THE NEXT BIG THING Four things to invest in that are hot right now
AGES AND STAGES
Investing in your 20s, 30s, 40s, 50s, and 60+
THE NEW KIWI POOR They own a big house but can’t pay the bills
housoen the t o ge t
p ro p e r
lad
The cost o
f be
SINGLE
ty
. r de
ing
.
Ways to use property over your
lifetime.
How to l ua q e t ge
9 772422 894000
chthoe ut t a W for ter
ar u q e e r th ! isis life cr
.
yo
NZ$9.95 INC. GST
reveal what the e y learned ’v
se
wiutrhex.
Billionair
The Y a Pl Game
THE
Juno Investing Game
You cash in your
KiwiSaver
Pick up a
to buy a house.
card.
Jump 10 sp
ng.
B 4 spaacck es.
goes badl
y wro
SKYDIVIN
G
aces.
You got
married! Jump 8 spac
es.
uy r. a ub Yo w c ac a nBeack 3 sp
es. r a h S are uppaces.
es.
p Jum
Pick up a card.
Retire with a million dollars.
YOU MADE IT!
4s
ED!
Pick u ac p
.
o
ces
spa
e rd.
Pick u a ca p
k 15 c a B
ce a p s
s.
rty
x pl
p6
Y
You
. s d
e
l nta e r r
.
ou r pJ ro entabluy a um pe
Ba
ck
O D IHValve y
ace s.
RC
o 17 ur as sp sets.
ard.
Trump’s ba Shares b ck om ! Back 4 spa b. Sell your
forest.
es .
Go straight to the finish.
ar Your Te sl Ju e s mp ar a 3 s e up p ac .
ces.
Pick u p a card
.
sh
THE
Juno Investing Game with
Investing can be fun. You can get rich, but life might throw up some unexpected disasters. Try our investing game with friends or family to see if can you be the first to collect a million-dollar retirement pot.
Get ready You’ll need a dice and some different coins – like 10c, 20c, 50c, $1 or $2 coins – to use as tokens to move from square to square. Cut out the cards inserted into the magazine on page 1 and put them in a stack on the card space in the middle of the game.
Play Throw the dice to move along the investing journey squares. When you land on a card square, pick a card off the stack, and follow the instructions. The winner is whoever gets to the end first.
Why did Partners Life sponsor the JUNO investing game? We’d all like to think that life’s a breeze and that you’ll retire with a million dollars, but sometimes disasters happen. Insurance will fill the gap if your earnings are interrupted. Get life right with Partners Life.
JUNO Game Cards Cut along dotted lines.
The Bitcoin you bought seven years ago is now worth a million dollars.
You win Lotto. The odds of this are 1 in 393,838 but somehow you did it!
Go forward 8 spaces.
Go to Finish.
Apple’s new iPhone is a dud. Shares drop 90 per cent.
You told a buddy your company is buying out Tesla and he made a million on the share market. The Financial Markets Authority found out and you’re in jail for insider trading.
Go back 4 spaces.
You bought a share in a property syndicate 10 years ago and now you sell it for double the amount. Go forward 7 spaces.
You buy a toy shop and go into business for yourself. Go forward 7 spaces.
Go back to the start.
Oh no! You die. Game over for you. But you have life insurance, so everyone else in the game moves 5 spaces ahead.
You catch Covid-19 and are stuck in hospital for a month. Go back 4 spaces.
Oh no! You’re widowed and your partner had no life insurance. Go back 4 spaces.
of a “ Days 5% term
deposits are well behind us ”
M I K E TAY L O R Execut ive Dire ct or, Foun de r & CEO
This decade it appears we are entering a phase not previously seen in history, when the cost of borrowing approaches zero and in many countries is negative. In Europe, interest rates have been negative for some time, and it’s not uncommon to take out a residential mortgage at a rate close to zero. In Switzerland, you must pay the bank to have money on call. In the last two decades the average 1-year term deposit rate in New Zealand has ranged from nearly 9% in 2007 to the current low of under 1% in 2021. It shows investors had it easy in New Zealand, and pre-GFC didn’t really need to take any risk at all to earn a modest return. So how do we navigate this environment and what are the alternatives to a term deposit? If you are used to the stability and security of a term deposit then venturing directly into other asset classes such as property, shares or fixed interest carries more risk, and the size of that risk can vary greatly. In my opinion, perhaps the best alternative for savers is a conservative fund. A typical conservative fund, such as Pie’s, aims to have lower volatility and to beat the returns provided by term deposits while still being lower-risk than other funds like growth funds. Pie’s investment team keeps a close eye on market conditions as part of our active management strategy, which helps us build wealth for our clients.
Pie’s Conservative Fund The Conservative Fund’s objective is to preserve capital with some growth and outperform the market index by investing about 80% in cash & fixed income and 20% in equities and other financial products, directly or through other Pie funds. + A potential term deposit alternative + Regular quarterly distributions + Ongoing liquidity without break costs + Still a lower-risk, low volatility option
Boutique. Bespoke. For you. Contact us on 09 486 1701 or email info@piefunds.co.nz to find out how we can help you.
P I E F U N D S . C O . N Z
To download the Product Disclosure Statement and Statement of Investment Policy and Objectives, visit piefunds.co.nz, companiesoffice.govt.nz/disclose. Past performance is not a guarantee of future returns.
“How is this free?!” The Property Academy Podcast: NZ’s No.1 business podcast
Learn how to become a successful property investor every day by subscribing to the Property Academy Podcast. Every single day, a new 10-minute episode is released by your hosts, economist Ed McKnight and property investor Andrew Nicol. Pull out your phone. Subscribe now to listen later.
“Great bite-sized pieces of property investing wisdom … highly worth listening to” – Matt
“Thank you, guys! It’s so cutting-edge. Love listening every time I’m driving” – Marin
Subscribe Now
Subscribe to JUNO for just $20 For 4 issues of JUNO (one year)
14
Contents IN THIS ISSUE
REGULARS
18. JUNO Exchange Speakers on relationships, property investing, and reverse mortgages brought readers to this JUNO event.
20. Subscribe to JUNO Subscribe to JUNO for a year for just $20 at www.junoinvesting.co.nz.
22. What We Like We find the hottest products, services, and places.
106. Book Reviews JUNO reviews two of the latest hot reads.
107. JUNO Junior Get your kids learning about money with our fun page to help improve their financial literacy.
8 JUNO |
AUTUMN 2021
22
crane-brothers.com
YOUR INVESTING
26
46
50
54
46. Billionaires: ‘Lessons I’ve Learned’ From finding a job you love, to testing your limits, the world’s wealthiest people pass on some of their wisdom.
26. Invest for Your Age
50. Beware the Bitcoin Bubble
Are you on track money-wise for your life stage? Martin Hawes explains what you should be doing with your finances.
Money-launderers, terrorists, hackers and scammers use Bitcoin. Should you? No, says Mike Taylor.
30. No Strategy is a Bad Strategy
52. Ask a Lawyer
Active versus passive, flipping versus buy-and-hold, index funds versus direct investment? Ed McKnight says it’s all about risk.
The legal team at Morrison Kent answers readers’ questions about employment law, in this new series.
34. House Rich, Cash Poor
54. The Three-Quarter Life Crisis
There’s a new class of poor in New Zealand, says Amy Hamilton Chadwick. They’re families with big mortgages.
A midlife crisis used to be when people in their 50s bought a Harley. Now they’re happening later, writes Brenda Ward.
38. The Hidden Costs of Being Single
58. How to Get Equal with Your Ex
Millennials are partnering later or not at all. This wave of singles are heading for a fraught financial future, writes Brenda Ward.
There’s a right way and a wrong way to divorce, to get through it with dignity, says divorce coach Bridgette Jackson.
42. Should You Give Cash to Your Kids?
98. Jake Millar’s Unfiltered
Will leaving your million-dollar home to your kids be a wonderful gift, or lead to fights, asks Amy Hamilton Chadwick.
Trader Jordan Belfort’s life story became the movie The Wolf of Wall Street. He talks to Jake Millar about what he learned.
10 JUNO |
AUTUMN 2021
YOUR INVESTING Property
76. A Tiny Step Onto the Housing Ladder Go small. That’s many Kiwis’ answer to the cost of housing. Amy Hamilton Chadwick investigates.
80. Property Through Your Lifetime If you want to build wealth through property, look at your stage, says Andrew Nicol, of Opes Partners.
84. Get the Best From Your Agent When you sell your house, a good agent could save you thousands, says Bindi Norwell of the REINZ.
86. How Did Your City Do? Bindi Norwell of the REINZ drills down in the property data.
76
80
92. The Great Baby Boomer Exit Will thousands of baby boomers sell their businesses at once? Maybe not, says Brenda Ward.
96. Business Vision Innovative Kiwi companies making their mark on the world.
LIFESTYLE
The Good Life
100. Essentials Play with warm and cooler textures and colours for the autumn months.
102. Coastal Playground Coves and beaches, charming villages, and inexpensive food. Live a millionaire on the Algarve coast, says Brenda Ward.
84
92
104. Price Per Wear These garments may be more expensive, but if you invest in quality, you’ll get your money’s worth.
YOUR INVESTING Market Reviews
108. Going Up, Going Down Cameron Bagrie looks at the economy.
110. Snapshot A quick look at events that could affect your investments.
112. In a Crisis, Look for Opportunities Exciting new themes and opportunities emerged in the wake of Covid-19, says CMC Markets’ Chris Smith.
102 12 JUNO |
AUTUMN 2021
112
116. The Pandemic Property Boom Last year, the world economy crashed, so why did property prices boom? Andrew Kenningham explains.
P R O U D LY MAR LB O RO U G H
Published by: Brenda Ward JUNO investing magazine, Level M, 17 Albert Street, Auckland Central, Auckland. junoinvesting.co.nz
Are You a Winner? Invite your friends and family to play our investing game to see how you ride the ups and downs of life. Investing can be a rollercoaster, a thrill, or a worry... And it can be fun! In this issue, we show you how.
I’d like to thank the fantastic team at Partners Life for covering the costs of printing our game board and the gatefold cover.
In an innovative and exciting initiative, we bring you the JUNO Investing Game, so you and your family can follow a typical investor over their lifetime.
Meanwhile, in this issue of JUNO, we look at the issues that affect us all at different ages and stages.
There are ups and downs, just like in real life, as you inch closer to your retirement goal. Just open out the gatefold cover and cut out the cards on page 1, then follow the instructions. We’re hoping you’ll realise there are lots of investing paths you can take. You can have a better life if you do your research, invest wisely, and protect yourself from the risks.
We explore why being single can hit you hard financially, why the midlife crisis is hitting later, why baby boomers don’t want to sell their businesses, and how to invest and manage your mortgage at every stage. And, as we always do, we talk to real people who are investing successfully and ask them how they did it.
Brenda Ward JUNO Editor
Publisher and Editor Brenda Ward – brenda@junoinvesting.co.nz
Resident Economist Ed McKnight
Art Director Mark Glover
Printer Crucial Colour
Advertising Manager Anita Hayhoe
Distribution Crucial Colour and Marketing Impact
JUNO is an investment magazine published quarterly by Brenda Ward. You need JUNO magazine’s written permission to reproduce any part of JUNO. Advertising statements and editorial opinions in JUNO reflect the views of the advertisers and editorial contributors, not JUNO magazine and its staff. JUNO’s content comes from sources that JUNO magazine considers accurate, but we do not guarantee its accuracy. Charts in JUNO are visually indicative, not exact. The content of JUNO is intended as general information only, and you use it at your own risk: JUNO magazine is not liable to anybody in any way at all. JUNO does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions. JUNO 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 JUNO, you must accept JUNO magazine’s advertising terms and conditions. Please contact anita@ junoinvesting.co.nz about advertising. JUNO 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 2422-894X DIGITAL ISSN 2422-9741
Proud printers of
Commercial Offset and Digital Printers
14 JUNO |
AUTUMN 2021
www.crucialcolour.com
Are you getting passive or active returns?
JUNO Growth Fund*
Market Index*
29.37%
8.10%
Grow your money faster JUNO’s low fees and active management help grow your KiwiSaver money faster. Low fees mean there’s less money taken from your account, leaving more to benefit from returns – great news! And with real humans actively managing your money, our investment team can help protect your money during market ups and downs. It’s a win-win!
One low fixed monthly fee One fee determined by the size of your balance. Paying low fees helps grow your KiwiSaver balance.
Active fund management Real humans making investment decisions to help grow and protect your returns.
*JUNO’s actively managed Growth fund return compared to its market index for the 12 months to 31 December 2020. Returns are before fees and assume a PIR of 28% (highest PIR).
www.junokiwisaver.co.nz
A market index contains similar assets and has similar risk to the JUNO funds, and so is a good reference point for judging performance. Every fund type is made up of a different mix of asset types. Each asset type (equities, fixed income and cash) in each fund has a market index. So, the market index figures shown combine two or more market indices, depending on the assets in the fund. For example, the JUNO Growth Fund combines market indices for equities, fixed income and cash. Finally, the combination of market indices for each fund is weighted according to its target asset mix. For example, the market index return for the JUNO Growth Fund is 80% the return of the market index for equities, 10% the return for fixed income and 10% the return of the market index for cash. More information about the JUNO KiwiSaver Scheme market indices can be found in the Statement of Investment Policy and Objectives (SIPO) at www.junokiwisaver.co.nz Pie Funds is the issuer. The Product Disclosure Statement is available at www.junokiwisaver.co.nz. Past performance is not an indicator of future returns.
Meet some of our
Contributors
CAMERON BAGRIE
SARAH ELL
MARTIN HAWES
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.
Sarah Ell is JUNO’s books editor. She’s an Auckland-based freelance writer and editor, with 25 years' experience in book and magazine publishing, at Random House and Design Trends.
Martin is the chairman of the Summer KiwiSaver Investment Committee. He’s an authorised financial adviser and offers his services throughout New Zealand.
LYNDA MOORE
ANDREW NICOL
PETER NORRIS
Lynda Moore spent 20 years in her own accounting practice before co-founding Money Mentalist. She blends psychology and neuroscience with money coaching.
Andrew is an authorised financial adviser and the managing partner of Opes Partners. He has over 15 years’ experience in banking, finance, and property.
Peter is the director of Lateral Partners. After spending five years with a major bank, he spent over 12 years in the mortgage industry and started his own mortgage brokerage.
16 JUNO |
AUTUMN 2021
BRIDGETTE JACKSON
ANDREW KENNINGHAM
ED MCKNIGHT
Bridgette is a lawyer, divorce coach, certified mediator, and the founder of Equal Exes, a divorce and settlement service.
Andrew is the chief Europe economist for Capital Economics. He was previously an economic adviser for the United Kingdom Foreign Exchange.
Ed McKnight is JUNO’s economist. Ed’s worked for the Auckland Philharmonia Orchestra and Hatch. Now he crunches data for JUNO magazine and Opes Partners.
BINDI NORWELL
CHRIS SMITH
MIKE TAYLOR
Bindi is the CEO of the Real Estate Institute of New Zealand. She is an experienced business leader and strategist who has worked in New Zealand and overseas.
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.
Mike is the founder and CEO of Pie Funds. He's also Portfolio Manager of the Pie Funds Chairman's, Global Growth 2 and Conservative Funds.
AUTUMN 2021
|
JUNO 17
REGULARS
Date Night Advice Speakers on relationships, property investing, and reverse mortgages brought readers to the Summer JUNO Exchange event.
You may be surprised to know that a money-inspired date night could go a long way to resolving issues in your relationship. That’s what Money Mentalist Lynda Moore suggested at JUNO’s quarterly reader event in early December, in a talk about money, couples, and love. Held at the newly refurbished Sofitel Viaduct Harbour hotel, with drinks and canapes, the free reader event attracted about 80 readers, their partners and friends. Moore told attendees that meeting regularly with your partner to talk about your financial goals is a great way to help people with different money personalities resolve their differences. Moore spent 20 years in her own accounting practice before co-founding Money Mentalist. A new columnist in JUNO, she has a post-graduate qualification in psychology and puts together psychology and neuroscience with her mentor coaching. Andrew Ford, head of retail at Heartland Bank, told the event he thought money and date nights were a great idea. He said he and his wife have ‘annual general
18 JUNO |
AUTUMN 2021
meetings’ when they plan their finances for the coming year. He talked about decumulation, and how few people understand the principles of managing their nest-egg as they wind down to retirement. He explained how reverse mortgages can be used to help people live a more comfortable retirement, and as a backstop when all your money is tied up in your family home. Ford manages Heartland’s award-winning deposit products and their reverse mortgages. He’s been with Heartland for over 20 years. Our third speaker was Kiri Barfoot, a director of real-estate giant Barfoot & Thompson, who has said she doesn’t want to be reusing teabags in retirement. Barfoot has a famous name and a big career behind her. She has a degree in commerce and worked overseas before returning to the family business. She’s a commercial and residential property investor herself and says investing in property is a no-brainer when interest rates at the bank are so low. She says people should stop worrying about things that could go wrong, which hardly ever do. “Just get in and do it!” she says.
AUTUMN 2021
|
JUNO 19
For a limited time
Subscribe for just $20 For 4 issues of JUNO (one year)
Never miss an issue! JUNO investing magazine is a New Zealand luxury investment and lifestyle magazine which explains in plain English your financial options and how to build wealth. It covers the share market, property investment, KiwiSaver, personal finance, the economy, books, travel, and all the good things in life you can buy when you invest wisely.
Subscribe now and get a year (4 issues) of this premium magazine for you or a friend for just $20, a saving of $19.80. Or subscribe for two years and get eight issues for just $40. Go to www.junoinvesting.co.nz/subscribe
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 in late May 2021, and in most cases your magazine will be in your hands before it goes on sale in the shops. 4. JUNO Magazine is published by Opes Media Limited, which handles delivery 20 JUNO |
A U T U M N 2and 0 2 1stipulates the lead time shown above. 5. Offer expires on 30 April 2021. 6. Offer available to New Zealand postal addresses only.
REGULARS
What We Like The hottest products and places that are the talk of the town. History and Luxury A new premium accommodation and venue experience has been created overlooking the vines in Hawke’s Bay. Built in the mid-1850s, the two-storey homestead was once the beating heart of a pioneering farming enterprise that stretched across more than 7,000 hectares, says owner Jacqueline Taylor, former publisher of JUNO magazine. The superbly renovated property is now available as a wedding and small conference venue, with two charming cottages available to rent amid gardens designed by Australian landscaping maestro, Paul Bangay. The Cottage is a purpose-built architecturallydesigned guesthouse delivering an oasis of calm and light. Soaring high-pitched ceilings, quality fixtures, and a carefully curated selection of local art make this a special retreat for up to four people. The Old Stables is a pretty, stone-clad studio for two, nestled amongst abundant lavender. Says Taylor: “This heritage building has been completely refurbished to include airy openplan living, a modern bathroom, kitchenette and a delightful mezzanine bedroom.” The new venue is ideal for weddings, says Taylor: “The bride can walk down an aisle lined with crab-apple trees, wed under the wisteria pergola, or the couple can pledge their love in a lavender field.” For workshops and board meetings, amenities include catering, whiteboards, and stationery, a tennis court, plus a pool to cool down in during breaks. www.tematahouse.co.nz 22 JUNO |
AUTUMN 2021
W H AT W E L I K E
Skincare and psychology When a woman wafted by in a cloud of perfume, as a schoolgirl Hannah Hong could have picked which fragrance it was. The teenager haunted the beauty section of Auckland’s Smith & Caughey department store, where she adored the perfumes. As a graduate, she went on to combine her love of beauty products with her talent for chemistry to create her own botanical skincare range, Lemon & Beaker. Her business was named for the two things that were on her desk, a measuring beaker for her formulations, and a lemon. She says: “I wanted to create a range that spoke of New Zealand, that was accessible to young people, delivered results, and provided a natural skincare routine for everyone.” With bachelor’s degrees in chemistry and psychology, and an MBA, Hong brings top credentials to her range. She believes skincare is good for our psychological and emotional wellbeing, as well as for our skin.
Get Toned Faster Can you get a better body in just 20 minutes a session? It sounds impossible, but that’s the claim of EMS, the new form of strength training that uses electrical impulses to mimic your body’s response to exercise. JUNO commercial manager Anita Hayhoe trialled the programme at boutique Auckland electro muscle stimulation (EMS) training studio fu/nis.
sacrifice when it comes to your health, and to ensure that there’s an option out there for those who want an achievable fitness routine.” Hayhoe found out that the studio’s name comes from the suit she wore for the training: it’s the Latin word for the umbilical cord, because the vest, arm and leg bands connect to a central training unit.
Here’s what she found out.
Kuehler says EMS training is non-weight bearing and suitable as a substitute for those with injuries to the lower back or knees.
Owner Catrina Kuehler told Hayhoe EMS is a unique and safe form of strength training that takes just 20 minutes to deliver a highly effective workout.
After five to six weeks or 12 sessions, people typically see increased muscle tone, weight loss, strength, and a kick-start to their metabolism.
She says the low-frequency electric impulses activate up to 90 per cent of the body’s muscles, giving a high-intensity workout equal to 90 minutes in the gym.
One client who attended twice a week went from a size 16 to a size 10.
Kuehler says she started EMS training in New Zealand after doing it overseas to tone up before her wedding. She saw a gap in the market for people who find it hard to commit to regular gym time or who want quick results.
She doesn’t use sulphates, parabens, colourings, or artificial perfumes, instead using extracts from New Zealand fruits, plants, and botanicals. Before and since launching the range, she’s given back to refugee women in Jordan, where she helped set up a soapmaking factory and a beauty therapy school. “They were so excited to find a job. Once they started to acquire the skills, they could go out and work.” The Lemon & Beaker range includes a cleanser, toner, brightening cream, a Vitamin C serum, the award-winning DualBlend Repairing Serum, and an Ageless Serum, priced from $46.
www.lemonandbeaker.com
She says training leads to better mental health and a feeling of body positivity. Hayhoe says she looked forward to her sessions and started seeing results. “You don’t sweat, so you cut down on shower time and get back to work quickly.”
“In the world we’re living in, we love the idea of work/life balance, so I started EMS for those that are juggling work, families, and social life.
She says EMS strength training might be suitable if you have previous injuries yet want to maintain bone and muscle density, want a summer body all year round, and are short of time.
“I wanted to remove the problem of
www.funis-emstraining.co.nz AUTUMN 2021
|
JUNO 23
ISSUE 28
AUTUMN 2021
Journey (noun)
Any course or passage from one stage or experience to another. Your Dictionary
24 JUNO |
AUTUMN 2021
‘Do the difficult things while they are easy and do the great things while they are small. A journey of a thousand miles must begin with a single step.’ – Lao Tzu
AUTUMN 2021
|
JUNO 25
YO U R I N V E S T I N G
Invest for Your Age Are you on track money-wise for your life stage? Check our guide here. Martin Hawes explains what you should be doing with your finances over the decades.
In your 20s Writer George Bernard Shaw once said that youth was wasted on the young. In terms of investing, in your twenties, you certainly have youth and time on your side, and you’ll want to use that time as well as you can. Compound interest grows wealth like nothing else – and the sooner you start, the better. The problem most people have in their twenties is that although you have decades ahead of you to make your money, you often don’t have much money. Chances are you’re in your first proper job and it doesn’t pay all that well. Rent takes up a lot of what you earn, and there’ll be plenty of things you want to do and want to have. However, in spite of a tight budget, there are things you can do:
Martin Hawes is the Chair of the Summer Investment Committee. The Summer KiwiSaver Scheme is managed by Forsyth Barr Investment Management Ltd and a Product Disclosure statement is available on request. Martin is an Authorised Financial Adviser, and a Disclosure Statement is available on request and free of charge at www.martinhawes.com. Martin is a Director of Lifetime Income, an annuity provider. This article is general in nature and not personalised advice.
26 JUNO |
AUTUMN 2021
•
Develop good money habits. Live within your means and try not to use debt to buy things like a car or household appliances. Every little bit that you can save has time for compound interest to work its wonder.
•
Plan to own a house. Set yourself a goal for the amount that you’ll have in, say, five years.
•
KiwiSaver is a great way to save for a house deposit.
•
Make sure you’re in a good KiwiSaver fund and that you put in enough to get the full contributions. If you’re employed, your employer has to contribute at least 3 per cent of your gross wage or salary, and you have to put in at least $1042.86 a year to get the full $521 government contribution.
PERSONAL FINANCE
In your 30s
In your 40s
For most of you, this will be a decade of housing and children.
These are the hard-scrabble years.
Both of these can put a big load on your finances, making this one of the most difficult times in your financial life. Children are joyous little critters – but they are expensive, and you’ll need to plan for more cost. Buying a house is difficult, but you do have help from KiwiSaver – you should use KiwiSaver as the savings vehicle for the deposit on your first home. This will be no easy thing and may take some time, but home ownership is worth fighting for. After you’ve bought a home, your KiwiSaver is critical. Put contributions up as your income grows, and the balance of your KiwiSaver account may be significant, although it has probably reduced when you used it as the deposit for your first home. Make sure you’re in the right fund with the right provider and that you keep putting money in. The important things to do in this decade are: •
Do what you can to buy a home.
•
Remember that your spending tends to rise with your income – keep control of your expenses and don’t live beyond what you can afford.
•
Manage your mortgage in the most efficient way possible.
•
Keep contributing to KiwiSaver as a first priority.
As the children get older, life gets hard to juggle. You’ll find that your career or business grows, and there are more demands on your time. It’s especially a time when it can be hard to control expenses. The ‘pay yourself first’ approach to saving works well at this time. This means that you put money aside before you see it and then live on the rest. That money should go to KiwiSaver first, so you get the maximum employer contributions, and then use anything else to accelerate the mortgage repayment. Your KiwiSaver balance may now be quite high. This means that you should take even more care to ensure that you’re taking the right amount of risk and that you’re with a good provider. Use the independent, government-owned website www.sorted.org.nz to work out the level of risk that’s right for you. Things to do in your 40s: •
Control your spending and pay into KiwiSaver and the mortgage.
•
Manage your mortgage actively to make sure you’re getting the best deal.
•
Check your KiwiSaver often – and switch providers if you need to.
AUTUMN 2021
|
JUNO 27
YO U R I N V E S T I N G
In your 50s
In your 60s and beyond
These are the gravy years.
In your sixties, retirement is looming.
These are the years when your children are gone and hopefully the mortgage has been repaid.
Your retirement plans need to become real – they should be concrete intentions for things you’re going to do soon.
They should also be the years when your income is highest.
You’ll need to work out how much you need for a decent retirement and figure out when you’ll have that amount.
For many, they are the years when you really start to get ahead financially.
The ‘when?’ of retirement is probably one of the biggest questions – and that is best answered as soon as you can.
You may be feeling that you do not have enough for a good retirement.
Think about where you’ll want to live in retirement: you may need or want to downsize. Do this sooner, not later.
But, with the mortgage repaid, the children costing you a little or nothing at all, and with a strong income, now’s the time when you should have a good surplus.
Most people are best to ease into retirement. Gradually reduce the amount of work you do and semi-retire for a number of years. The income from just a small amount of work now will get you a much better retired lifestyle.
Take advantage of this and pay off all your debt – then save. Some people move beyond KiwiSaver now as their savings grow.
You’ll need a good investment strategy – with interest rates low, you can no longer rely on bank deposits.
They move into other investments – perhaps a personalised savings plan, some managed funds or maybe a rental property.
You could use your KiwiSaver account. From 65, it’s no longer locked in and becomes an investment you can pay into and draw down on at any time. Or see a financial adviser and get your own portfolio of investments.
Things to do in the gravy years:
Things to do in your 60s:
•
Save, save, save.
•
Make a good plan for retirement.
•
Re-check your KiwiSaver.
•
•
If you need other investments, take financial advice.
Keep putting money into KiwiSaver while government and employer contributions are here (at least until 65).
Start to think about retirement
•
•
Start to reduce investment risk – maybe move from a growth fund to a balanced fund.
•
Have the time of your life – you deserve it!
28 JUNO |
AUTUMN 2021
ADVERTORIAL
Are high returns too good to be true? Brenda Ward talks to Alpha First Mortgages’ Olivia Fraser about returns of 7 to 8.5 per cent. With trading banks offering depositors interest rates at 2 per cent and less, is an investment paying 7 to 8.5 per cent simply too good to be true? Alpha First Mortgages Director Olivia Fraser says it’s not. She explains why the company’s investors are getting such excellent returns – and whether that means they must be taking on too much risk.
Fraser says: “In fact, we tend to be conservative with our loan-to-value ratios and always ensure that our security position is conservative. We don’t lend to people with a bad credit history.” Who typically invests in property mortgages?
The key is that Alpha First mortgages fund commercial property, residential developments, farms and horticulture, and land development for borrowers, says Fraser.
“We have a diverse range of registered investors, from pilots, family trusts, professional investors, retired farmers, lawyers, accountants, and retired or nearly retired people, to people who have recently sold rental properties, and investors who have accumulated wealth over a long period of hard work.
For these groups, lending interest rates are already much higher from banks and non-bank lenders than retail borrowers get. And they’re structured differently, too.
“All our investors have one thing in common, which is they cannot rely on bank deposit rates to fund their living costs and maintain their lifestyle.
“We’re mainly lending to small-scale developers, builders doing several townhouses on a site, or people building childcare centres, for example. “We’re not lending in a retail environment where low mortgage rates of 2 per cent are now commonplace,” she says. “These are not principal-and-interest 30-year first mortgages on mum and dad’s home. We’re doing commercial loans only to capable borrowers, who only pay the interest on the loan and repay it at the end of the term.” Non-bank lending at 7 to 8 per cent is very competitive. Many investors like investing in a property-related investment, which helps them to diversify (spread their risk). What’s the risk level? That still sounds like an amazing return. Are the loans high-risk?
www.alphafirst.co.nz
“They may also have to wait for bank interest at the end of a term deposit, but we pay interest monthly, without any deduction for fees or costs.” You must be eligible So, is there a catch? There are a couple of conditions, says Fraser. You need a minimum of NZ$50,000 to invest and only experienced investors can invest with Alpha First Mortgages. Explains Fraser: “You do need to qualify as either ‘eligible’ or ‘wholesale’. There are wholesale criteria in the Financial Markets Conducts Act 2013, or investors can register by the ‘eligible’ criteria. That assumes someone is eligible because they have investment experience and are capable of making their own investment decisions. They may have bought and sold property, or financial products. That could be rental properties, shares, or term deposits they’ve been using to earn an
income. And they need to know what level of information they need to make an informed decision. “Somebody might not have a portfolio meeting one of the wholesale criteria of NZ$1 million in specified financial products, but they may be very qualified to assess the merits and risks of any opportunity. "So, they can register with Alpha First as an ‘eligible’ investor. They need an accountant or solicitor that knows them and their experience to certify their eligibility, and verify the information provided to us.” How to apply “We can only offer our first-mortgage opportunities to our registered investors, and once they register, the process, the security and all the investment information is fully transparent," says Fraser. “We do detailed and stringent due diligence on every loan, interview every borrower, and inspect every security property. We package for investors all the information we assess to make our lending decision, and a full executive summary, and forward that to them.” This includes complete and detailed information about the loan security and the borrower. Fraser says: “We provide to the investors everything we’ve used to make our lending decision. "They know where the property is, who’s borrowing the money, what the loan is for, the structure, how long it’s for, absolutely everything.” Alpha First welcomes enquiries. Go to www.alphafirst.co.nz, to get started.
PERSONAL FINANCE
No Strategy Is a Bad Strategy Active versus passive, flipping versus buy-and-hold, index funds versus direct investment? Debate rages, but JUNO economist Ed McKnight says it’s all about your tolerance for risk.
Go to an investment event, whether it’s for property, shares or funds, and you’ll find battles raging all around the room. Look at the faces of some immersed in the animated discussions and it’s clear that these keen investors have not just invested their money and wealth, but their emotions too. Consider the battle between those who favour index funds compared to direct investment. Who’ll beat the market? In the left corner, you’ll find investors who favour index funds. They denounce any suggestion that a fund manager or investor could ever truly beat the market over the long term. They favour stability, confidence, and predictability in their investment strategy. In the right corner, there are those direct investors. These are the ones who’ll take a punt on individual companies or funds in hopes of achieving better returns. At the end of 2020, those who bought shares in Tesla, Zoom, Peloton, and Amazon could rightly sit smugly after a bumper year. The battle rages over which strategy is the best strategy, each side sticking to their own position. These battles are not just relegated to shares.
AUTUMN 2021
|
JUNO 31
YO U R I N V E S T I N G
Property critics At the start of this year, a successful property investor remarked how some in the property community had publicly criticised parts of her strategy on property investor forums. A whole subculture exists on Facebook groups and social media pages, where well-meaning Kiwi property investors try to convince the new and uninitiated of the merits of their chosen strategy. Perhaps it’s because investment is inherently unemotional that we need to inject emotion, competition, and all importantly, an enemy into the mix. Yet, such battles of opinion are misplaced. In investment, differences tend not to be caused by a disagreement over the facts, but by risk tolerance. We can all agree that Fisher Funds Premium NZ Fund achieved the highest return, compared to other managed funds, over the last five years, according to Sorted, an investment education website. At the same time, we can agree that over the long term, index funds tend to outperform managed funds.
term. I’m investing for five years. I’ll take the punt and invest in an active fund.”
But what you do with that fact depends on your read of them.
In both instances, the diagnosis is the same. Still, the prescriptions are different.
Conservative investors with a low tolerance for risk may think: “Just because Fisher Funds was at the top of the list over the last five years doesn’t mean they will be over the next five years.
In truth, money can be made, and wealth can be built using all investment strategies.
“It’s too risky to take a punt on an individual firm – better to invest in a lowcost index.” Investors with a higher tolerance for the unknown are more likely to think: “I don’t care that index funds do better over the long term. I’m not investing for the long
If well-meaning investors really want to help other Kiwis in their financial decisionmaking, they can have a greater impact by focusing their attention on people who are not already investing. Convincing a saver to move from their default conservative KiwiSaver fund into a balanced or growth fund will have a greater impact than arguing with an existing investor about which growth fund is the best.
Similarly, helping an investor purchase their first investment property – whatever the location – will have more of an impact than arguing with an existing investor about whether they’ve invested in the right location. The core to success in investment is less about what strategy you use, and more about whether you have started. Once you’ve considered the facts, the answer to the question, “what’s the right strategy for me?”, is the one you can tolerate the returns from, whatever they may be. It’s not the strategy but doing something with it that counts.
ADVERTORIAL
Commercial Property Offers Range of Options Don’t want a hands-on investment? How about commercial, industrial, or horticultural land? Fractional ownership widens the opportunities for new and experienced investors. Many people believe that commercial property is too expensive to buy outright, so they stick to what they know – residential investing. But as interest rates look to stay at historic lows, Kiwis are exploring a range of commercial property structures, says Ross Verry, chief executive of Syndex. On the Syndex platform, investors can buy and sell shares or units in investments like rural land, syndicated commercial properties, investment funds, and forests. “We’re seeing gains in all our markets,” he says. “In particular, we’ve seen increased investment in horticultural land as a property class. “Interest in kiwifruit has been extraordinarily strong over the past 12 to 18 months and this continues. With the exceptional results, they have reason to continue. “It’s a really good way for people to get exposure to that horticulture sector. With a strong global focus on health, nutrition, and wellbeing, there are some pretty good returns for owners and operators being delivered.”
www.syndex.exchange/markets
Often these investments are structured as commercial property schemes, where an investor has the opportunity to own the land where a horticulture operation is based. They derive their income from a lease arrangement with an expert operator. Syndex has listed opportunities to invest in kiwifruit, wine and manuka forests, along with other investments. Horticulture is a relatively new class of commercial property that hasn’t always been available to invest in fractionally, he says. Verry says fractional ownership is becoming a more popular and achievable way of investing in commercial property. Assets under administration on the Syndex trading platform have increased 25 per cent to over NZ$3.8 billion in the last year, and the secondary market trades have also been more active.
He says there are three main areas of property Kiwis most commonly invest in through Syndex. “They are the primary sector, industrial land, and office buildings, which sometimes have retail attached.” Included in the primary sector is services to agriculture. “You might be able to get exposure to a packhouse facility or infrastructure supporting horticultural or other food production activities.” Other investment types in the Covid era that have been strongly supported are logistics and warehousing, he says. Whether it’s primary sector, industrial or office properties, a key component is the tenant, which is key to the investors’ analysis and investment decision. Verry says investors are turning to Syndex to buy and sell more easily. “Private markets are historically illiquid, which was a barrier to many investors, but by offering a secondary market, we’re making private market assets more investible. A number of active investors also use the secondary market as an entry point into certain opportunities.”
“These increases are quite significant.
Syndex also supports the issuers in the background by managing their records, running their registry, and helping them with the regulatory compliance and communication.
“There’s been quite a wide range of options so, depending on the investor’s appetite for risk, they can choose what suits their risk profile and stage of life.”
On the platform, investors can browse Syndex’s offerings in commercial properties and agricultural land. Go to www.syndex.exchange/markets.
YO U R I N V E S T I N G
House Rich, Cash Poor There’s a new class of the poor in New Zealand, says Amy Hamilton Chadwick. They’re the families with big mortgages who don’t have cash left at the end of the week.
It’s a strange situation when your house is worth a huge sum of money, but you’re struggling to pay for groceries. Yet, this is a predicament which many New Zealanders find themselves in, sometimes at more than one stage of life. For first-home buyers and retirees, being ‘house rich, cash poor’ can be a significant source of frustration and stress. “I’ve been very careful at the supermarket, and of course we haven’t been on any holidays,” says Catherine (surname withheld). She and her husband Steve own a NZ$1.7 million home in St Heliers, near their families who help with childcare. It’s the couple’s first home, which they bought when they returned to New Zealand after several years working abroad. Catherine admits they spent more than they planned to on the house, then the arrival of their second child meant she needed more time off work than they had expected.
34 JUNO |
AUTUMN 2021
PERSONAL FINANCE
AUTUMN 2021
|
JUNO 35
YO U R I N V E S T I N G
Their savings quickly dried up, cash is now tight, and the credit card statement gives her real anxiety. “Every scrap of energy and money is already accounted for by something essential. It’s a bit of hamster wheel. We’re both working hard to bring in more money,” she says.
Those who have stretched themselves to buy will be feeling the pressure, particularly if they throw a baby or two into the mix. “I think a lot of people will come under mortgage strain over the next 12 months,” says Hannah McQueen, director of enableMe.
“But I’m not complaining. We know we’re lucky to live here and we’ve made the decision to make life harder now, in the hope that it will be easier in the future. I believe we can make it work.”
“It frightens me that people commit to loans without realising how scary it feels. We see people with debt higher than six times their income, and it’s very hard for them to make true progress.
Catherine is far from alone, and in a much better position than many. With house prices surging and interest rates at record lows, first-home buyers jumped into the property market with both feet in 2020.
“If interest rates go up only one or two per cent, it kills you.”
36 JUNO |
AUTUMN 2021
At the other end of property life cycle, retirees are sitting on homes that have skyrocketed in value over the past decade,
yet their own income may be meagre. The cost of rates, insurance and utilities on the house continue to rise as older Kiwis chip away at their retirement savings. “I had a client who was in her early seventies. Her husband had just died, and she was complaining that she couldn’t afford to visit her daughter in Paris,” says Martin Hawes, authorised financial adviser and author. “But she was sitting on a NZ$3 million house in Auckland. She was choosing the house over visits to her daughter.” For retirees, there are three main options for homeowners to improve cashflow, of which the best one is downsizing, says Hawes.
PERSONAL FINANCE
It can be a tough decision to leave a longloved family home, but clients almost always say they wish they’d done it sooner. The other options are using the house to create an income by having a boarder or listing it on Airbnb, which works best for younger retirees. Finally, as a last resort, a home equity release or ‘reverse mortgage’ can work well for people who really don’t want to move. The equation is more complicated for first-home buyers. McQueen says being asset rich and cash poor isn’t necessarily a problem, provided you are retirement ready. But for those who aren’t, the first course of action is what Catherine is doing: spending as little as possible and looking for ways to earn more, so you can maximise your cash surplus.
The larger the surplus, the more options you’ll have available to you. Changing the behaviour and mindset can improve your cash position by up to 50 per cent, says McQueen.
a more affordable location. It could also mean renting for yourself, while investing in property.
“That in itself might be sufficient to fix the problem if that money can be put towards extra mortgage repayments to repay the debt fast.
If you really don’t want to move, McQueen says your capital gains can potentially be used to create wealth that will generate more cash in the future. It’s not a quick fix, and you’ll need to hang in there on a shoestring budget, but it might be possible.
“But if, after those concessions, it’s still not sufficient, because your mortgage is so high that any changes you make are inconsequential in relation to the size of your repayments, that needs to trigger some more drastic changes.”
The best approach all depends on your individual circumstances, and good financial advice could really pay off. The chronic stress of unpaid bills takes its toll; Hawes’s clients often tell him they wish they’d downsized sooner.
For anyone in that situation, it feels dire – but there are ways out. Downsizing is one option, whether that’s a smaller house or
“Being asset rich and cash poor is a choice,” Hawes says. “You’ve chosen to do it, and you can choose to undo it.” AUTUMN 2021
|
JUNO 37
YO U R I N V E S T I N G
The Hidden Costs of Being Single Millennials are partnering later – and sometimes not at all. This wave of singles may be heading for a fraught financial future, writes Brenda Ward.
Being single could be a huge blow to your financial future. In fact, in the US, a survey of the costs of being single found an unmarried person could pay as much as a million dollars more than their married friends over their lifetime. That’s because costs for singles are often the same as those shared by couples, but the single person has just one income to pay for their expenses and lifestyle. And couples have the capacity to earn twice what a single person earns, so saving is usually easier for them. After a lifetime of working, singles generally face retirement worse off financially. A British survey by peer-to-peer lending platform Lending Wise found 24 per cent of single adults despairing that they’ll never be financially secure enough to retire. Ageing and caregiving It gets worse. Forbes magazine in the US has suggested that extended singledom and having children later in life can leave millennials facing a clash between career prospects and caring for ageing parents. 38 JUNO |
AUTUMN 2021
AUTUMN 2021
|
JUNO 39
YO U R I N V E S T I N G
In late life, they’ll have less of a nest-egg themselves, so they may be forced to pay for caregiving, rather than having the unpaid support of a partner. Forbes says tasks often shared by partners, like taking out the rubbish, cooking meals, shopping, and even changing light bulbs are tougher if they have to be done alone in retirement. Singles will also need more retirement income to cover the costs of things like cars, food, and healthcare that are usually shared with a partner. More of us live alone The number of Kiwis living alone is projected to grow to between 491,000 and 522,000 people by 2023. A Statistics NZ report suggests that 37 per cent of people who live alone are not partnered. The figures show 63 per cent of people who live alone are divorced, separated, or widowed. Being a singleton has a big influence on their wealth and whether they’ll have people to care for them in later life. And singles in older age groups report lower levels of life satisfaction than people who live with others. Let’s look at some of the factors that hold back the unpartnered. Saving and investing When two people are co-habiting, costs like rent or a mortgage are spread across two incomes. Savvy couples can sometimes pay their home loan with one income, using what’s left over for saving or investing. That also means couples can afford a bigger mortgage to buy a more expensive house, so their capital gains will be proportionately higher. On the other hand, singles will find a higher percentage of their income will go to cover household expenses, making it harder for them to put money aside. Buying a house With two in a household saving for a first home, couples can buy sooner, which means they benefit from capital gains over a longer period of time. Saving for the minimum deposit for a lowcost First Home Loan will take a single person longer. You need a minimum 5 per
40 JUNO |
AUTUMN 2021
cent of the purchase price of the house you want to buy. The First Home Grant also favours couples, because two people can claim a maximum First Home Grant of up to $20,000, whereas a single person can claim a maximum of only $10,000 towards their house. When singles do buy, it’s harder because banks have to consider that there’s only one income to service a loan. It has to cover the mortgage unless they’re sharing the house and costs with flatmates. Transport costs The cost of a car will be a higher burden on a single person. A car loan will be harder to pay alone, and petrol and registration costs will take up a larger amount of a single person’s budget. Food Cooking for one can cost nearly as much as a meal for two.
If you want to save at the supermarket, specials are mainly for buying in bulk. For example, at New World, a one-litre Anchor milk is NZ$2.86, but a two-litre bottle is NZ$4.58, working out a good 50c more per litre for the one-person household. Meat packs at supermarkets are often in packages of two, three, or four, with steaks intended for one person both bigger in size and more expensive than the multi-packs. Household bills One-person households pay the same council rates as a couple or a family would, even though their use of refuse services and roading costs will be significantly less than bigger households. A rates bill of around NZ$2500 can be a huge cost to face with only one income coming into the house. Heating the living areas of a house costs the same for both couples and singles, so the power bill can be similar for one person as it is for four.
PERSONAL FINANCE
Hot water cylinders still have to be heated, even if only one person is using the water. Using an oven can also be a big drain on power, whether you cook for one or for a horde.
Even dating… Not all singles want to stay that way.
Fibre will cost the same for a single-person household, even though they’ll be using the internet a lot less than a couple. Two-for-one deals Cheap package holidays come mainly in double rooms. If you’re cruising, single cabins are much more expensive than twin rooms. Car insurance companies give discounts for more than one vehicle. Few singletons run two cars, so they never get the benefit of these savings. Even wills and enduring powers of attorney are cheaper to buy in pairs. For example, at Public Trust, enduring powers of attorney cost NZ$129 each, but
just NZ$229 for you and your partner when you get a mirror EPA, bringing the cost to couples down to just NZ$114.50 per person.
Singles who invest in finding a partner online will pay around NZ$180 a year for annual subscriptions to one or more online dating services. And they may spend on their appearance and clothing for dates. Retirement Even though the bills, rent, and rates of a single person household are similar to the costs of a couple in retirement, singles receive less in NZ Superannuation payments.
The outcome of higher costs and lower levels of saving are likely to leave the single well behind their partnered friends at retirement age. But there are ways singles do better: • They’re less likely to have been victims of crime. •
Stats NZ says people who live alone have higher rates of face-to-face contact with family and friends. So, living alone does not necessarily mean being socially isolated.
•
And the group of younger people who live alone reported better health than their partnered friends, even though in general people living alone rate their health status lower, the Statistics NZ figures show.
•
Childless singles avoid the costs of child-rearing, with no childcare costs, school fees or more expensive holidays to fund.
There is a small premium for singles, but 2021 rates before tax are: •
Single, living alone or with a child NZ$490.73 a week.
•
Couple NZ$744.54 (NZ$372.27 each) a week.
Looking to earn better interest?
6.5 p.a.
%+
Fixed term investment opportunities* offering returns from 6.5% p.a. secured by registered 1st mortgage.
visit rocketfinance.co.nz
AUTUMN 2021
|
JUNO 41
*This opportunity is only available to select wholesale investors.
YO U R I N V E S T I N G
42 JUNO |
AUTUMN 2021
PERSONAL FINANCE
Should You Give Cash to your Kids? The average Auckland home is worth over a million dollars. Will leaving that to your children be a wonderful gift or lead to fights? Amy Hamilton Chadwick talks to the experts about generational wealth.
The world’s richest investor has a US$85 billion fortune – but his kids won’t get much of it. Most will go to charities.
money to create opportunities for them, and give them the education to know how to use it.”
That’s because Warren Buffett famously says: “A very rich person should leave his kids enough to do anything, but not enough to do nothing.”
Should you spend it all yourself? If you’ve amassed some wealth, it’s up to you what you do with it.
Even for those of us who don’t have a fortune, how to leave money to your children (or even whether you should) is a tricky issue. One of the reasons many people create wealth is to make life better for the next generation. Being able to help your kids get a degree or buy a house, for instance, can make all your efforts feel worthwhile. On the other hand, having (or expecting) an inheritance can be a motivation-killer. Your kids, or their kids, could burn through that hard-earned money in just a few years. ‘Shirtsleeves to shirtsleeves in three generations’, the saying goes. Simon Hepple, wealth adviser for Pie Funds, says: “As a general rule, I’ve found someone who’s given something for nothing is a lot more likely to spend it than if they’ve earned it. “I say to my clients, give your kids enough
For most people Hepple sees aged between 60 and 80, leaving money behind is a secondary consideration compared to spending it now, he says. As an earlier generation used to say, ‘The last cheque I write should bounce’. Travel is a priority for his clients, which might include paying for holidays with the kids and grandkids, as well as living a highquality lifestyle. Spending might also include funding education for the children and grandchildren during their lifetime, while explaining that they shouldn’t expect any inheritance. ‘Entitled’ kids An increasing number of wealthy people say they don’t want their kids growing up feeling entitled, says Donna Nicolof, who volunteers in schools to teach kids about money. “The family will provide a good education, but often expect kids to make their own
way,” says the Nicolof, chief executive at Pāua Wealth. “When children make their own money, they not only develop a solid work ethic but take pride in their own successes. “By the same token, those who have come to expect handouts can become resentful, which is why purpose is so important.” Financial education is vital Whether you leave your children a huge estate or nothing at all, instilling in them a solid understanding of money management is something valuable you can pass on. Ideally, teaching them about money should start even earlier, says Nicolof. “I’ve read research showing that if you educate kids on the basics of budgeting and saving at age seven, they retain those skills for life. “By supporting your kids, you can make sure they have the right knowledge to handle whatever wealth they build or inherit.” Hepple agrees that educating your children about money is the safest way to protect your wealth for future generations. He’s recently been working with a mum who brings her adult kids along to
AUTUMN 2021
|
JUNO 43
YO U R I N V E S T I N G
meetings, so they can get the benefit of Hepple’s advice on their own finances. “Your kids need to differentiate between wants and needs,” he says. “They need to understand good and bad debt, how to use a credit card, and investing 101.” By investing in financial education, you’re doing more than most to ensure future generations can benefit from the wealth you’ve created. Prevent conflict and animosity Unfortunately, an inheritance can create conflict between family members, sometimes causing legal battles which can rapidly erode even a large estate. “Conflict within the family is often the biggest risk to private wealth, sometimes more so than market, business, and creditor risks,” says Henry Brandts-Giesen, partner and head of private wealth at Dentons Kensington Swan. “Siblings falling out is common. But 44 JUNO |
AUTUMN 2021
conflict also happens between parents and children. Where the family is blended, then the level of risk increases.” That’s why it’s important to talk with the people who will inherit your money, so they understand not only your purpose for the wealth, but your legacy. Use a facilitator if you need to, adds Nicolof. Managing huge estates If your family’s net worth is NZ$25 million or more, you might want to consider a family office. A family office effectively turns your investment portfolio into a business that generates an income for future generations. Keeping the estate together allows for more buying power and growth than splitting your wealth up between your children. “A few families have the financial means to set up and sustain a family office, with inhouse human resources and tools to carry out these processes, much like a financial
institution,” Brandts-Giesen says. “This can lead to better returns on investment but, more importantly, also empowers and protects family members. Wealth provides both benefits and burdens.” The ‘rule of 92’ is that 92 per cent of an estate is destroyed by the third generation. Family offices aim to avoid this pitfall. With good advice and the right set-up, it can be achieved. The Todd Corporation, with NZ$4.3 billion in equity, is New Zealand’s most famously successful example. The principles are the same Whether you’re worth billions or just starting out, you want the best for your kids. If you’re wondering what, if anything, to bequeath, start by talking to a financial adviser about how best to handle it. In the end, good relationships, education, and excellent life skills are a better legacy.
ADVERTORIAL
Partridge Diamond is Pink Magic Excitement is mounting as a spectacular and rare pink diamond comes up for sale in New Zealand.
One of the last pink diamonds ever to be recovered from the renowned Argyle mine in Western Australia has been bought by Partridge Jewellers in New Zealand. It’s now for sale and expected to fetch a record price as investors search for alternatives to banks and mainstream investments. The value of Argyle pink diamonds sold at tender has grown more than 500 per cent over the past two decades, outperforming all major share markets. Partridge’s owner, Grant Partridge, says the diamond is “magnificent.” He says it’s among the last brought out of the Argyle mine, which closed in November after the vein of diamonds ran out.
He bought Lot 44 by tender from the 2020 Argyle Pink Diamonds Signature Tender in Australia, attended by bidders from eight countries. “I tendered for several, but this was the one I really wanted.” The value of the gemstone depends on what people will pay for it, but Partridge but says pink diamonds are usually 100 times the cost of white diamonds of a similar size. It’s believed to be similar to the cost of the average Kiwi house. He says the stone could be left as it is for safekeeping, or mounted in a classic setting, so it can be worn. If the buyer is keen to wear it, his team can work with the new owner to design a bespoke setting especially for it. The diamond is an intense pink, and flashes with sparkles of blue, violet, and red. The sparkle of a diamond is due to its density, meaning light slows as it passes through it, reflecting light in all the colours of the rainbow. The Partridge diamond is a 0.84 carat modified cushion-cut diamond, classified as GIA Grade ‘Fancy Intense Purplish Pink’. It’s rated Small Inclusions 1 (SI1), which is one of the purist forms of diamond, with
no flaws visible to the naked eye. Rio Tinto, which owns the mine, says the dazzling diamond was one of just 62 rare pink, red, blue, and violet diamonds sold as part of the tender, all renowned for their extraordinary rarity and quality provenance. Rio Tinto says interest was high because rare pink diamonds have been growing in value by double-digit percentages. Almost the entire world’s supply of rare pink, red and violet diamonds came from the Argyle mine, over 37 years of production. Travel restrictions due to the COVID-19 pandemic presented challenges for the 2020 tender, delaying the launch, and limiting face-to-face viewings. Live streaming and an exclusive virtual portal allowed bidders to see the display of gems. Technology meant buyers could see the colour calibration and magnification of the jewels. Those interested in buying the diamond should contact the company, www.partridgejewellers.com. But Partridge says there’s no hurry. “I’m just enjoying owning it. Twenty years ago, I saw one for sale and didn’t buy it. I always regretted that decision.” AUTUMN 2021
|
JUNO 45
YO U R I N V E S T I N G
Billionaires: Lessons I’ve learned Larry Ellison – US$82.4 billion Co-founder Oracle
Mark Zuckerberg – US$100.5 billion
Facebook CEO
Larry Page – US$78 billion Co-founder of Google
“What is the one sentence summary of how you change the world? Always work hard on something uncomfortably exciting.”
“The biggest risk is not taking any risk... In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks.”
“What drives me is this constant testing of limits. Constant learning... How can you move the world just a bit, make a difference, change lives... and how much can I help [while] discovering my own limits?”
Jeff Bezos – US$113 billion Former CEO, Amazon
“When you are 80 years old, and in a quiet moment of reflection narrating for only yourself the most personal version of your life story, the telling that will be most compact and meaningful will be the series of choices you have made.”
Elon Musk – US$136.9 billion
CEO Tesla and SpaceX
“When something is important enough you do it, even if the odds are not in your favour.” 46 JUNO |
AUTUMN 2021
PERSONAL FINANCE
Warren Buffett – US$85.6 billion
Super-investor, CEO of Berkshire Hathaway
“There comes the time when you ought to start doing what you want. Take a job that you love. You will jump out of bed in the morning. I think you are out of your mind if you keep taking jobs that you don’t like because you think it will look good on your resume. Isn’t that a little like saving up sex for your old age?”
Bill Gates – US$98 billion
Co-founder, Microsoft
“At the end of each year, I still enjoy taking stock of my work and personal life… Today of course I still assess the quality of my work. But I also ask myself a whole other set of questions about my life. Did I devote enough time to my family? Did I learn enough new things? Did I develop new friendships and deepen old ones? These would have been laughable to me when I was 25, but as I get older, they are much more meaningful.”
Bob Jones – NZ$1 billion
Property investor
“At my age, it’s not about money. I hardly need that. But it’s about the sheer joy of it.”
Richard Branson – US$4.9 billion
Founder, Virgin Group
“I love life – and after 67 years of it I’ve worked out some of the things that help me manage my workload and have fun at the same time… I don’t really separate work and play – it’s all living. This doesn’t mean I’m always working; it means I’ve learned the art of balance.”
Graeme Hart – NZ$17 billion
Owner, Rank Group
“I will hang in there as long as it takes.”
AUTUMN 2021
|
JUNO 47
YO U R I N V E S T I N G
Managing your mortgage at every stage The first-home buyer has different needs to someone buying a rental property. Peter Norris of Lateral Partners explains how to get the best out of your mortgage. Low interest rates, skyrocketing house prices, loanto-value (LVR) restrictions and debt-to-income (DTI) ratios are all hot topics.
to understand the daunting parts. Knowledge is power.
Ironically, the LVR restrictions have had hardly any short-term impact because people’s house values have gone up more than enough to offset them.
As I write, debt-to-income ratios have been talked about but not yet brought in.
With so much hype in the housing market, it’s hard to sift through the junk to find the quality. It’s then even harder to work out what it all means for you. Here’s an easy guide to mortgages in this market.
Affordability
These would dramatically change how banks assess the affordability of your home loan and what you can borrow. Honestly, I hope they don’t come in.
It’s FOMO
For now, banks assess your affordability using a ‘test’ rate to see if you could still afford your loan if the rate goes up.
Not surprisingly, hype in the housing market and low interest rates have driven a crazy amount of activity, pushing up property values.
For most banks, the test rate sits between 5.5 per cent and 6 per cent – even though the real rates are around 3.5 per cent below that.
We’re all human and we’re suffering from a severe case of Fear of Missing Out (FOMO). The housing market’s the winner. The Netflix show Boom Bust Boom explains this perfectly. But buying a property is still a good thing. It’s something you should aspire to and be proud of when you do it. Whether it’s your first or your tenth property, it shouldn’t be stressful. At every stage of life, buying a property and taking out a mortgage can be exciting, but it’s important
www.lateralpartners.co.nz
Banks then assess how affordable your loan will be over 30 years, paid as principal and interest. There are a couple of variables: 1. If you’re over 45, banks may shorten the term they test you on, expecting you to have a shorter working life than 30 years. Shortening the term will cut how much you can afford. 2. If you’re an investor and you want an interestonly loan, the bank will assess the affordability of your loan based on a 30-year term, minus the number of years interest-only. If you want
ADVERTORIAL
Save on your home loan Here are four tips for structuring your mortgage that will save you money, no matter what stage or age you’re in. Make your loan payments weekly or fortnightly. Interest is calculated daily and charged monthly, which means the more payments you make during that month, the less accrued interest you will pay and the more principal you’ll repay.
five years interest-only, you’ll be assessed over a 25-year principal and interest term – again cutting your borrowing power. Understanding what you can afford is really important in any market – and especially in this one. Get a pre-approval and try out a few banks because they’re not all the same. Structure How you structure that debt depends on a number of things. You’ll often hear the advice that investors should put a house on interest-only for as long as possible, and that owner-occupiers should get debt-free as fast as they can. I’d say that’s not always the best solution. Instead, focus on your own circumstances and how to make the mortgage work best for your future. Borrowing to invest Leveraging equity from your existing house is a hot topic right now because property values are rising steeply. If you’re a homeowner wanting to grow your portfolio and there’s equity in your home that you can borrow against, it’s important to understand how to leverage it.
In simple terms, you’re able to borrow 80 per cent against your owner-occupied home and 70 per cent against your investments. Let’s say you have a home worth $1 million and an investment worth $600,000. You can get a maximum loan of $1,220,000 but you do need to afford the mortgage. Let’s assume you have $400,000 lending against your home and you borrowed the full $600,000 to buy the investment. That means you have $220,000 that you can use as equity. That’s what you can use for deposits on future purchases. For your next investment purchase, you need to have a 30 per cent deposit for existing houses or a 20 per cent deposit for a new build. This means that $220,000 gives you the ability to spend $730,000 on existing properties or $1,100,000 on new builds. Understanding how to leverage your equity and use it correctly is a fundamental investment rule. To get the most effective tax benefits, get advice from people who know what they’re doing. At Lateral Partners, we’re happy to help you understand these concepts. Book a time to chat on www.lateralpartners.co.nz.
Set up a ‘revolving credit’ or ‘offset’ facility. You need to be really strongwilled to manage revolving credit, and it doesn’t work for everyone, so offset is a good alternative. These types of home loan mean your money’s paying off debt while it’s in your account. They can save you a heap of money – and you can still access it if you need it. Pair these facilities with a credit card. Get debt-free faster by paying the bills with a credit card that you pay off once a month. That way, the money’s in your account for longer. Don’t accept an off-the-shelf rate simply because it’s the cheapest. This is where your mortgage broker can be a star. Get good advice.
YO U R I N V E S T I N G
Beware a Bitcoin Bubble Money-launderers, terrorists, hackers, and scammers use cryptocurrencies. Should you? No, says Pie Funds CEO and founder Mike Taylor.
Bitcoin reached its all-time high of over US$40,000 in early January, generating a wave of interest in the cryptocurrency. I haven’t written about Bitcoin since its last peak at US$20,000 in December 2017, after which it promptly collapsed to below US$5,000. So, be warned. Bitcoin’s a digital currency created in 2009 as an alternative to government-issued currencies. There are no physical Bitcoins – it’s created, traded, and stored within a computer system called blockchain technology. It’s not legal tender. Demand is driving the value of Bitcoin higher but, to me, it’s speculative mania and a pure bubble. It was created out of thin air, it’s not real money, and anyone buying it is just gambling it’ll be worth more tomorrow. There are also other risks – a lack of regulation, and the fact that the systems and people who use them are often a target for hackers and scammers. Of the people I know who are trading it, not one is actually going to use it, even if they could. It’s not even that easy to buy. Bitcoin has been created using blockchain technology by those looking to create a way around 50 JUNO |
AUTUMN 2021
government-backed money. That makes it perfect for terrorists and the like. Its value, however, thrives on the ‘bigger fool’ theory. If you believe in the complete collapse of the financial system, you like to have a punt, or you think I’m completely wrong, then go ahead. But remember, for something to be money it must be accepted as a method or medium of exchange, it must be a unit of accounting, and a store of value. Bitcoin is none of these. I can’t use Bitcoin on Amazon, its price is quoted in US dollars, not the other way around, and its value is volatile.
Still keen to invest in Bitcoin? Here are some things to think about before investing in cryptocurrency: •
Are you investing money you can afford to lose? Bitcoin’s value can fall quickly and dramatically, and this may happen just at the time when you’d like to withdraw your money and spend it.
•
Do you have debt? If you have highinterest debt, such as personal loans or credit cards, it’s best to pay this off before you considering any investments.
•
Do you have an emergency fund? Start with $500 spare and try to build up to three months’ worth of expenses. This is your safety net when things go wrong. Avoid viewing any money invested as your emergency fund because its value could change.
•
Are you aware of all the risks involved? Investing comes with risks and investing in cryptocurrency is high-risk.
•
Are you comfortable investing in something you don’t understand? For many people, how cryptocurrencies work and who is behind them is completely unknown, or the information has not been made public.
Even if I’m completely wrong, and Bitcoin becomes widely accepted as a niche currency, it’ll need to establish some price stability. Do you want your wages paid in Bitcoin when it could be worth 20 per cent less overnight? Until that happens, it just remains another speculative asset. Mike Taylor is the CEO and founder of Pie Funds. This article is general in nature only and has not taken into account any particular person’s objectives or circumstances. You may wish to discuss with an independent financial adviser before relying on it.
PERSONAL FINANCE
Bitcoin BTC 2017 – 2021 $40,000 $35,000
USD
$30,000 $25,000 $20,000 $15,000 $10,000 $5000 2018
2019
2020
2021 Source: Coindesk.com
CREATING WEALTH. NATURALLY. At Forest Enterprises, we know responsible investment is about more than money. The vital role of forests in sustaining our quality of life has never been so important. Forests store carbon, stabilise hill country, filter waterways, moderate temperature and conserve biodiversity. Forest Enterprises is New Zealand’s original and most successful forestry investment manager. Our forests are a renewable resource offering real returns.
Learn more about investing in forestry at www.forestenterprises.co.nz
YO U R I N V E S T I N G
Your Legal Questions Have a tricky legal question? The team at Morrison Kent can confidentially answer your questions. This issue the theme is employment.
How to avoid redundancies Q: Business has been tough since Covid-19. What should I think about before starting a restructure which could lead to redundancies?
interests. We see a lot of workplaces coming up with creative and flexible arrangements which, when done well, can also help retain key staff and boost productivity. •
A: It’ll depend on what you’re looking to achieve. Are you trying to save money? Or are you wanting to adapt to changing times, in terms of physical workplaces, technology, and staffing structures? Or all of the above? The key thing is to figure out what you’re trying to achieve early, but not make any hard and fast decisions on how to do it.
•
Then you’ll be able to figure out if you need a restructure and possible job losses, or whether there are other options, like a variation to staff’s terms and conditions of employment. If you vary their terms, employees will need to agree to the changes – they can’t be forced on them. Here are some of the changes we’re seeing and advising on that could avoid redundancies in the wake of the pandemic: •
•
Changes to workplaces. Some staff are moving to shared office spaces or working from home partly or fully. Hours of work. Reducing hours or days of work can be good for both employers and workers. Companies can save money as long as the work still gets done, and employees get time to spend on outside
52 JUNO |
AUTUMN 2021
•
Track how you use staff and roles. Do some members of your team have extra capacity, while others are over-stretched? Can you spread work more evenly to fully utilise every member of your team? Diversifying roles allows staff the chance to upskill in other areas that will complement their existing role, skillset, or career. Consider contracts. Is it time to move to part-time and flexible arrangements, or move to contractor roles? In this way, you can allocate costs to projects according to what they need, rather than having employees with fixed salaries and guaranteed hours of work. Introduce new technology. An expert may be able to streamline your processes and find more efficient ways of doing things. Yes, there may be some upfront costs – but the savings may well be worth it. Teams could be more productive in the time they have.
These and other creative solutions all come with legal fishhooks you need to be aware of, so make sure you’re ready to manage them before you press ‘go’. Get legal advice before you start, to help reduce the risk of personal grievances or breach of contract claims.
Shirker workers Q: How do I deal with an employee who never shows up for work? A: This depends on how often the issue is coming up, and whether you know the reason for it. The first step is to open communications. Find out why it’s happening and don’t jump to conclusions. For example, if an employee’s taking regular sick leave, you may need to ask them for medical certificates – and offer to pay for the certificates. It could be a sensitive medical issue that the employee hasn’t wanted to tell you about. It could be relationship problems, family violence, a drug or alcohol problem, or even internal workplace issues, such as bullying or harassment. Ask them, so you know what you’re dealing with, but get some advice before you do – you need to avoid a situation where the issue is ‘asked and answered’ at this early stage, or where you then want to rely on what they say to issue a warning. If a careful process isn’t followed, that could result in a (legitimate) personal grievance. You’ll have to carefully navigate legal processes to manage any of these issues, to avoid claims of unjustified disadvantage or dismissal, unlawful discrimination, or breach of contract claims. Of course, it could be simply a lack
ADVERTORIAL
of motivation! That’s likely to be a performance management issue, or a deliberate breach of instructions to turn up on time – or turn up at all, which is more likely to be a disciplinary matter.
•
This really has the potential to be a legal minefield, so it’s worth getting advice at the start.
Templates or individual contracts?
•
Q: What are tailored employment agreements – and are they a good idea? A: Many companies use templated employment agreements to save money. They could be found online, or perhaps via a subscribed service where the employer answers questions to generate a template document. However, there are many benefits to having an agreement that’s tailored to your business, including in the drafting of specific clauses. Here are some examples of why you should consider a bespoke solution: •
Legal compliance. A template may have ‘compliant’ clauses, but if they don’t fit exactly how your business operates, there can still be compliance issues. Take hours of work and rosters. If you don’t operate a standard 40-hour week within set business hours, or if you need staff to work overtime, these clauses can be complicated and leave you open to significant liability if they’re not tailored correctly for your business.
•
Industry-specific clauses. Is there something about your workplace that’s unique? Do you provide tools, cover the costs of memberships, or require training or special health and safety rules? A tailored agreement makes sure specific issues are covered in a way that best suits the business. ‘Onerous’ clauses. We often see template agreements where the contractual obligations are actually more stringent than what’s set out in law. This is unhelpful, because if you contract to a higher standard, that is the standard you’ll be held to account to, if issues arise. With a tailored agreement, your legal team will already be familiar with the clauses, so if issues arise, they can hit the ground running to resolve them.
Steps to a restructure Q: What legal steps should I take if I restructure my business? A: Your main obligation is to outline the reason for the proposed change, provide details of what is proposed, and explain how you consider the proposal may achieve the goal, if it is implemented following consultation. This all needs to be communicated as (and genuinely be) a proposal, which could change based on feedback from potentially affected employees.
The proposal also needs to include or attach any relevant information sitting behind it – the rationale – so employees can give informed feedback. This could be financial information, organisational charts, in fact any information the management considered when they were coming up with the proposal. There can be ways to do this that avoid disclosing highly sensitive information, but you should seek advice on how to do this and if you should. All of that sounds pretty straightforward and obvious – but in fact we often see restructure processes go wrong (to varying degrees), leading to legitimate personal grievances. It’s important to understand that there is no safe, ‘one size fits all’ process. Each proposal and process needs to be tailored to the rationale, the drivers, and the staff involved. Again, spending some money on upfront professional advice can save you a lot of grief and legal costs later, defending claims from disgruntled staff members.
JUNO’s content comes from sources that JUNO magazine considers accurate, but we do not guarantee its accuracy. The content of JUNO is intended as general information only, and you use it at your own risk. AUTUMN 2021
|
JUNO 53
YO U R I N V E S T I N G
54 JUNO |
AUTUMN 2021
PERSONAL FINANCE
The Three-Quarter Life Crisis A midlife crisis used to be when people in their 50s bought a Harley and had a fling. Now we’re living longer, personal crises are happening later, writes Brenda Ward. But you can prevent them.
It can happen to anyone – a crisis that makes you question your values, think about how short life is, and wonder where your life is going. We used to think this angst happened only to the middle-aged. Now it’s happening later. Canadian pyschologist Elliott Jaques was the first to call these times of soul-searching a ‘midlife crisis’, in 1965, and he believed it mainly happened to people in their mid-40s. A few decades later, it was seen as a 50s problem. Now the experts argue that longer lives are delaying the midlife crisis till our 60s or even 70s and it’s being called the ‘three-quarter-life crisis’. Auckland financial adviser Jonty Horrocks of Element Financial, says this later-life crisis marks a number of factors colliding at the same time, that used to happen much earlier. “We’re having children later, so kids are leaving home later, around the time people are leaving the workforce and facing an uncertain future,” he says. Within a few years they face emotional turmoil from giving up work, possibly downsizing the house, facing friction at home that can lead to a ‘grey divorce’, and can have later-life financial woes leading to depression.
But Horrocks says there are ways to avoid the three-quarter life crisis. Half of us have them Experts are just starting to realise how common the phenomenon is. Across the Tasman, the Australian Seniors’ 100 Year Lifespan Report asked 5000 people about ageing and found 32 per cent surveyed had had a three-quarter-life crisis and 46 per cent had seen others go through one. But rather than seeing a life crisis as a negative thing, almost seven in ten (67 per cent) said re-evaluating our lives can be healthy. Clues to the reasons for the delay of the crisis can be found in Kiwi demographics that are being echoed around the world. Emeritus Professor Paul Spoonley of Massey University says he’s seeing a ‘structural ageing of the population’. •
The number of over-100s will double by 2030, he says.
•
A quarter of us are now aged over 65.
•
The number of us living to over 85 will triple from 83,000 to 264,800.
•
We used to retire at 65 and spend 15 years in retirement. Now many of us could live up to 30 years after giving up work.
AUTUMN 2021
|
JUNO 55
YO U R I N V E S T I N G
But in modern families, some of us will be starting families later, or divorcing and starting again, or having more children with a younger partner. Says Horrocks: “If you start a family later, at the age of 55 you’re still carrying quite a lot of risk and you need to think about how you mitigate that risk and the cost of it. “So, the pressure is there to work for longer and your retirement dreams can change. It can be very challenging.” How do you plan? Horrocks says in planning you should always start from where you want to be in the future, and work from there. “If you’ve never climbed a mountain before, you’re never going to be able to climb Mt Everest on your first day. “If that’s your goal, you have to figure out the steps that you need to do to achieve that. If retirement’s the Mt Everest, what do you have to do, to reach the top?” He says every year or couple of years when you refresh that plan with your financial adviser, you can update it. He says you can simply say you’ve got a child and you’d love to support them through university, or maybe help them get into a home. Spoonley says baby boomers are entering retirement as the healthiest and wealthiest generation ever.
planning your goals and how you want your life to look, years before you retire.
And unlike their parents, at 60, many baby boomers are still active, enjoy working, and have a youthful mindset.
“We’re having children later on in life, so you need to think about the whole notion of planning and understanding what that looks like.”
Their parents married young and spent 20 years raising a family and forging a career. Then they asked: ‘Now what?”
He says a financial adviser can help you plan your goals and dreams at any stage of your life.
But today’s 60-year-olds are living longer, they often started their families later, in their 30s, and their kids can’t afford homes, so they’re leaving home later.
“You might say to your adviser, OK, if I’m 42 and I haven’t started a family yet, what is my life going to look like? How much do I need to save? Do I want to save for that child’s future education?
This all delays the day when they face empty nests, stop working, fall into a hole, and start rethinking the purpose of their life. Professor Carlos Strenger, a psychologist at Tel Aviv University, told Time Magazine there’s another common trigger for the crisis – the death of a loved one. He says you usually start being aware of your mortality when your parents die. What to do Horrocks says the anguish of a threequarter life crisis can be avoided by just 56 JUNO |
AUTUMN 2021
“That way, when some people might be coming down the tail-end of that financial responsibility, you don’t feel that you’re still riding that massive financial risk, because really that’s what it is.” Horrocks says research shows the stage from the early 30s to mid-50s is a high-risk time. “Then, by the time you’re in your mid50s, probably most people will have adult children who’ve left home. You’ll have an empty nest, so you can reduce your debt, and your risk profile reduces.”
“The answer might be just as simple as setting up KiwiSaver for your child, and contributing into that, so by the time they’re 25 it could be a massive investment for their first home.” Signs of a three-quarter life crisis The experts say if you recognise any of these symptoms, you should ask for help: •
You no longer have a sense of purpose.
•
You’re turning into a grumpy old person.
•
You live in the rear-view mirror, regretting the paths you never took.
If you see the warning signs, you can: •
Talk to your family doctor, a life coach, counsellor, or a trusted friend.
•
Develop and maintain a strong support network.
•
Work longer you can, even if it’s only part-time, or volunteer.
•
Keep a healthy body and mind, and make sure your finances are secure.
•
Make a bucket-list.
Remember, say the experts, assessing your life can be a healthy process to work through, leading to positive change.
Enjoy financial independence and a lifestyle you love with a Heartland Reverse Mortgage
Heartland is New Zealand’s leading reverse mortgage provider, allowing you to access the equity in your home so you can live a retirement lifestyle you love. Heartland Reverse Mortgages have helped over 17,000 New Zealanders live a more comfortable and enjoyable retirement. A Heartland Reverse Mortgage can be used for a number of purposes including home improvements, assisting family, medical and healthcare, purchasing a new car, day to day living expenses or unexpected costs. A Heartland Reverse Mortgage offers considerable flexibility and protection, including: • Maintain ownership of your home • Flexible drawdown options • No regular payments required • Designed to provide you peace of mind Call our friendly dedicated team members today to discuss how a reverse mortgage could help you on 0800 488 740.
Heartland Bank Limited’s lending criteria, fees and charges apply.
YO U R I N V E S T I N G
58 JUNO |
AUTUMN 2021
PERSONAL FINANCE
How to Get Equal with Your Ex (and Survive) There’s a right way and a wrong way to divorce, to make sure you get through it with dignity – and your fair share of the family assets, says Bridgette Jackson, who coaches people through their divorce.
To separate, divorce or uncouple is a timeconsuming, fraught time. No one really wants to go through it. People feel a range of emotions, from fear of being alone and feeling unattractive, to anger, shame, and embarrassment. I see a wide range of emotions from both men and women and all these are natural and real feelings. You could leap straight into a divorce and hope for the best, but there is a better way to do it – if you prepare for and plan the process. There are no winners Who comes out worse from a divorce? You may be surprised to know that both sexes are affected equally, but for different reasons. That’s because money isn’t the only measure. There’s also the state of mind of each partner. As you might guess, women tend to be the losers financially. But, after divorce, I find that women are typically happier than their exes. Studies show that although men experience an increase in financial wellbeing following
divorce, divorced women experience less depression. How to protect yourself If you’re with a partner now and you want to protect yourself from divorce, both men and women have the same issues to contend with, just from different positions. I would say that it all depends on who’s been the main breadwinner and who’s been the caregiver. Many women don’t manage household finances. That means their first step is to find out what they and their spouse own and owe, along with their spouse’s salary. This will have a bearing on child support and ‘spousal maintenance’, which is a legal term for continuing financial support of a partner. For both parties, it’s important to consider the following ahead of time to protect from divorce: •
Be financially organised – set up individual bank accounts in your own name.
•
Protect your privacy by changing all your passwords to financial accounts and social media.
•
If you have children, think about custody, and how you want to build an amicable coparenting relationship with your ex.
•
Move, eat well, and get enough sleep. Looking after yourself is essential because divorce is emotionally taxing.
•
Revise your current will or get a lawyer to draw up a will that reflects your new relationship status.
•
Build a support network of people who can help you through the process quickly, costeffectively, with a positive outcome.
•
Lawyers do a fantastic job advising you from a legal perspective, but you may find it’s useful to use a separation strategist or divorce coach who can guide you through the process.
Positive story For most people, divorce is scary, overwhelming, uncertain, and confusing, but by taking positive steps, you can navigate the divorce in a way that supports and empowers you. Remember this is your story and no one else’s. You will have a new life after divorce, so it’s your responsibility to take control of the process. When you feel empowered, it will inevitably lead to a more favourable outcome. AUTUMN 2021
|
JUNO 59
YO U R I N V E S T I N G
Divorce is a business transaction At some point, you have to move away from the story, to the ‘business’ of divorce. This is about money and assets. If you can control your emotions, in my experience, it will lead to a healthier and more positive separation process. Set your goals and intentions before and post-divorce. In my experience, people of both sexes holding on to negative emotions like anger and resentment will potentially lead to a legal battle that will waste money, energy and cause a heavy emotional toll. Lasting agreements Are you at an early stage of a relationship and worried about a possible split later? People often ask me how to protect themselves at this earlier stage of the process and ask whether contracting out agreements do the job. Aaron Nicholls from Nicholls Law says: “The short answer is, ‘yes’. The longer answer is much longer, but ultimately also, ‘yes’.” ‘Contracting out agreements’, sometimes called pre-nups or Section 21 Agreements, allow the partners in a relationship to negotiate themselves how assets will be divided, he says. “They set an intention and resolve any disagreements that come from dividing up assets,” says Nicholls. “Partners are encouraged to discuss and agree on the division of assets themselves. “However, couples usually need expert legal advice – and in some cases accounting advice – to ensure that the final agreement is effective and lasting.” What about the kids? Remember you are divorcing your exspouse – not your children. So, how do you approach the situation to protect children from lasting damage? What your children should know: • What the plan is for them.
•
The financial details.
•
•
Negative things one parent feels about the other.
How major events will be shared with both parents.
•
Managing their friends and activities.
What children usually know: • That there has been an affair. •
That the divorce was coming.
•
That one parent has an addiction or mental health disorder.
•
When the divorce is final.
•
How to reach both parents at all times.
•
If there is a plan for either parent to remarry.
What your children will be worrying about: • Missing the other parent.
•
If a parent has an addiction or a mental health disorder.
•
What will happen to them.
•
What your children should not know: • If a parent has been unfaithful.
Parents fighting or arguing.
•
Not having a family.
•
That it’s all their fault.
•
Transitions.
•
Not having enough time with either parent.
•
Anything about the court filings and proceedings, unless there has been a decision that has a direct impact on them.
60 JUNO |
AUTUMN 2021
•
That their parents don’t like each other.
Warning signs There are several telltale signs that you may need to pick up the phone and make an appointment with a counsellor or therapist. •
Your family and friends are over listening to your issues.
•
People have commented to you that you don’t seem yourself and wonder what is going on in your life.
•
The issues confronting you are causing significant distress and upset in your life.
•
This is a biggie – you start abusing alcohol, drugs, sex, food (or lack of), gambling, spending money or abusing someone, to ease feelings of despair and overwhelm.
If you’re seeing one or more of these signs, it’s wise to seek help or arrange counselling.
PERSONAL FINANCE
Situation
5 – 10 years
> 10 years
When a parent moves out of the marital bed
“Mum and Dad don’t like sharing a bed any more.”
“Mum and Dad are not getting along and need to take some time apart.”
Are you getting divorced?
Admit that it might happen but there haven’t been any clear decisions.
When a parent moves out of the marital home
When there has been a decision to divorce
2 – 5 Years
Simple explanations: e.g. the parent is living in a new home, with grandma, a best friend, etc. Mum and Dad are going to live in different houses.
Adolescents:
Can be told Mum and Dad are getting a divorce if the papers have been filed. If no papers have been filed make it clear that the separation could lead to divorce or may simply be a “time out.”
Adolescents need to be told that parents are tired of fighting and/or not being happy and are planning to divorce.
FOR ALL CHILDREN The child(ren) should be told as soon as possible. It is best for them to hear it from their parents rather than any other source.
Parents should tell them together if at all possible. Work with your clients to help them develop a script.
It is helpful to give them a few simple reasons why there is going to be a divorce, and a timeline for changes that are going to occur.
Tell them together or, if that is not possible, one parent with another close relative. They should not be asked their opinions!
Let them know immediately which parent will be moving out and when.
Have a plan for time sharing and tell the children what it is.
They should be allowed time to express their opinions and ask questions.
If a parent does not know what to say s/he should tell the child(ren) s/he will think about the question and answer the next day.
Parents should always be encouraged to ask the Divorce Coach for feedback.
Bridgette Jackson is a divorce and settlement expert at Equal Exes. She is a qualified lawyer, a CDC-certified Divorce/Separation Coach with a postgraduate dispute resolution qualification. She is also a certified mediator. www.equalexes.com
What can you build at your place?
Proposed Proposed Duplex House Duplex House 1 2
The Unitary Plan provides great opportunities for many Auckland property owners to generate wealth through property development. From stand-alone homes to multi-unit developments, Ashcroft’s plans are designed to make the very best use of your land.
JUNOHP0121
Discover the development potential of your land with a FREE Site Evaluation Report, register at ashcrofthomes.co.nz
YO U R I N V E S T I N G
‘I invested in shares and now I’m not worried about my future’ This mum-of-two wasn’t going to give up after her marriage ended.
After the unexpected breakup of her marriage, Rachael Fitzjohn decided she could go one of two ways: “I could fall apart at the seams and everyone could say, ‘Poor Rachael’, or I could bloody own this.” She decided on option B: “Bloody own it”. She wanted to show her two young sons that she could take care of them, take care of herself, and take care of their future. It hasn’t been easy, but it’s getting easier, thanks in part to Fitzjohn’s hard work and careful money management. Although she’s always been a saver rather than a spender, without a clear plan for her money Fitzjohn felt haunted by “visions of working until I was 80 and hanging teabags on the washing line”. Sleep at night Her immediate money goal was to be able to sleep soundly at night. For the future, she wanted a retirement where she could sit by the beach sometimes, with a cocktail in hand, relaxing in the company of her best friends. But with only a small amount of leftover income each month to invest, she wasn’t quite sure where to start. She felt that an adviser wouldn’t be interested in a client with only a few thousand dollars to invest. Kiwi DIY approach Instead, she picked the classic Kiwi DIY approach. She read articles about investing and joined online platform Hatch, starting a watchlist of shares she was interested in and using the site’s educational guides. After a few months, she invested NZ$500 in 62 JUNO |
AUTUMN 2021
Tesla, a sum of money that she could afford to lose if everything went wrong. It all went right. Last year alone, the Tesla share price rose from around US$90 to around US$400. Since then, she’s been investing a regular monthly sum and enjoys the process of picking shares. She likes the US market She says the Hatch platform suits her because she likes the US markets, with their recognisable brands, and appreciates the educational resources provided for free on the platform. Fitzjohn’s favourite shares are companies with problem-solving products and ideas, even if they’re sometimes controversial, like Beyond Meat and Aurora Cannabis. She also likes to diversify by using ETFs like the Vanguard S&P 500. So far, she’s grown a portfolio worth four or five times what she’s put in. “When I started my portfolio, I used to check it every day, but now it’s only a few times a month. “It’s a long-term investment. I’m not
playing the market, and although some of my investments have been a bit dicey at times, most of them have bounced back. “I trust my research and I diversify across different industries.” Her confidence grew Her understanding of investments and money management have given Fitzjohn more confidence about her future. When she was interviewed for her current role at Xero, they explained the company’s share incentive scheme to her, and Fitzjohn says it was a great feeling to understand exactly what was on offer and how much it was worth to her. “Funnily enough, I think I probably could go and talk to an adviser now, because I have a bit more experience.” Thanks to investing, maximising her KiwiSaver contributions, cautious spending and working hard, Fitzjohn no longer needs to feel anxious about money. There’s certainly no danger of anyone thinking ‘poor Rachael’ – consider the situation “bloody owned”.
‘I started my first business when I was 11’ Nick Hoogwerf started making craft jewellery as a hobby and turned it into a thriving business.
Nick Hoogwerf was just 11 years old when he started his jewellery business. “I’d always loved creating things with my hands,” he says. “Art was my favourite subject. While other children were out in the playground, I was inside constructing something. That was my passion.” Hoogwerf’s aunt Sherryl Prince recognised his talent early and paid for him to do a jewellery course. “I was going to give one of the pieces I made at the course to my mum, but I ended up selling both of them for NZ$12 each,” says Hoogwerf. “So, I had NZ$24. I remember that amount quite vividly from when I was 11.” He reinvested that NZ$24 in materials and sold the jewellery to his aunt’s friends. “That’s how I started my business.” Market stalls The business grew through Hoogwerf’s teenage years. “While most kids were playing sport on Saturdays, I was setting up stalls at the Mt Eden village craft market.” He also sold around other markets, wholesale gift fairs and expos, and direct to stores, including Te Papa. Mum Donna Miers helped him create business cards, signage and a website. When banks and EFT-POS machine suppliers wouldn’t take her son seriously, she helped. Hoogwerf lived and breathed jewellery, so it became his fulltime job when he left school. Two years later, he heard that Kagi Jewellery, which he followed on social media, was up for sale. Kagi sells high-quality, affordable statement jewellery made to last, through jewellery stores. It’s mainly a wholesale business.
“I had always looked up to Kagi because it was the market leader in terms of the type of jewellery I was selling,” he says. “I would look to the designer of this brand for inspiration in colour and style.” Mother and son team He jumped at the chance to buy the company and by coincidence, Miers had been made redundant in a restructure from her role in human resources and was looking for work. “My mum is also very passionate about creating things and she knew quite a lot about the business. We put two and two together.” He’s now focused on building the company. “Covid has really shaken things up for everybody. We’re expanding online. We’re also looking at broadening our base, because people’s shopping behaviours are changing.” Saving a fifth of his earnings Hoogwerf also has personal financial
ambitions. He learned early from his grandmother to save 20 per cent of all the money he made. “I remember going to the bank with my mum and opening three separate suffixes to my account. One was for materials, one for spending (business and personal), and one for saving,” he says. His goal is to pick up a broader investing knowledge. He follows JUNO KiwiSaver founder Mike Taylor online and the Opes Partners Property Academy podcast. He’s investing in KiwiSaver and in managed funds and wants to get into property. His newest venture is into real estate, with Ray White. His other goal is to encourage more young people into business. “I know when I went to a careers counsellor at high school and said I wanted to be an entrepreneur, she didn’t really have anything to offer.” AUTUMN 2021
|
JUNO 63
YO U R I N V E S T I N G
‘We struggled to see a way forward – now we own 12 houses’ This young couple decided they wanted a better life for their family, so they invested in property and doubled their portfolio in the last six months, during a pandemic.
Ten years ago, Chad Evans and his wife Rachel struggled to see a way forward, with a new-born baby and surviving on one very modest youth worker income. If things weren’t already tough enough, Chad’s contract was coming to an end and he couldn’t find work so, for a short time they had to rely on Work & Income to make ends meet. “We were living from week to week and the debt was just getting deeper,” says Chad. Says Rachel, now 36: “It’s been 10 years now and we’re starting to see the impact of that first decision we made to invest in property.”
Photo: Mo + Co www.moandco.co.nz
They say they’re investing to create a secure future for their children, Amos, 11, Adele, 9, and Arana, 3.
off Chad’s parents, in an industrial area in Lower Hutt. It was a real do-up, damp and cramped, and it cost just NZ$260,000 – for a reason.
It hasn’t been easy, and it’s been a journey of learning along the way, says Chad, now 35, a personal trainer and youth worker in South Auckland.
“It was in a terrible condition. It had been flooded, so the floors were rotten, and it had no heating or insulation.”
The inspirational couple are about to secure their 12th rental property. After losing his job and six months of job-searching, Chad found work installing insulation, hot and itchy work – “the worst job ever!” – but then he got a role helping young people from disadvantaged backgrounds, which gave them stability. The couple saved up to buy their first home 64 JUNO |
AUTUMN 2021
Over the next few years, they did up the house, stripping wallpaper, changing the carpet, skimming the walls, installing a fireplace, and painting inside and out.
room, an oil heater, so that he was warm at night. We didn’t care though, because we owned our own home!” Chad looked after the baby and renovated, while Rachel continued with her career at NZST, an institute for vocational training. Then a friend gave Chad a few books on property investing to read.
This was to improve their living conditions, but they found later it would add value to the house to allow them to invest in property.
“I was blown away at what could be achieved through investing. He had been investing in property for a while. I hijacked a meeting with his mortgage broker and real-estate agent while they were looking through properties.”
“There were nights where we were sleeping in a hoodie and trackpants because of the cold. The only heating was in the baby’s
They spotted a three-bedroom home that was on the market for NZ$285,000 but valued at NZ$310,000.
PERSONAL FINANCE
“We’ve gone from five houses a few months ago to having 12 halfway through this year, in the middle of Covid and two Auckland lockdowns.”
“We’d been in our house for two years, so the broker said we should have some equity. I was still learning what equity was and how it worked! “My friend said: ‘Look me in the eye and tell me you’re going to the bank tomorrow to put an offer on this house. It’s a good deal, and if you don’t take it, I will. “So, I went to put an offer on the house the very next day.” First rental The offer was accepted and tenants living there wanted to stay. After a couple of months, with the rental going well, they realised because the house’s value was NZ$25,000 higher than they’d paid, they could buy another property. The couple secured their third property, also buying it under its valuation. The couple’s life became focused on servicing their debt and learning more about property investing. Chad would run fitness bootcamps in the mornings, and when Rachel went to work, he’d look after the new baby and their toddler while he renovated. In the evenings, he worked in cargo at Air New Zealand, from 9pm until 2 or 3am. “Then I’d be back up at five for bootcamps in a park in the city. That was my daily routine for a while, and my wife and I would be like ships passing in the morning and night.” To get ahead, they moved in with Chad’s mother to turn their own home into a rental property, hoping to save enough to move to Auckland. “Me, my wife and my two children were all in one bedroom.” When they moved to Auckland, they stayed with family in Mangere and both worked fulltime while they learned as much as they could about investing. With the rentals ticking over, finally they could buy a home in Onehunga, Auckland, and turned a garage into another bedroom they could rent out to international students.
That house later became a rental when they moved to a home they’d bought closer to Chad’s work, in Manurewa, Auckland.
there, you don’t picture yourself in a position like this or think it could possibly happen.”
Says Rachel: “We were still young and with young children, just like every other average Kiwi, both working and trying to get ahead.
Rachel grew up in Whangaparaoa, a rural area on the East Coast, with a solo mother.
“Deciding to buy an investment property and then another soon after was quite scary at times. But Chad and I have a really great relationship and I trusted that what he was doing for us was going to be good in the long term.” They now have plans to demolish and develop their first Wellington investment property to build a three-bedroom, twostorey rental in front and two two-bedroom units at the back. They’ll also turn the three-bedroom Manurewa house into a four-bedroom home with a two-bedroom self-contained unit at the rear as rental properties. Realising that prices in the Auckland market are at a peak, they’ve turned to Christchurch, buying off the plans in a new development at Karamu, and buying an already tenanted home in North New Brighton. Christchurch focus They now have three Christchurch properties, after settling on a third at the end of the year. Says Chad: “We’ve gone from five houses a few months ago to having 12 halfway through this year, in the middle of Covid and two Auckland lockdowns. “Before we got into property, we didn’t have finances left over for Christmas presents for our baby. We were living off a credit card.” When they bought in Auckland, the pair were both working fulltime, with Chad doing fitness training in the mornings, working with disengaged youth in South Auckland in the day, then working as a security guard most nights, plus working at events at weekends. Throughout their journey, Rachel has progressed with her career, which has allowed the couple to further invest in property. Says Chad: “We look back and scratch our heads and think, wow, we would never have pictured ourselves being in this position – and to think that it’s still only the beginning is exciting. “I grew up in Pomare, a low socio-economic area in Wellington. When you grow up
“Now she’s flourishing in her work and doing amazing things,” says Chad. “She’s an inspirational leader. And now we’ve got this property portfolio that’s taken us to another place.” Rachel says: “I’m happy that we made that decision all those years ago. At the time, we were struggling to get ahead. When you’ve got a child and one income coming in, you have to make some cuts and live on a budget at times, but I was thinking, ‘I don’t want to live like this forever. I want something more’.” All three children are in JUNO KiwiSaver and have accounts with Liberty Trust, a church-based group that helps Kiwis by giving interest-free mortgages. The couple also use their credit cards wisely, by using a Westpac credit card for large purchases to get Airpoints for international family holidays. They also have money in the Oyster Direct Property Fund and in Sharesies, reinvesting their returns. “If you look at Auckland now, a property is a million dollars on average, so why don’t people look at other options or be a bit creative in the way they’re working? They could buy down the line and do it up, to get a deposit. “I’m a firm believer that if you want to make it work, there’s always a way. You can be creative about it, like adding an extra bedroom, subdividing a large section, reconfiguring existing properties, or even a cosmetic renovation. These are all things we’ve done to continue to be able to further invest in the property market.” Rachel says their main driver has been freedom – the freedom to do what they like with their time and not be dictated to by cost. “If we want to travel, we can, and if we want the option not to work, we can. We want to be able to make those choices for ourselves, rather than being bound by having to work or not being able to take leave. “We want to retire early, but both Chad and I share a passion to see others succeed so that’s one of the other big contributing factors for us – we want to give back.” AUTUMN 2021
|
JUNO 65
YO U R I N V E S T I N G
‘We came back to NZ to buy a business of our own’ These Kiwi ex-pats realised they could grow a nursery business on their return to New Zealand.
Kiwi ex-pats Sarah Hales and Clifford Scott had high-powered careers in Singapore, but they missed the New Zealand outdoors, so they decided to head home. Says Hales: “There was the attraction of looking for a business of our own, instead of working for corporates.” For the past 12 years, Scott has been head of construction for an insurance company in Singapore, and Hales, a lawyer, worked for a legal technology start-up. More job satisfaction Scott says he enjoyed working for corporations, but found there’s more satisfaction in working for yourself. “We could run the business the way we wanted to run it.” Sarah says it was also about their own moral compass. “You’re able to run it with your own values.” But which business? After considering a couple, in 2019 they bought the Waikato nursery through ABC Business Sales. “This is large wholesale plant nursery, specialising in shrubs, trees, and perennials. We don’t sell to the public, but to the garden retailers,” says Scott.
“What we were really looking for was a strong business from a numbers perspective,” says Scott. “It had a lot of the infrastructure, processes and systems already in place. “It was quite straightforward, but in other ways quite complex, because we do everything from propagation to distribution and everything in between.” Then Covid struck The Covid-19 lockdowns were a worry, hitting the business soon after they bought it, but they turned out a windfall. “It exceeded our expectations,” says Scott. “Since we opened back up in April, it’s been flat-out.”
Excited about the possibilities for growth, they’ve gone on to buy second nursery, this time in Palmerston North, selling a different kind of plant.
Says Sarah: “Auckland’s a very large market, so every time there’s a Level 3 lockdown in Auckland it has a big effect on us, but trading has been better than we expected.”
Room to grow The pair had no background in propagation or gardening, but they could see it was a healthy business with room to grow and they knew they could add value to it.
The pair found their skillsets ideal for the new business, managing a combined staff of about 55.
66 JUNO |
AUTUMN 2021
Scott says: “The learnings I’ve transferred here were about running a team
from a leadership style, rather than a management style. I believe in empowering people and having the framework in place to monitor and track success.” Useful skillsets Hales found her tech skills could open the business to new ways of working. “We were able to update some of the systems and introduce new things that have made the team’s job easier.” The pair are learning about the industry. They inherited an expert team who’ve been working in the business for a long time. “They’ve got procedures and goals. They just get on with it.” Scott says he’d recommend owning a business, but it wouldn’t suit everyone. “If you want a nine-to-five job, probably not. It’s not that we work excessive hours, it’s just hard to switch off. “We could have created a start-up, but it would have been a lot of hard work. “Instead we found that buying a business with a proven track record through a trusted broker gave us confidence.”
$
P E R S OA NDAVL EFRITNOARNI C AE L
Love and Money In some relationships, joint finances fit together well, but others find it a real struggle. Money Mentalist Lynda Moore explains how to make it work. It can be hard enough to work out your own relationship with money. Then what happens? You fall in love. Now you’re trying to figure out your partner’s relationship with money as well. Often we fall in love with our opposites – that’s probably what attracted us in the first place. So, how do you know if you’re financially compatible? Think back to the early days of your relationship when you were getting to know each other. How did your partner behave with money and how did you respond? Were they always shouting the drinks when you went out? Or getting out the calculator to make sure everyone paid their fair share? Did their behaviour make you cringe, or were you quite comfortable with it? How did your partner respond to your money behaviour? If you bought something new, were you given the second-degree on how much it cost? Or were they very casual about how you spent money? This will have given you a pretty good idea of how financially compatible you were. If there were a few niggles, you might have thought ‘we can change each other’. Or, you might have decided it’s not going to work. Or, like most people, you might have ignored the signs and carried on regardless. There are three things you need for a successful money relationship. 1. An understanding of your money personality, recognising that differences
can be strengths, not something to argue about. 2. That we all come into our relationships with our own stories (beliefs). If you have similar money beliefs to your partner, then you understand where you’re coming from and money just makes sense. If you come from different money beliefs, you should try number 3. 3. Communicate about money. Yelling is not communicating! Neither is avoiding talking about it. Listen to each other and talk about your history, your family, your fears, and your dreams. Work as a team to reach your goals. Financial infidelity ‘Financial infidelity’ can rip your relationship apart. I’m not talking about buying a pair of shoes and hiding them in the wardrobe for a couple of weeks. This is at the very low end of the scale and you can work through that. At the high end of the spectrum is mortgaging your house without your partner knowing. Yes, I have seen this happen! More often it’s having credit cards or bank accounts your partner knows nothing about. Financial infidelity isn’t just about decisions, or even hiding them. It’s the two together that breaches trust. It can be hard for a relationship to recover from that. What does an unhealthy couple’s money relationship look like? They’ll argue about money. One probably doesn’t have any idea what’s going on with
the finances. Maybe they aren’t told, or maybe they just don’t want to know. They have no idea how much debt they have, and they have no say in financial decisions. There’s probably financial infidelity going on from both sides. These relationships can struggle on for years. But if something happens to upset the equilibrium, you could be headed for a messy divorce. What does a healthy couple’s money relationship look like? They have complete transparency about their financial position, they talk about money, have a plan, and make big decisions together. They’ll have some ‘play’ money to spend as they like, but generally their finances will be merged. Get started! How do you build a healthy relationship with money as a couple? Start early. Watch your behaviours, understand each other’s backgrounds. What baggage have you brought into this relationship? When your relationship evolves from just dating, use a weekend away together as a chance to talk about money, and who’s paying for what. The easier you and your partner find it to talk about money, the easier it’ll be to invest it to reach your financial goals. Lynda Moore is a Money Mentor Coach and accountant, www.moneymentalist.com. AUTUMN 2021
|
JUNO 67
Humpty Dumpty sat on a wall,
YO U R I N V E S T I N G
Humpty Dumpty had a great fall.
All the king’s horses and all the king’s men couldn’t put Humpty together again.
Why Unhappily Ever After? Partners Life’s cheeky adverts have generated a lot of interest around New Zealand, and for good reason, says Naomi Ballantyne. The ‘Get Life Right’ advertisements we at Partners Life ran last year were quite a departure for a life insurance company. They could be seen as macabre, featuring the waiting room for heaven as the dearly departed (and a dog) lined up, woefully unprepared for death. When we launched that ad campaign in March, we used cheeky Kiwi humour to challenge cultural stigmas towards life insurance among Kiwis. We wanted to increase awareness of the need for financial advice and let people know who Partners Life is and what we stand for. It seemed it worked. Most people saw it and we even got a couple of complaints from people offended by the reality of sudden death. Really, that was the point. New campaign Now we’ve done it again. Our latest campaign ‘Unhappily Ever After’ continues with the Kiwi humour and dark undertones in a way that we think should really hit the mark with new parents and non-parents alike. We believe that having kids and starting a family is a major turning point in people’s lives. For many of us, it’s the first time that the concept of risk becomes ‘real’ as we’re thinking about the long-term impacts of an interruption to a child’s future. So, we wondered how to reach new parents to get them thinking about risks. 68 JUNO |
AUTUMN 2021
What better way than by using something they will be all-too-familiar with, classic children’s nursery rhymes – and giving them a ‘Get Life Right’ facelift. Nursery rhymes Nursery rhymes, at their core, are a way to teach young children of risks and danger in a fun and imaginative way – whether that’s having a great fall, bumping a head, or losing a tail. Nursery rhymes allow Kiwi parents to talk to their children about risks, but we all know that it’s Kiwi parents and adults who need to be thinking and talking more frankly and openly about the risks to their own lives. Unhappily Ever After That’s where Unhappily Ever After comes in. We’ve taken a number of classic nursery rhymes and turned them into irreverent, cheeky tales about why Kiwis should be thinking more regularly about their financial risks. They’ve been beautifully animated. They’re narrated in a cosy way by Kiwi actor Dave Fane, a veteran of Sione’s Wedding, Eagle vs Shark, Bro’Town and Outrageous Fortune. Not only do nursery rhymes take people back to their childhood, but they often have a dark origin which lends nicely to conveying our message that unexpected things do indeed happen. Watch Unhappily Ever After’s Humpty Dumpty remake on YouTube. And if you’d like to get life right with Partners Life, see www.partnerslife.co.nz or contact an insurance broker.
Humpty Dumpty’s yolk started to run, Humpty Dumpty’s time might be done.
All the king’s horses and all the king’s men couldn’t resuscitate Humpty, and then…
Humpty Dumpty had no life cover,
Humpty Dumpty just didn’t bother.
He’s left behind a financial shambles, Don’t be like Humpty, don’t get scrambled.
Humpty Dumpty’s wife arrived, Humpty’s pronounced no longer alive.
All the king’s horses and all the king’s men explain her new financial burden.
It doesn’t have to be unhappily ever after. So, plan ahead.
PERSONAL FINANCE
Test Your Stress
The Holmes & Rahe Stress Scale was created in 1967 for measuring how much stress you’ve experienced over the past year.
High levels of stress can affect your long-term health, leading to illness. Check out your stress rating on this scale, devised by psychiatrists Thomas Holmes and Richard Rahe.
1. Death of spouse (100) 2. Divorce (73) 3. Marital separation (65) 4. Jail term (63) 5. Death of close family member (63) 6. Personal injury or illness (53) 7. Marriage (50) 8. Fired at work (47) 9. Marital reconciliation (45) 10. Retirement (45) 11. Change in health of family member (44) 12. Pregnancy (40) 13. Sex difficulties (39) 14. Gain of new family member (39) 15. Business readjustment (39) 16. Change in financial state (38) 17. Death of close friend (37)
25. Outstanding personal achievement (28)
26. Spouse begins or stops work (26)
28. Change in living conditions (25) 29. Revision of personal habits (24) 30. Trouble with boss (23) 31. Change in work hours or conditions (20)
32. Change in residence (20) 33. Change in school/college (20) 34. Change in recreation (19) 35. Change in church activities (19) 36. Change in social activities (18) 37. A moderate loan or mortgage (17)
150-299 You have a moderate to high chance of becoming ill in the near future.
Over 300 You have a high or very high risk of becoming ill in the near future.
If you find that you’re at a moderate or high level of risk, then you should look at your lifestyle to see whether you can reduce higher stress events in your life.
38. Change in sleeping habits (16) 39. Change in number of family get-togethers (15)
40. Change in eating habits (15)
19. Change in number of arguments
41. Vacation (13)
20. A large mortgage or loan (31)
11-150 You have only a low to moderate chance of becoming ill in the near future.
27. Begin or end school/college (26)
18. Change to a different line of work (36) with spouse (35)
Scientists have since proven the link between stress and illnesses like heart disease, depression, and gastrointestinal issues.
42. Christmas (12) 43. Minor violations of the law (11)
21. Foreclosure of mortgage or loan (30) 22. Change in responsibilities at work (29) 23. Son or daughter leaving home (29)
Calculate Total
24. Trouble with in-laws (29) AUTUMN 2021
|
JUNO 71
YO U R I N V E S T I N G
The Important Things in Life When he was fighting his battle against cancer, Cocksy the builder was forced to consider the most important things in his life, writes Brenda Ward.
www.asteronlife.co.nz
Celebrity builder John ‘Cocksy’ Cocks was a lovely guy. He was always active and full of energy, ready with a gentle joke and a smile.
The adviser suggested a package of income protection, lump sum trauma, and life insurance.
I interviewed the builder from My House, My Castle many times for home magazine Your Home & Garden, and I saw how his positive outlook affected everyone on the set of the TV show.
“I could’ve said no, but I took his advice,” Cocksy said, not long before he died. “And luckily I did – I’ve used two of those covers now, and I have one still to come.”
‘I took his advice’
Cocksy sadly died in 2019, aged just 52, after a three-year battle with the disease.
When he was first diagnosed with cancer, Asteron Life paid out Cocksy’s lump sum trauma benefit.
The most powerful interview he gave was one where he talked about the important things in life. Before he died, he shared his story in the hope that other Kiwis could learn from his experience.
“That money enabled me to think, I’ve got a dream that I want to achieve – building a bach on my section in Tairua. So, I set that money aside and said, that’s what that’s for.”
He said: “I was doing some building work for an insurance adviser, and we got chatting about how insurance cover could reduce my ACC bill. It was something I didn’t really know much about.”
Cocksy couldn’t work as a builder any longer, but his skills and the insurance money meant he could plan and design the bach in Tairua, which he finished in 2018.
ADVERTORIAL
Happy memories “For me, Tairua is the place where I feel most at home, where I feel most comfortable. My happiest memories, for myself and with my girls, are all there. And that’s what I want to leave behind for them – somewhere that they can feel at home. “I thought about it later and thought, how would I have done this without the insurance? How would I have been able to not work, to build my bach, to set up my kids for their future? “At the end of the day, it’s allowed me to do things I like doing. I’ve got limited time, so I want to make the most of it – I’m using it to the best, for myself and for my family.” There was a time, not long before he got sick, that Cocksy said he looked at reducing his cover.
“If things have changed, if money’s tight, you sometimes look at your premiums and think... can I reduce these a bit?
“Talking to an insurance adviser can help you feel more confident you’re making the right decision.”
“But I didn’t do it, and thankfully I didn’t – because money spent then is money I’m getting now.”
They can explain any consequences of cancelling your policy. And an adviser will talk to you about your future needs, says Hill.
Hard decisions Times are tough now and many of us are facing hard decisions on where to make cuts in our spending. Asteron Life’s Graham Hill says you should talk to an adviser before cancelling your life insurance. He says one of the common reasons people give for cancelling their life insurance is that they can’t afford the premiums. “Sometimes there are other options to reduce the cost, including reducing your cover, increasing wait times or restructuring your policies,” he says.
“Retiring, paying off the mortgage, or having your kids leave home can all be good reasons to review your life insurances – and you may decide you no longer need the cover. “Cancelling your life insurance can be a big decision, so it’s always great to get personalised help.” Asteron Life would like to sincerely thank Cocksy and his family for allowing us to share his story. See the full interview with Cocksy on www.asteronlife.co.nz. Brenda Ward is the editor of JUNO and former editor of Your Home & Garden magazine.
www.asteronlife.co.nz
YO U R I N V E S T I N G
10 MOST POPULAR STOCKS IN JANUARY (As of January 30, 2021)
1. Nio (NIO) 2. Tesla (TSLA) 3. GameStop (GME)
Wall Street in Focus
4. Apple (AAPL)
With the NZX50 sitting mostly in the red to start 2021, Kiwis continue to turn to the US market as they look for innovation, liquidity and alpha, says Stake’s Bryan Wilmot.
9. Plug Power (PLUG)
Kiwi traders are making the most of a hot market and I’d expect that trend to continue over the coming quarters. The Nasdaq 100 and S&P500, up over 6 per cent and 4 per cent respectively to start 2021, have provided scores of avenues for Kiwis looking to make money while they sleep, through a wide range of stocks and ETFs (exchange traded funds). Here’s a look back at the month that was, and a look ahead at what Kiwis can expect to be trading later this year. New top spot In a bit of a turnaround, there’s a new No.1 among Kiwis.
5. Churchill Capital Corp IV (CCIV) 6. Palantir (PLTR) 7. Marathon Patent Group (MARA) 8. FuelCell (FCEL)
10. Blackberry (BB)
saw 45 per cent more trade volume than Tesla over the period. Befriend the Trend Kiwi traders continued to show how much they love momentum stocks. Each stock in the top 10 most-traded list has gained at least 10 per cent since the start of the new year. Such an approach certainly carries risk, because the quicker they rise, the quicker they can fall, but traders have been taking profit throughout the month as shown by relatively low buy-sell ratios.
For the past 15 months, Tesla has stood firmly at the top of Stake’s most-traded lists around the world, but the five million inhabitants of Aotearoa changed that.
Bye-bye, Big Tech! Usually, a fixture of top-traded lists, big tech stocks have seen a contraction in trade interest on the Stake platform in New Zealand.
Bucking the trend of Stake traders globally, Kiwis traded Chinese electric car manufacturer Nio (NIO) more than any other stock in January. Not only that, Nio
While Apple remains popular among Kiwis, names like Facebook, Microsoft, Amazon and Alphabet have fallen out of favour.
74 JUNO |
AUTUMN 2021
Since the US election, trade volume in dollars for these four companies has fallen by 42.2 per cent. Big tech has been under the spotlight for some time now, constantly in front of courts and congress. A general uncertainty around how President Biden may handle the companies, combined with a volatile six months of underperforming means the Nasdaq may have led to the decrease in interest in such companies.
If investing in the US market intrigues you and you want more information on Stake, head to hellostake.com and begin your investing journey.
PERSONAL FINANCE
NEW LISTINGS TO KEEP AN EYE ON Bumble Having just filed for an initial public offering (IPO), which is its launch onto the stock market, the dating app Bumble looks to list on the New York Stock Exchange in mid to late February under the ticker code $BMBL. What’s unique about Bumble is the power lies in women’s hands to make the first move. The proposition has been valued by users as the app has ticked past 100 million users across 150 countries. In fact, during the lockdown period, their user base increased by 25 per cent. Founder and chief executive Whitney Wolfe Herd will be the youngest woman, at 31, to lead a company through the IPO process. The female-focused dating app stays true to its model, backed by a 73 per cent female board. The company has an early valuation estimate of US$6-8 billion. Tinder, its close competitor, is already
tradable through its owner Match Group ($MTCH) on Stake. This company, which also owns Match.com and Hinge, is worth US$36 billion.
Roblox Roblox is the biggest game you’ve never heard of. It’s played by 75 per cent of American children aged between nine and twelve, says CNN. With over 150 million monthly active users, the game sees more players than both Call of Duty and Minecraft. Founded in 1999, Roblox has taken some time to gain popularity and reach the public markets. In November last year, the company’s executives decided to postpone listing it, to “work with our advisers to see how we can make ... improvements” to its market debut. Earlier in January, the company announced it was in a position to carry out a direct listing in the coming quarter.
Coinbase They say the best way to make money in a gold rush is to sell shovels, not search for gold. In the case of cryptocurrencies, that means investing in the exchange, not in the currency. The recent rally in the price of Bitcoin has led to an increase in traders and volumes on crypto exchange Coinbase, and with it interest in the impending IPO. With that, one of the world’s largest retail exchanges has filed to go public. It’s filed its S-1 registration form, which means approval now lies in the hands of the US Securities and Exchange Commission. Coinbase has been careful about how it’s prepared for its IPO. Having declined to adopt the controversial USD token Tether (USDT) as well as delisting Ripple (XRP), executives are doing all they can to remain in the good books of the SEC, which has traditionally been sceptical about the crypto space.
AUTUMN 2021
|
JUNO 75
YO U R I N V E S T I N G
76 JUNO |
AUTUMN 2021
PROPERTY
One Tiny Step Onto the Housing Ladder Go small. That’s many Kiwis’ answer to the cost of housing in our cities. Amy Hamilton Chadwick investigates, to see if tiny houses are worth it.
Could you live in a house that’s below 38 square metres? Plenty of people have decided they can, opting for tiny houses as a cheap solution to a Kiwi housing problem. They’re eco-friendly, portable and cleverly designed, and that’s why the tiny house movement has been gathering momentum since the global financial crisis of 2008. As housing costs have risen, so too has interest in tiny houses. If you’ve been wondering whether tiny house life could suit you, Kyron Gosse, chairman of the New Zealand Tiny House Association, says they’re extremely versatile. “They give you flexibility, freedom, and they have less impact on the environment. Tiny houses suit all sorts, from younger couples living on their parents’ lifestyle block to downsizing grandparents moving to be close to the kids.” Gosse chose a tiny home because it gave him an affordable lock-up-and-leave base, and it frees up money for travelling and investing. He also gets to enjoy a high quality of life on the North Shore, one of Auckland’s most expensive areas, at a fraction of the cost most others are paying. He’s parked on a friend’s section and thoroughly enjoying the lifestyle. A tiny step onto the housing ladder It’s possible to use a tiny house to get yourself into
a traditional home, although you’ll need to run the numbers pretty carefully. A new-build tiny house will usually cost around $90,000 to $150,000, although a do-it-yourself build can be much cheaper – and the sky’s the limit if you can’t live without gold taps or an inbuilt Italian coffee machine. If you can pay with cash and find somewhere cost-effective to park, you could save thousands each month. Island life When Kate and Willem van den Bergh were struggling to buy a house in a rampant Auckland housing market, they decided to try something different. They used savings and a family loan to build their 32-square-metre tiny house for $96,700. Using their KiwiSaver accounts and a loan, they bought a section on Waiheke Island for $387,000. Their tiny house went across the harbour on the car ferry and they put a concrete and steel foundation around it so it could be hooked up to power and water. That work, with consents, cost just under $80,000, including a septic system, stormwater and a water tank. They’ve been living in the house for around three AUTUMN 2021
|
JUNO 77
YO U R I N V E S T I N G
years, with son Leo arriving two years ago. Kate van den Bergh says it’s been easy to live there. “It’s amazing. It’s enabled us to save a lot of money and we’re now building a 95 square metre house at the top of the section. We didn’t want a big house, because we know we don’t need the space.” Once the family moves into the new house, they plan to use the tiny house for guests, and it’s still removable if they ever want to move it or sell it. Borrowing to buy is costlier, because you’re taking out a vehicle loan rather than a home loan. Rates start from around 8 per cent, and you’ll need to pay it off over five years. That’s what Gosse has done; he thinks it’s about the equivalent of paying rent. Of course, after the five years is up, he’ll own the tiny house outright and have a big chunk of extra money each week to spend or invest. Once your tiny house is paid off, you could sell the tiny house and use that money, plus your savings, to buy a piece of land or a regular home. You can buy second-hand tiny houses for NZ$50,000 to NZ$120,000. Tiny houses in your garden A tiny house can be an affordable way to put a granny flat into your garden at home, at the beach house, or at your rental property. It might be a way to support an adult child to move out of the house, or to provide a space for grandparents, or guests. You can potentially rent out a tiny house, or, more commonly, list it on Airbnb where they tend to be pretty popular. You can also make money by charging people with tiny houses to park them on your land. You’ll make NZ$100 to NZ$200 a week, depending on where it is, and amenities. Websites like Landshare.nz and Tradeyourspace.co.nz match tiny house and caravan owners with those who have space to rent. This isn’t a typical landlord situation and you’re not subject to any rental laws – it’s essentially a private contract situation, says Andrew King, NZ Property Investors’ Federation president and owner of cabin hire business Cabin King: “You may provide electricity or water, or not. There may be a separate water meter. How will waste be handled? It depends on how the tiny home has been constructed and the arrangements between the two parties.” Clear rules will help tiny houses proliferate In February 2020, tiny houses were declared vehicles (rather than buildings) by the Christchurch District Court, meaning they don’t need to comply with the Building Code. This is a win for tiny house owners and helps keep the costs down. Previously, councils around New Zealand had taken different approaches, leading to confusion. “It does need the Government to get everybody on the same page,” says King. “We need to avoid 78 JUNO |
AUTUMN 2021
problems like the Resource Management Act, where councils interpret things differently and have different rules. They need to make it clear, because in essence tiny houses are a really good idea to increase the density in our big cities.” Van den Bergh says interest is ramping up from people wanting to visit and asking about tiny house living. She isn’t surprised they’re popular. “Housing and consents are just too expensive. The cost to build affordable housing is completely out of touch with the huge demand here in New Zealand and tiny homes are one of the answers to the problem. “There are so many reasons why tiny homes and tiny home villages can be an effective approach. They’re a really good option for a lot of different generations. “I would recommend this way of living.”
This page and previous page: The tiny house Kate and Willem van den Bergh built on Waiheke Island.
YO U R I N V E S T I N G
80 JUNO |
AUTUMN 2021
PROPERTY
Property Through Your Lifetime If you want to build wealth through property, look at the age and stage you’re at now, says Andrew Nicol, of Opes Partners. Here’s his guide.
With property prices booming around the country, many investors are asking: “What’s the right investment property for me?” Of course, the right investment property will be different for everyone. Though, part of the answer can be determined by your age and stage in life. The truth is the right property for you will change as you age. There are three stages most investors will pass through. Planting – Getting the first seeds into the ground. When you’re young and just starting on the property ladder, you’ve got to put in the hard yards. You’ve got to get your first seeds into the ground. At this stage, your aim is to create ‘equity’. Put simply, equity is wealth that you can use to purchase investment properties later. Generally, you do this in one of two ways. The most common way is to buy your first property and pay down the mortgage. While you’re paying down the mortgage, your property is likely to go up in value. Together, this boost over time and the amount you’re paying off allow you to move on to the next stage. If you’re an ambitious ‘planter’ who wants to get through this stage more quickly, you can increase your mortgage payments to
www.opespartners.co.nz
pay your home loan off faster. Because they tend to be young, many planters have decent incomes and relatively low expenses. That gives them space in their budget to increase their mortgage payments beyond the minimum they need to pay. Another path is to take an ‘active’ investment approach, which involves renovating properties to manufacture wealth.
that case, you may find your lifestyle has outgrown your previous investment strategies. That’s why investors in this stage will invest in properties that grow in value more quickly. The investor’s focus turns towards capital growth. That probably means investing in new or near-new standalone houses or townhouses in main centres. These properties don’t take up much headspace at the best of times. They take up even less when you use a property manager. The passive approach may mean that you’re not manufacturing equity, but that’s OK. Rather than focusing on one of two properties as you may have in the previous stage, your equity base allows you to buy multiple investments.
If you go down this path, you might buy a property that needs some love, in an affordable area.
Over the years, you’ll prune your portfolio – cutting properties that are no longer a good fit and reinvesting in those which fit your new life stage.
The standard playbook is to renovate it, revalue it, and then borrow against it again to buy your next property.
Harvesting – Enjoying the fruits of your efforts.
Growing – Building on the equity you have. After a few years, planters move on to become ‘growers’. Having built a base of equity, they can expand and grow a portfolio. Investors at this stage often begin thinking about their long-term wealth and financial future, which tends to coincide with a lifestyle change. Imagine you’ve started a family. Your priorities begin to change and spending time with your partner and kids is at the top of your weekend plans. You may have worked your way up the corporate hierarchy, taking on more responsibility and putting in more hours. Suppose you’d previously taken the active approach and renovated properties. In
Once you start getting close to retirement, whether that’s 65, or earlier because your investments allow you to, investors will start thinking about income. You’ve invested your whole life and made sound financial choices. Now it’s time to enjoy what you’ve built. Instead of thinking about building your asset base, you use those assets to give you an income to live off. And that’s where investors will start to transition away from properties that grow in value faster, to real estate that produces a better cash return. In practice, investors will sell their portfolio of standalone houses and townhouses and reinvest that equity in room-by-room rentals, like student
YO U R I N V E S T I N G
accommodation, apartments, or multiincome housing.
Stage
These properties won’t grow in value as quickly, but they provide a solid rental return after costs.
Young
How to transition your portfolio When moving between stages, it’s essential to give yourself time. For instance, I began my investing journey with an active approach. I renovated properties where I could increase their value. I then moved into the growing phase, years ago. But it has taken me over five years to remove the properties which are no longer a good fit for me and reinvest those funds into more appropriate investments. Similarly, when I’m working with investors to transition into the harvesting stage, I’d usually allow another five years. That lets these investors sell down their current portfolio at the right time while they’re buying properties that will serve
Under 30-35
Mid-way through 30-60
Later stage 60 +
Tactic
Properties
Buy your first home and pay off the mortgage quickly. Renovations – manufacture equity.
Older, cheaper, rundown, or value-add potential.
Growth buy and hold.
New, low-maintenance, highgrowth areas, main centres, standalone houses and townhouses.
Yield.
Room-by-room rentals, apartments, dual-keys, low risk of maintenance.
them well in their next stage of investing.
Do you need to build an initial base of equity?
What’s important to recognise here is that you need to diagnose which stage you’re in now … and age isn’t the only indicator.
Can you grow a base of equity you already have in your current property?
What’s more important is the stage you are in right now.
Or are you now looking to generate an income from a substantial equity base you’ve created over many years?
Go to www.opespartners.co.nz to book a free session on how to become a property investor.
HOME LOANS
LATERAL PARTNERS
LOAN EXPERTS
BUSINESS LOANS
DEVELOPER FINANCE
20 YEARS EXPERIENCE
PETER NORRIS peter@lateralpartners.co.nz 021 192 4911
PROPERTY INVESTORS
EXPERT ADVISORY & CAPITAL SOLUTIONS, TAILORED TO YOUR SPECIFIC LOAN NEEDS. Lateral Partners have over 20 years of experience and help clients every day to get the best options from their lending partners. LATERALPARTNERS.CO.NZ
ADVERTORIAL
So Chic Borrow from the spirit of the French for an event at the elegant Sofitel Viaduct Harbour Hotel. Experience the very best of modern luxury at Sofitel Auckland for a chic encounter combining the spirit of its Viaduct Harbour location with the French Art de Vivre. Sofitel offers tailor-made services that are stylish and cosmopolitan. Sofitel Auckland Viaduct Harbour is committed to delivering hospitality excellence and heartfelt service. If you’re looking for meeting spaces, Sofitel Auckland is the preferred venue for Auckland’s most polished events.
With four boutique meeting spaces, creative and flexible catering menus, and state-of-the art technology, Sofitel delivers tailored and refined meeting experiences. Host your next business lunch at La Maree by Marc De Passorio. a refined dining experience showcasing the best local seafood. Or for something more casual, you can’t go past the French Press Café for pastries, coffee, and signature crêpes. Or try Sabrage Champagne Bar for an authentic, traditional Champagne experience. Business travellers should try Club Millésime’s VIP services. Club Millésime offers a realm of privileges, from an executive breakfast to tasty afternoon treat, all in a sophisticated and modern lounge, for those staying in a luxury marina view room or an opulent suite.
YO U R I N V E S T I N G
84 JUNO |
AUTUMN 2021
PROPERTY
Get the Best from Your Agent Get the right professional to sell your house or help you buy one, says Bindi Norwell of REINZ. A good agent could save you thousands.
Buying or selling a property can be one of the most expensive and stressful decisions you’ll ever make in your life. That’s why you should work with the right partners to make the process as seamless as possible. Here’s how to get the best from an agent when you’re buying or selling a property. Why not to sell privately Homeowners who use a real-estate agent to sell their home can expect to get on average 15 per cent more money for the property than they would by selling it privately, recent analysis conducted by REINZ showed.
But, for example, if you’re a busy family where both parents work fulltime, then it might be better to use the skills and expertise of an agent. Keep in mind that there have been many regulations and legislative changes in the property market over the past few years. Agents have been trained to help you understand what’s required and keep you informed of your rights and obligations. Talk to several agents When you’re buying a house, the best way to find the ideal property is to talk to a number of local real-estate agents about what’s happening in the property market.
This is the highest difference between the two methods of selling that we’ve seen in 18 years. We’ve seen the difference slowly increasing over the past few years.
They’ll be able to fill you in on what’s around in your price range and what might be coming on sale over the coming weeks or months.
Back in 2015, you would have been 8 per cent better off using an agent. In 2016, the gap grew to 11 per cent, 12 per cent in 2017, dropped to 5 per cent in 2018, 6 per cent in 2019 and has now leapt to 15 per cent in 2020.
They’ll often they have properties on their books that haven’t yet been advertised online or in print.
The figures show the true value an agent can bring to the process of selling your property.
Referrals count If you’re selling, ask your family, friends, and neighbours which licensed real-estate agent they’ve used in the past couple of years to sell a house for them, and whether they’d recommend them.
That’s not to say you can’t sell privately – it can work perfectly if you have the time, inclination, expertise, and patience to do it.
It’s important to get on with your agent because there could be difficult conversations down the track around selling.
Appearances are everything The agent will advise you on the best way to present your property for sale. They may suggest any maintenance the house needs and whether the gardens need a tidy-up. The agent may recommend decluttering or staging the property as a way of getting the best price. Look for an agent who can show they know your local area and community, ideally with a network of potential buyers. They can make sure your property is best positioned for people looking in your area and is marketed the right way for potential buyers. Don’t choose on commission It’s worth understanding what an agent’s commission fee is. Fees vary by agency and, in a competitive environment, agents can adjust their fee to be more competitive, but our advice is that choosing an agent on commission alone could lead to you getting a lower price for the property and losing out on a lot of money. Last, but not least, it’s important to work with someone you trust. Bindi Norwell is Chief Executive at the Real Estate Institute of New Zealand (REINZ).
AUTUMN 2021
|
JUNO 85
YO U R I N V E S T I N G
Hot Property It’s been a summer of breaking records in real-estate, says Bindi Norwell, CEO of the REINZ. She says something has to change.
For four months in a row, New Zealand has seen house prices reach new records, with December 2020 seeing a new national median house price of NZ$749,000. As well, 11 regions and 27 districts saw record high median prices. This is a continuation of what we’ve seen in the housing market for the last few months. These price rises highlight how strong the residential housing market is across the country. I believe we urgently need a combined response from Government and industry to solve the housing affordability issues we’re facing. Currently, we have half the inventory levels we had back in December 2018 – there are simply not enough houses on sale to satisfy demand. This has reduced choice for potential purchasers and has put huge pressure on house prices in most parts of the country. With record low interest rates around, people are willing to compete to secure a property.
This lack of choice is also leading to properties being sold at the fastest pace we’ve seen in 17 years. Across the country, 14 out of 16 regions had a median number of days to sell of less than 30 days –only Northland and the West Coast were exceptions. The median number of days to sell a house nationally is just 27 days, showing how people are moving quickly to secure ‘good’ properties. December 2020 saw 8,935 properties sold, which is 2,392 more houses than in December 2019. That’s an additional 77 properties sold every single day in December. Similar to what we’ve seen in the past few months, with market confidence high and ‘fear of missing out’ (FOMO) in full swing, buyers are likely to be keen to purchase ahead of further expected price rises and the re-introduction of loan-to-value ratios for lending. That means I would expect that the housing market will be busy for the next few months. However, if we don’t see more houses coming on sale, we may start to see this have an impact on sales volumes going forward.
www.reinz.co.nz
PROPERTY
Median House Price Changes
Northland
25.2%
Year–On–Year December 2020
Bay Of Plenty
13.4%
Auckland
17.4%
Gisborne
Waikato
43.9%
17.4%
Taranaki
19.6%
Mananawatu/Wanganui
Hawke’s Bay
31.3%
27.3%
Tasman
11.5%
Wellington
18.6% Nelson
12.7%
Marlborough
18.8%
West Coast
31.9%
Canterbury
16.5% Southland
13.6%
Otago
16.7%
National Median Price
Up 19.3%
www.reinz.co.nz
AUTUMN 2021
|
JUNO 87
YO U R I N V E S T I N G
Jumping the Ditch for Higher Returns Investing in Australian property gives Kiwis a way to diversify their property investments, says Silverfin. Silverfin’s new Adelaide syndication scheme is likely to be just as popular as its earlier Australian investment opportunity, says Silverfin’s CEO Miles Brown. A $10 million Brisbane property that was syndicated in November 2017 has been consistently delivering returns of 8.65 per cent per annum (pre-tax), as forecast in the memorandum of information, says Brown. Now the company is taking advantage of a market that’s again offering better value for money with the syndication of a property at 13 Webb Street, Adelaide. “The New Zealand market is very competitive right now,” says Brown, “driven by low interest rates, so quality stock is rather scarce and priced accordingly, particularly in the Golden Triangle of Auckland, Hamilton and Tauranga. “In Adelaide, where the property market operates in a similar way to New Zealand’s, we find we can buy better for cheaper.” The scheme is projected to provide a pre-tax cash return of 8.0 per cent per annum, paid as a monthly distribution to investors. The property is made up of an industrial warehouse building and an office building on a large, 4.4-hectare site that offers opportunities for future expansion.
It’s fully leased to Infrabuild Trading Pty Limited, Australia’s largest integrated manufacturer and supplier of steel long products and solutions, with over nine years left on their lease. How syndication works Syndication is a tried-and-true model for property investment that’s been used for over 30 years, says Brown. Silverfin gets a property it likes under contract, raises equity, and splits the ownership of the property up into parcels, in this case, 206 investment parcels of AU$50,000 each. Everybody who buys a unit in that property owns their percentage of it. Says Brown: “Investors get to become a landlord at an accessible price point, with no property management hassles.” Many people who choose syndication want to invest in commercial property
www.silverfinsyndications.nz
but find the cost of buying a building too overwhelming. With Silverfin’s proportional investments, Kiwis can become commercial property landlords without the hefty price-tag, or the work involved with managing tenants, says Brown. “We enable people to invest as though they were an institutional investor or a high-net-worth individual, by purchasing portions in quality commercial real estate.” The company was set up by the late Cheryl Macaulay in 2016 and it’s staying true to her legacy of buying quality, highyielding commercial, industrial, and retail property. Silverfin’s goal is to syndicate about NZ$100 million worth of quality commercial property every year and its portfolio is currently sitting at NZ$466
ADVERTORIAL
million under management, spread over 19 separate syndication schemes. “We look at all sectors – industrial, office and retail.” The company targets a wide range of properties and sizes, the smallest being the AU$10 million property in Brisbane, and the largest being the Ingham’s portfolio in Waikato, which was acquired in 2019 for NZ$86 million. Secondary market One common concern investors have with syndication is how they can get their money out of a scheme prior to it being wound up through the sale of the property, says Brown. Syndicates are less liquid than shares, for example, but Silverfin has partnered with Syndex, which has developed a secondary trading platform for investors
to buy and sell units in syndicates. “Property syndication works best as a medium to long-term investing strategy,” says Brown, “but if they need to, investors can sell their units on the Syndex platform.” Silverfin doesn’t have a large volume of secondary sales at the current time. However, in the last year 27 units were traded via the secondary market on Syndex, with a total value of NZ$1.38 million, selling in an average time of seven days. This demonstrates that liquidity in this secondary market is available and growing. There are risks in syndication, as there are for most investments, but Silverfin works hard to minimise them, says Brown. One risk is rising interest rates. Silverfin
typically borrows up to half the cost of each transaction. This could reduce an investor’s returns over time if rental growth does not keep pace with interest rates. Another is tenant risk. “But to minimise that risk, we seek long-term leases with robust tenants.” Other issues that can be managed are repairs, insurance and leverage – being the need to extend loans from time to time. “What we’re all about is finding quality property investments for our investors which will offer between a 6.0 per cent and 8.0 per cent pre-tax distribution return per annum.” Silverfin is run by a passionate, tight-knit team that puts investors’ interests first, says Brown. “The door is always open for coffees and a chat.”
It’s a Kiwi Success Story You don’t have to be an orchardist to invest in the kiwifruit industry. Southern Cross Horticulture offers Kiwis a piece of the action. The SunGold kiwifruit variety has become New Zealand’s main driver of horticulture industry growth. It’s propelled Zespri, the biggest horticultural exporter in New Zealand, into a global leader, with revenues surpassing $3 billion in 2021 and a target of $4.5 billion by 2025. This is a story of growth on a global scale. Many Kiwis want to be able to invest in this thriving success story – and now they can. Family-owned business Southern Cross Horticulture has been in the kiwifruit industry for more than 40 years. In 2019, it formed Southern Cross Investment Partners (SCIP) to seek coinvestors who are looking for long-term exposure in the kiwifruit industry through a series of orchard developments and downstream investments in the sector. SCH specialises in offering highperforming turn-key orchard developments for their own investment partnerships and third-party customers within the industry. The internal rate of 90 JUNO |
AUTUMN 2021
return (IRR) is in double digits. Its business model is designed to create the world’s best kiwifruit orchards, says chief executive Andrew Dunstan. The world’s best “We’ve been blessed over time to be able to create a vertically integrated chain across every aspect, from land purchase through to design, subdivision, site preparation, water exploration, nurseries, orchard construction, and leading vine management.” This end-to-end solution means it can tightly control every aspect of the development and operation of worldclass kiwifruit orchards. This is reflected in orchards that consistently: • Come into production more quickly. • Produce yields well above industry averages. • Are built to stand the test of time. • Produce superior returns on investment. Dunstan says: “Our track record and the capable people within the business put it in a strong position to take part in the
continued growth of kiwifruit production in New Zealand. “We have the ability to construct, plant, and establish up to 100 hectares of new orchards each year. “We’re keen to keep growing our family exposure to the kiwifruit story, and it makes sense to do this alongside professional co-investors who share our values and identify with our mission and purpose.” A wider mission Dunstan says the business has a wider mission. “The values we strive to live by are embodied by excellence, integrity, teamwork, relationships, and attitude. “Our mission is to create the world’s best kiwifruit orchards – and by fulfilling this we serve our purpose of enhancing our team, our customers, our shareholders, and our community.” “SCIP helps us to scale the development of world-class orchards to meet projected demand for kiwifruit and provides an opportunity for like-minded
ADVERTORIAL
investors to partner with SCH on this journey. The Dunstan family behind SCH is the cornerstone investor in each project Southern Cross Investment Partners takes on. World-class orchards aside, he says, “a big part of why people invest with us is that we pride ourselves on spending other people’s money wisely – the same as if it is our own. “This doesn’t mean we’re perfect – we aren’t, but it does mean we operate with integrity and take pride in what we do and those we do it for.” Investment opportunity Southern Cross Horticulture has two new orchard projects available in the Bay of Plenty and are looking for investors now. Land development will be starting shortly. Investment criteria: • You should identify with SCH’s values. • Have the ability to understand horticulture and farming risks. • Minimum investment $250,000. • You need to qualify as an ‘eligible investor’ under the Financial Markets Conduct Act. For more information, go to www.schort.co.nz. AUTUMN 2021
|
JUNO 91
YO U R I N V E S T I N G
The Great Baby Boomer Exit: Fact or Fiction? Will the economy be rocked by the exit of thousands of baby boomers selling their businesses as they near retirement? The figures and what we fear might be misleading, writes Brenda Ward.
In New Zealand we have around 400,000 registered companies, many of them started by or owned by Kiwis from the baby boomer generation. As baby boomers start to retire in ever greater numbers, there’s been a concern that these asset-rich Kiwis would all decide to sell up at the same time, in fact, over the next 10 years. Economists and banks worried that we would face a ‘tidal wave’ of sales as older owners cash up to start enjoying life post-work. But ABC Business Sales’ Steve Smith, himself a baby boomer business owner, disagrees, both with the numbers and how that generation is likely to behave. “In fact, we haven’t really seen that trend, and I don’t believe that we will,” he says. “I think lot of the ownership statistics are probably overstated about how many people are in that age group and the number of companies that are registered to them.” His comments come after a survey of ASB customers suggested as many as one in four business owners were considering retiring and transitioning out over the next five years. Smith says it’s not as drastic as people think. 92 JUNO |
AUTUMN 2021
“The actual number of registered companies with more than six employees and less than 100 employees [small to medium enterprises] is 55,077. That’s because 388,323 registered companies have no employees. “Yes, 55,077 is still a material number, and our internal research suggests about a quarter of these SME business are owned by boomers, and that translates to only 13,770 businesses needing to be transitioned over the next 10 years, at the rate of 1,370 a year.” Smith calls 1,370 business transitions a year ‘very manageable’. “It’s not something I would call a structural shift, or an issue for the New Zealand economy.” He says there’s also another factor at play. Baby boomers are behaving differently to previous generations as they approached retirement. They might never walk away from their businesses. “For baby boomers, it’s not all about the money. In most cases, it’s about support for their family and their lifestyle. “It doesn’t matter whether it’s a small business or a large business,” he says, “they’re
BUSINESS
YO U R I N V E S T I N G
not necessarily doing it just for financial gain. They’re more passionate about it.” He says he doesn’t see that same drive in many of the next generation taking up the business reins. “When you look at the new generation, I don’t think they’ll have that longevity in business ownership and they probably have different philosophies on how they operate. “Generally baby boomers started their businesses, or they may have had a succession from their parents. “It’s really part of their lives and a lot of them don’t on-sell unless something happens in their life that prompts them to make a change. “If you go to the next generations, it’s not the passion that’s driving them, it’s an opportunity for monetary reward. “With new generations it’s not necessarily their life. It’s a journey they take for a finite period for different motivations.” He says he’s increasingly seeing older business owners never intending to retire, perhaps just cutting down to a few days a week, or keeping an active interest in the running of the business. Others are passing companies to family members. So, what does prompt a baby boomer to sell? “It might be their health, a family member’s or a business associate’s, or they might have a sudden scare in their lifestyle and think, maybe it’s time to do something else. “But I find it’s likely that something has forced their hand into retirement.” If they do sell, they’re often are looking for different things than the best money from the sale, he says. “In most cases, they want to know that it’s passed on to safe hands. They’re very particular about who’s going to take their little baby over – and what they’re going to do with it,” says Smith. “They’re very conscious about whether this person is the right fit. And, in some cases, they’ll take a lesser price to make sure the right person takes it over. “The key thing is, it’s been part of their life and part of their family.” Smith is also a baby boomer who started his own business sales agency nearly 35 years ago when he saw a gap in the market that wasn’t being well serviced. “It started me down a road – and the 94 JUNO |
AUTUMN 2021
journey still continues. I never would have believed that I’d still be doing it nearly 35 years later.” Would he sell his business? No, he says. “What would I do with myself? I think you get to a work/life balance at some stage, that’s the ultimate. You have one foot in the door and one foot out the door.” Instead, he’s planning a managed transition, because he’s seen a lot of business owners who lose interest in life when they retire. “When they exit their livelihood, their life expectancy changes because they’re not driven any more, so there’s this big void and they don’t really know what to do with themselves.” So, what’s the best way for an ageing business owner to depart? “I think they should look at a transition period, a sort of a structured buyout, so the new owner gets to work in the business with them, so they transition it into safe hands over a period of time, rather
than just exiting. It’s about handing over the reins.” So, if there’s not a tidal wave of sales, what does that mean for buyers and sellers? Smith says: “If you’re a buyer and you find a business that meets your criteria, just go for it and don’t wait around for the perfect business, because there’s not a plethora of businesses coming to market in the next 10 years, as you might have been told.” For sellers, the key requirements for maximising value haven’t changed, he says. “Be prepared and use a professional to sell your business to give yourself the highest chance of getting the best result.” Smith says at ABC Business Sales they’re seeing quality businesses being snapped up very quickly. “It’s a no-brainer. Economic fundamentals like the low interest rates are making the returns a business can offer look really attractive compared to property.” Steve Smith is the owner of ABC Business Sales, www.abcbusiness.co.nz.
ADVERTORIAL
Top Tips for Home Buyers Years of planning and saving go into buying a new home, and it might be the greatest asset you’ll ever own – so it goes without saying you’ll want to protect it, says Richard Godman. Many home buyers leave organising insurance until last in their buying process, but depending on the age, type, location, and condition of the property you’re buying, it can take longer than you think. The best time to start thinking about insurance is as soon as you find a house you’re interested in – here are our tips for things to think about. 1. Find out about the property’s insurance history. When you find a property that you’re interested in buying, find out everything you can about things that might affect insuring it.
agreement, along with any other conditions, like finance or building reports. That way you won’t get stuck purchasing a dud that you can’t get cover for. 3. Organise your insurance early. Shop around to first make sure that you can get cover and second, that you’ll be able to afford both your mortgage and the insurance premiums. If your insurance needs are complex, you might want to get advice from an insurance broker or adviser to find out what you need to know to get the best cover for you.
The property’s size, age, condition, location, and the materials it’s made from are all things that might affect the availability and the cost of insurance.
Banks will usually make house insurance a condition of your home loan, so if you’re taking out a mortgage, you’ll need to get your insurance sorted before you can settle.
It’s also a good idea to find out from the vendor which company the house is currently insured with, whether the insurer has imposed any special terms, how much the premiums are, and any claims history, especially if it’s suffered major damage in the past.
It’s important that your insurance comes into effect from the day the property becomes yours (settlement day), even if you aren’t planning to move in straight away. This way you won’t be stuck footing the bill for something that happens before you’ve moved in.
2. Research your insurance options.
4. Get your sum insured right.
If you’ve found a property that you’d like to make an offer for, start thinking early about the type of insurance that suits your needs. Start by checking that you can even get insurance on the property you’re looking at. You might want to add an insurance condition to your sale and purchase
www.vero.co.nz
Most house insurance in New Zealand is sold on a ‘sum insured’ basis - meaning the most you’d get paid out if your home is damaged is the amount you’ve specified on your policy. It’s important to get your sum insured right, because if it’s too high you’ll be paying for insurance you don’t need, and if it’s too low your insurance might
not cover the cost of rebuilding your home if it’s destroyed. The sum insured should reflect what it would cost to fully rebuild your home. Include the cost of additional structures on the property like the deck and driveway, along with additional costs like demolition and debris removal, legal and professional fees. There are several ways to calculate your sum insured including using a tool like the Cordell Calculator, which will give you a rough idea of how much your house might cost to rebuild. Or you could get a registered valuer or quantity surveyor to give you a rebuild estimate and use that to set your sum insured. This is especially helpful if your home has special features or is an architecturally designed one-off. Cut out the hassles Buying or moving into a new home can be an exciting milestone. With a bit of planning, you can make sure the process runs smoothly, so you’re not caught out by a last-minute hassle to get insurance cover before can get the keys. You’ll have the confidence of knowing that you’ve taken steps to help avoid life’s little disasters that could leave you out of pocket. If you’d like to check your insurance or talk to someone about home insurance, you can find a broker near you on the Vero site, www.vero.co.nz. Richard Godman is the Manager, Technical Underwriting, Consumer Insurance for Vero.
YO U R I N V E S T I N G
A Cool Club of Traders
Business Vision Kiwi companies are coming up with some innovative solutions. Brenda Ward showcases some that are working smarter to bring you business that inspires.
Have you always wanted to work in a busy international trading room? Now you can. Omega Exchange, a new shared workspace, gives traders access to world markets, institutional-level information flow, idea generation and the synergies that come from working with a group of like-minded traders, for a fixed monthly fee. Founder Sheldon Slabbert says the new trading room offers a collaborative environment that enhances a trader’s experience and results. “It’s like being in an international trading room, a hybrid between a hedge fund and prop trading room, where members trade for their own account. “The bottom line is that trading can be isolating. Online, it’s often the blind leading the blind in chatrooms, but being part of a group helps overcome that, and helps a trader’s decision-making, which flows on to better results.” The trading room is in the Auckland suburb of Newmarket. Members will have 24-hour access with flexible membership options. It’ll be staffed on trading days from 7am till 11pm. Just like at the big brokers, there’ll be a daily briefing, ‘Around the World’, to assess how trades perform and review global markets.
Buy jeans now, pay later Laybuy is a Kiwi company that started around the kitchen table in Auckland with a family talking about a pair of jeans. Now the ‘buy now, pay later’ company has a million accounts around the world, after just three years – and it’s listed on the Australian Stock Exchange (ASX). It all started with his youngest son, Alex, says Gary Rohloff, Laybuy’s co-founder and managing director. He and wife Robyn were chatting with Alex and his brother James, he says. “Alex wanted to know why he couldn’t buy a pair of jeans, wear them out that night and pay them off from his future pay cheques. “That got us talking about the oldfashioned lay-by model, where you used to be able to put aside an item in a shop and pay it off weekly before taking it home. Traditional lay-by model “I mentioned I had an idea about setting up a technology-based system when I was leading Ezibuy in the early 2000s.
raided their savings, and mortgaged everything they had to develop the technology and pay merchants on behalf of the first customers. Laybuy brings the traditional layby model into the 21st century, says Rohloff. “Consumers can shop now, receive their purchase straight away, and pay it off over six weekly interest-free payments.” International growth It launched here in May 2017 and quickly reached 100,000 customers. Now it’s in Australia and the UK, and there are a million accounts worldwide. In September last year, it listed on the ASX, raising $80 million in its initial public offering. In mid-December, its share price was trading at $1.29. “With the benefit of hindsight, starting Laybuy seemed like a simple decision,” says Rohloff. “It wasn’t. It involved huge risk. There was no Plan B. We had no option but to succeed.”
“Alex’s answer was stop talking about it and get on with it.”
He says part of Laybuy’s success is that it makes life easier for people by helping them manage their weekly budgets, and helps retailers offer payment solutions.
Gary and his wife Robyn quit their jobs,
www.laybuy.co.nz
96 JUNO |
AUTUMN 2021
Slabbert’s been a trader for more than 20 years in South Africa and London, in managed funds and foreign exchange companies, and here at XE.com and CMC Markets. Seeing that traders working from home were disadvantaged, he decided to set up the professional-style trading room. “We are on the buyside ourselves and our interests are fully aligned with our members. The room’s intended for experienced traders, with a collaborative culture where members can learn from the experts and swap war stories over drinks on Friday afternoons. www.omegaexchange.co.nz
Looking for a rewarding lifestyle? We’ll take you there.
We’ve been connecting people to business opportunities for 35 years. ABC Business Sales brokers have unparalleled knowledge across a wide range of business categories and understand the dynamics that make a business successful. This enables us to uncover potential, recognise true value and give you the best advice possible. What inspires you? Turn it into your new career.
When professional Kiwi ex-pat couple Cliff and Sarah returned to New Zealand, investing in a business was a no-brainer for them. Having been away for 12 years in Singapore, moving back home was a lifestyle choice. That’s why transferring their skills from a corporate background to owning and operating Growing Spectrum, a large-scale plant nursery in the Waikato, ticked all their boxes. Now they and the business are both blooming.
If you’re thinking of buying or selling a business, call one of our business brokers for a chat in confidence now on 0800 180 122
LIC REAA 2008
Get your FREE guide to buying or selling a business now at www.abcbusiness.co.nz
YO U R I N V E S T I N G
UNFILTERED Game-changer series with Jake Millar Five Minutes with Jordan Belfort The Wolf of Wall Street
Stockbroker Jordan Belfort is known all around the world as the Wolf of Wall Street. He was portrayed by Leonardo DiCaprio in the movie of that name, directed by Martin Scorsese in 2013. He’s famous for having made over US$50 million a year while heading his brokerage firm Stratton Oakmont, where he raised over US$1.5 billion, employed more than a thousand stockbrokers, and started more than 30 million-dollar companies, from scratch. Now Belfort is an author, business coach and motivational speaker. Here he talks to Jake Millar about his famous story, including the greatest lessons he learned from his years in the world of investing. 98 JUNO |
AUTUMN 2021
PERSONAL FINANCE
What emotions come to you when you hear the stories from the ‘old days’? It seems surreal, like it never really happened, but you know, the things that make sense to you when you’re 25 years old don’t really make as much sense when you’re 55 years old. I look back now as a sober person, hopefully wiser in my decisions. I’m very careful now about each decision I make and understand that decisions have consequences, and that you better really think things through and make sure that your ‘why’ is pure. Are you doing things for the right reason? What’s your ethics behind it? My life and everything I did brought me to this point where I am now, which has given me a platform to really give a message that empowers people in what to do and what not to do. Do you ever party as hard as you used to? No way, never. I got sober in 1997 and I never looked back, it’s just not what I do. Was the 10-year-old Jordan Belfort incredibly driven? When I was in my teens, I’m like, “So, wait a second, the guy with the Ferrari on TV’s got all the hot girls and the businessmen and the people in Dallas and Dynasty have all the girls.” I’m like: “I want that life.” Your business selling meat and fish door-to-door, earning US$500 a week, went under when you were 24. What did you learn? I guess the biggest lesson I learned is not to go into business without knowing how to be in business. I was naturally a great salesman, but I wasn’t born knowing how to start a business, how to grow a business, how to take risks the right way. That’s a skill set you have to learn. About a year later when I kind of got my mojo back, I had a chance to go into the brokerage industry. I was able to apply a different meaning to the experience, which was: “I learned a lot from that, and I’ll make sure that I surround myself with the right people this time and I don’t make those mistakes that I made.” And all the mistakes I made the first time I didn’t make the second time. I picked a much better business model and the rest, as they say, is history. Is there something you would’ve done differently? The first mistake I made was instant gratification – my desire to make money quickly, and I cut a few corners and then once you do that, it becomes a self-fulfilling prophecy because, number one, your own line of morality moves. So, things that you once thought were not OK suddenly seem
OK and every human being is like that, they become desensitised to things. What’s your advice to people now? It’s hard to remain morally correct, when you’re surrounding yourself with people who are doing things that are not morally correct, because we start to define our own universe by what we surround ourselves with. The mistake that people make, when they’re young especially, is they walk into a situation and, because it’s operating, they assume, well, it must be legal. They don’t understand that if something’s going on and it’s making money, they can be breaking a thousand laws. I didn’t even know what penny stocks were, so how would a kid, 24, smart as I was, how’d I possibly know that something is illegal? But then you figure it out pretty quickly, but before then you then get the taste of the money and then greed starts and that’s when again, some people will run, but many people, they get baited. You can’t take the first step and as they say with ethics, you can’t be half-pregnant. It’s either you’re ethical or not. Now you’re working all over the world, inspiring people, educating people… It feels totally different. When you know there’s something wrong, you almost feel like a compulsion to spend the money. It’s like, “I’ve got to get rid of it.” It’s this compulsion to spend money that you don’t really think you earned, versus money that you work hard for and you value. You spent 22 months in prison. I think I changed tremendously. I began the process of writing my book... I re-examined every step of my life, and I got to really see my own strengths, and my own weaknesses and what I did right, what I did wrong. It allowed me to become a much more profound teacher when it came to inspiring people about taking control of their lives. You had 1000 stockbrokers who would’ve done anything for you. What did you learn about leadership? The overarching principle behind leadership is that people are not going to follow you for a goal; people follow vision. There are two aspects to being a visionary. One is having a vision inside your own head, and the second is the ability to sell that vision to other people. The huge mistake I made is I didn’t ground the idea in ethics and integrity. Anything that’s not grounded in ethics and integrity will always fail. You’ve said there’s a very thin line between ambition and greed. Where is that line? Ambition is the driving force behind
progress, while greed is about, “I want to make as much as I can, as quick as I can. I don’t care who gets hurt along the way.” So, they’re very different things. The line where you cross over from one to the other is when ethics leaves the equation. What inspires people? Every person has their own ‘why’. The most powerful ‘why’ I’ve ever had in my life, was when I was in jail and I had lost everything and my biggest, crushing blow was my two young children. I imagined the faces of my kids and said, “I will do anything to make this right for them.” You’ll always do more for someone you love unconditionally, or a cause that you believe in. Identify your ‘why’ and integrate that into your vision and then you have power. If your sole ambition today were to make $1 billion ethically, how would you do that? Wall Street is probably still the best way to make it. The most viable pathways to getting rich are real estate and the stock market. What’s the biggest difference on Wall Street today versus in your day? Well, there was no Internet, there was no access to information. So, more information. And it’s more ethical, I hope. In the wake of the global financial crisis (GFC), things got much worse – and they were bad when I was there. I think that the ethics have improved. A lot of people say there’s another GFC coming… There’s a difference between a GFC and a stock market crash. I’m sure there’s a stock market crash coming because there’s always going to be. There’s going to be bubbles and busts, because that’s human psychology, and it’s the nature of markets. But the GFC was a fundamental breakdown of the banking system where there was fraud that was endemic on every level. I think what will much more likely happen is there’ll be some sort of world event that causes a shock to the system. That causes things to start to unwind on Wall Street and you have a massive devaluation of assets. What is your billion-dollar advice for the world of business, entrepreneurship, and making things happen? You need to aim so much bigger than everyone else around you, that even if you’re only one-quarter right, you’re still going to be awesomely great in life. You can’t think small. There’s no nobility in thinking small. You’ve got to play big, and think big, and don’t be scared to put a huge vision out there and be wrong.
* Full interview on www.unfiltered.tv AUTUMN 2021
|
JUNO 99
YO U R I N V E S T I N G
Fall Harvest.
1
2
Play with warm and cooler textures and colours for the autumn months.
3
8 4
6
7
5
1 Phoebe bucket bag in orange – www.shopyumeibrand.com, 2 Whatever Floats dress – www.trelisecooperonline.com, 3 Pearl drop hoops – nz.kirstinash.com, 4 Atelier Des Ors Iris Fauve fragrance – www.worldbrand.co.nz, 5 Max Tall Unit – www.Bauhaus.co.nz, 6 Milk Bottle Crate Sculpture by Simon Lewis-Wards – www.thepoiroom.co.nz, 7 Bubble & Squeak No. 3 artwork by Tony Harrington – www.thepoiroom.co.nz. 100 JUNO |
AUTUMN 2021
9 10
Colour your walls to match your gear.
Resene Bluetooth 11
Resene She’ll Be Right
Resene Buttercup
12
Resene Adrenalin
13
Visit your local Resene ColorShop for more colour ideas and inspiration.
8 Lightsome floor lamp – www.goodform.com, 9 Tosta leaning shelf – www. bauhaus.co.nz, 10 Shades of Blue by Natasha Wong – www.endemicworld.com, 11 Luster graphic vase – www.amara.com, 12 Sanseviera snake plant – www.kings.co.nz, 13 Warm Nordic Leanback Armchair in Rusty Red – www.goodform.co.nz.
www.resene.co.nz
YO U R I N V E S T I N G
Coastal Playground Spectacular sandstone coves, golden sand beaches, charming villages, and inexpensive food and wines. What’s not to like about Portugal’s Algarve coast, asks Brenda Ward.
When the catamaran slowly glided along the channel back into the port of Lagos, everyone on the street stopped to watch – locals, tourists, kids, street market stallholders, even the barmen in the cocktail lounges. Abba was playing at full volume, everyone was dancing, and our farewell to the Algarve coast had turned into a spontaneous Portuguese party. To anyone looking on, we looked like a group of millionaires, in bikinis and beach wraps, drinking cocktails on the decks of the luxury cruiser. But in fact, we were just ordinary people enjoying the incredible value of what a New Zealand dollar can buy you in this inexpensive holiday destination. Just NZ$50 had bought us a half-day cruise with lunch. Earlier, the launch had set off in the brilliant sunshine we’d come to expect over our stay, as we moved slowly along the coast, peeking into coves hidden from the road. Ponta da Piedade, translated as ‘point of mercy’, is a striking headland near Lagos where grottoes and towering cliffs make a fantasy world of shallow aqua water and golden sand beaches. Intriguing rock formations look like bridges, castles, or animals. Unable because of our size to enter many of the coves, we watched smaller boats and kayaks slip in
102 JUNO |
AUTUMN 2021
AMA ZING PL ACES
Opposite page: The catamaran Discovery cruises past coves and beaches. Left: Lagos's old town has a mix of charming houses, restaurants, tourist shops and churches. Above: Some of the coves can only be reached by boat. Lower left: A vibrant city square.
As we dropped anchor by the charming village of Praia da Luz, we could swim, and the toys were unloaded. The highlight was a raft linked to the boat by a narrow inflatable walkway, where we were challenged to cross without slipping into the water. Some headed out near the boat on stand-up paddleboards. The barbecue was set up and lunch was a buffet of fresh salads, seafood, and meats. On the return journey, we basked in the setting sun, as the music started, and people swayed to the beat.
and out of the narrow entrances as they navigated the rocks. But later, when they were baked by the sun or exhausted from paddling, we were able to enjoy the luxury of choice. Should we stretch out in the sun on the trampolinestyle nets, or cool down in the breeze under the canopy? Or sip a glass of sangria or an excellent Mojito in the cabin? The rakish captain looked like a younger version of the pirate Blackbeard, but he created an onboard atmosphere of education, entertainment, and enjoyment.
By the time we left the boat at Lagos port, we’d met friends, exchanged numbers, and found the crew our new best friends. Tingling from the sun and still buzzing with excitement, we returned to our resort to change and headed out to the old town for a celebration dinner. The Mateus Rose tasted magical as a guitarist played folk songs and we ate crusty bread and delicious fresh food served by waiters in crisp uniforms and aprons. The old walls of the fortified city released the warmth of the day as we wandered back past the shops, in floaty summer dresses or shorts. We felt that we’d lived like millionaires in Portugal for small change.
AUTUMN 2021
|
JUNO 103
YO U R I N V E S T I N G
1. 2.
Investment Style ‘Price per wear’ is about getting the best value from your wardrobe. Quality garments can be worn season after season, making buying autumn classics a cost-effective choice. 3.
4.
6.
5.
1. Patterson Creek vest www.rmwilliams.com.au/nz 2. Equality shirt www.hejhej.co 7.
3. Comfort Craftsman boot www.rmwilliams.com.au/nz 4. Collins button-down shirt www.rmwilliams.com.au/nz 5. Suit, shirt and tie www.crane-brothers.com 6. Howe sweater www.rmwilliams.com.au/nz 7. Will Piper True Black sneakers www.allbirds.co.nz
104 JUNO |
AUTUMN 2021
LIFESTYLE
1. High Loose Levi's www.levis.co.nz
3.
2. Crush Tote Maxi in Toffee www.deadlyponies.com 3. Marla shirt www.rmwilliams.com.au/nz 4. Olivia knit cardi in Tan www.nz.camillaandmarc.com 5. Black and white brogue www.kathrynwilson.com 6. Kingscote boots www.rmwilliams.com.au/nz 7. Tarantino trench www.nz.camillaandmarc.com 8. Classic Tee in black & Carpenter jeans www.kowtow.co.nz. 9. Octo black bag www.deadlyponies.com
4. 2. 1. 5.
8.
9.
6.
7.
AUTUMN 2021
|
JUNO 105
REGULARS
Book Reviews Reviewed by Sarah Ell
Broke Millennial Takes on Investing: A Beginner’s Guide to Leveling Up Your Money
The Ultimate Retirement Guide for 50+: Winning Strategies to Make Your Money Last a Lifetime
Erin Lowry Tarcher, $35
Suze Orman Hay House, $50
Millennials undeservedly get a bad rap, blamed for squandering their money on smashed avocado and then complaining they can’t afford to buy a house. They might not be that bad, but many of them do need help. Author and blogger Erin Lowry’s on a mission to help more of her generation become financially savvy. She’s made a career out of writing about money in an accessible, entertaining way and this is her second book in the Broke Millennial series. The first, Broke Millennial: Stop Scraping By and Get Your Financial Life Together, was published in 2017 and was a real hit. Now she turns her focus on investing. The book is aimed at young adults who are no longer living payday to payday and are now looking longer term, at how to grow their wealth and even – perish the thought – plan for retirement. The book looks at the why and how of investing for those in their 20s, those in their first job or early in their career, perhaps with student debt. Its style will appeal to those who might be turned off by more serious financial books, using modern language without dumbing down the content.
At the other end of the spectrum, once you get to the age of 50, things are getting real. By this stage most people have at least considered how they’re going to fund their lifestyle in the years after they stop working. As American finance guru Orman points out, in today’s lowinterest environment, just having some money sitting safely in the bank is not going to fund a comfortable retirement. It certainly looks like Orman’s got her later-life act together. After being a popular TV show host and author for many years, in her mid-60s she decided to have a complete change of direction, moving to the Bahamas. There, she says, she discovered that “the ultimate retirement is one in which you discover who you truly are, and you love that person”. But having enough money to live off for the 30 or more years after you stop working certainly helps along the way. The book begins by discussing family, and how much, if at all, older adults should consider they need to provide for younger generations, which can be a sticking point for retirement planning.
There’s a useful glossary of common investing terms in the second chapter. Her definitions are audience-appropriate, for example, comparing asset classes to beer.
It also covers strategies for maximising earning and saving in your later working years, deciding whether to stay put or downsize, major decisions to make before 70, and how to generate income streams beyond retirement.
Lowry sets out to demystify investing as something only old or rich people do and examines issues particular to younger people: that compounding returns are on your side, whether to invest when you might still have a student loan to pay off, and how to use apps and robo-advisers.
There’s also a chapter on wills and other legal steps older adults need to consider. Once again, the book is focused on American investment and superannuation options and plans, but Orman’s take-home message is not about specific schemes but about attitude.
106 JUNO |
AUTUMN 2021
Fun With Money Find the money words hiding in Harold’s puzzle. Here’s what to do: Just find the 10 money words hiding inside our puzzle. They could be up, down, sideways, backwards, or on an angle. Good luck!
1. Account 2. Bank 3. Buying 4. Cash 5. Cents 6. Dollar 7. Invest 8. KiwiSaver 9. Savings 10. Spending
Can yo find al u 10 wo l rds?
YO U R I N V E S T I N G
Going Up, Going Down Economist Cameron Bagrie takes a good, hard look at New Zealand and how we’re going as a nation.
Economic tick The housing market has been one key part of the aggressive bounce-back for the economy and one way the Reserve Bank influences the economy via low interest rates. The rising market has boosted confidence, housing investment, and spending. It’s also creating jobs.
Up
The pressure is on
House prices flew up 2.4 per cent in December, 9 per cent in the three months ended December and are up an astonishing 17.3 per cent compared to last year.
Inflation remains low at 1.4 per cent, below the 2 per cent target. But, like the economic data, it is not as weak as expected. There are a lot of cost pressures percolating that need to be watched. Firms normally find it hard to pass on price increases but those cost pressures are rising rapidly.
A rocket under it
Down You can see how strong the market is by looking at the short number of days it takes to sell a property. It fell by four days from 31 to 27 compared to last December.
Skyrocketing house prices are increasingly under the spotlight through both an economic and a social lens. Surging prices are worsening housing unaffordability and inequality. Loan-to-value ratio restrictions (LVRs) have been tightened by banks ahead of the proposed March date, but more action is needed. The market’s too hot, economically. This is a risk to financial stability because borrowing is rising fast and the social lens is troubling. Kiwis see housing and the price of houses as the No.1 issue, according to the Ipsos Issues Monitor. It beats the economy. The pressure is on.
108 JUNO |
AUTUMN 2021
MARKET INSIGHTS
Savers are sad
We now expect the OCR to remain broadly unchanged at 0.25 per cent, which is more sensible than the flirtation with negative
interest rates. This doesn’t change the basic picture, though, of incredibly low interest rates, both for borrowers and savers. It’s worse for savers because banks are giving you interest of under 1 per cent.
Keeping an eye on… Jobseeker numbers have started to lift again after being flat in October and November. The number of workingage Kiwis living off a benefit is 12.5 per cent.
Houses vs people Building consents for new houses are still going up, reaching 38,624 in the year to November 2020. But do we still need so many houses? We needed to build lots of them when net migration was running at around 60,000, and our population was naturally growing at 30,000, a total of 90,000 a year, which is what we saw for years. But monthly figures show a big change in migration, which drives population growth and demand. Net migration between April and November 2020 was estimated at just 5,100, or an annual run-rate of 8,000 a year. That means the total population is likely to grow by under 40,000, well down on previous years.
Alphabet soup Will the economy’s graph look like a U, V, W, or K? The economy bounced back in the September 2020 quarter in the shape of a V. An 11 per cent fall in June was followed up by a 14 per cent quarterly rise in gross domestic product (GDP). BOING! The Reserve Bank of New Zealand’s forecasts suggest a ‘soft’ W, with a strong bounceback in GDP in the September quarter, followed by negative quarters over December 2020 and March 2021. This bumpiness partly might be us settling down after a postlockdown surge in spending. It also reflects all the international tourists missing over summer, when net tourist numbers used to add 150,000 to the New Zealand population. I think there are increasing signs we’ll be morphing into a U-shaped recovery after the initial V-shaped bounce. That’s because: • Supply chains are disrupted around the world, making it hard to get stock and materials. • There are long delays for orders on some goods. • Border control is holding back migration and growth in the labour force. • Firms are struggling to find the right skills here. Some sectors and firms are doing well (the top part of the K). Others are still struggling.
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. AUTUMN 2021
|
JUNO 109
Correct as at 28 January 2021.
A better-looking economy has pulled back the likelihood that the Official Cash Rate (OCR) could go negative.
Snapshot We take a look at some of the events around the world affecting the global economy. From the Americas, through Europe, and then Asia, find out the latest from around the globe this quarter.
Britain UK Steel said it was likely export quotas for some products would run out in the first quarter of this year. That means exports would face a 25 per cent tariff.
US Massive online retailer Amazon has announced that Jeff Bezos will step down as its chief executive. He’ll be replaced by Andy Jassy.
France The Covid-19 vaccine rollout was interrupted by a row with pharmaceutical company AstraZeneca over supplying doses in time.
Argentina Argentina has passed a one-off wealth tax on the superrich, to help pay for the country’s Covid-19 response.
110 JUNO |
AUTUMN 2021
MARKET INSIGHTS
Myanmar There were riots after a coup in Myanmar that saw leader Aung San Suu Kyi detained when the military seized control.
Ethopia Kids are starving in Ethopia’s Tigray region, which faces a humanitarian disaster. People are dying from hunger while conflict rages.
Adelaide The trade war between Australia and China escalated when Australia said it would challenge China’s tariff on its barley exports.
Correct at 4 February 2021.
Perth Bushfires raged while Perth went into lockdown after the discovery of cases of Covid-19 in the community.
AUTUMN 2021
|
JUNO 111
YO U R I N V E S T I N G
In a Crisis, Look for the Opportunities A year unlike any other, 2020 saw a number of exciting new themes and opportunities emerge in the financial markets. CMC Markets’ Chris Smith looks at the top three trends for investors.
The last 12 months will go down in the history books for many reasons, but none more so than the COVID-19 pandemic – and the immense impact it’s had on the way we live, work, play, and do business. For years to come, economists will study and debate the recession the pandemic created, and the impressive V-shaped equity market recovery – proving once again the stock market is always focused on businesses’ future earnings potential or forced to look for returns in the face of central bank actions. New trends always emerge from crises, and COVID-19 is no exception. We’ve seen advances in digital speed and transformation; the rise of mobile, remote workforces; a leap in streaming and gaming in a lockdown world, and a jolt to e-commerce across all manner of online businesses. Here are three hot investing themes to consider. The legalisation of online sports betting COVID-19 saw many professional sporting competitions and events cancelled or postponed. We saw the shortening of the US Major League Baseball (MLB) and National Basketball Association (NBA) seasons, and delays to major events such as March Madness, the Olympics, and European Football Championships.
112 JUNO |
AUTUMN 2021
MARKET INSIGHTS
AUTUMN 2021
|
JUNO 113
YO U R I N V E S T I N G
This disruption was a huge risk to the industry. Still, with the world crying out for entertainment during lockdown, as sports slowly resumed, consumers looked offshore to bet on games taking place around the world – leading to an explosion in sports betting and online gaming. The global sports betting market has benefited massively from advances in mobile and digital technology. A report from Zio Market Research, predicts sports betting will reach nearly USD$155 billion globally by 2024. Share market investors should consider: •
Leading names such as DraftKings, Penn National Gaming, Rush Street and FanDuel.
•
Traditional bricks and mortar casinos like MGM, Las Vegas Sands and Wynn Casino, which are also betting on future growth online as COVID-19 continues to have an impact on their businesses.
•
Other ways for keen investors to gain exposure is via the popular gaming ETF, BETZ that has a combination holding of the entire sector.
Leading fund manager and founder of ARK Invest, Cathie Wood, predicts massive growth in the e-sports, fantasy sports, and online sports betting industries, with up to 31 per cent compound growth a year. ARK analyst Nicholas Grous says: “Augmenting fantasy sports and e-sports, legalised online sports betting is giving companies – and the leagues themselves – an opportunity to offer exciting interactive experiences and generate new sources of revenues.” Sports betting is relatively common in New Zealand and Australia, but overseas markets are rather more complicated – particularly in the US, where each state manages its own rules. Sports teams across the NFL and NBA have campaigned to legalise sports betting, because of the huge revenue it could generate.
million threshold for the first time in October 2020, up 43 per cent from October 2019. The next year will present exciting opportunities for growth in the US online sports betting industry. Legislation will likely open new markets and we’re hearing chatter around potential regulation in New York, Texas and (hopefully) California in the next few years. Vaccine and Reopening We hope the year ahead will see a number of heavily impacted business sectors recovering, due to the planned widespread roll-out of the COVID-19 vaccine. Vaccine distribution continues to accelerate in major economies of US and UK, and the current trend of acceleration in daily doses is consistent with full immunisation of the over-65 population by the end of March, and herd immunity by the end of summer. Should the pharmaceutical industry manage to get COVID-19 under control during 2021, it will be an absolute triumph for the sector. Public companies involved in the effort are set to be handsomely rewarded, and there are a number of potential investment opportunities within the healthcare sector. Some obvious potential winners will be: •
Vaccine makers like Pfizer (PFE) or Moderna (MRNA), and Johnson & Johnson.
•
And companies developing therapeutic drugs like Regeneron (REGN) will benefit too, along with pharmacy networks such as CVS and Walmart.
Distributing the vaccine will require an enormous logistics effort, with firms such as Amazon, Fedex and UPS set to become critical to global rollouts. Savvy investors will be considering these sectors which play a critical role at various stages of the distribution effort: •
Airlines.
•
Storage facilities.
The US market is currently in its infancy. Analysts predict that the American sports betting industry could be worth anywhere between US$15 – US$40 billion in the next few years, as more states legalise sports betting.
•
Tracking technology companies. Data collection software firms such as Palantir, Microsoft, Apple and Google will all benefit by supporting the healthcare systems with tracking and logistics on a speed and scale never seen before.
New Jersey is currently the largest online sports betting market in the US. There, industry revenue for January to October grew 35 per cent year-on-year between 2019 and 2020, and broke the US$50
Consumer spending has already rebounded significantly from its pandemic lows, but if vaccine rollout speeds up and we start to achieve herd immunity, it could pay to look at these sectors:
114 JUNO |
AUTUMN 2021
•
Casinos.
•
Airlines.
•
Cruise liners.
•
Dining and entertainment companies. Many have incurred debt to survive, but also cost bases have been improved if pent-up demand emerges.
SPACs ‘SPAC’ is a new financial term you’ve likely heard mentioned on financial websites and media recently. It’s the new speculative craze taking the US markets by storm. SPAC stands for Special Purpose Acquisition Company and can be defined as a ‘blank check’ shell corporation designed to take companies public without going through the traditional IPO rigorous duediligence process. SPACs that have announced acquisition targets are up 125 per cent over the past 12 months as a group.
MARKET INSIGHTS
There are numerous steps to a SPAC transaction:
we saw USD$83 billion raised via hundreds of different listed SPAC companies.
The pre-target stage – where a group of experienced investors have raised capital but don’t know what business they will target for a merger agreement.
The opportunities are huge, and retail traders have completely embraced it with almost daily big moves in EV sector stocks to sports betting, financial technology (fintech) and software as a service (SaaS).
The merger agreement stage – where the investment firm has found a firm which agrees to merge and them to list on the share market in a mutually beneficial agreement, versus staying private or as a traditional initial public offering (IPO) process, usually known as listing on the stock exchange. The final stage is the ‘merger completed’ date – when the ticker symbol on the exchange changes and life as public company begins for the business, with the expert backing of the SPAC team usually joining the board. In 2013, just US$1 billion was raised via SPAC IPOs, but fast-forward to 2020 and
There’s plenty of negative press about the rise of SPAC investing, saying it’s speculative, but there are some incredibly successful investors involved with some SPACs, such as Chamath Palihapitiya, Bill Foley, and Bill Ackman. Retail investors have embraced these more than other investors. They’re betting on the investment managers’ skill at finding a solid business to merge with that has a big growth opportunity already in place. This process gives retail investors groundfloor access to IPOs that they otherwise wouldn’t have.
DraftKings (mentioned previously) listed via a SPAC investment company, with shares since growing more than 400 per cent. This built on their previous success as a private firm by giving them access to public markets to grow. There are more than 500 SPACs in process now and many exciting businesses being brought to the public markets – particularly within the fintech space. Certainly, I see it as a theme likely to stay through 2021 and beyond. Note that there are likely to be some bad outcomes, as there always are with IPOs. 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.
AUTUMN 2021
|
JUNO 115
YO U R I N V E S T I N G
116 JUNO |
AUTUMN 2021
MARKET INSIGHTS
The Pandemic Property Boom Last year, the world economy crashed, so why did property prices boom? Andrew Kenningham of Capital Economics in London looks at what’s happening and asks if it can last.
It’s not just New Zealand. There’s been a pandemic property boom around the world. In the UK, for example, house prices rose by 7 per cent over last year in December – and that’s despite the economy suffering its biggest contraction since 1709.
below 3 per cent today, and in the UK and New Zealand, mortgage rates have also dipped. House prices might be higher, but they’re also more affordable. Not all property is equal That said, not all property prices have risen.
The US saw a similar rise, and in Canada prices rose by 13 per cent year on year. So, the whopping 18.5 per cent year on year increase in property prices in New Zealand in November is just an extreme example of this global phenomenon.
House prices rose more in the suburbs than in inner-cities, as people itched to escape the madding – and infectious – crowd.
An unusual recession Few predicted a property boom when the pandemic hit last year, but it’s not difficult to explain, with the benefit of hindsight.
At the same time, deserted retail and office spaces have left many high streets feeling like ghost towns.
There are three key factors: 1. In many countries, people are spending more time working from home than ever before, as governments have clamped down on commuting and tourism. A spare bedroom, home office, and a garden have never been so desirable. 2. Household finances have held up better than many imagine. Governments have stepped in with income support and measures to limit unemployment. Many people have ‘pandemic savings’ because of the limited options for spending when hotels, restaurants, cinemas, and nightclubs shut, and tourism came to a halt. In Europe and New Zealand, the additional savings which have accumulated are worth around 3 per cent of gross domestic product (GDP) – a significant amount. 3. But the most important factor is the third one. The cost of borrowing to buy a house has never been so low. In the US, 30-year mortgage rates have fallen from 3.5 per cent in January 2020 to
Working from home has released people from the restraints of commuter lives.
In contrast, due to the boom in online shopping, warehouses are suddenly hot property. Will it last? Many people have suggested that the boom has now turned into a bubble which, by its nature, is likely to burst. Economists define bubbles as a situation when prices can’t be justified by the fundamentals and demand is driven by people whose aim is simply to sell at a higher price later. It’s often difficult to know whether there’s a bubble until after it has burst, but property prices now look very high by many of the conventional measures, such as prices compared to average incomes. What’s more, there are signs of overexuberance in the market for other assets, such as technology stocks, Tesla shares, gold and even Bitcoin. And bubbles often arise in more than one asset class at a time. One concern is that some of the forces which boosted property prices during the pandemic will go into reverse when it ends.
AUTUMN 2021
|
JUNO 117
YO U R I N V E S T I N G
As lockdowns are lifted, demand for property from those fleeing the cities will fade. We may all be desperate to socialise, throw parties and go on holiday, rather than invest in new homes. Governments will also withdraw some of their support when the economy reverts to its prepandemic ways; indeed, politicians in some countries are already clamouring to raise taxes. In many cases, governments directly supported the property market by cutting taxes on property transactions or through other measures to promote bank lending; these too may be reversed. Red-light warnings Just as low interest rates have been the most important driver of the property boom, so the biggest threat is that central banks raise interest rates. If they do, houses may soon become unaffordable at current prices and demand could collapse, prompting a slump in prices. While central banks may want to take some of the heat out of property markets, the only reason they would hike interest rates substantially is if inflation started to rise. Some warning lights of inflation are already flashing red: the money supply has expanded exponentially, and government deficits have shot up. In some countries, including New Zealand, measures of underlying inflation have begun to edge up and are likely to rise further this year. Low risk of a crash For now, though, the risks of a big increase in inflation and interest rates seems low. The last time the world suffered from runaway inflation was in the 1970s. Then, oil prices were skyrocketing, trade unions were flexing their muscles, and central banks were under the thumb of politicians. Happily, none of those things is true today. What’s more, if inflation were to rise, central banks could use other tools to tackle it, such as putting a ceiling on housing loans relative to the value of the property being purchased (LVRs), rather than by jacking up interest rates. Overall, it seems likely that there’ll be some cooling of the property market in many countries this year. But a major collapse in house prices, triggered by a significant adjustment in expectations for interest rates, still seems unlikely.
Definitions Gross domestic product (GDP): GDP is a measure of a country’s market value. It covers all goods and services produced within a timeframe and can be used to compare nations. Loan-to-value ratio (LVR): LVR is the percentage a loan makes up of your house’s value.
118 JUNO |
AUTUMN 2021
Are you paying too much in monthly fees?
At JUNO, we take less money out of your KiwiSaver account in fees, which means there’s more left to benefit from returns. Our low fees help keep more money in your pocket.
JUNO’s fixed fee $8.00 a month
Industry average fees $19.81 a month
Based on a balance of $20,000 in a Growth Fund*
*Comparing JUNO’s one low fixed monthly fee of $8.00, versus the industry average of $19.81 for a KiwiSaver balance of $20,000 in a Growth fund, according to the latest Morningstar KiwiSaver Performance Survey as at 30 September 2020. We’ve used $20,000 as this is close to the average KiwiSaver balance (FMA 2020 KiwiSaver Annual Report). Higher fees may apply to higher balances. Pie Funds is the issuer. The Product Disclosure Statement is available at www.junokiwisaver.co.nz.
www.junokiwisaver.co.nz
Are your term deposits going backwards?
M I K E TAY L O R Executive Director, Founder & CEO
New Zealand’s low interest rates are having a significant impact on the rate of return from a term deposit. With term deposit rates with most New Zealand’s major banks now under 1%, the scene is set for many term deposits to earn next to nothing, or even go backwards after tax, in 2021. Whether it’s a bull or bear market, you don’t want your term deposits locked in. You want to be able to respond quickly to opportunities and be earning decent returns. Depending on your risk appetite and investment horizon, Pie’s Conservative Fund, with CEO and Founder Mike Taylor as the portfolio manager, offers a potential term deposit alternative. Pie’s investment team keeps a close eye on market conditions as part of our active management strategy, which helps us build wealth for our clients.
Features of Pie’s Conservative Fund include: A potential term deposit alternative Pie’s Conservative Fund could be a good alternative for savers wanting to get better returns, without large exposure to risk. Regularly quarterly distributions For investors seeking a regular source of income, the Pie Conservative Fund pays quarterly distributions. We can also tailor withdrawals to suit investors’ needs to set a specific withdrawal amount or frequency from the fund. Ongoing liquidity without break costs Get access to your money within 5 business days with no break costs or associated fees. Accessing money on term deposits may take far longer and can incur break costs. Still a lower-risk, lower volatility option The Conservative Fund has diversity across cash, New Zealand and international fixed interest, and international equities (shares).
Boutique. Bespoke. For you. Contact us on 09 486 1701 or email info@piefunds.co.nz to find out how we can help you.
P I E F U N D S . C O . N Z
To download the Product Disclosure Statement and Statement of Investment Policy and Objectives, visit piefunds.co.nz, companiesoffice.govt.nz/disclose. Past performance is not a guarantee of future returns.
WORLD CLASS WINES HAWKE’S BAY SEASONAL DINING LUXURY LODGES BOUTIQUE COTTAGES
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