This article was published on 14 March 2020. Some information may be out of date.

QI am in my 60s and have a large sum invested with one of the better-known investment advisory companies.

I have one contact within that company (my adviser) from whom I receive trading notes and the occasional email. I have scant knowledge about investing so I leave it to my adviser, and my portfolio has done well over recent times.

However, I am not 100 per cent happy. My adviser is condescending and I feel stupid when I ask simple questions. I want to withdraw some of my accumulated funds, and my adviser is unhappy with this, even though it is my money!

I want to move to another investment company. My adviser receives considerable fees from me and I don’t think they deserve my patronage. I don’t even get a Christmas card! To change to another fund manager, would this be just a formality or am I locked in to the current one?

AReading your letter makes my blood boil.

I’m sometimes in a similar situation when talking on the phone to somebody who knows much more about IT than I do, and they become condescending and impatient.

I’ve taken to responding: “Look, I may not know much about this, but I’m sure there’s other stuff I know more about than you do. Please be patient and pleasant.” It usually works.

The trouble is that you have an ongoing relationship with your adviser, so perhaps it’s harder to be blunt. But no longer, I hope. Show them the road, on three grounds:

  • Unwillingness to patiently answer your questions. How can he or she possibly justify charging you high fees and not want to explain what’s going on?
  • Unwillingness to help you withdraw your money. I bet your adviser is basing their fees on the amount of money you have invested. He or she might also be receiving commissions from financial providers your money is invested with. If that’s the case, no wonder the adviser wants you to keep as much money as possible with them.
  • Lack of a Christmas card! Not really — but still.

Here’s what I suggest you do. Read the Advisers page on my website. My main point is that it’s best to go with an adviser who doesn’t take commissions when they invest your money, and instead charges you a fee.

At the bottom of the page is a list of financial adviser firms who operate that way. Some charge fees based on how much you invest, while others charge by the hour or a flat fee. You want someone with an hourly or flat fee, so there’s no issue about your making withdrawals.

Make a list of 15 or 20 firms that operate in your area, and read their websites. Then send the appealing ones an email — perhaps including a copy of this Q&A — and ask how they would work with you, and how they charge. If they don’t reply fairly promptly, cross them off the list.

Choose three or four that sound promising, and make the most of their free first meeting or phone call. If none of them really feels right, try more. It’s worth putting effort into getting an adviser you trust and like.

Once you’ve found “the one”, ask them to help you move your money from your present adviser. I don’t see how it could be locked in. If you have trouble getting the money out, get back to me.

One more thing: Take little notice of the fact that your portfolio has done well in the last decade. New Zealand and world sharemarkets have risen pretty steadily — aside from recent hiccups — and anyone who hasn’t earned good returns should be asking why.

Q“Don’t time the market — don’t even try”, is the general wisdom. But could we in a teeny-weeny way start dreaming that the Covid-19 crisis might be too good an opportunity to waste? Would drip feeding into investments be safer. But when to start?

Forgive me for wishing to leech on the misfortune of others. On the other hand we have too much money basking in term deposits.

AI feel like a Mum whose kid is pleading for permission to have just a few lollies. Who wants to be a killjoy? So okay then!

I said last week that:

  • It’s better to buy than sell when the markets are falling and volatile.
  • But it’s better still to drip feed over the years into shares or a fund — KiwiSaver or otherwise — that holds lots of shares.

People who buy when shares are down are sometimes called contrarian investors. One difficulty is trying to pick when a market has hit rock bottom. You can’t know for sure until much later. Prices might settle or rise for a while, then fall further, and repeat that several times.

But some contrarians are lucky, and most don’t do disastrously. It can work well if:

  • You don’t plan to spend the money within ten years.
  • You’re investing a small enough proportion of your savings that it wouldn’t matter if it doesn’t do too well.
  • You would enjoy a bit of a gamble.

Be prepared, though, to see prices fall further after you’ve bought. Investing, say, a third now, a third in a week and a third in two weeks might help.

QI have been a share investor for several decades. When markets are all over the place, like now, I remind myself of the quote by a Rothschild (don’t know which one): “The time to buy is when there’s blood in the streets.”

AAccording to, the quote is credited to “Baron Rothschild, an 18th-century British nobleman and member of the Rothschild banking family.”

The article adds, “He should know. Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon. But that’s not the whole story. The original quote is believed to be ‘Buy when there’s blood in the streets, even if the blood is your own’.”

This quote supports the previous correspondent’s plans. It’s important to note, though, that when someone does really well with an investment strategy, we hear about it. We don’t hear about the many who tried a similar strategy — maybe only half a day later — and did only okay or terribly.

There’s a lot of luck in these things, and a huge bias in the stories we hear about.

QI will be 65 in a few months and am in a growth category with KiwiSaver. Should I move my funds to a money-only investment or leave them, assuming our economy is going to react negatively in the short term to the Coronavirus?

ASorry, but you — and pretty much every other investor — are too late.

Sure, the New Zealand economy is likely to be harmed by the virus. But that doesn’t mean share prices will gradually fall as economic activity slows.

It doesn’t work like that. The experts have already allowed for a likely economic downturn in the prices they are willing to buy or sell shares at. And sometimes — quite often actually — they overestimate and the market falls too far. So while the economy might slump, share prices could rise from here. Who knows?

But in any case, how the economy reacts to the virus should have nothing to do with when you move your KiwiSaver money.

What matters is when you’re planning to spend the money. If you expect to spend it:

  • Within three years, put it in bank deposits or a lowest-risk fund in or out of KiwiSaver.
  • In three to ten years, put it in a bond fund or middle-risk fund, and expect some volatility.
  • In ten years or more, put it in a higher-risk fund — as long as you can cope with the balance falling lots sometimes.

If you’ll start spending some of your savings in the next few years, ideally you would have set this up some time ago. But better late than never!

Think about the timing of your spending and then move your money accordingly. Your KiwiSaver provider should let you invest in more than one of its funds. If it doesn’t have what you call a “money-only” fund — good name! — for your short-term money, switch to a provider who does, or use bank term deposits.

The only problem is that moving money from your growth fund to low risk at the moment doesn’t feel good, because the markets have fallen. Maybe you should wait a bit. Then again, the markets might fall further.

So what should you — or anyone planning to withdraw from a higher-risk KiwiSaver fund within the next few months — do?

Move the money in, say, three or four lots, each a month apart. For more on this, see the next Q&A.

As it happens, you’ve been lucky. The share market growth in recent years means you’ve still done well despite the recent downturn. But it won’t always be like that. So please, everybody, don’t put money you plan to spend within ten years — and especially within just a few years — in higher-risk funds.

QI have $200,000 I won’t need for at least five years. I want to put it in a growth managed fund.

Is it better to drip feed the money in (say $20,000 per month) or bang the whole lot in right now?

AAs my previous answers suggest, I like drip feeding investments — whether it be moving money into or out of shares or growth funds, or from one country to another. Or, for that matter, buying or selling several properties if you’re wealthy enough to be doing that.

Nobody ever knows what will happen to share or property prices or foreign exchange rates, so doing a bit now, a bit soon, and a bit later removes the risk that you’ll move all the money at what turns out to be a really bad time.

Of course it also removes your chance to move the lot at what turns out to be the best time.

However, there’s an effect that is often observed around investing: most of us dislike losses more than we like gains.

It’s called loss aversion. As Wikipedia puts it, “it is better to not lose $5 than to find $5.” Or as behavioural psychologists Daniel Kahneman and Amos Tversky put it, “losses loom larger than gains”.

In one experiment, people were asked if they would accept a coin toss. If it came up heads they would lose $100, but if it was tails they would win $100. Few people accepted that. The researchers found that on average they had to increase the win to about twice the loss for people to accept the bet.

Says, “It is thought that the pain of losing is psychologically about twice as powerful as the pleasure of gaining.”

A prominent New Zealand economist — apparently unaware of this research — once told me off for saying someone with a lump sum should drip feed it into shares. “In the meantime the rest of the money is sitting in a bank earning much less, on average, than it would in shares,” he said. “More often than not the person will do better putting it all into shares straight away”.

There’s no denying that. But it doesn’t take psychology into account.

By the way, I would rather you had ten years than five before you plan to spend the money. Over five years, there’s about a one in 15 chance you’ll end up with less than you put in, and a fairly big chance of only a mediocre return. Over ten years those chances are much lower. Up to you.

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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.