DUX Newsletters and Articles. On this page are copies of DUX Financial’s newsletter releases that are emailed to clients.  Back issues, articles and Alan’s comments in the media are further down the page.

DUX Newsletters and Articles

To receive each issue of our newsletter by email you can subscribe at this link subscribe to our newsletters.

Being subscribed has the additional advantage of putting you in the draw each issue for a $100 restaurant voucher to a wellington restaurant.

In addition, if you ‘like’ our Facebook page you will see Alan’s thoughts on current events in the media, links to other items of interest, and get a second chance entry to each issue’s restaurant draw.

If you have any questions or suggestions for our newsletter releases please contact us.

DUX Financial Newsletters


October 2012 DUX Financial Services Newsletter

Click to view full page

Welcome to the October issue of the DUX Financial newsletter. In this issue we are looking at contents insurance and Part 1 of a series of articles looking at clearing debt.

DUX staff

Dayna Berghan-Whyman started at DUX Financial earlier this year as the Practice Manager. She is in charge of making sure Alan knows where he is meant to be, our records management and our compliance. Dayna is also learning the ropes of the Fire and General Insurance side of the business and will become the key person in this area.

Interest Rates

Interest Rates are all over the place at the moment, but mostly they are down. The floating rate is no longer the lowest rate, its typically sitting between the 2 and 3 year fixed. Lenders are offering good discounts for good equity, and freebies are now starting to pop up to sweeten the deals. If you are looking at re-fixing, don’t hesitate to get in touch with us for advice and we can take care of it for you.

Getting contents right

Recently, a friend of mine mentioned that they had lost one of the stones out of his wife’s engagement ring. Oh well, time for an insurance claim was the general response from everyone. No, it’s not insured was the answer.

This was very surprising, who doesn’t insure their valuables? After some more discussion, it turns out that they have contents cover, but the engagement ring was not listed as a specified item, so they are limited to the general maximum of the policy.

What this means is that if you don’t specify valuable items, the insurer has a maximum they will pay out for one item and sometimes a maximum for a collection. So, for jewellery it might be $2,500 for one item, and $10 000 for a collection. If the ring in the example had been lost and was worth $10,000, they would only get $2,500. As the ring is only missing a part, it’s possibly covered (if the stone is less than the $2,500 limit).

There are three categories of items when it comes to your contents cover.

General Items

This is the majority of what you own, your clothes, TV etc. The key here is to make sure you have enough to cover for all of what you own. Too many people randomly pick a number they think is the value of their belongings and don’t actually sit down and work it out. DUX Financial has a contents inventory form that can help you with working out the value of your belongings.

Specified items

These are individual high value items over the limits of the insurer (e.g. $2,500 for a piece of jewellery) or a collection of items over a certain value. For these items we need to let the insurer know the item exists, and what it’s worth, either by getting a valuation (jewellery) or getting the replacement value from the supplier. If an item is specified, then it is insured over the general limits. Specified items do attract an increase in premium due to the increased risk of the item, and maybe some conditions (jewellery over $20,000 in value might have storage requirements for example), but it’s worth it to make sure you get a valuable item replaced.

Noted Items

Noted items are odd belongings or valuable collections that do not come under a specified limit. In this case we let the insurer know they exist, usually with a list of the items and their values, so that it’s easier in the event of a claim. If the items are worth enough, they may get escalated to specified items, so it’s worth checking. Examples over the years of noted items are sets of sports gear (usually kite surfers), war gaming/toy soldier collections, comic book collections, some stamp collections (some become specified) etc.

Most people treat their contents cover as an afterthought, and do the minimum amount of work to get the cover in place. This can come back to bite you if you have a loss. With a little bit of effort, and a yearly review, you can ensure that when it comes to claim time it’s simple to make a claim for all your belongings.

In future newsletters we will look at ways to store the information on your belongings and how to make a claim easier.

Clearing Debt or Saving For a Goal

Step 1 – Get the Facts

As I spend time with clients giving advice on how to get out of debt or save for a goal (like a house deposit), I find myself going over the same strategies each time (though tailored to the individual). I decided it would be a good idea to put down the steps I use with clients for everyone to use.

The real first step is to make the decision to change, you have either decided you want to reduce debt better than you are, or make a concerted effort to achieve a goal. This decision is made with both partners on the same page.

I am going to assume that the goal has been set, and look at the Step 1 of the actions to take.

Before you can look at strategies or make changes you have to know the facts.

You need to get written down (on paper or spread sheet, whichever you prefer) the following:

Your incomes

  • If your income is varied or you get commission or bonuses you need to break it down into base income and extras, so you can get down to the minimum you will get each pay.
  • If you and your partner get paid on different cycles (weekly vs. monthly for example), record it the way you get paid.


  • Write it all down, go through bank statements and check for spending.
  • Don’t forget the car warrant, or the dog registration, or other expenses that happen infrequently.
  • Be honest, try not to guess, but don’t ignore stuff. Get it all down
  • Write it down the way you pay it, so have a column for weekly, 1 for monthly, etc.

Assets and Debts

  • Track your financial position, by seeing what your net worth is.
  • For the debts, get the current balance and the repayment figure (if it’s different), the term remaining and the original term, the day it started, the interest rate and the payments (minimum and what you are paying).
  • For the assets, if they have a debt against them, note it (i.e. which debt is the car security for etc.)

Once you get all this down, we can start to look at patterns, and you will probably see changes you make already.

Next time we will look at step 2.

2012 October Newsletter Winners

Congratulations to Ashley Woofe and Rory Bell the lucky winner of this month’s DUX newsletter and Facebook draw.

Each month DUX Financial picks a lucky subscriber to win vouchers for Uncle Mike’s BBQ Restaurant in Petone.

To enter our draw simply “like” us on Facebook or subscribe to our newsletters via our website.

DUX Financial featured in the media


Investors advised to take long-term view

Click to view full page or PDF copy

By Jason Krupp

Scource : http://www.stuff.co.nz/business/money/8856871/Investors-advised-to-take-long-term-view
Last updated 05:00 29/06/2013

Mighty River Power has been one of the single biggest equity catalysts on the Kiwi market in decades, with the partial float of the state-owned electricity company attracting mum-and-dad investors in droves.

And while the talk over whether it was a good investment before it listed was persistent, the hubbub has grown to a roar as the shares have slipped below their par listing value.

At last look they were trading at about $2.22, about 12 per cent below their pre-IPO listing price of $2.50. It’s enough to make any newcomer to the market feel a bit panicky, especially for what is regarded as a solid cash-generating company that’s low risk.

In a bid to cut through some of the panic, an accredited financial adviser, a stockbroker and a fund manager shared some of their experience and insight into equity investments.

Shane Solly, a portfolio manager at Mint Asset Management, says looking at price movements can be misleading unless you take a holistic view of why they are taking place.

Share prices, he says, are a reflection of what the market thinks a company’s assets and future profits are worth at any one moment. But they also reflect the mood of the market at any one time, and investors need to factor that in when looking at price movements.

For example, while MRP has fallen just over 12 per cent in the past six weeks, the overall share market has fallen by 4 per cent, so in reality the decline is probably closer to 8 per cent. In addition, he says, investors need to be realistic about the kinds of earnings they expect from particular stocks.

Shares in accounting software company Xero have increased by 140 per cent to $16 over the past year, but then the company is in high risk expansion mode and has yet to make a profit.

MRP, meanwhile, expects to deliver a profit of $95 million for the 2013 financial year.

“You don’t buy a house and expect the value to jump up the next day or week. It’s the same with shares – you’re investing in a business,” Solly says.

Grant Williamson, a director at brokerage Hamilton Hindin Greene, says it is important for shareholders to remember that six weeks is too short a period in which to judge a newly listed company.

Shares often take a while – even years – before they bed down into stable trading patterns.

Ryman Healthcare, the current darling of the stock market, struggled in its first three years as a listed company before its solid returns started catching the eye of investors. Now it is regarded as one of the must-have blue chip stocks on the market.

“Experienced investors that have been in the market for quite a while – the been-there-done-that types – wouldn’t panic [about MRP],” says Williamson.

“For those inexperienced investors, I would be asking them why are you selling out and crystallising your losses?”

Alan Borthwick, the principal financial adviser at Dux Financial Services, believes it is important to remember the reason why investors bought the shares in the first place.

“If you think this is a viable company to buy shares in, then your position shouldn’t change unless there is a fundamental shift in the state of the company.”

He adds that investors who are putting their money in equities for the long haul have the ability to look through short-term fluctuations.

“If I have a 10-year window and they go down 10 per cent over a month, then it hardly matters.”

All three concede their tips barely scratch the surface of sound investment advice, which is why they recommend investors consult a professional.

“It’s worth spending some money and talking to a financial planner,” Solly says.

“New Zealand is a very do-it-yourself kind of environment, but these people take a holistic view of your assets.”

– © Fairfax NZ News

Taking the plunge in Mighty River

Click to view full page or PDF copy

By Jason Krupp

Scource : http://www.stuff.co.nz/business/industries/8402544/Taking-the-plunge-in-Mighty-River
Updated 05:00 09/03/2013

If there’s a single question that’s bound to be hogging dinner table conversation for the next few months it’s whether Mighty River Power (MRP) is a good investment.

The process of selling a 49 per cent stake in the Government-owned power company kicked off this week, with mum-and-dad investors given the opportunity to pre-resister for shares in the float.

Judging by the 200,000 who signed up in the first three days, and the patchy performance of the Treasury-run website mightyrivershares.govt.nz, which buckled under the deluge of traffic, public interest has been astronomical.

Even if those who registered received only their guaranteed $2000 of shares, it would add up to $400 million out of a possible $1.7 billion in shares that are up for sale.

But while interest is sky-high, information assessing the merits of the deal has been scarce ahead of the release of the investment statement and prospectus required in an Initial Public Offering (IPO) process.

Sources within the fund management industry say that’s largely due to the Maori Council’s challenge to the sale, which was dismissed by the Supreme Court at the end of last month.

With the uncertainty out of the way, brokerages and investment banks are now free to start pawing through the firm’s financials, but almost everyone in the equity advice business has held back pending the prospectus.

So, the question remains: Is MRP a good investment?

On the surface of it, the numbers certainly stack up. In its latest interim results announcement, MRP reported an underlying operating profit of $133 million, up 330 per cent on the same period a year ago.

That was in spite of lower revenues from its hydro and geothermal plants because of weak electricity prices as well as flat demand on the retail side of its business amid weak economic growth.

Net profit for the period was a more humble $57m after the company took write-downs to the value of its geothermal investments in Chile and Germany, but professional investors have dismissed that as typical “polishing of the balance sheet” before an IPO.

What’s missing is a view on MRP’s future prospects, which could tarnish the rose-tinted view presented by the firm’s half-year accounts.

Hanging over the company’s near term earnings is the drought gripping the central North Island.

MRP generates two-thirds of its power from nine hydro stations on the Waikato River, and levels at the source, Lake Taupo, have dropped to their lowest level in since June 2010.

The lake’s water level is sitting at 356.22 metres above sea level, in the bottom 20 per cent of MRP’s operating levels.

Under typical circumstances the shortage would be offset by higher wholesale electricity prices. But brimming hydro lakes in the South Island, a cutback in Tiwai aluminium smelter production and low economic growth are likely to keep a lid on prices on the generation side.

The drought is “going to drag on full-year 2013 earnings”, one investment source said.

In addition, some energy sector commentators have questioned MRP’s decision to actively pursue geothermal projects in Chile and the United States as opposed to passively investing via an investment fund structure as it has done in the past.

Energy analyst Molly Melhuish said investors needed to be aware the strategy shifts MRP’s risk profile away from a “safe, utility-type investment prospect”, which is how the firm is being marketed to investors.

Countering those negatives is the company’s position within the New Zealand market, with MRP generating and selling about a fifth of the country’s power, a position that gives it fairly defensive earnings.

“Mighty River Power is a high-margin business,” said Phil Anderson, an energy analyst at Devon Funds. “If demand takes the upside or downside case, Mighty River Power will still make a profit.”

He said the firm was also in the final stages of wrapping up a decade-long capital investment phase, in which it built geothermal plants in the Central North Island region.

Anderson said that should free up funds within the business which MRP could use to pay dividends to shareholders, in the model of Contact Energy.

Contact, the last state-owned asset to be listed, declared an interim dividend of 11 cents per share, representing 87 per cent of the firm’s underlying earnings and an earnings yield of 6.1 per cent.

One fund manager said he expected MRP’s dividend yield to be in the same ballpark.

Contact’s own IPO hangs as a spectre over the MRP sale. The firm listed in May 1999 at $3.67 a share, a level it would take more than two years to regain after being heavily sold down after its debut. The firm’s shares peaked at $9.99 just ahead of the global financial crisis, and recently traded at $5.38 apiece.

Head of Fisher Funds, Carmel Fisher, said the investment decision could be made only once the investment statement and prospectus were released. There’s no indication of when that will be exactly, but it will be after pre-registration closes on March 22.

Fisher cautioned investors against making assumptions before a proper analysis of the financials has been done, such as the belief it would trade as a high-yielding infrastructure stock.

“If you’re interested in yield, there may be other assets that can offer a better yield with a lower risk profile,” she said. “Obviously it’s a large company and you can look at its history and gain some certainty and comfort from that, but it’s the outlook that’s important.”

That advice is backed up by Grant Williamson, a director at South Island brokerage Hamilton Hindin Green, who said: “Normally the worst investment decisions are when you’re caught up in the hype”.

One institutional fund manager said would-be investors faced no penalty from pre-registering for the shares, but the responsibility for actually buying them would fall on their shoulders.

“Register and get the documents, then read them . . . they’re not going to be that difficult,” he said. “If you can’t be bothered to read these documents, stick with term deposits.”

Beyond the fundamentals of MRP, investors also need to gauge how sensitive they are to risk, and whether buying shares at all is a sound investment choice.

Financial adviser Alan Borthwick said by buying MRP, first-time equity investors would expose themselves to single stock volatility.

That makes it a less suitable investment for those saving for a short-term goal, such as a deposit on a house, but it would suit those who don’t need quick cash and are saving for the long term.

“People need to go in with their eyes open, and know how shares work,” Borthwick said.

On a wider analysis, Borthwick is positive about the MRP sale, calling it a relatively inexpensive way for retail investors to educate themselves about equity markets.

“Sure, people aren’t immediately going to go from buying shares in this IPO to investing in start-ups, but hopefully it reverses the trend of people thinking shares are bad.”

– © Fairfax NZ News

Winners v losers in Ross failure

Click to view full page or PDF copy

By Jason Krupp

Source : http://www.stuff.co.nz/business/money/8169626/Winners-v-losers-in-Ross-failure

Updated 05:00 12/01/2013


The collapse of Ross Asset Management snared 900 investors in what could turn out to be NZ’s biggest Ponzi scheme. Investors now face a massive struggle to claw back some losses.

‘Christopher’, a man in his early 60s, sits at a cafe in downtown Wellington, rattling off a detailed list of events that span 15 years, pausing often to wryly chuckle and shake his head.

It’s hard to marry his easygoing demeanour with the knowledge he’s recently seen his investment portfolio go instantly from about $2 million to zero. He says – with a shrug – that it’s a bit like grief, and he’s now at the acceptance phase.

“You recognise all the stages: you go through stunned disbelief, anger, depression and then gradually, gradually, acceptance. For me it took six weeks.”

Christopher is one of the 900-plus investors caught up in the collapse of Ross Asset Management, the Wellington wealth manager run by David Ross. The firm was raided by the Financial Markets Authority in early November after investors complained they were unable to access their funds or even reach Ross.

What has since emerged after an investigation by receiver PricewaterhouseCoopers is an investment portfolio purported to be worth $449.6m backed by just $10.5m in assets.

In addition, an analysis of the RAM bank accounts shows that since the year 2000 just over $303m was invested in the firm, while $29.8m was taken out in fees and investors withdrew $289.2m.

The records show withdrawals outpaced contributions for the first time in 2008, when the global financial crisis hit, but recovered the following year, with $30.5m going into RAM, while $28.7m was taken out in fees and withdrawals.

Critically, the recovery soon reversed and withdrawals outpaced contributions in 2010, 2011 and 2012, but those contributions still amounted to more than $80m during the same period.

In total, the funds withdrawn by investors in the 12-year period exceeded investor contributions by more than $60m.

For some that is a classic sign of a Ponzi scheme, where incoming funds are used to pay for withdrawals while maintaining the illusion the portfolio is still delivering market-eating returns.

IF David Ross is found to have been operating a Ponzi – and the receiver has yet to officially rule that he was – it creates a situation where some investors who withdrew their funds before the collapse of RAM profited from those who were entering it. It pits the haves against the have-nots.

Bruce Tichbon, head of the Ross Supporters Group, believes the numbers clearly spell out that Ross was operating a Ponzi.

He favours a clawback process, where the receiver reverses fictitious profits, in effect mutualising the losses but ensuring no one is left penniless.

A similar approach has been used in the Bernie Madoff case in the United States, where US$9.3 billion (NZ$11b) of the estimated US$17.5b invested in the pyramid scheme has so far been recovered.

Tichbon, who appears to have lost all the money he invested with RAM in 2009, says it would be the fairest approach, but that those who profited from it are likely to fight bitterly.

“There are so many people who are winners and are fighting any form of clawback, and so many people who are desperate to get something back,” he said.

“When I hold meetings they are very, very contentious. I’ve held meetings where I was afraid someone was going to attack me.”

Complicating matters is that many investors are caught in the middle.

Christopher, for instance, invested the proceeds of a land sale with RAM in the late 1990s, and saw that original investment grow tenfold over the next 15 years. The original capital was gradually drawn down to pay for household expenses, but the bulk of the portfolio was lost when RAM collapsed.

That is hardly a windfall, but next to the people who have been left penniless by the fraud, Christopher is wary of being labelled a “have”, and that is why he requested his identity be kept secret.

PwC’s John Fisk said there were provisions in the Companies Act that allowed liquidators to recover some funds under voidable transaction provisions, but it needed to be established whether investors were creditors of the company, and it could get complicated.

For instance, the Companies Act also prevents liquidators from recovering funds paid out by a liquidated company provided they were received in good faith.

The receivers also have to determine when RAM tipped from being a legitimate investment firm to an illegitimate one, to determine how far the clawback should reach.

That process is complicated by Ross’s poor record-keeping and outdated systems.

“It doesn’t mean we can’t make the claim, but there’s likely to be legal action defending the claim,” Fisk said, noting receivers may choose to go the route of a test case to reduce costs.

Cost is a potential hurdle.

As it stands, the $10.5m in assets that have been found are subject to proprietary claims from some investors, who say David Ross merely traded their shares in their name, and as such they should be returned to them.

If they are successful, Fisk estimates that the general pool of funds available for redistribution and to fund legal action could be reduced by as much as 40 per cent.

Christopher, resigned to never seeing a cent of his nest egg again, has moved on with his life. Plans for an early retirement have evaporated but he said he enjoyed his work and life went on. But that doesn’t mean he is without regret.

“One day you’re rich and you haven’t got a financial worry in the world, and the next day you are sort of going to be OK but you haven’t got any special fund to leave the children.”

What he regrets most is having recommended Ross to friends and family.

“You do feel you’re doing the right thing at the time – why shouldn’t they share in some of the benefits that you’ve enjoyed over the past 10 years or more?”

He also regrets not heeding the red flags.

“People might have thought his bookkeeping was careless, that he was doing very well but that he was a bit casual with his reporting,” Christopher said.

“But overall I, along with a lot of other people, checked the buying prices and the selling prices and they all seemed to tally on the day.”

He also wants to dismiss the perception that RAM investors were so greedy they could not see the returns were too good to be true.

Yes, some were highly wealthy and sophisticated investors who could have known better, but the bulk of them are everyday people who were hoping to see their savings outperform inflation and tax.


Ross Asset Management timeline

1990s: David Ross sets up Ross Asset Management

2008: Investor withdrawals exceed contributions for the first time

2010-2012: Investors take out $119m, with just $81m of new funds invested

2012: November 2: RAM offices raided and assets frozen

November 6: PwC appointed as receiver, with brokerage First NZ Capital. Ross in hospital for undisclosed reason

November 15: First receivers’ report shows just $10.5m in assets

November 21:Ross discharged from hospital, agrees to assist investigation

December 3: Application to liquidate RAM

December 17: RAM and various entities liquidated


The  Ross Asset Management scandal has seen a rash of finger pointing among investors, advisers and regulators over who was responsible for preventing what could be New Zealand’s biggest Ponzi scheme.

But while the argument is a long way from being resolved, it has left many people wondering how you spot what could be a highly sophisticated fraud, designed to keep investors in the dark while appearing beyond reproach to regulators.

Alan Borthwick, principal adviser at Dux Financial Services, said it was often very hard for investors to get a view on what was happening behind the investment statement, but there were a few red flags to watch out for.

In no particular order, the first is a lack of separation between the fund manager and the adviser.

Many legitimate financial services firms operate on both sides of the line but have clearly defined rules and practices to keep the two apart, preventing them from talking up their own book.

The second is whether the business is audited or monitored by an external party such as a trustee or ratings agency, though this is not always foolproof as false claims can be made. That also extends to who is investing the funds.

Borthwick said investment firms that employed external managers were far less likely to be able to hide fraudulent transactions, whereas a single manager could easily manipulate investor statements.

“If they’re doing active portfolio tweaking that would be a major red flag,” he said.

Consistently high returns are also a major warning, according to Borthwick, who notes that while many Kiwi firms have produced earnings of 20 per cent or more in a given year, they are unlikely to sustain that over the longer term.

He also advises investors to follow their instincts – if they sense that something does not smell right, they should investigate it further or raise it with the relevant regulator instead of ignoring it.

Lastly, he suggests people get external advice from financial advisers, other players in the industry or regulators if they are unsure about a matter.

“Even if they don’t come up with a different view to you, at least someone else has looked at it,” he said.

– © Fairfax NZ News

Cracking a nest egg plan to keep you comfy

Click to view full page or PDF copy

Cracking a nest egg plan to keep you comfy

By Jason Krupp

The Dominion Post, page C13

Saturday, October 13 2012


With the market’s focus on getting people into KiwiSaver, a growing number of Kiwis hitting retirement are finding there is little in the way of products or advice for them.  Jason Krupp looks at some of the key factors they need to consider to protect their nest eggs. 

After 40-plus years in the workforce it’s probably safe to assume most people hitting retirement age are looking forward to spending at least a little time with their feet up.

But while they can deservedly take the weight off, the fact remains that people are increasingly living longer than they used to – and their retirement savings may need to keep earning for at least two or more decades if they’re to fund their dotage in comfortable style.

The challenge for the newly retired is that there isn’t a lot of information out there on how to protect, let along grow, their nest eggs.  In fact, if you search Google for “KiwiSaver divestment”, the search engine will ask you if you mean “KiwiSaver investment”.

That’s not too surprising given the relative maturity of the current retirement landscape. 

KiwiSaver has only been operating for five years, and the focus has been on getting people enrolled and contributing on a monthly basis.  To some extent that has been achieved, with 2 million Kiwis signed up, but the investment advice and education focus has remained on those contributing to the system, not those exiting at the other end.

The thinnest edge of the KiwiSaver population wedge is only now starting to hit retirement age, when they can start drawing down on their savings.

While that explains the dearth of investment advice and products for retirees, it doesn’t really help those needing advice on what to do with their pension nest egg.

Financial adviser Alan Borthwick, of Dux Financial Services, says that with a number of financial and economic considerations to take into account, probably the best place to begin is with a vision for retirement.

This includes lifestyle, as well as whether you want to travel, move to the country, keep working part-time, or spend your twilight years catching up on the hobbies that work interfered with.

You can then look at your savings, assets and income (from superannuation, rents or interest and dividends).

Borthwick says this will give savers a yardstick to assess whether their nest egg can achieve their goals, and if not, where the compromises need to come from.

It’s vital at this stage to carefully assess the impact of inflation on retirement savings, a complicated hurdle many people fail to correctly factor into their retirement planning.

“The biggest risk to retirees is not capital loss but spending power loss,” Borthwick says.

A good example is an expense such as groceries, which may cost a retired couple $10,600 per year now.  At a benchmark inflation rate of 3 per cent inflation per year, the same amount of groceries would cost $14,250 in 10 years.

If you haven’t budgeted correctly for the extra $3650 a year you’ll be paying for food, it will have to come from somewhere else in a limited budget.

Borthwick says that even if savers factor in 3 per cent inflation – which is at the top of the Reserve Bank’s target band – they often fail to recognise that retirees are exposed to costs which increase at a higher rate than 3 per cent, such as medical insurance, power bills and rates on your house.

A preliminary picture should now be starting to emerge of what lifestyle you can afford in retirement, what the potential financial shortfalls may be, and what kind of returns you’ll need on your nest egg to beat inflation.

Much of this information can be calculated on the sorted.co.nz website, a free financial planning site sponsored by the Commission for Financial Literacy and Retirement Income.

However, Borthwick and others suggest savers meet a certified financial adviser to get an accurate plan for retirement that takes all of this complexity into account.

That may seem like they’re feathering their own nests, but the real value an accredited financial adviser brings to the table is the ability to raise issues that savers didn’t consider or lack the technical knowledge to assess correctly.  You don’t know what you don’t know.

Issues to consider include whether you want to live in your own home, if you want to leave any assets to your children, can you live off interest alone or will you have to draw down on your capital, and will you be paying for private medical insurance, among a host of other things.

Good quality advice should also guide you to financial products and strategies that are appropriate to your financial goals.

David Boyle, general manager of managed funds at OnePath, says an obvious place for retirees to chase inflation-beating returns is in equities, but they need to remember that the rules that applied during the investment years also apply in divestment ones.

These are principally diversification and correct risk profiling – or in layman’s terms, not putting all your eggs in one basket or a basket that could easily tip over.

The value of diversification was underscored by the collapse of the finance companies in the run-up to the global financial crisis, which wiped out many older people’s savings because they were over-invested in one asset class, he says.

Retirees should also steer clear of investing in highly speculative assets such as shares in emerging technology companies, and instead take a conservative investment approach.

“People should be looking for a good balanced portfolio or managed fund that offers a range of asset allocations in equities as well as more secure assets,” Boyle says, stressing that good advice is vital to getting this risk allocation right.

A rough rule of thumb is to have about 20 per cent of assets allocated to a balanced share portfolio to beat inflation, with the remainder in cash, bonds and property assets.

It’s better to have put this investment plan together well ahead of retirement to give savers enough flexibility to reach their goals and compensate for bumps in the road, he says.

Lastly, with a plan in hand, the next step is to stick to it.


DUX Financial Articles

Gift vs Guarantor – should your parents guarantee your loan or gift/lend you the deposit?

Contact Us