apartments being built. And consumers have scaled back major purchases, such
as cars. On top of that businesses are tightening their belts, notably by reducing investment. Covid strategy Economic growth in China has also stalled this year. There has been a big downturn in the property sector; exports have weakened; and there are repeated local lockdowns due to the country’s zero Covid strategy. Unlike previous downturns, the Chinese Communist Party has been reluctant to step in with more lending because of fears that this could put the financial sector at risk. China’s economy will probably not grow at all this year, although government statisticians will not admit things are that bad. The situation in Europe is worse. It faces similar problems to those in the US – rising inflation and interest rates – but they are compounded by surging energy prices because of Vladimir Putin’s decision to cut off the supply of natural gas through its European pipelines. There is even a risk of power cuts this winter. European households, and likely their US counterparts, face a “cost of living” crisis driven by high energy prices and a “cost of S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 5 5
M A R K E T U P D AT E
borrowing crisis” as interest rates rise. The impact will vary between countries, but Germany is in the eye of the storm because its chemical and metal factories rely heavily on natural gas. As it is the largest economy in Europe, a recession in Germany will also drag down its neighbours. There is no agreed definition of a “global recession” but in the past the International Monetary Fund has suggested that anything below 2.5 per cent growth would qualify for that label. On that definition, we look certain to experience a recession. In any case, regardless of the numbers a combination of declining real incomes, declining world trade and falling asset prices means it will look and feel like a recession for much of the world. Silver linings Needless to say, this rather gloomy prognosis is not ideal for asset prices. Equities and bonds have already fallen significantly this year and, while some commodities have done relatively well, there are no obvious safe havens in which to take refuge. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 5 6
Despite all this gloom there are a few silver linings.
interest rates, and these tend not to be so severe.
First, the labour market has remained surprisingly healthy. In most countries unemployment is close to record lows.
And fourth, the recession seems, at this stage, unlikely to last as long as the downturns of the 1980s, which dragged on for several years, or the euro-zone crisis which lasted for around five years during the early 2010s. This is largely because the financial sector is in a healthier state and is unlikely to collapse under the weight of a relatively mild recession.
Second, the world economy has always bounced back from recessions and this time should be no exception. As the current wave
‘This recession is likely to be shallower than the last two.’ of inflation fades, central banks will reverse course, cutting interest rates and nurturing growth again. Third, this recession is likely to be shallower than the last two – caused by the global financial crisis and the pandemic. The recession of 2022-2023 should be a more typical one caused mostly by higher
Finally, asset prices tend to recover before the economy has picked up because investors anticipate that economic activity will recover and interest rates will fall before either of those things happen. Indeed, bond prices may now be close to their low points and it is possible that equities are not far from their lows too. What’s more, asset prices typically do very well in the years after a recession. So while the coming year may be very difficult for the economy, the next few months could turn out to be a good time to invest.
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M A R K E T U P D AT E
Snapshot: Innovations Innovations, news and events from around the world that grabbed our attention and are likely to impact the global economy going forward.
UNITED STATES
Microsoft and Alphabet (parent company of Google) shares dropped 8 per cent and 9 per cent, respectively, in late October. Shares of Facebook parent Meta also dropped by nearly 20 per cent after a disappointing third quarter.
UK
A non-fungible token (NFT) marketplace called myNFT showcased a physical NFT vending machine at a London event. The aim is to make NFT trading easier for people to buy and sell digital assets without a digital wallet or knowledge of the rather esoteric industry.
S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 5 8
EGYPT
COP27 was held in Egypt in early November after findings from the UN Emissions Gap Report revealed that with current policies in place the world will warm by around 2.8 per cent by the end of the century. “We had our chance to make incremental changes, but that time is over,” said Inger Andersen, Executive Director of the United Nations Environment Programme, who produced the study.
CHINA
China’s third quarter results of 3.9 per cent growth exceeded forecasts but fell far short of a 5.5 per cent target. This represents the slowest growth in three decades for the economic giant, which also extended the rule of its President to three terms in late October.
Correct at 30 October 2022.
SNAPSHOT
UKRAINE
According to Reuters, the Ukrainian economy is likely to shrink by nearly 32 per cent. This is due to the Russian invasion. But GDP is likely to increase 4-5 per cent next year if security stabilises and demand increases. This is based on a report by the Ukrainian central bank.
CANADA
Canada is experiencing a vertiginous property bust, with prices dropping up to 16 per cent in six months in some regions, according to Bloomberg. But like New Zealand, these prices are still higher than pre-Covid levels, and there are predictions of further drops to come.
AFRICA
SAN FRANCISCO
Looking for solutions to an emerging energy crisis in the wake of sanctions on Russian exports, European leaders have been visiting African nations in the hope of finding alternatives sources. The New York Times reports German, Polish and Italian representatives have visited African countries in recent months, looking for new gas opportunities.
Elon Musk’s purchase of Twitter points to a new era of disinformation as he shares a Tweet from a discredited false news site. Formerly Donald Trump’s favoured soapbox it seems likely Musk will allow the autocrat back onto the platform.
S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 5 9
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Personal Finance
IN FO RM E D I NV E STOR
The value of financial advisers; bridging the KiwiSaver gap; helping women get ahead financially; and investment lessons from 2022.
PERSONAL FINANCE
Bridging the KiwiSaver Gap If you’re not quite on track to reach your KiwiSaver goals, what can you do? David Copson, investment expert at Booster, has some tips. ‘I WISH I’D DOWNSIZED SOONER’ Downsizing can be a powerful tool to improve your cash flow and lifestyle in retirement. There’s a natural urge to hang onto enough space to fit everyone in case of an apocalypse or that full family reunion. But that could be putting a huge crimp in your ambitions.
You might have a retirement lifestyle in mind, and some retirement savings. But will they meet in the middle or will there be a gap to bridge between your funds and your dreams? Although a retirement shortfall can feel stressful, you do have options.
Consider those non-negotiables: if your heart is set on that trip or that classic car, and you can also afford to keep your family home, then that’s great. But if you can’t afford both, why not get a smaller property or one in a different location? When our clients do this, the main feedback we get is that they wish they’d done it sooner.
The first step is to identify your non-negotiables. Is that the house, the travel, the new car or the grandkids’ university fund? Once you know how much you need, you can make a plan. That might include earning more, spending less, downsizing, or changing your investments – or all of the above.
SMALL KIWISAVER SACRIFICE NOW ADDS UP LATER If you’re still working it’s worth calculating the difference between KiwiSaver contributions. Let’s say you’re 55 years old, earning $100,000 and your current KiwiSaver balance is $70,000, in a growth fund. You might barely notice a 1 per cent increase in contributions, or even a 3 per cent increase, but you’ll certainly notice the difference in savings at age 70. Extra weekly contribution compared to 3%
$182,329
3%
4%
6% Contribution rate
S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 6 2
$57.69
$196,114
$38.46
$223,684
8%
$96.16
$251,254
$19.23
(not adjusted for inflation)
Lump sum at retirement
$278,825
10%
DO THE KIDS REALLY NEED AN INHERITANCE? With a life expectancy of 81.7 years, we’re living longer. We’re also having our kids later, with women aged 30.5 on average when they have their first child. That means the child will likely be in their 50s when they receive their inheritance. My view is your kids shouldn’t be in their 50s and relying on your inheritance to support them – you should do what you want with your money and plan for it to run out by the age of 85 or 90. Once you reach that age, NZ Super should be enough to live on if you make it to the full century.
BO O STE R
ALL YOUR MONEY DOESN’T NEED TO BE IN TERM DEPOSITS
MANY NEW ZEALANDERS WORK BEYOND 65 We have one of the highest rates of workforce participation for those aged 65-plus*: Country
Rate of people 65+ still working
United Kingdom
10%
Australia
12%
USA
19%
Japan
20%
New Zealand
24%
Iceland
35%
*Source: Retirement.govt.nz
Being retired doesn’t mean your money can’t keep working for you – there’s no reason to pull out of your investments. Instead, consider a three buckets strategy: money you need over the next five years in your short-term bucket; money needed five to 10 years from now in your medium-term bucket; and money you’ll need in over a decade in your long-term bucket. Each bucket needs to be managed differently; a more growth-oriented approach can be taken with money in the long-term bucket, while money the short-term bucket would need a more conservative strategy. Ideally, speak to a financial advisor to help you map out your spending and investing, bridge the gap and come up with a plan for how to maximise your funds so you can enjoy the best retirement possible.
AGEISM SEEMS TO BE DECLINING Working until 70 gives you a buffer, but I am a fan of people being able to enjoy their retirement – it comes down to how much you like your job. Many of us get a real sense of meaning from our work, we love interacting with different people, and the money is also a nice bonus. If you’re considering working beyond age 65, the good news is that ageism in the workforce seems to be in decline. The shortage of skilled workers and the quicker turnover of roles is helping older Kiwis find great jobs. And for those who are just looking for something casual, there’s far less stigma around older people working in hospitality or retail. This article provides general commentary only and is not, and is not intended to be, financial advice as defined in the Financial Markets Conduct Act 2013. It does not fully consider your personal financial situation or goals, does not recommend a particular investment product, and is not a substitute for obtaining financial advice from a Financial Advice Provider. Booster Investment Management Limited is the issuer of the Booster KiwiSaver Scheme, Booster SuperScheme, Booster Investment Scheme, Booster Investment Scheme 2 and the Booster Innovation Scheme. Product Disclosure Statements are available at www.booster.co.nz S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 6 3
PERSONAL FINANCE
S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 6 4
FINANCIAL ADVICE
The Value of Using a Financial Adviser Some people think a financial adviser is there solely to choose investments, but there is so much more they can bring to the table, writes Laine Moger.
A financial adviser is going to be your investment “hype girl” (or guy).
Law to patent a formula for paying off a mortgage faster.
If you want to retire at 55, send your kids to university or help them onto the property ladder, these professionals are there to make those financial goals a reality.
EnableMe helps clients with good money habits to budget and grow wealth as well as mortgages and insurance, and this applies at all ends of the financial spectrum.
Some people think a financial adviser is there solely to choose investments, but there is so much more they bring to the table.
Similarly, Lisa Dodson, of Acumen, uses her experience in the industry by offering herself to clients as a “financial sounding board” for general advice before referring to a more specialised business.
Sure, a financial adviser will run the numbers for you. But more importantly, they will keep you accountable to your investment goals and also provide you with access to financial products. This is where the real value lies. All and any financial adviser can give broad advice about your entire financial situation, but the thing is they typically specialise in one specific area. Encouraging good money habits Being rich isn’t a condition of meeting a financial adviser. If you are one of those people who clean your house before the cleaner arrives, don’t apply the same principle to a good adviser who specialises in budgeting. EnableMe is a nationwide business designed to specifically help people get better with money through budgeting. Founder Hannah McQueen started the business at 27 after she personally found it difficult to get ahead financially despite earning a good income. She used her Masters in Taxation
Co-creating a plan for your future Property has what other investment options don’t – leverage. Investors can buy a high-priced asset with zero cash upfront. In doing so they generate substantial returns, and they get to keep all the profits. But if it were that easy, everyone would do it. A specialised property investment company will have financial advisers on staff to help co-create a financial plan for your future, before matching that plan to properties. The big names in New Zealand are Propellor, Opes Partners, iFindProperty and Positive Real Estate. When investors work with Opes Partners they are assigned a Property Partner who is also a qualified financial adviser. Together, they use in-house software to create a property investment strategy, running cash flow analysis on potential properties 15 years into the future. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 6 5
PERSONAL FINANCE
‘Being rich isn’t a condition of meeting a financial adviser.’ Once the final choice has been made, the investor is then guided through the process of actually purchasing the property. Or there’s Twine Financial Advisers. Director Eugene Bartsaikin says his business’ point of difference is that they are “property strategists”. This means the team details the ins-andouts with investors, getting a game plan in place before making any purchase decisions. After this process is finished Eugene refers his clients to other professionals. Funds, shares and investments Not all investing is property investment. Another popular option is investing in shares and managed funds. A share is when you buy a small part of a specific company. A fund is where you put your money into a big pot with other investors and money is invested on your behalf. Managed funds are great for emerging investors because you can invest in everything all at once: shares; term deposits; and property (although usually commercial property). Some of the big names are: Milford, Craigs Investment Partners, Fisher Funds and NZ Funds. The latter, NZ Funds, currently manages around $2.1 billion of investments for Kiwis in New Zealand and overseas, helping to manage funds and KiwiSaver. There is also the option to work with a private financial adviser for one of the mainstream banks. The catch here is they only work with high net worth clients. So, you’ll need at least $1 million to work in these circles. Your link to the bank Probably the most familiar financial advisers (although not always known as such) are mortgage advisers.
A mortgage broker is your link to the bank. They are the person who is going to take all your documents (e.g. pay slips, bank statements) and dress your mortgage application up to give it the best chance of obtaining a loan.
give advice. Insurance brokers go much more in-depth for your personal situation.
Could you submit your application to the bank yourself? Sure, you could. But often you’ll have a better shot at success (or more money) if you go with a broker. They have a lot more behind-the-scenes knowledge and insider secrets that could help you.
It’s all based on risk. What’s $1800 to insure in Christchurch could be $1100 to insure in Auckland.
And don’t look at them sideways if they advise you against buying a new car or having a baby in the short term. Their end game is making sure you can get the money to buy the house when you want it.
These are companies like Squirrel, Loan Market and NZ Home Loans – all mortgage broking firms that have financial advisers who specialise in mortgages.
The vital role of insurance Insurance advisers often slip under the financial adviser radar. For companies think names like Axico and Apex, but many mortgage advice companies will also have insurance advisers.
These financial advisers are there to help get your mortgage approved, and then structure it correctly.
This is where the line is drawn between an insurance broker and a direct insurer – direct insurers are “order takers” and don’t
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The cost of insurance in New Zealand is situation dependent, meaning the same house in a different city or section can be thousands more.
This is because all policies contain different wording and will insure you for different risks. Therefore, all premiums are differently priced. One word of warning: No-one can just “label” themselves with the title of financial adviser without being licensed by the Financial Markets Authority. Make sure you check the Companies Office and disclosure statements. A good Google search never goes amiss either. But just because someone has met the legal requirements to be a financial adviser doesn’t automatically mean they give good advice. This is why it can be a good idea to get a recommendation.
Staying on Top of Your Money A good insurer will help its clients stay on top of their money and have several ways to help when the times are tough.
Having the right life insurance products is one way consumers can stay on top of their money and offering products and benefits that help clients do this is a sign of a good insurer. With guidance from a network of independent financial advisers, Asteron Life’s products provide flexibility and affordability options for customers over the life of their policy. While some benefits are built in, others are optional allowing you to choose if you want to remove optional benefits to reduce costs without affecting your core benefit. Seema Bangera, Asteron Life’s Executive Manager, Claims and Customer Solutions, acknowledges in the current inflationary environment when we’re all looking for solutions that suit our budget, life insurance can feel like a luxury. She says, Asteron Life wants to make sure its customers know they have choices. “We have trained our teams to look for clues when affordability could be an issue, because we know it can be hard sometimes for customers to ask for help or they may not realise we have options in place. You can ask to skip inflation adjustments for a year or ask to have them removed or make other changes to help with affordability; there is support available.” Life insurance is a long-term purchase. If, for example, you take out a policy with $100,000 of cover and hold it for 20 years, inflation means the value of your $100,000 gradually reduces. To prevent this the customer’s sum insured is automatically updated every year based on the Consumer Price Index, and this brings an associated premium change. “These adjustments are optional and if premiums are a struggle, then customers should talk to their financial adviser and understand their options,” Seema says.
Here are some other ways you can adjust your cover to save money in these tough times. Stepped vs level premiums Premiums can be structured as either stepped or level to a selected age and this affects the cost of your premiums. A stepped premium starts lower but increases each year as you get older. As level premiums spread the cost of the insurance more evenly over the selected term of the policy, this means that premiums are higher in earlier years as you are paying upfront for that future cover. You can also choose a combination of both. What’s important is we have options that can be tailored depending on your insurance needs through your life. Setting your amount and type of cover The amount and type of cover, as well as any optional additional benefits you have in place will influence the cost of your premiums. It’s important to have enough of the right cover in place to protect your lifestyle and ensure you and your family will be looked after, but you don’t want to be paying for insurance protection you might not need. Since your level of cover can be based on things like your income or mortgage repayments and how much you need may change over time, it’s not always easy to figure out. We recommend bringing it up with your adviser, who can help you work through your options. Adjusting the benefit period for Income Protection and Mortgage Protection covers Your benefit period is the length of time you receive payments from your insurer if you are unable to work due to one of the reasons specified in your policy. Usually, the longer your benefit period, the more expensive your premiums. Benefit periods could be two years, five years or until the age of 65 or 70.
Having the right benefit period means you are not over-insuring and paying for cover you might not need. For example, you might have an increased need for income protection at the start of your mortgage or when your children are younger. However, as your children become financially independent and the amount you owe on your mortgage drops, you might only need income protection for a shorter period. Adjusting the waiting time for Income Protection and Mortgage Protection benefits to start Your wait period is the length of time you will need to wait before you are eligible to start receiving payments after making an Income Protection claim. The longer wait period you have, the lower your premiums will be. Wait periods can range between 14 days and two years. You can choose your wait period based on how long you think you can manage without an income, any annual leave that you can use or whether you have sufficient money in your savings account to manage for a time. Having manageable premiums is important and it’s also important to keep in mind why you’re taking insurance in the first place. You should think realistically about the type of cover you are taking and how much cover you need to protect the lifestyle you’ve worked hard to create. “Asteron Life’s cover packages have a lot of inbuilt flexibility, and now is a good time to talk to an adviser if you are looking to manage costs. We want to support our customers to make informed decisions about what’s best for them and fits within their budget,” Seema says. In FY2022* Asteron life paid $100m in claims with a claims acceptance rate of 94%. *Period July 1, 2021 to June 30, 2022 S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 6 7
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PIE FUNDS
Investing Lessons we can Learn From 2022 This year has been a challenge for investors as global markets navigate significant world events. What are some of the key things we can learn from 2022? Pie Funds founder and CEO Mike Taylor explains. Significant global events have meant rocky markets this year, resulting in a bear market. Downturns are never enjoyable for anyone, but there are always lessons to be learnt and tips to be reminded of. Here are a few of them. Downturns bring opportunities Even though we are in a downturn, not every company is doing badly. Some global sectors and themes are stable, if not performing strongly, despite these volatile external factors. This year, sectors like healthcare, renewables, infrastructure and building, and some aspects of travel have shown growth. Don’t fight the US Federal Reserve There is a saying, “don’t fight the fed”. That’s for a reason. If the Fed wants to slow demand, remove liquidity and raise rates, you don’t want to go against the tide of the world’s largest central bank. And vice versa. The Fed has already told the market many times what to expect. They will continue to raise rates for the remainder of 2022 and possibly into 2023 and then hold them there until inflation is back below 2 per cent. The best outcome at this point will be for bad news to become good news. If the economy slows and, as a result, inflation falls, this will be good news for investors.
of months, a year, or even several years. This year’s downturn might be unsettling, but market volatility is the price you pay in the short term to hopefully benefit from returns over the long term. Try to focus on your long-term investing goals. If you’re feeling unsettled, try not to check your investments too much, maybe every 6 or 12 months. Keep investing during a downturn If you’re able to, continuing to invest regularly during a downturn can bring benefits. Every month the market falls your investment contributions allow you to buy at lower prices. You can get maximum benefit from this if you invest regularly. This is called dollar-cost averaging. It’s an investment strategy where you invest a fixed amount regularly no matter what the prices are and what the financial markets are doing. You might already be doing this through your KiwiSaver account, by contributing every time you get paid. Sometimes you’ll buy these shares at a higher price, and your money will buy fewer shares. Sometimes you’ll buy at a lower price, and your money will buy more shares than expected. The idea is that over the long term the price will average out. At the moment your money will be buying shares at a lower price.
Reach out to the experts If you haven’t received financial advice and this year has been particularly unsettling, maybe it’s time to talk to an expert about your investments. There is inherent value in a trusted relationship with someone who can travel with you on your investment journey. Another reason for feeling unsettled could be your portfolio is not set up to suit your personal situation and risk tolerance. An adviser can help with this too.
Bear markets don’t last forever Investing is seasonal. Right now we are in winter, but spring will come. Bear markets are a normal part of investing and do not last forever. I’ve been investing for more than 20 years and I’ve seen plenty of bear and bull markets during this time. Make no mistake, bear market investing is hard, even for professionals. But having been through rough times before, in my experience, the best returns have sometimes been achieved roughly 12 months after a bear market ends. My best year in funds management was coming out of the global financial crisis. Try to stay positive, better times will return.
Investing is for the long term It can be easy, and often enjoyable, to focus on short-term returns. But a bear market is a reminder that investing is for the long term; sometimes 20, 30 or 40 years. Dips in the market could last a couple
Disclaimer: Correct as at October 21, 2022. Mike Taylor is the CEO and Founder of Pie Funds Management Limited. You can view our disclosure documents on the Pie Funds website. For personalised financial advice, please speak to a financial adviser.
‘Investing is seasonal. Right now we are in winter, but spring will come.’
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PERSONAL FINANCE
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PERSONAL FINANCE
Why do Women Spend Money? For generations women have seen money as a way to enjoy and enhance day-to-day life and create a lifestyle. In other words, it’s all about the here and now, writes Lynda Moore. OK girls, this one is for us. What is it that gives us the urge to spend money and buy that handbag or candle when we are feeling a bit down? I also suggest you share this story with the boys in your life so they get a much better understanding of why we feel the need to shop and spend money. When John Gray wrote Men are from Mars, Women are from Venus, we became a lot more aware of the differences between how men and women think. These differences not only apply to our relationships, but also to how we think about and spend our money. When my daughter changed jobs from working in a small family-owned business to a more corporate environment I received the SOS call from her after she was offered the position. “Mum, my clothes are all wrong; I need your help to get some new ones.” I was more than happy to oblige. So we met at one of our local shopping malls; started with coffee and a bit of a planning session about what we were looking for and what the budget was, and then we started our mission in earnest. We went to just about every clothing store in the mall, trying things on, rejecting some and putting others on hold to come back later and make a final decision. We took a break for lunch and caught up on all the news and what was happening, then it was back into it. We continued picking and choosing and making the final selections. Messages about money It was a full day of activity. I got home exhausted but very happy with the outcome and the time spent with my daughter. I am sure that by reading this you will be able to relate to it and share stories of your own, while the guys will be scratching their heads going “so what!”
Let’s go back to our childhood; girls and boys are brought up to see money quite differently. Even though we are taught the same things in school like “You need to save and invest for your future” and “Don’t spend more than you earn”.
4. Feeling guilty? We better buy a present. I think every working parent has been caught by this one. We couldn’t make it to the school sports day, so to make up for it we took home a little gift to say “sorry”.
Historically, girls got a few extra messages that the boys didn’t. For example, “Men know more about money than you do” and “it’s better to do good, than be rich."
5. We think we are saving money when really we are spending more. How many times have you been caught out on the buy two and “save 50 per cent” on the second item. So, what do we do? We buy two, but we probably only really needed one. Or my favourite, if you just spend another $20 you get a free gift.
Fortunately this is changing, but for generations women have seen money as a way to enjoy and enhance day-to-day life and create a lifestyle. In other words, it’s all about the here and now. While men saw money as something to be accumulated and gain in value. It’s all about the future, so they typically didn’t spend but invested. Our attitude to spending and money can get us into trouble. This doesn’t just apply to women, men do this too. Here are a few of the ways we get into strife. 1. We spend emotionally. This can either be the “I have fallen in love with (insert your own word here) and I have just got to have it” spend, or the spending we do to make ourselves feel better when things aren’t going well. 2. We succumb to temptation. Internet shopping, infomercials, catalogues in the mailbox; whatever the source we can shop 24/7, and we do. Having a sleepless night? Just hop online and buy a new jumper, cushion or whatever takes your fancy at the time. 3. We tend to buy on impulse. This can be as simple as the chocolate bars strategically placed as you stand in the aisle at the supermarket or something that catches your eye as you are passing.
Bit of planning goes a long way So how do we stop ourselves falling into these traps? Slow down and take more time before making a purchase. Adopt the attitude of challenging your purchases before you buy, with questions like: Why am I really purchasing this? Do I really need it, or is it a want? If I didn’t buy this now, will I still need it tomorrow? Now, I am not saying don’t go shopping. It’s part of our psyche as women and the social aspect is hugely important to us. Just make sure you do a bit of planning first. – Know how much you can spend, take cash and leave the credit cards at home if that works for you. – Be prepared to say “no” and leave some things behind. Window shopping is OK. – Go home when you start to feel stressed about how much you have spent. – But most of all make sure you enjoy yourself and the time you spend with the friends (or family) you have gone shopping with. To learn more, feel free to reach out to me via www.moneymentalist.com S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 7 1
PERSONAL FINANCE
Investing online – Why it’s so Different There’s no printer in the Kernel Wealth office, for good reason. This pioneering digital investing platform and index fund manager is turning heads for its innovation in the sector, writes Laine Moger.
The problem with the financial sector is too much paperwork and not enough talking, says Kernel Wealth founder, Dean Anderson. After spending seven years at the NZ Stock Exchange, Anderson realised investment options desperately needed to improve. His solution was: Kernel Wealth – a personal finance platform designed to suit the investment needs of Kiwis – in an easy-touse and accessible way. “Kernel Wealth has been designed from scratch to do the same thing as a traditional investment provider, but is cloud-based, giving customers an entirely digital experience that isn’t burdened by legacy processes, Anderson says.” Investing refresh This means instead of trying to retrofit the paper-pushing ways of old, it’s hit refresh on the entire approach to investing. “If anyone has ever dealt with a bank, they’ll know it’s a lot of paperwork,” he says. “I set out to change that and put investors at the heart of my business. There isn’t even a printer in our office.” Anderson says other financial institutions who try to go digital, still opt to lead with S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 7 2
the financial product in mind. This, in his opinion, is too heavy on the figures. “This isn’t what Jo Bloggs on the street understands, and wants to see.” In fact, Anderson’s team tries to keep the emphasis away from the dollars and percentages, instead preferring to focus on realistic goals and outcomes.
‘It’s about humanising the experience of investment.’ “We ask questions like: ‘What are your habits? What can you achieve? What would you like to do with your money?’ This way, people are more likely to stick to it and work towards the goal,” he says.
Despite the “worst financial markets in decades”, Kernel Wealth investors are still putting their money to work and investing, opting to take a long-term view towards their goals, with 95 per cent plus of orders placed being to buy, rather than sell. This could be an argument for outdated investment ideals. In traditional investing, Anderson says too much “obsession” has focussed on returns, and people have stopped investing – based on this – when times got tough. But if you approach it from the perspective of: “I’ll keep going to reach my goal of helping my child buy his first home,” there’s more motivation to keep investing. This way as long as you keep on going, you’re achieving success, he says. It’s a win, win.
“It’s about humanising the experience of investment.”
Different dimension So, instead of just investing $5000 and hoping for a return, Kernel Wealth operates in a whole other dimension, Anderson says.
As airy-fairy as that may sound to other members of the sector, Anderson says this approach is paying off.
As a company, Kernel Wealth believes there are three things stopping Kiwis from investing: poor financial literacy (trusting
K E R N E L W E A LT H
underperforming savings accounts rather than investments); lack of innovation (outdated fund managers creating unnecessary barriers to entry); and paralysis analysis (too many doom and gloom headlines). To make it easy to get started, Kernel Wealth removed the paperwork, meaning an investor can set up a free account online in minutes with just a few documents. They then can select from the investment options, look at the online savings account, or even switch their KiwiSaver account. The choice and control is with the investor. Either using the ready to go diversified funds, or building your own portfolio. Then, a dashboard gives you an easily comprehensible overview of your portfolio. Unlike other comparable platforms like Hatch, which offer third-party funds, Kernel Wealth owns and creates the investment options, which means they can now offer some of the lowest fees in the market – including no broker fees. There’s also an option to either move your KiwiSaver balance to Kernel Wealth, or to start brand new.
“It’s not a supermarket with 20,000 different investment options,” Anderson says.
“We have a proactive way of talking to our customers, and a very quick response.”
Kernel Wealth charges some of the lowest fees in New Zealand. It’s free to use the platform for investments under $25,000, and then $5 a month for portfolios over this (there is no platform fee for KiwiSaver).
This is something else, not so common with financial services, he says.
‘It’s not a supermarket with 20,000 different investment options.’
Award winners Anderson was this year’s winner at the 2022 Financial Services Council Awards in the “Emerging Leader Award” category.
In terms of the management fees on their investment funds and KiwiSaver, these range from 0.25% - 0.45% depending on the fund type.
“It is a team effort. Everyone is chipping in,” Anderson says. “Everyone contributes to everything, all [team members] contribute to content or customers.
Despite its entirely digital premise, Anderson knows most investors still need that human connection. So, the relatively small team of 30 work out of Auckland’s Queen Street.
“The nice thing about having a collaborative office is the diversity amongst us,” he says.
“It’s a human-centred design to help cocreate a plan with users,” he says.
“We’re not financial advisers so we can’t give personal advice. But we can answer customer queries and encourage them to read content. We can give them a context for what is happening,” he says.
But it’s not just the boss drawing attention, his team were also finalists in the “Team of the Year Award” category.
“Everyone has different viewpoints with money and experience, which helps our investors.” S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 7 3
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BO O STE R
Take the Pain out of Budgeting An online budgeting tool can be a vital piece of kit when tackling inflation and jumps in the mortgage rate. The entire world of money has been transformed by technology over the past couple of decades – from the way we shop, to the way we bank, to the way we invest. This has helped flatten the playing field so everyday Kiwis can get smarter about money, invest more easily and even take the pain out of budgeting. Budgeting has a pretty stodgy reputation. Spreadsheets, notebooks and line items aren’t sexy or fun. Yet budgeting is a powerful tool for improving your financial position. It helps you understand where your money is going and it makes you think more carefully every time you pull out your eftpos or credit card. With inflation on the rampage and mortgage rates rising, trimming your spending can make an enormous difference to your financial success. That’s why Booster created its online budgeting tool, mybudgetpal, which is available to everyone, at no charge. Automatically categorise your spending Mybudgetpal synchs with your bank account and categorises your spending, so you’re soon able to see where each dollar goes without having to manually allocate each transaction. You get a clearer picture of your outgoings, so you can put a spotlight on areas of higher spending and decide whether to cut back. For example, if you’re about to re-fix a mortgage at a higher interest rate, it could take away some of the pain of the new repayments. “Mybudgetpal works for everyone, which is why we’ve made it available to everyone, even non-Booster members,” says Diana Papadopoulos, Chief Customer Officer at Booster. “It’s a very cool tool that shows
you where you can improve. It’s easy to get into bad habits, or do well for a couple of months and then let that progress slip away. Mybudgetpal lets you see yourself backsliding and gets you back on track.” Set limits by category to manage your outgoings Budgeting shouldn’t be about taking away all of life’s small pleasures, says Papadopoulos. Instead, it’s about deciding what matters to you, and cutting back on the other areas. It allows you to set spending limits by category, schedule bill payments, and link to several different accounts.
‘It’s a very cool tool that shows you where you can improve.’ “Maybe it’s a surprise to see how much you’re spending on lunch each day, and you’ll then know that you can save a lot by making the effort to pack lunch four days a week. But maybe you’re happy with that spending because you enjoy the highquality food and the camaraderie of eating with your colleagues.
“When you want to reach a destination you need to know where you are now, and where you want to be. Then you can come up with a pathway to get you from point A to point B,” says Papadopoulos. “Mymoneymap shows you whether your current savings are on track to reach your goals.” The platform includes your KiwiSaver, other investments and savings, properties, and it can even estimate future actions like downsizing to help you plot out your financial future. By keeping it up-to-date, in conjunction with your adviser, and adding in goals as life changes, you can always see how far you are from where you want to be. “Not enough New Zealanders really sit down and look at where they are on the road towards retirement. Mymoneymap gives you a visual guide to whether you’re likely to reach your retirement goals,” says Papadopoulos. “If you’re doing well, it will give you the confidence you need to maybe relax a bit. And if you’re not quite where you want to be, we can help you create a strategy to get you on track.” To access mybudgetpal visit Booster.co.nz and sign up – it’s free and available to anyone. Mymoneymap is available to any myBooster member and can be accessed through the Booster NZ app.
“Budgeting actually helps you spend money on the things you love, because you’re managing your money more effectively.” A retirement road map at your fingertips Mybudgetpal is one of several tools Booster clients have access to – the company has an extensive suite of technology to support its services. Those who have joined myBooster also get access to mymoneymap, a personalised road map to help you reach your retirement goals.
Booster Investment Management Limited is the issuer of the Booster KiwiSaver Scheme, Booster SuperScheme, Booster Investment Scheme, Booster Investment Scheme 2 and the Booster Innovation Scheme. Product Disclosure Statements are available at www.booster.co.nz
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Property
IN FOR ME D I N V ESTO R
Investing in an upward market; the appeal of the office; quiet spring, but fresh shoots in real estate; three stages of property.
PROPERTY
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Ed McKnight looks at the three key stages of property investment and how to make them best work for you.
The way you use property changes throughout your life. There are three distinct stages: •
starting blocks
•
running the race
•
crossing the finish line.
And within each stage, there are set steps you need to take. That’s the premise of my new book – Wealth Plan: How to invest in New Zealand property and retire on real estate, written with my co-author Andrew Nicol. Here’s what happens in each stage. Starting blocks In the starting blocks, you need to buy your first home and build enough equity so you can purchase your first investment property. That’s because the primary way investors grow a portfolio is by using the equity they have in their home as the deposit for a rental. They don’t save up a cash deposit. But once you buy your first home, how do you build equity? The first option is to pay off your mortgage aggressively. This tends to work for career focused Kiwis who prefer a hands-off approach to property. Or you can take the hammer-wielding S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 7 8
Andrew Nicol & Ed McKnight
Wealth Plan HOW TO INVEST IN NEW ZEALAND P R O P E R T Y A N D R E T I R E O N R E A L E S TAT E
Andrew Nicol & Ed McKnight
3 Stages of Property
Wealth Plan
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approach and renovate your home to increase its value. Taking one (or both) of these approaches will help grow your equity faster and move you closer to the “running the race” phase. Running the race In this phase, your goal is to grow an investment portfolio of multiple properties. And you’ll do this because this is the stage where you calculate your wealth gap.
‘To help you do this, the book has its own companion software which does the number crunching for you.’ You see, everyone wants to skip ahead to the third phase – “crossing the finish line”. That’s where you earn a passive income and live off your property portfolio. But to do that, you need equity. You need wealth. And Kiwis who are at the beginning of their investment journey don’t have a lot of wealth (yet). But that raises the question, how much wealth do I need? And how many properties do I need to buy?
That’s the purpose of figuring out your wealth gap. This is where you calculate the amount of wealth you need to achieve your ambitions … and how much wealth you’re currently on track to create. If there’s a difference, that’s your wealth gap. For example, if you want to live on a passive income of $100,000 a year, you’ll need to have $2.5 million in net assets to make that happen. That assumes a 4% net yield. But then, let’s say you run the numbers and see that your KiwiSaver and other assets will only be worth $1.5 million by the time you want this passive income to start. Then you have a $1 million wealth gap. Unless you build more wealth, you won’t be on track to live the lifestyle you want. And that’s where you run similar calculations to determine the number of properties you need. To help you do this, the book has its own companion software which does the number crunching for you. Because once you know you need to buy three properties over the next 20 years, you’ll have the confidence to do it.
O P E S PA R T N E R S
But that’s not the end of the running the race phase. Not only do you need to buy rental properties, but you need to set your investment properties up for success and continue managing them over time. Then, once you’ve closed your wealth gap, you can move on to the final phase. Crossing the finish line This is the final stage of investing in property. It’s where you use the equity within your properties to build a passive income. There are two ways to do this – the Nest Egg strategy and the Golden Goose strategy. We’ll focus on the Golden Goose in this column since it’s the least wellknown. The goal of this strategy is to buy two to four high-yielding properties without a mortgage. This means you can live off the rent from those properties. Every fortnight you’ll have income hitting your bank without you having to go to work for it. The hard work has already been done. You’ll move away from investing in houses and townhouses to make this happen. These properties tend to grow in value quickly, but the cash flow isn’t good enough to make the crossing the finish line stage work.
Instead, you’ll invest in higher-yielding properties like room-by-room rentals and dual-key apartments. Take the above example. The investor wants a $100,000 passive income, and we said they’d need $2.5 million of net assets. How do the numbers work? If you target a 6 per cent gross yield, that $2.5 million of property should bring in $150,000 of rental income per year.
‘This book doesn’t just tell you what you need to do. It guides you through the process of actually doing it.’ But you still need to pay your property manager, the rates, insurance, maintenance and your accountant. Plus, you also need to know that your properties won’t have a tenant 100 per cent of the time. These costs typically total 1.5-2 per cent of the property’s value. Roughly $37,500$50,000 in this case. Once you take these costs away from the rent, you have $100,000-$112,500 a year in passive income that you can live off.
The way you invest will change The way you use property will change throughout your life. You might start by buying your first home and renovating it while you’re in the starting blocks. You then might transition to a more passive strategy when you’re running the race and building an investment portfolio. And then, you’ll transition to yield-based properties in the crossing the finish line phase to earn your passive income. But there’s more to each stage than what can be covered in a single column. Throughout the book, you’ll get other actionable tactics, like: •
The Fast 5 – the five ways to build your deposit (fast).
•
Cashflow Hacking – the six cost-effective steps to renovate and add value to your property.
•
The 8 Principles of Capital Growth – the factors to look for when finding properties that increase in value quickly.
This book doesn’t just tell you what you need to do. It guides you through the process of actually doing it.
You can buy the book now at www.wealthplanbook.com S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 7 9
Graham
REAL PEOPLE, REAL HOMES Unlocking the value of your land could be easier than you think. When Chris and Andrea’s children left home, they discovered subdividing their section and building a second home was an ideal way to unlock the value of their land and get what they wanted in a new home.
“When the kids left home, we decided we should do something with our extra land. We got a real estate agent, weighed up our options, and decided it was by far best to build a second home on the site rather than sell the section. It had to be a nice house, that would complement our old home to keep the value of both of them. GJ’s helped us with all our boundaries, plans and daylight angles, and dealt with all of the contractors and services. It was a complex job made simple with GJ’s. In the end it’s going to be a really good investment. We’ve got two really nice homes.”
– Watch Chris & Andrea’s full story gjgardner.co.nz
PMG FUNDS
A Bumpy Ride Ahead? Learning From 30 Years of Investing Success Scott McKenzie on the storm clouds ahead, lessons he’s learned as an investor, and how to keep cool when the road gets bumpy. PMG launched in 1992, with just 13 clients, and it’s thrived through several economic cycles to grow into one of the most established property funds management companies in New Zealand. Having launched over 40 commercial property investment offerings, five unlisted commercial property funds, and over $900 million in assets under management, the PMG Funds team has a track record of stability, continuity and performance. We talked to Scott McKenzie, CEO and Director of PMG Funds, about what lessons the business has learned after three decades of investing – and what that means for investors looking to ride out any upcoming economic turbulence. What can investors do with a possible downturn on the horizon? From a geopolitical and economic perspective, the road ahead is more unclear than ever. We don’t know what’s around the corner – it could be a bumpy ride over the next six to 18 months. That’s why we believe in remaining focused on controlling what we can control. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 8 1
PROPERTY
‘In times like these, our funds complement many of our investors’ portfolios with sustainable cash returns and lower value volatility.’ From our point of view, it’s about careful stewardship of our assets and having a smart strategy. That will allow us to keep building scale and income resilience irrespective of the economic climate. It’s the investment philosophy that has served PMG well now for 30 years. Are there any upsides to a downturn? Successful investors will often tell us that you make your money when you buy. With market volatility, good investments can often be acquired at a “discount” price, providing outstanding returns when markets recover once again. Here at PMG Funds, we’ve been getting ready to move when opportunities present themselves. An important strategy for our capital raises this year has been to ensure each of our funds are well positioned, through reduced gearing, to take advantage of opportunities that may come up; to be proactive not passive. PMG’s investment schemes went through 2008 well as the world headed into the global financial crisis. This was largely due to our conservative approach to debt and how we proactively worked with our tenants and on our properties. How do property investments provide a buffer against rising inflation? I think I can say with some confidence, that enabling a long-term passive investment in commercial land bricks and mortar that helps to preserve value against inflation, offers regular and reliable income and enables growth in value over time is an approach that continues to serve us all well. Inflation seldom brings good news to investors. But that doesn’t necessarily make it a bad time to invest. At times like these, when investment objectives change from growing wealth to simply protecting it, fund managers will talk about increasing exposure to defensive assets – sectors or companies that are positioned to survive and thrive through difficult periods. PMG Funds has now been operating for over 30 years, and reflecting on everything that has happened in that time, it’s clear S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 8 2
to us that the long-term view of property is the only one to hold. In times like these, our funds complement many of our investors’ portfolios with sustainable cash returns and lower value volatility. Our funds are suitable for investors with a longterm outlook, who understand their own risk profile and the natural ups and downs of the market. How do you keep your cool as an investor when the market is dropping? Economic cycles by definition means the market naturally rises and falls. By having a clear investment strategy, ideally by having received professional financial advice, and maintaining a long-term investment horizon with a focus on regular cashflow, short-term market movements should be nothing to fear and should be viewed as a buying opportunity.
But it’s also important that we don’t view all opportunities purely through a prism of growing wealth. Over the last 30 years, PMG Funds has grown and thrived because our motivation has not only been to make money for our clients, but to make a difference. Our business is working hard to play a leadership role in encouraging the commercial sector to improve the environmental performance of our country’s commercial buildings. We’re also passionate about improving financial literacy among young New Zealanders, through our PMG Charitable Trust and our support of the Life Education Trust’s SMART$ programme. Financial freedom is important because it provides us with freedom of choice and the opportunities this brings. Life isn’t just about wealth – it’s also about what you do with it.
A solid past, a strong future. Since 1992, our proven success through multiple economic cycles has made PMG one of New Zealand's most established licensed unlisted property funds management companies. We have a 30-year track record of stability, continuity and performance and we’re extremely proud to have investors who are fourth generation customers; investors who trust PMG to grow their wealth because we have done right by their family. We’ve worked hard to earn and retain their trust and we value the relationships we hold with them.
Find out how PMG can support your financial future at pmgfunds.co.nz 07 578 3494 info@pmgfunds.co.nz
PROPERTY
A Quiet Spring for Sure, but there are Fresh Shoots The usual spring uplift was subdued, but an uptick in activity is expected as motivated vendors bring their properties to market before the end of the year, reports Jen Baird from REINZ.
Through 2022 we have seen market dynamics shift and settle at a more moderate pace. Over the three months ending September 2022 (Q3), prices eased, sales activity was down and inventory levels remained elevated as properties stayed on the market longer, with median days to sell high. Market by numbers In Q3 2022, the national median property price was $810,000, a decrease of 5.3 per cent, from $855,000 over the three months ending June 30 2022 (Q2). Year on year, there was a 1.7% decreases in median price – from $824,000 in Q3 2021.
The REINZ House Price Index (HPI), which measures the underlying value of property, showed a 3.3 per cent decrease over this quarter, and in September the HPI was down 12.6 per cent from its peak in November 2021. All but four regions across NZ saw negative HPI movements, indicating that in many regions buyers are not paying as much as they were for the same type of property.
Two regions saw a quarter on quarter increase in median price; Taranaki was up 1.6% from $620,000 to $630,000, while West Coast was up 0.9% from $337,000 to $340,000. All other regions saw a decrease in median price quarter on quarter; Wellington saw the greatest decrease down 10.4% from $892,880 in Q2 2022 to $800,000.
The fundamentals Several fundamentals are affecting the market. Last year, demand far outweighed supply, and a sense of urgency propelled the market. Now the scales have tipped the other way; we are seeing more properties available to purchase, at the same time there are several barriers to entry for potential buyers as they continue to grapple with increasing interest rates, tighter lending criteria, changes to taxation of residential investment property and concerns around the cost of living.
The number of properties sold across New Zealand was 14,802 over Q3 2022, compared to 15,751 over Q2 2022. Inventory levels sat at 25,900 compared with 26,023 in Q2 2022, and the median days to sell increased 6 days, from 42 in Q2 2022 to 48 in Q3 2022. Properties are staying on the market longer.
Annual inflation has hit 7.2 per cent, and the Reserve Bank has increased the official cash rate to 3.5 per cent, and is expected to increase it to 4.0 per cent by year’s end, with more increases to come in 2023. Many say mortgage rates are yet to peak and some banks are increasing their fixed mortgage rates.
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However, there remains a strong labour market in NZ. And while lending criteria is tight, banks are willing to lend. Agents report signs of more buyers dipping their toe in the market, although this has yet to translate to sales activity. Mixed sentiment Those for whom affordability has been a barrier to entry are finding opportunity in a market where there is more choice, less competition and easing prices. In some areas agents note more of this buyer group returning to take advantage of property options, and increased first home grant house price caps. While prices have eased, the benefit to first time buyers is balanced with interest rates, but as they continue to increase that chink in the property market will close. Investors continue to hang back. However, our monthly survey of agents, conducted with Tony Alexander, suggests a more positive trend emerging in this buyer pool too. In September, a net 28 per cent of agents said they were seeing fewer investors in the housing market looking to buy, compared with a net 68 per cent in February. Where to next? The September figures indicated the usual spring uplift was subdued. As we edge towards the close of the year we expect an uptick in activity as vendors motivated to sell this year bring their properties to market. And there are a few signs to suggest this may well be the case. As the market settled into this phase of the cycle, people hit pause to wait for a more favourable market: buyers waiting for a deal, and vendors reluctant to be that deal, slow to lower price expectations. Now, vendors are increasingly understanding and willing to meet the market. People are less likely to hold off listing, and agents say they have seen an increase in appraisals compared to earlier this year. There are still challenges, but life goes on, people need to make decisions, whether that’s upsizing, downsizing or leaving the city behind.
REINZ
Median House Prices Quarter-on-quarter September 2022
Northland
$695,000
Bay Of Plenty
$870,000
Auckland
$1,070,000
Gisborne
Waikato
$592,000
$780,000
Taranaki
$630,000 Mananawatu/Wanganui
Hawke’s Bay
$575,000
$720,000
Tasman
$832,000
Wellington
$800,000 Nelson
$715,000 Marlborough
$654,000
West Coast
$340,000
Canterbury
$664,500 Southland
$440,000 Otago
$660,000
National Median Price for Q3
Down 5.3% $810,000
(ended Sept 30, quarter on quarter)
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PROPERTY
Getting Good Advice Andrew Nicol on the benefits of getting personalised advice from a professional and avoiding the potential mistakes of going it alone.
When I started investing in property, I went to every property seminar, every course and every presentation I could. This was me investing in myself. And that’s part of why today I own over 40 investment properties and have done ok for myself financially. But it’s not enough to learn. You also have to do something with it. And that’s where all investors need to surround themselves with investment professionals. People who can guide you along the way and tell you what you need to do. Here are a few war stories of mistakes I’ve made when I didn’t get good advice, so you can avoid making the same mistakes How I bought my first property You see, despite going to all these seminars and presentations, I was still terrified when buying my first property. I’d gone to over 50 open homes, looked at countless more online, and read every Property Press from cover to cover and still hadn’t pulled the trigger on anything. It wasn’t until I talked to mortgage adviser – and local Christchurch legend – Tony Mounce that it all fell into place. I’ll never forget the day Tony and I were driving along between appointments. I was a fresh-faced 19-year-old and had saved up a $10,000 deposit. I mentioned that I was thinking of buying a property. He said, “That’s enough, just buy something.” And with his guidance, I eventually did. But without that blunt encouragement and Tony’s guidance along the way, I wouldn’t have taken action as early as I did. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 8 6
Lesson: Learning about investing isn’t enough. You need to get someone to look at your personal situation and give you advice on what to do.
The time I didn’t use a professional Every time I’ve made a major mistake in property, it’s been because I either didn’t use professional advice … or got it, but didn’t act on it. Early on in my property investing days, I started to diversify my portfolio outside of Christchurch, purchasing a property in Tauranga. It was a brand new build that I hoped would attract good tenants. Even though I was a two-hour flight away, I still decided to manage it myself, from a distance. And because it was a new-build, I wanted to set the rent at an aggressive price, which really meant advertising the property above the market rate. Because of the high rent, there wasn’t a lot of interest. So I said “yes” to the first person who came along. A good property manager would do full credit and reference checks. But, I didn’t do any of that. The tenants quickly got behind on the rent. By the time we got to the Tenancy Tribunal, the tenants owed me $5500. I won the case. But they still didn’t pay. In the end the tenants were means-tested through the tribunal. The missing rent would still be paid back – but at a rate of $5 a week. It would take them 21 years to pay back all $5500.
I’m not telling you this story to play the victim. In fact the moral of the story is that it was my fault: I should have hired a property manager in Tauranga to look after the property. That would have meant that the proper credit, background and reference checks were completed, and the rental application from these tenants wouldn’t have then been accepted in the first place. The property manager would also have made me be realistic about the right rent to charge.
Lesson: Get the right professional for the job. As a minimum property investors should have a mortgage adviser, property manager and a financial adviser.
O P E S PA R T N E R S
The case of the missing property manager Another notch on my property belt is the cautionary case of the missed mortgage payments. After trying to manage my properties myself, I learnt my lesson and went to find a property manager. I ended up going with a “5-percenter”. These are low-cost property managers who charge under the market rate, and cost substantially less. Unfortunately, in these situations you often get what you pay for. All went fine for a couple of months before ring ring, ring ring – it’s Westpac calling. “Mr Nicol, your mortgage account is in arrears.” I’d missed my mortgage payment. This was surprising, since the rent was meant to cover all of the mortgage payments, and the property manager hadn’t mentioned any issues with the tenant not paying.
In fact, I hadn’t heard from the property manager at all, so I had assumed that all was well. Imagine my further surprise when I looked at the bank account and discovered that no rent had hit my account in the previous two months. I jumped in my car and drove over to the property manager’s office – he was nowhere to be found. I later learned that the property manager had succumbed to a drug problem and skipped town along with two months’ worth of my rent – and probably the rent of quite a few other landlords as well. Suffice to say the missed mortgage payments left a hole in my personal bank account, because I had to cover the costs since the missing money wasn’t recoverable. I never tracked him down.
Lesson: When it comes to working with professionals in your investing, don’t just go for the cheapest option. The cheap option can often be lower quality and end up costing you more when things go wrong.
What professionals do I need? At a minimum property investors need: •
a good mortgage adviser to help them get the money from the bank
•
a quality property manager to look after the tenants, do the correct background checks and follow the Residential Tenancies Act by the letter
•
a financial adviser to help them achieve their goals through investment property, and decide what to invest in.
If you get all three of these you will be far more successful, and you’ll avoid many of the same mistakes I made. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 8 7
PROPERTY
Commercial Real Estate Opportunities in the Current Economy In spite of market challenges commercial property presents a good investment opportunity – particularly in the industrial sector.
First Light Capital has recently appointed Shane Scott as CEO. Shane brings more than 25 years of real estate experience in New Zealand, the UK, Europe and the Middle East, including as partner of Resolution Property in London for the last 13 years.
– have negotiated the past two years better than many other asset classes.
What are the challenges facing the commercial property market at the moment? Commercial property isn’t alone in facing a challenging economy right now.
Elsewhere in the commercial property sector, the pressure being put on small businesses may lead to more vacancies within B-grade stock. Again, this underpins the value of the premium sector.
Inflation has created a dual-edged sword, where asset owners with lease agreements that are based on CPI are seeing rental returns increase considerably. This looks likely to continue in the short term.
Is commercial property still a good investment? For scaled property owners, the best approach to navigating the current environment is to adhere to the commercial property cliché of buying quality property in good locations with strong tenants on long leases.
At the same time, mortgage interest rate rises have seen loan repayment levels increase. The risk of tenant failures is of particular concern for property owners. Businesses are being hit with higher costs, household living expenditure is rising, and there are residual supply chain issues coming through China Many businesses are being squeezed from all sides, and this increases the risk of defaulting on their leases. How has commercial property performed through the last few years? Industrial property continues to outperform other sectors of the property market. Premium commercial buildings with strong tenancy profiles – usually large corporates that are more able to absorb rising costs S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 8 8
As a result, industrial property and large, premium A-grade commercial premises are holding their value better, and will recover faster from this economic downturn.
The property market as a whole is swinging in favour of buyers, and there are great opportunities to buy into A-grade commercial properties. Now is a very good time to diversify investment risk across multiple properties, sectors and tenants. As an example, our First Light Property Fund Offer has recently acquired a third property at 57 Forge Road, Silverdale, Auckland. The property is the food grade manufacturing facility for Dad’s Pies, which is owned by George Weston Foods subsidiary Allied Foods. The addition of an Aucklandbased industrial facility both strengthens and diversifies the Fund with another premium tenant on a long-term lease.
It adds to the Fund’s two existing properties in East Tamaki and central Hamilton to create a portfolio that lives up to our location, tenant, yield and potential growth criteria. As a result, the Fund offers a 6 per cent p.a. return that’s payable monthly; excellent returns in any climate. This conservative investment structure provides our shareholders with superior security, and we’re actively in the market looking for new acquisitions for both our First Light Property Fund and other syndicates. Who is First Light Capital?
First Light Capital (FLC) is an independent
commercial property and fund management company that prioritises people alongside performance. FLC prides itself on being accessible, accountable and assertive, with a portfolio of premium investments around New Zealand for both individual and institutional investors. FLC has over $330m under management, 59 tenants and 100 per cent occupancy. The company is 100 per cent owned by its directors, and brings together more than 100 years of combined expertise in property, funds management and investor relations in New Zealand and overseas.
www.firstlightcapital.co.nz Disclaimer: All content in this article is the opinion of Shane Scott. It is for information purposes only, is not intended to be relied upon, and should not be construed as financial advice. We recommend that prospective investors seek professional advice from a Financial Advice Provider who considers their personal circumstances.
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PROPERTY
Tips on Investing in an Upward Market While some are sitting on their hands we are still seeing a significant number of purchasers taking advantage of opportunities in today’s market, writes Peter Norris. For at least a decade now – with the exception of a couple of short-lived increases – we have been in a downward interest rate market. That downward trajectory sped up drastically as a result of Covid and we all saw the record low rates that resulted. What happened from that was a significant increase in asset values – in particular property – and a feast on debt in order to pay for those assets. That’s now changed and we are very much in an upward rate market. Over the course of 2022 main bank home loan rates have close to tripled, going from the lows of 2.09 per cent to where they sit now, which is over 6 per cent. Outcome: reduction in property prices, property listings and overall a much more negative sentiment in the market. However, in a market where that negative sentiment is meaning a lot of people (buyers and sellers) are sitting on their hands, we are still seeing a significant number of purchasers taking action – or, taking advantage of the opportunity. In fact it’s becoming very common for my team to tell me they’ve never been this busy. I’m not a believer in luck. I’m a believer that luck is simply where preparation meets opportunity. And right now, despite interest rates increasing and the property market softening, there is significant opportunity. So how can you be prepared to take advantage? S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 9 0
Pick your strategy: Passive Passive is often more long term, low touch investing and for us that means buying something new (townhouse/standalone) and holding it long term to get capital growth. The opportunity Unfortunately, there are a reasonable amount of buyers who, over the last couple of years, have put new build properties under contract and paid deposits without obtaining their full approvals from the bank in order to settle that property. With interest rates increasing, this leads to those buyers potentially struggling to settle those properties and needing to nominate their agreement to buy. What this means for investors who are prepared is that there is the opportunity to take on those properties and buy at a price agreed one to two years ago. There’s benefit to
this for all parties. The developer still gets the property sold; the initial purchaser gets their deposit back (or most of it) and can move on; and the new investor gets a property at below market value. The advantage Getting a property at below market value means you get instant equity gain. However, the real advantage to this strategy is all the benefits that come with buying a new build. Interest deductibility; little to no maintenance; lower deposit requirements for lending and shorter bright-line rules, to name a few. Active Active investing is for those investors who want to be more involved. Similar to passive, it may be a long-term strategy in that you hold the property long term, but it’s very much short term in that active investing is about buying cheap, renovating
C ATA LY S T F I N A N C I A L
to add value and increase rent quickly, and then re-valuing, extracting the equity and going again, and again. The opportunity In a market with high inflation, higher cost of living and rising interest rates, there will be those who are put in a position where they need to sell property rather than wanting to. Perhaps they’ve over-leveraged and need to pay down some debt, or they could simply be wanting to adjust their own investment strategy and swap old for new. That need to sell creates an opportunity to purchase below value and find properties where you can add value quickly. In this strategy, you make your money on the way in. The better you buy, the better the end result. The advantage This strategy has a clear advantage that outweighs the new build approach. It’s the
ability to add value and recycle that equity gain to go again. If done well, adding things like bedrooms, cabins, minor dwellings and simple cosmetic renovations will increase your property’s value, increase the rental yield and allow you to keep buying more quickly. Pre-approval Once you’ve got your strategy, get preapproved. The sooner you do this the better. Remember that when interest rates increase, the banks tend also to increase their test rates. This means that every time the rates go up, your borrowing potential goes down. Therefore, getting a pre-approval sooner rather than later will give you the maximum level of borrowing. It also means you’re in a strong position to take advantage of deals when they come up, which means you could get an even better price.
Revolving credit The last part of being prepared is about the loan structure itself. Having a revolving credit, or some sort of buffer (offset) set up is crucial. This could be used for things like covering the weekly top-up you need to put into the property costs such as mortgage repayments. While rates are higher, you’ll likely be negatively geared and need to top up your repayments. Understanding what that number is, and having a revolving credit set up to cover it, will mean that as rates go up you won’t be frightened into selling. You’ll stay the course and remember the longterm goal. The trick with this one is to borrow while you can. Don’t wait until you’re short of cash and needing the buffer in place, to go to the bank and ask for it. By then, it’ll likely be too late. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 9 1
Your Your future future is our our priority. priority. Most Mostpeople peoplehave havedreams. dreams. They dream about building a better life, a future that’s going to be They dream about building a better life, a future that’s going to be substantially different from today’s reality. But, most people wait. substantially different from today’s reality. But, most people wait. They wait for something to happen – someone to tap them on They wait for something to happen – someone to tap them on the shoulder. Something to change. They need something to spark the shoulder. Something to change. They need something to spark them into action, an idea, a meeting, a new insight to cause that them into action, an idea, a meeting, a new insight to cause that change and drive us all forward. In short, they need a catalyst. change and drive us all forward. In short, they need a catalyst. Our mortgage and insurance advisers work with you to ensure Ourare mortgage and insurance advisers work with youwhat to ensure you set up for success, if you are interested to see is you are set up for success, if you are interested to see what is possible reach out we’d love to work with you. possible reach out we’d love to work with you. Call us on 0800 888 617, email advisers@catalystfinancial.co.nz Call on 0800 888 617, advisers@catalystfinancial.co.nz or forus more information go email to www.catalystfinancial.co.nz or for more information go to www.catalystfinancial.co.nz
T H E R E N TA L B U R E A U
‘A Win for Everyone in Our Industry’ A small company in a tough sector scores big at INNOVATION. The Rental Bureau in Auckland is on a mission to change the rental industry landscape for good, and is getting the accolades to prove it! The independent property management business took home the Westpac Award for Excellence in Innovation for their commitment to continuously embracing technology. When you think of innovation, most of us think of the latest tech start up, or about advances in science or healthcare. You wouldn’t immediately think of property management as an industry where innovation would be recognised and awarded. Property managers often get a bad rap, but The Rental Bureau’s Victoria Heyes says “Winning this award and gaining recognition for the hard work we do is a win for everyone in our industry. It’s nice to have some positive light shining on all the work we property managers do,” she says. The company made the finals in two categories in the Westpac Business Awards 2022: Excellence in Customer Service Delivery, and Excellence in Innovation. It was was also a finalist in the REINZ Awards 2022 for Property Management Company of the Year (Small Office) – an award they took home in 2021. Point of difference What is this business doing differently? “The innovation focused on reshaping the usually laborious, long and costly process for finding and securing good tenants,” Victoria explains. “The team realised that in the postCovid environment finding great tenants was taking even longer and the costs were rising further, leaving both owners and prospective tenants dissatisfied.” They mapped out the process and pain points and reinvented the proverbial wheel.
“By using new technology, and having a unique two-team structured approach to our viewings, The Rental Bureau has adapted the capability to process, approve and sign up new tenants within an hour of viewings taking place,” Victoria tells us. They didn’t cut corners; they simply employed a new approach to carry out their existing processes, fast tracking everything. The innovation includes 3D online property tours at no additional cost to owners, meaning that often potential tenants turn up already knowing that they are ready to sign. Property owners receive real-time feedback from the viewings, and are thrilled to have fully-vetted, great tenants signed up so quickly. Prospective tenants don’t have to wait around for days wondering whether or not their applications have been successful, searching for other properties in the meantime. Everybody wins in this scenario. Team passion Victoria says that the success of this innovation comes down to using great technology effectively and her team’s passion to make it work. “I am so proud of our team who have worked very hard on this achievement. Their continuous ideas and initiatives to improve and deliver great service for both owners and tenants is the reason that we were part of this amazing event.” Victoria Heyes started The Rental Bureau from her garage in early 2015, with zero clients, but a firm belief that she had something new to offer with a focus on customer satisfaction for both tenants and owners. Fast forward seven years and
Victoria’s dream is becoming a reality. The Rental Bureau has grown from one woman in her garage with zero clients to more than two hundred clients serviced by a passionate team of six. Victoria states this is just one of 27 processes the team are reviewing, and just the beginning. She’s busy getting ready for The Rental Bureau’s Investor Evening taking place at Lopdell House on December 7. Property commentator Ashley Church will present on the future of the property market. Everyone in the sector will be watching to see what this creative-thinking leader comes up with next. Here’s to a brighter, more innovative future, and to some more “good news” stories for the property management industry. “This win for us is a win for the whole industry,” Victoria says, “and it shows the public there are some excellent people in our industry who work hard and care about what they do.”
Come and join our Christmas Investor Evening with special guest speaker Ashley Church on the December 7 in Titirangi. See website for more details and to book your spot. www.therentalbureau.co.nz For more information contact: Victoria Heyes victoria@therentalbureau.co.nz 09 8877 420
S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 9 3
We lease, we sell, we manage, and we know how to increase the value of your Commercial property When results matter, you’ll want to talk to our specialist Commercial team. 0800 367 5263 | pb.co.nz/commercial
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Upping the Appeal of the Office It’s been a challenge for offices to adapt over the past two years, so it comes as no surprise design has also shifted with the times, writes Sally Lindsay. There is no doubt Covid-19 has dramatically changed the way office design is viewed. Many companies have had to find innovative ways to ensure workplace safety remains a top priority, while maintaining high levels of productivity and efficiency and promoting a much-needed sense of employee well-being. It has been a challenge for many offices to adapt to the numerous changes over the past two years, so it comes as no surprise that top office design trends have also shifted with the times. Many offices are finding that a renewed focus on flexibility, comfortable surroundings, sustainability, and digital technology is better for productivity and the bottom line. Workplace interior design consultant Cachet Group has created several successful and comfortable "resimercial" suites for a range of owners. A combination of “residential” and “commercial,” resimercial design brings aspects of home into the contemporary workspace. By combining the residential and commercial components together, it makes a work environment where employees can be comfortable and happy. The goal is to recreate a workplace which inspires workers to be more creative and productive at the office.
Above: New commercial design celebrates commercial quality, but with residentialinspired features. Right: The homely feel of contemporary commercial is created by residential furniture, light fittings and fabrics.
This trend has gained momentum lately; the design celebrates commercial quality, residential-inspired features over the stale and stereotypical feel of corporate furnishings. It brings a homey feel to the layout and furnishing style, usually with the introduction of residential furniture as a starting point, and gradually light fittings, paintings, fabrics etc. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 9 5
PROPERTY
‘It’s official: cubicle farms and rigid partitions are out.’ Smart design rules Cachet Group design lead Sarah-Jane Sullivan says the company’s objective is to create leasable tenancies that fit a wide pool of tenants, often a business employing 15-30 people. Cachet’s design and construct teams apply pragmatic space planning to accommodate a tenant’s size while allowing for flexibility to make minor changes when their business grows. “It helps office owners/landlords to increase the tenant’s lease term,” says Sullivan. “A suite is about smart design incorporating the build aspect, which creates cost efficiencies for the asset owner, increases the market value of the space and creates a leasable and practical space.” During Cachet’s design process for suites the aim is to create a commercial office that mimics a residential and hospitality environment, says Sullivan. “It is a look many people have become used to during the Covid lockdowns.” The design includes elements, such as timber finishes, natural materials, soft furnishings and greenery to create a memorable and meaningful space. This is showcased in Cachet’s recent work at 125 Queen Street and AON Centre. The 125 Queen Street floor was vacant for more than five years and had a challenging floorplate creating limited lighting in many areas. To combat this Cachet Group split the floor’s five original suites into three to allow for a better ratio of meeting and workspaces, breakout areas and waiting space a tenant needs while making use of the views in each suite. These suites were successfully leased; two of them before completion of the build. Sullivan says during these challenging times tenants want to encourage their staff back into the office, but many unfortunately do not have the capital to invest in better designed space. “This has become a market gap and it is where office asset owners/ landlords can take advantage of creating spaces that entice tenants to move and remain in the building for several years.” S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 9 6
Other office design experts say there are key trends revolutionising the office environment. The ever-changing workforce It’s official: cubicle farms and rigid partitions are out. Modern design elements are beginning to feature more dynamic spaces that can be easily adapted to fit the needs of an ever-changing workforce. Since many people have spent at least part of the past two years in social isolation, the best way to foster more collaboration and teamwork amongst employees is to ensure that space is versatile enough to accommodate a variety of interactions with colleagues. Add pods to your office space As many businesses adopted an open concept office design, flexible workspaces and “pod” style layouts became more popular. In the times of social distancing, they proved to be especially useful, but even in post-pandemic office environments they are good for adding an element of privacy to open space. When employees are in the office they often seek out safe and confidential places to work in. As remote workers return to the office and the number of employees in the workforce continues to fluctuate, employees may find themselves without
a sense of belonging in their office. This is where pods come in. Many of these pods feature small private spaces with enough room to work alone or with a small group, as well as soft seating and outlets for laptop charging. Some pods are even soundproof so employees can hold meetings and talk to each other in a convenient, secure way. Incorporate more flexible furniture If pods are unsuitable for your office space, consider adding furniture that can easily adjust to the needs of your workplace. Rather than large tables and fixed chairs, opt for smaller tables and chairs with wheels that can be pushed together during times of collaboration, and then pulled apart later for independent work. This workplace design is incredibly popular in small office spaces in the post-pandemic era as most employees are more conscious about health and safety in their office environments. This flexible office design not only allows staff to feel safe and comfortable in their offices but also modifies their space for ideal levels of productivity. Social environment More offices are adding couches and armchairs with throw pillows to their lobbies and office spaces to create a sense of home in the work environment. Not only can these
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Exposure to daylight has been scientifically proven to increase our wellbeing and mood.
fixtures provide an appealing place for relaxation, they are also versatile and will suit any open space in the building. If it suits the office and brand, adding coffee tables and beer fridges can be considered alongside new comfortable furniture. Whether it’s a lobby for waiting clients or breakout rooms for employees, these features can create a social environment no-one can resist. Create more natural light Exposure to daylight has been scientifically proven to increase our well-being and mood. It also brightens rooms and makes the office feel bigger and more spacious. So it goes without saying that adding more natural light to a building can benefit office environments. Sometimes, it’s as simple as moving furniture away from windows to allow more sunshine to illuminate the space. However, in commercial spaces with fewer opportunities to embrace the daylight, the illusion of natural light can be created with well-placed mirrors or a warm colour scheme. No matter what works best, adding more natural light is key to a more comfortable, homey office environment that will boost productivity and morale. Contactless technology Investing in automated light switches and
taps in a new office space was already a key feature of modern office design before the pandemic, but now this technology has become essential for health and safety. Wherever possible, make sure there are a limited number of surfaces that employees and customers need to touch to interact with the office. Reconnecting with nature Many offices are starting to use plants more generously because of their positive effects on employee well-being. The Global Impact of Biophilic Design in the Workplace, a 2021 study, found that workers in offices with natural elements,
such as greenery and sunlight, achieve 6 per cent more productivity; 15 per cent more creativity and 15 per cent higher levels of well-being. There are many benefits to adding green walls to office space. Indoor plants are scientifically proven to improve air quality and circulation, especially in small spaces, which makes them perfect for offices. Not only will they boost well-being and inspire creativity and productivity, they may also reduce noise in open office spaces. This will lead to less headache and fatigue amongst employees, and make them feel more relaxed in their workplace. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 9 7
HACKT!CS
Turning a Game into a Lesson for Life A money-savvy couple have come up with a board game that promises to teach young adults how to engage with wealth, writes Joanna Mathers.
Benjamin Franklin once proclaimed: “Tell me and I forget, teach me and I may remember, involve me and I learn.” And this classic quote underpins the development of Hackt!cs, a board game that may well change the way young people engage with money.
“It took four years to make it simple,” she laughs. Aimed at the 13-25 age group (“the sweet spot is for 18 to 22-year-olds, heading out into the world on their own for the first time”), there was a huge amount of finetuning throughout the creation.
Released in December for the Christmas market, Hackt!cs was developed by property investor and mum, Debbie Trent. Four years in the making, it draws on Trent (and husband Craig’s) years of experience with money and property. In Trent’s words “it’s a fun game about life, community, environment, happiness, and making mountains of money” … something that should appeal to anyone with aspirations around future wealth.
“Our friends would come and play it on a regular basis and give feedback,” she says. “They were very patient.”
Trent had “retired at 28”, due to their success with property, and became a full-time mum. But she’s always wanted to run her own business. Having graduated with a Bachelor of Commerce before working in a start-up in the UK, she knew about business. A blank piece of paper The money-savvy couple have often been called on by friends for advice about money. “We really have a passion for helping people,” she says. And watching her two children and friends play board games gave her an insight into young people’s hunger for knowledge. “I saw that they were really wanting to learn about how the world works, but there were no board games that helped them with important lessons around life and money.” An idea was born: a board game that was fun, educational, and helped young people get set up for a successful life. Trent confirms the board game started with a “blank piece of paper”. Working alongside a design company for an effective and attractive game, the development took nearly half a decade.
Game based on points system Hackt!cs is based on a small town, which has opportunities for players to buy and sell stocks, property and businesses, work in a chosen career, and get ahead in life. It’s 12 rounds long and based on a points system; when the scores are tallied up at the end of the day, it’s often a surprise.
‘It really helps young people understand how money works.’ “It’s interesting as people often don’t realise who has won. It usually isn’t who people think it will be.” Networks are often a key to the success of any new venture. Trent says she joined a community of board game makers to gather information on exactly how they worked. It was a good move. The network is run by University of Auckland’s Richard Durham, from the Faculty of Creative Arts and Industries, and through him she was able to find a Chinese-based manufacturer who could make the game. “The game has a lot of magnetic parts, which meant it was quite hard to find anyone who could do it. The manufacturer we chose was amazing; the games have now
arrived in Australia, and will soon be in New Zealand.” The games will be sold through hackticsboardgame.com; they will use influencers to market the game as well as Facebook ads and social media. In all 3500 games have been produced for the first run; 2000 for New Zealand and 1500 for Australia. And the margins are tight. At $99 per game, they are hoping to keep it affordable. “We want people who are starting out and have a limited budget to be able to afford it.” Four years of development The Trents are fortunate their own financial skills have allowed them to amass wealth; they self-funded the game without getting into debt. Four years of development could have been costly, but their property portfolio has provided the financial backing needed to get the job done without sacrificing family life or having to service a huge loan. It’s a good looking game that stands up to others at the $99 price point, and the Trents are hoping that the response will be positive. Feedback from players so far is excellent, with the young people who have played it claiming it has helped change their mindset around money. “It’s a really fun game and offers many life lessons,” says Trent. “We hope young people will be encouraged to buy it for their children or grandchildren, it really helps people understand how money works.”
For more information about the game, people can visit the website: www.hackticsboardgame.com S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 9 9
Thinking Outside the Box Silverfin Capital has created opportunities to look outside traditional asset classes for attractive investment returns. Pine forests and poultry farms aren’t the usual fare for property investors, but they’re proving to be attractive sectors for Silverfin Capital Limited. Silverfin’s chief executive, Miles Brown, says while the industrial sector continues to be a crowd favourite for investors, rising interest rates are making it tough to find industrial investment opportunities that deliver an acceptable return. “Silverfin has instead broadened our mandate and has looked outside the box for asset classes that still offer a measured level of risk – but with a stronger level of returns. These property investments may look different to the industrial, retail and office buildings we are used to seeing. However, we’re finding they are popular among investors looking to diversify their portfolios.” Carbon forest scheme Brown says one example of an alternative investment is the recent Gowan Lea Carbon Forest Scheme, which Silverfin closed, fully subscribed, earlier this year. This scheme offered the opportunity to invest in a permanent forest with income generated from the receipt and sale of carbon credits. Gowan Lea forest is an established, midsized forest in Canterbury near the foothills of the Southern Alps. The forest consists of 316ha of freehold land with 185ha of net stocked area. “The offer was open to wholesale investors only, and the minimum investment was $50,000,” Brown says. The scheme is projected to deliver an 11 per cent total return per annum (forecast to March 31, 2024), consisting of 8 per cent per annum pre-tax income distribution S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 1 0 0
and 3 per cent per annum pre-tax capital repayment. “The Gowan Lea forest is forecast to produce carbon credits through to 2048, meaning that level of return should continue well into the future, depending on the underlying price of carbon credits. It’s also an ESG investment that helps New Zealand reduce our carbon footprint,” Brown says. “It has an existing registration in New Zealand’s Emissions Trading Scheme, and provides immediate exposure to the increasingly important carbon market. With the price of carbon continuing with its upwards trajectory, we are looking to offer further opportunities in this space in the future.” Agricultural schemes Gowan Lea Carbon Forest Scheme follows on the back of two other investment agricultural asset classes: schemes delivered by Silverfin in agricultural asset classes: •
A portfolio of four rearing sheds, a hatchery and a processing plant all leased to Inghams Enterprises on an initial 20-
year term, valued at over $100 million and providing a return of 8.5 per cent pa. •
A second smaller scheme, consisting of a new rearing shed also leased to Inghams Enterprises for 12 years, valued at $20 million.
Silverfin continues to target the more traditional asset classes as well, where they see value in a property. Silverfin was started by the late Cheryl Macaulay in 2016, and six years on the company is staying true to her legacy of buying high-quality, commercial and industrial assets. Brown says while many people may want to invest in commercial property, the cost of buying a quality commercial building on their own can be prohibitive and ongoing management is often a burden. “Silverfin’s proportional ownership investment structure means that commercial property can become much more accessible, without the high price tag or the time commitment of managing tenants.” The company aims to syndicate $100 million worth of property every year, and its portfolio is currently valued at over $600 million.
Invest in Yourself
IN FO RM E D I NV E STOR
Luxury adventures in Northland; summer fashion inspiration; the power of good communication.
WORLD’S MOST ADMIRED WINE BRANDS Craggy Range - Number 30
THE PEAK OF LUXURY Under the spectacular escarpment of Te Mata Peak, Craggy Range Winery presents a second-to-none visitor experience. A short stroll through the vines from our luxury accommodation, enjoy a seated tasting in Cellar Door or Head Chef Casey McDonald’s Hawke’s Bay menu in an intimate, comfortable & relaxed space. 253 Waimarama Road, Havelock North, Hawke’s Bay, New Zealand | +64 6 873 7126 | www.craggyrange.com
C O M M U N I C AT I O N
The Power of Good Communication Successful leaders lead teams that communicate effectively and recognise the importance of developing those skills, writes Miroslav Petrovic. Want to know what Richard Branson and Oprah Winfrey have in common other than being wealthy and famous? They are both extraordinary communicators. Successful leaders have teams that communicate effectively. They continue to invest in not only their team’s development but also their own. This produces cohesiveness with all members of the team (even the ones in accounts). I have seen time and time again skilled employees being too afraid to authentically communicate their desires or boundaries, which can lead to resentment and conflict, or even worse – good employees leaving because they are not able to express themselves well. The way we communicate in this world is constructed at a very early age. Our habits are programmed into our subconscious by watching those around us. Some of us were made to stay quiet, and often decisions were made for us and our opinions were ignored. This limits our expression later in life. Our body can contract and our posture can become contorted due to the tension we hold in our body. The more awareness we bring to this restriction, and if we have the courage to speak the truth that sits in our heart, the more our body begins to open and expand. Steps to better communication It doesn’t matter if you are pitching an idea to your team, trying to win a new client or sorting out the best way to approach conflict, the steps to prepare yourself for effective communication are the same. Here are some suggestions to practise in your next meeting: •
Before entering any room allow time to breathe more deeply. Feel your breath going down into your lower belly. As you breathe let your body become heavier. Slow the breath down and let there be a pause between the inhale and exhale.
•
Focus on your posture; notice your shoulders, neck and head position. Allow yourself to acknowledge where you’re holding tension in the body, then allow your body to move how it wants to. Resist the urge to force your body into ideas of “confident” postures. This often just adds more tension. It is better to release the tension than to use a band-aid approach.
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When entering a room be sure to acquaint yourself with the space. Allow your body to feel safe before engaging in eye contact with others. You want to feel like the attendees are being invited into your living room.
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Prepare yourself with some bullet points of the things you want to articulate, but be flexible and follow what is most alive for the audience. Watch whether they are engaging or disengaging and adjust accordingly. Don’t be afraid to ask questions to gauge the interest of your audience.
‘The biggest mistake people make is to have an agenda and talk at people.’
The biggest mistake people make is to have an agenda and talk at people, rather than realising that any time we speak it’s about creating an authentic relationship. How people feel about their connection with you is just as important as the content you’re sharing. Miroslav Petrovic is the founder of the Enlivened Speaking Institute and author of Give Them Goosebumps: Utilise The Power of Presence To Own The Stage of Communication. Find out more about his mentoring or sign up at your workplace to host one of his Evolving Communication events during his tour of New Zealand and Australia in March 2023. For more info visit www.miroslavp.com S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 1 0 3
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Power Dressing
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1. Timberland sneakers – www.timberland.co.nz, 2. Cos zip-up jacket – www.cos.com, 3. Cos trousers – www.cos.com, 4. Ahlem Bellechase Sun – www.ahlemeyewear.com, 5. Levi’s baseball cap – www.levis.co.nz, 6. Asics Japan court – www.asics.com, 7. Cos shorts – www.cos.com, 8. Cos T-Shirt – www.cos.com, 9. Birkenstock Arizona Sandals – www.birkenstock.co.nz S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 1 0 4
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1. C&M Flax waistcoat – nz.camillaandmarc.com, 2 Kathryn Wilson Evie Heel – www.kathrynwilson.com, 3. Kowtow Poppy Dress Blue Stripe – nz.kowtowclothing.com, 4. Carolina Herrera Good Girl Supreme – www.carolinaherrera.com, 5. Twenty seven Names Good Luck blazer – www.twentysevennames.co.nz, 6. Deadly Ponies Flip n Snap Maxi Pea – www.deadlyponies.com, 7. C&M Santiago Blazer Lemon Sorbet – nz.camillaandmarc.com, 8. Ahlem Eyewear Art Deco Sun Coffeelight – www.ahlemeyewear.com, 9. Kathryn Wilson Plaza Heel Gold – www.kathrynwilson.com S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 1 0 5
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The Art of Discovering a True Gem It’s not often considered when it comes to luxury travel, but Joanna Mathers finds the Whangārei region is a diamond in the rough. A golden onion hovers atop a forest of masts. For travellers driving alongside Riverside Drive towards Whangārei’s Victoria Bridge it’s an unmissable beacon; a luminous orb signalling arrival at a significant destination. The orb is the crowning glory of Whangārei’s Hundertwasser Art Centre, a gallery of international significance. The design of the gallery was gifted to the people of Aotearoa by the artist himself, but he never lived to see its completion. Years of internal dissention and disagreement saw the project relegated to the backburner and it took years of agitation by a dedicated group of volunteers to see it created. The Project Action Team (a group of around 20 volunteers) charged themselves with bringing the art centre to life (they even undertook a referendum on the subject) and raised millions in funds. And the glorious new centre (finally) opened earlier this year, bringing in crowds and accolades, a true gem in the city’s crown. I’m visiting the art centre after a glorious five days at a luxe Airbnb on the edge of the Pataua River in Pataua South. Close to Whangārei Heads, it’s an area I’ve never explored, but it’s worth it. Just 30km from Whangārei there’s plenty for nature and ocean lovers in these parts, and some very luxurious accommodation … but more on this later. Closest thing to heaven on Earth Stepping into the Hundertwasser Art Centre is like journeying into a curved and comforting alternative reality. The floors undulate softly (it takes a little getting used to). Even the toilets are gloriously askew and ebullient – a riot of colour in this most utilitarian space. (His toilets in Kawakawa, 45 minutes north of Whangārei, are also well worth a look.) S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 1 0 6
TRAVEL
Far left: A dish from Aqua's delectable menu. Left: Aqua's balcony is perfect for cocktails in the sun. Below: The exterior of Hundertwasser Art Centre.
Hundertwasser lived in the Bay of Islands for 24 years, and considered New Zealand the closest thing to heaven on Earth. Born in Vienna in 1920 and raised by a Jewish mother (his Catholic father dying when he was very young) he even joined the Hitler Youth to deflect attention away from his heritage. But very few of his Jewish family would survive the ravages of Hitler’s death machine. Sent to concentration camps, 69 were murdered. “This had a huge impact on his worldview,” says the excellent Hundertwasser ambassador and art centre guide Pam Tothill as we sit in an area dedicated to his youthful artistic endeavours. “He was really aware of being the ‘only one left’, and felt responsible for doing something great on behalf of his family. To make the Earth a better place.” Hundertwasser is known for his eschewal of straight lines (“he called them an invention of man, godless, leading to hell” says Tothill), his celebration of colour, and the organic motion that reflected the
lines and exuberance of nature. The horror of his early life led him to nature. He travelled Europe and Africa extensively, before discovering NZ in 1973. A trip to Fiordland after a touring show of his art led him to exclaim: “New Zealand takes me back to my origins. Like Israel is for the Jews, New Zealand is for me.” A trove of off-kilter and joyous works The art centre is a trove of his beautifully offkilter and joyous works: ranging from the early dabblings to the conservation posters he created for Conservation Week in the 1970s. There are photographs of his property in the Bay of Islands; his move into architecture as he created a home from used bottles; the roof from earth and grass. There is also an afforested roof atop the centre. Here you will find some very rare plants, including Pennantia baylisiana or kaikōmako. There is only one of these left in the wild, perched on a cliff on northern Three Kings Islands. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 1 0 7
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‘Beaches on this coast are spectacular and perfect for a range of water sport.’
Left The historic Le Consulat coffee house is minutes from the Basilica of Sacre-Coeur. Above Amélie was a waitress at the Café des Deux Moulins.
The art centre offers regular tours (public and, by arrangement, private) as well as function spaces where people can gather for special occasions. There is also an exclusive restaurant, Aqua, which exudes Hundertwasser quirkiness. The food is beautifully presented and delicious, there’s a deck which accommodates dogs and humans, and an excellent drinks selection.
Bottom left Walk in the footsteps of writers, painters and philosophers.
Hundertwasser Art Centre may be one of the major drawcards for Whangārei right now, but it is far from the only attraction. There are some amazing offerings up here. For example, MV Waipapa is available for charter per hour and can take visitors on harbour cruises or to Parua Bay Tavern on the Whangārei Headland. Further out, there are spectacular spots to stay and explore. Conservation project with history One of these is Tahi Eco Retreat. Situated 30km from Whangārei in Pataua North, it is set on 316ha of bush-clad land on the edge of the Pacific Ocean. Lesley Vincent, services manager for Tahi, explains the retreat is one aspect of a conservation project that began nearly 20 years ago. The land had been deforested to create farmland, but the owners have a commitment to returning it to its original state. Nearly 30ha of wetlands have been restored, 349,000 native trees planted, and over 71 species of bird returned. There are also native fish, lizards and insects returned after many years. Three original cottages have been renovated for guests to use: “We are in the process of updating them again,” says Vincent. She explains that the self-catered cottages are incredibly popular over the warmer months when guests go hiking, swimming at a nearby beach, birdwatching and exploring the beautiful spot. S U M M E R 2 0 2 2 | I N F O R M E D I NVESTO R 1 0 8
There is also a barn that can be used for small events such as intimate weddings. In summer they have a popular café that serves breakfast and lunch. The land is also home to many bees. Tahi Honey is created here, which is carbon neutral and GE free. Beaches on this coast are spectacular and perfect for a range of water sport. The Pacific Ocean is nearby, and further up you can find some of the best beaches in the country, including the secluded white sands of Whale Bay. All in all, Whangārei and its nearby coastal surrounds are a true gem. It’s not often considered when it comes to luxury travel, but for those who love art and nature and want to truly escape it all, this district is ideal.
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