| Welcome to the February issue of the Select Wealth Management Dashboard Newsletter. As I write, New Zealand has just re-entered various states of lockdown. After months of very little thought or consideration, this is a stark reminder of how quickly circumstances can change with Covid. Let's hope this is just a quick 3 day lockdown. Either way, remember that for Isaacs Financial Planning it's business as usual, and this does not interrupt us in any way. Remember also from an investment perspective that we (New Zealand) have been through this before, and on a global scale the world has been through far more significant disruption. Yet investments have been resilient and performed exceptionally well under stress, so this latest move out of Level 1 should not be cause for any concern or angst. That said, if you have any questions or concerns about your portfolio, please do not hesitate to contact me directly – I am here to help.
The next month is a significant month for the Financial Services Industry. On 15 March, the new Financial Services Legislation Amendment Act comes into force. This is the act that Governs the way in which Financial Advice is delivered. The purpose for the change is: 1. to ensure the conduct and client-care obligations of Financial Service Providers, and the regulation of financial markets, remain fit for purpose; 2. to set industry-wide standards for conduct and competence; 3. to engender trust in the financial services sector, and make Financial Advice accessible; and 4. to allow financial advice to be provided online as well as in person. The reality is that whilst the new legislation will result in significant change for some Financial Service Providers, you will not notice any changes at all in how Isaacs Financial Planning operates. We have been preparing for this change for some time now, so it's more of the same for our clients. However, I was at a seminar about this subject last week, and as all the Government and Industry bodies trawled through the fine print and detail in their presentations, my mind wandered and I imagined what a client of the Financial Service sector would think of it all. Could clients who have received Financial Advice even explain what "Financial Advice" is? Is it budgeting advice? KiwiSaver advice? Advice on how to structure your mortgage? Advice on what stock to buy next on the Nasdaq before it takes off...? I guess it could mean different things to different people and entail all of the above. But what I am absolutely clear on is what "Financial Advice" we deliver for our clients. "We help our clients achieve their retirement goals."em> How do we do this? For a start, we keep it pretty simple – it's not rocket science. And we follow a very disciplined approach. Here's our recipe: 1. Get to know you – really know you. We need to spend a disproportionate amount of time understanding exactly what you want from your retirement – your dreams, your fears, your priorities, your tolerance for risk. If I don't really understand this, how can I possibly design a retirement plan for you? It would be like a doctor prescribing drugs before they have done a physical examination. 2. Prepare a projection that shows you a year by year breakdown of your cashflow – your savings, your projected drawings in retirement, downsizing the home, going on the big family holiday, inheritances, buying the new car. We need to understand how long your money is likely to last given all these factors, and if you're on track with your goals or not. 3. Use conservative, but realistic, assumptions in this projection. I don't want to promise you a 15% return only to under-deliver and jeopardise your retirement. That would make me the guy who has to tell you that there's no money left in the bucket at some point in the future... No one wants to be that guy! I want to use conservative assumptions based on robust research to ensure we achieve your goals – maybe even exceed them. 4. Implement an investment portfolio which is consistent with your risk tolerance and investment preferences, and which will achieve your retirement goals. It may not be super sexy, and I'm certainly not going to pick the next Tesla, but slow and steady wins the race. 5. Recommend suitable insurance if you are exposed to risk that might jeopardise your retirement plans. Now this last one is the magic gold dust... 6. REVIEW THE PLAN EVERY YEAR! It seems so obvious, but it's easily forgotten or pushed out until suddenly 4 or 5 years have slipped by. We need to monitor your plan and make sure you're still on track. It's critical. Especially for people who are already retired. I spend most of my time encouraging this cohort to spend their money (instead of leaving it to the grave). And if you happen to be falling behind on your plan, wouldn't you rather know this and make adjustments accordingly? So, there you have it - a very simple recipe. But let that bake for 30 years, and it's fool proof. So, the next questions are how do we measure our success? How do we know if we are doing all of the above, and doing it well? Is it when the investment return is better than peer firms? Is it if the process is convenient? For me, the measure of success is simple and summed up in the following 2 questions: 1. How confident are you about achieving your retirement goals? 2. How much "financial angst" do you feel? If we are doing our jobs property, then you should be confident and experience little angst. Simple. And finally – what should you pay for this "Financial Advice" – a hot debate in the industry. I'm not quite sure what the answer is to this, but it must sound something like "fair value". What I can say is that as an industry, investment fees have been falling over the past 10 years. On average, I would say that they are about 30% - 40% lower than they were a decade ago – a material shift, but one that was needed. So your average "Balanced Portfolio" should cost you somewhere between 1% and 1.6% per annum of your account balance now (depending on your balance, provider and several other factors). At Isaacs Financial Planning, we try stay at the sharp end of that range, and that feels about right to me. I encourage feedback, and no doubt you'll let me know if you feel differently. In terms of the markets, the past month has seen continued strong performance from most share markets, the exception being New Zealand (down 4%) and the London stock exchange (down 3%). Currency markets have been muted with little movement, and mortgage and term deposit rates remain historically suppressed. Here are the numbers for the past 30 days: |
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In terms of your Select Wealth Management portfolio, there is not a great deal to report. The most material point of interest is the fact that your online portal (if you use the portal facility) is going to have a major facelift which is due to be implemented on 31 March. This will result in some significantly better information being made available to you through the portal, and a much "nicer" dashboard when you login. I'm excited about these changes, and hopefully you will find them beneficial too. Finally, a quick update on our Giving Back program. I'm pleased to say that we have had a very busy start to the year, so our campaign for Volunteer Hutt has got off to a good start and we have made a big dent in the target of $2,500. You can follow progress at https://mifinancialplanning.co.nz/giving-back.html Thank you for your continued support, and the referrals of family and friends – I really appreciate it. Until next time, take care and stay safe. Warm regards Dave and the team at Isaacs Financial Planning dave@mifinancialplanning.co.nz |
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This newsletter is intended for general distribution and does not constitute personal financial advice. Copy of my primary disclosure statement and secondary disclosure statement.