NZ Herald 6 February 2010

AIt comes down to this: do you want to be landlords — not just for a few months, but possibly for several years?

There are two reasons it might not be a short-term commitment. One is that it’s not easy to find good tenants if they have to put up with would-be buyers looking at the place, and the possibility that they will be turfed out when the house sells. So you might have to stay out of the market for a year or two.

The other reason is that nobody knows when house prices will rise enough for you to be confident you will get a better price than now. Quite apart from the usual difficulties with predicting market trends, it seems likely the government will introduce tax changes that will make rental property less profitable. And that will probably put some downward pressure on house prices — so that they either fall or rise less than they otherwise would.

I say “probably” because prices are no doubt already lower because of this possibility. If the government announces milder changes than many expect, prices could actually rise as people say, “Phew, that wasn’t so bad.” But somehow that doesn’t feel likely.

Which leads me to another factor for you to consider. Quite apart from affecting the house price, tax changes might also affect how well you do from renting out the property in the meantime.

All of this might not matter much if you had been seriously considering buying a rental property anyway. Many people seem to enjoy being landlords, and I doubt if the government will change things enough to make rental property totally unattractive.

On the other hand, landlording can be worrying, time-consuming and expensive. It’s not a good idea to invest in something that’s not “you” just because circumstances seem to steer you that way. And reading between the lines, that sounds like your situation.

All in all, then, I say “sell”. Forget about what you paid for the house and what you’ve invested in it. That’s history. Price to meet the market, as the real estate agents say. It doesn’t sound as if you will lose nearly as much as many property sellers have. Be thankful for that.

Finally, I hate to say it, but next time you might want to heed the old warning: It’s not wise to buy a new house before you sell your old one — unless your purchase is conditional on getting at least a certain price for the old house.

AA year ago, when I was doing research for my book “The Complete KiwiSaver”, I checked out all the passive KiwiSaver funds.

If you want to invest outside KiwiSaver, you’ll find that many of the providers of passive KiwiSaver funds will also offer passive non-KiwiSaver funds. Check the providers’ websites, looking for the words ‘Index’, ‘Tracker’ or ‘Passive’ in their fund names.

My book lists the following KiwiSaver providers who largely use passive management:

• ASB Group Investments’ default scheme.
• Civic Assurance — all shares in their funds except 10 per cent of international shares, which are invested ethically.
• Smartshares — built around the Stock Exchange’s index funds, so all the shares in their funds are passive.
• SuperLife — all their funds are passive except Gemino and Ethica.

The following are listed as using some passive management:

• ASB Group Investments’ FirstChoice scheme — all funds with “Tracker” in their name.
• Craigs Investment Partners’ kiwiSTART Defined — about 50 per cent of international shares in their funds.
• Fidelity — all international shares.
• Grosvenor — 60 per cent of international shares.
• ING KiwiSaver — all international shares.
• Mercer KiwiSaver — For 30 per cent of the international shares in the Mercer KiwiSaver Conservative, Active Balanced and High Growth Funds, the manager uses an “enhanced index” approach. For more info, see the provider’s website.
• Mercer Super Trust — the Passive Balanced Portfolio and all of the funds that hold international shares have a 30 per cent “enhanced index” management component. See website.

With Craigs Investment Partners’ kiwiSTART Personalised scheme you can go entirely into passive investments, entirely into active, or a mixture.

If there are any other New Zealand-based providers of passive funds, let’s hear from you.

AStart by checking the websites of the companies listed above, which should tell you how to sign on.

The minimum investments into KiwiSaver for the four largely passive providers are: ASB Group Investments, no minimum; Civic Assurance, $10 a week; Smartshares, $50 a month; SuperLife, no minimum.

Outside KiwiSaver the minimums may be higher, but they are still often reasonable. If the websites don’t tell you, ask them.

AGood point. It’s horrid when people’s losses are so big they have no money left to fight with.

On the nitpicking, you’re quite right about the Acts. Sorry, I relied on an oversimplified summary — although it’s not going to make much difference to the outcome.

The correct situation is this: Under the FAA, all financial advisers will have to be registered under the FSPA — unless they work for what is being called a qualifying financial entity and offer only a narrow range of services, in which case it’s the entity that will have to be registered.

And to get registration, any financial adviser offering services to the public will have two options: be a member of a dispute resolution scheme or be employed by a company that is a member of a scheme. Likewise, any company that employs financial advisers will have to be a member of a scheme before offering services to the public.

Got all that, everyone? The main point is that by the end of this year, most people — including small organizations and businesses with fewer than 20 employees — will have somewhere to go for free help with grievances against advisers.

“Currently, consumers have access to the Disputes Tribunal, which has a limit of $15,000 (or $20,000 with the agreement of both parties), and bank and some insurance consumers have access to the Banking Ombudsman and the Insurance & Savings Ombudsman schemes,” says Evelyn Cole of the Ministry of Consumer Affairs. But under the FSPA there will also be other new schemes, so that clients of every adviser are covered.

Note, though, that we’re talking about “most” people being covered. As you say, there are limits to claims. “The Banking Ombudsman Scheme and the Insurance & Savings Ombudsman Scheme both have compensation limits of $200,000,” says Cole.

She adds, “This is the limit of the compensation sought, not the limit of the transaction on which the complaint is about. This limit has been set at the level limit of claims to the District Court. Claims above $200,000 are seen as more complex and thus go to the High Court.”

One recently formed disputes scheme, Financial Services Complaints Ltd (FSCL), has a compensation maximum of $100,000, says Cole. And the reserve scheme being set up by the Ministry of Consumer Affairs for providers who don’t belong to another scheme will have a $200,000 maximum. So your $100,000 to $200,000 looks spot on.