Weekend reading (1 & 2 July 2017)

In the Saturday 1 July 2017 edition of The Press:

  • Susan Edmunds discusses the financial ramifications of divorce, especially for people over 50. Takeaways include: Entering into a property relationship agreement (aka a pre-nup) before marrying can save tens of thousands of dollars. Divorce is one of the key reasons people end up off-track financially beyond 50. It can be especially hard for women to get back on track if they took on more of the burden relating to childcare. Liz Koh notes that one fo the biggest mistakes people make when splitting is not getting what they're entitled to. Koh also notes that people can find it hard for both parties to adapt to a more modest post-separation lifestyle (given that they can no longer individually afford the lifestyle they had as a couple). 
  • Edmunds also talks about "How to create a sense of wealth". Two of the key tips are: "Don't keep up with the Joneses" (ie, be mindful that how you see your position depends a lot on who you compare yourself with), and "Know your net worth" - it can be easy to be stressed by a lack of cash flow when in fact you could be worth a significant amount of money, and be on track towards achieving your lifestyle goals. 
  • Liz Koh gives a primer on exchange-traded funds (ETFs). She covers a fair amount of ground, notably referring to "Research from S&P Dow Jones Indices... shows that the majority of actively managed funds (around 70 per cent in Australia) failed to outperform their benchmark indices over the last five years after taking fund management fees into account. / Of the top-performing managed funds, only a very small percentage stayed in the top-performing quartile over the five-year period. Interestingly, the research also shows that before the deduction of fees, the majority of managed funds outperformed their benchmarks".

Koh concludes with an important observation: "Ultimately the performance of an investment portfolio will primarily depend on the asset allocation. The weighting towards growth assets versus income assets has far more impact on performance than the weighting of active versus passive funds in a portfolio."

In the Sunday 2 July 2017 edition of the Sunday Star Times:

  • Martin Hawes wishes KiwiSaver a happy 10th anniversary. He starts by pointing out that "If there was going to be a celebration for the KiwiSaver's 10th birthday, it would be the banks who would party hardest". The rest of us, however, "can also enjoy a quiet tipple". The average Kiwisaver balance is around $14,000, but there are many people with substantially more. He does, however, note "that KiwiSaver has not yet been tested by a major market fall. No-one knows what people will do when they see their KiwiSaver balances sharply reduced by a market crash. Will they panic and stop contributing? I hope not, but we cannot be sure." At the personal level, it's worth considering how you would deal with this.

In The New Zealand Herald:

  • Mary Holm focuses on KiwiSaver, discussing responses she received from a survey of 300 of her readers in relation to KiwiSaver. In short: "The vast majority now have balances of way more than the amount they themselves have contributed - either directly to their providers or through deductions from their pay. Some people have more than tripled their money." One respondent had more than $420,000 in Kiwisaver. Some respondents were unhappy and did not generate much of a return, however only responded lost money - she contributed $12,350 and currently has a balance of $10,419 after 9 years. 

Sonnie Bailey

Sonnie is the founder and principal of Fairhaven Wealth.

Before founding Fairhaven Wealth, Sonnie worked in the legal and financial services industries for over a decade.

Sonnie first became involved with financial advice as a specialist financial services lawyer. For many years, he was an “adviser of advisers”, reviewing thousands of advice files prepared by hundreds of financial advisers, and providing feedback in relation to the quality and appropriateness of advice; industry best practice; risk management; and regulatory compliance. He has published work in industry publications and spoken at various financial advice conferences.

Sonnie has also worked with banks, investment management firms, insurers, and derivatives providers.

Sonnie has worked as a private client lawyer, focusing on succession, estate planning and trusts. He ran his own legal firm in Australia before relocating to New Zealand. He has also acted in independent trustee and company director positions.

Sonnie is passionate about helping people achieve their goals and manage the risks to which they are exposed.

He has written extensively on his blog, New Zealand Wealth and Risk, which can be found at www.wealthandrisk.nz.

Sonnie is married to his wonderful wife Chrissy, and has two young children, Ben and Anna.