Some Probing Questions
NOTE: This article written by Tony originally appeared in the June 2017 edition of Grey Power magazine
In our work we come across some very interesting situations. And we are constantly challenged to work out how people actually got themselves into such scrapes.
In this post we thought we would do a sort of “Frequently Asked Questions” piece – and provide our commentary on them.
If you have questions that you would like answered in the future, drop us a line, either via the comments on this post or via the email address at the end of the article.
How do I know if I’ve got enough money to get me through?
You need to be a bit more specific. What does “get me through” actually mean? If, as for most people, it means having a comfortable, secure lifestyle, then you need to put a number on that. How much does your comfortable, secure lifestyle cost? The answer to this question might be found in a budget – and while budgeting may not be a “preferred activity” it can bring reassurance if money is tight. You then need to figure out how long you need the money for – and then you need to make assumptions about investment returns and inflation rates. Sound complicated? Well it can be, and that’s where some good advice may help.
How do I know if my investments are being properly looked after?
Do you actually know who is looking after your investments? We recently came across some clients who thought their adviser was actually looking after their money – only to discover that the investments were actually being managed by a large financial institution – and the ‘adviser’ was merely the “middle man”. Who makes the actual investment decisions? And what are the right decisions for you? Much of the information available in the investment world is confusing – and, in spite of the best efforts of the regulators, this shows no signs of improving. If you are concerned about this important issue, you can either take some action – or you can do nothing. We always encourage people to educate themselves so that they can ask the right questions. After all, as we said in the last edition, “you don’t know what you don’t know”.
I am concerned that I might be paying too much in fees on my investments. What can I do about it?
Do you know how much you are paying in fees? All investments have some fees – even term deposits have fees embedded within them. And some investments have lots of fees – some of which are hard to find. If you knew that 2.5%pa of the annual return of your investment was consumed by fees, how would you feel? But do you know how to find out?
All investments have some fees – even term deposits have fees embedded within them
Fees are often considered to be the most corrosive part of investment portfolios. And, if your car was showing signs of rust you’d do something about it.
The other side of the fee coin is “value”. No one minds paying a fair price for good value. But what is the value of the fees you are paying? Has anyone ever explained that to you? Or do you just accept it – while grumbling about it?
The regulators are concerned that fees are clear and transparent. Yet, our experience suggests that there is a long way to go.
Making sure you are getting value for money is one of the most important principles of sound financial management.
And what do you do? Simply, ASK. But who do you ask? And what questions do you ask? First, ask for help if you need it.
I have heard that the regulations governing financial advisers are getting stricter. What does that mean for me?
Simply stated, financial advisers should act in the best interest of their client. Until recently, this has only applied to Authorised Financial Advisers – so there has been a whole group of financial advisers who have not had this legal requirement imposed on them. Scary, eh!
In the current review of financial advice legislation it is proposed that all financial advisers should have to follow this simple principle.
So, if you feel that an adviser you have had dealings with is not acting in your best interest, challenge them – and if you don’t get a satisfactory answer, the Financial Markets Authority would love to hear about it. They are the “police” for the financial services industry. And they are very sensitive to situations where consumers are not treated well.
But the new proposed legislation has stated that it aims to “improve access to high quality financial advice for all New Zealanders”. A noble aim – but we are not so sure. The last regime made “high quality” advice less accessible – as anyone who has tried to get advice about a small investment amount will have discovered.
My health insurance premiums keep rising. What can I do about that?
As we get older we become more expensive to maintain – fact! The cost of health care is one of the big unknowns for seniors. Of course, New Zealand has an excellent public health system which will provide much of the treatment for life-threatening illnesses. But many New Zealanders choose to carry private medical insurance. Why?
As we get older, we become more expensive to maintains.
Well, it’s for the non-life threatening events? Southern Cross reported recently that knee and hip replacements, cataract surgery, and coronary angiograms were the most common cause of claims for the 60+ group . All these are generally considered in the “elective” category of procedures. And, if you are one of the unfortunate victims, these conditions can cause a severe impact on your quality of life – and being able to bring forward the procedure (i.e. by having private treatment) can significantly enhance your quality of life.
But, because costs of claims keep rising, premiums keep rising. Medical inflation refers to costs in the medical area – and it is generally considered to be about 10% pa, well ahead of consumer price inflation, currently running at about 2% pa. So, even if your premium is “level”, medical inflation will cause premiums to rise.
Can you do anything? Well, if you believe that medical insurance is important for your quality of life, you might need to look at the structure of your cover and ask if there are ways to reduce the premium. An independent adviser should be able to help you here – but if your insurance adviser is earning commission on your policy, they might be less inclined to act in your best interest – until the new regulations come in effect!
Just remember. Consumers should be the top priority for financial services providers (and for everything else, come to that). After all, no business has a business without consumers.
So don’t put up with situations which cause you concern. Your comfort, security and peace of mind should be at the forefront of everything. If you feel it’s not, then ask the question – who is really benefiting?
This article is of a general nature and is not personalised financial advice.
Financial Impowerment Specialist
Tony Walker is the co-owner of ImPower Limited. He is an Authorised Financial Adviser and Certified Financial Planner (CFPCM) and his disclosure statement is available free of charge on request by emailing Tony at or by calling him on 021 656 223.