This article was published on 1 August 2015. Some information may be out of date.

Q&As

  • Gold bugs disappear now that their price has plunged
  • 2 Q&As about older bank customers getting poor service
  • How to judge your financial adviser
  • 76-year-old doesn’t have to reduce risk

QI just wonder how the gold bugs that used to pester you are going these days, given that gold has crashed 42 per cent and is looking more acute by the day.

They predicted hyperinflation, bank crashes and all kinds of serious economic consequences, none of which has happened of course, and in the meantime the stock markets and property have produced excellent returns.

AIronically, amongst the grimmest financial news of recent years — far from being what the gold bugs predicted — has been the plunge in the gold price.

To be fair, though, the first gold champion to write to me, in October 2010, wasn’t too far off the mark in the short term. Gold was about $US 1300 an ounce when he wrote, “I am pretty sure we will see $US 1600 an ounce by year’s end”.

The final 2010 price was $US 1422, but the surge continued to more than $US 1800 the following year. Here’s hoping he bailed out around then — but I rather doubt it. It’s not possible for anyone to pick when a market has reached its peak.

As for the other gold bugs who have written over the last few years, I just hope they didn’t put all their savings into gold.

It’s not a bad idea to have a small portion of your savings in the precious metal. Sometimes it moves in the opposite direction to other investments, giving you some comfort when the rest of your portfolio loses value. But:

  • Gold is highly volatile, and as impossible to predict as other investments.
  • And it pays no interest, dividends, rent or other ongoing returns.

QI am an older bank customer, and I have also experienced problems with my bank when it comes to investing and communication.

Perhaps it is time that one of our New Zealand banks started a special area to handle the baby boomers, and leave Gen whatevers to their own devices with the Aussie banks.

I think the problem we face is that we still have that “money in the bank” attitude from a bygone era, and think that being a loyal customer is a good thing, rather than a stupid thing, as today it seems we should swap banks weekly to be considered a good customer.

AI can see it now: BoomerBank. You and the mother of our next correspondent could be the first customers.

QMy mother (81) was left with a large sum of money that needed to be looked after. When we tried to make an appointment with a bank financial adviser she was fobbed off, and an appointment was made with a young lady who thought my mother just wanted to shuffle her money around and didn’t even know what a PIE was.

This left us not knowing what to do. In the end I had to look for a relevant PIE fund for my mother, which came down to using the fund I use because the choice is so overwhelming!

AAt least both you and last week’s correspondent are helping your elderly parents with their finances. I worry about those who don’t have a younger person to assist them when their banks are unwelcoming.

The banks you and the correspondent above named are two of the big ones. PwC reports that the profits of ANZ, ASB, BNZ, Westpac and Kiwibank in the first three months of this year were 5.9 per cent higher than in the previous quarter. Come on banks. Can’t you spare a bit of cash to hire staff to look after retirees?

QThanks for your comments Mary, and thanks to your readers for writing in with their experiences with getting financial advice. It is important for the Ministry of Business, Innovation and Employment to gather this kind of feedback to inform our understanding of how financial advice laws work in practice.

We have received a significant volume of feedback and we are now in the process of analysing this. A further consultation paper with possible recommended changes to the regime will be released towards the end of the year. There will be opportunities to provide us with feedback during the consultation period on this second paper.

For further information about the review please go to www.mbie.govt.nz/what-we-do/faareview. Thanks again.

Signed: Iain Southall, manager, business law, Ministry of Business, Innovation and Employment

AA big thanks from me, too, to the 23 readers who took the time to send letters about their experiences — good and bad — with financial advisers. I’ve forwarded them all to the ministry.

You will have read a few of the letters in this column — those that raised interesting issues to discuss. There’s another below, and more over the next couple of weeks.

Quite a few unpublished letters were from readers who are pretty happy with their advisers. That’s great, but sometimes the reasons for their contentment — that the advisers are friendly and communicative — are a little worrying.

Are these advisers really doing a good job with their clients’ money? In recent years, with many markets performing unusually well, it would be easy to think your adviser has invested you money well when, in fact, you would have been better off investing directly in a low-fee index fund.

I suggest all clients once a year ask your adviser for:

  • A breakdown of your investments — for example 25 per cent NZ shares, 25 per cent international shares, 40 per cent NZ bonds and 10 per cent bank term deposits — and info on how each of those asset types in your portfolio has performed after fees.
  • Information on how indexes for your asset types — such as the NZX50 for large NZ shares — have performed over the same period. You can compare this with how your investments have done.
  • A statement that specifically says, “These indexes are appropriate benchmarks against which to measure your investments.”

Advisers — is this unfair or unreasonable? If so, please write and tell me, and we’ll follow this up in the column.

Clients — would you be embarrassed to ask for this, especially if your adviser feels like a friend? Don’t be! It’s your money, and you’re entitled to know how it’s performing. Perhaps take this page with you to show your adviser.

While we’re at it, as I’ve said often before, I don’t like advisers accepting commissions for placing you in a certain investment. It gives them an incentive to choose investments that pay them more, rather than the best ones for you.

I think advisers should give you any commissions they receive, and instead bill you for their time, or charge a percentage of your investment money. For more on this — including a list of advisers who charge this way — see the Info on Advisers page on www.maryholm.com.

Even if you decide to stick with an adviser who takes commissions, I suggest you give him or her a page with the following written on it, and ask them to sign it: “I truly believe I give you the best advice I can, having considered a wide range of products, and that I have told you about all real or potential conflicts of interest.”

Get it in writing once a year! A good adviser shouldn’t hesitate.

A few more points that have arisen from your letters about financial advisers:

  • A reader spoke of the shares he has in AMP and Contact Energy, through being a customer of those companies.

Let’s say those shares are worth $4000. He should ask himself if he were given $4000, would he buy those shares? Almost certainly not. So sell them, and invest the money in whatever way he would otherwise have done. I’m not saying those shares aren’t good. I don’t know. But historical chance is not a good basis for choosing investments.

It’s actually a good idea to ask that question about all your investments every now and then.

  • One reader’s accountant told her a few years ago that his father had had “a great run” with David Ross — who is now serving time for running New Zealand’s largest ever Ponzi scheme. The reader was about to send a large cheque off to Ross when a friend talked her out of it.

While some accountants know about investing, many don’t. And yet, because their work is to do with money and numbers, people often think they do. Lawyers can be even worse. Some I know haven’t a clue financially.

I suggest you don’t use these professionals as financial advisers unless you’re sure they know what they’re talking about.

  • A reader reports, “One bank manager told me that there was no advantage in splitting money between banks because if one bank failed, they would all fail.”

That’s ridiculous. It’s highly unlikely any bank will fail in the near future, and it’s even less likely there will be a domino effect from one bank to the next. Ignore that manager and spread large savings over more than one bank.

QI am a married 76-year-old male, and I have spoken at length with two financial advisers as well as to friends who have had some experience.

I have difficulty accepting their advice mainly on risk, and how much they can justify their charges. I have a higher risk level than many at my age.

Perhaps it will be explained by our asset position: We have a house valued at $1.3 million-plus. We have no other real property, fancy cars or a boat. Our investments are about $1.4 million-plus. They are spread across NZ 50 per cent, Australia 10 per cent and UK 40 per cent. We have cash on call and $250,000 in term deposits. The rest is in shares. Our investment income is $47,000 in total across three countries.

My conclusion: Our ages suggest we should invest conservatively. On the other hand our asset level suggests we can accept significant risk.

If our assets were only $200,000 I could accept the conservative approach, as the financial advisers have advised me, but then with only that level of investment they would not want to know us. Is my conclusion too far wrong?

ANot unless you’re planning to spend all or most of your savings in the next ten years. You two could have some pretty amazing world trips!

The basic idea is to have money you plan to spend in the next two or three years in bank term deposits, the money you’ll spend in three to ten years in high-quality bonds, and the rest in shares or property. Each year or so, move your savings to keep this current.

In your case, you might want to move some money into bonds. But that doesn’t necessarily need to come from shares. It could be from term deposits. It depends on your spending plans.

Chances are you’ll die quite wealthy. If you’re enjoying investing in shares — and it sounds as if you are — why not?

Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.