We advise on approx. $1.2 billion for retail investors most of whom require a reasonable level of income and some capital growth.  We do this by investing in balanced portfolios of high-quality bonds, property/alternatives and shares.  Our clients have no exposure to nor have we ever recommended finance company debentures.  More importantly, we have no corporate department or investment banking affiliations so are not required to sell IPO’s or debt offerings just because someone pays us to do it and because we are fee-based are able to genuinely pick between the whole universe of investment offerings with the clients’ interests in mind rather than those of our employer.  In contrast most financial advisors who work for vertically integrated organisations like banks or fund managers are required to invest a large proportion of client’s funds in the banks own, usually expensive, products thus place their employer’s interests ahead of the client.  Whilst we are based in Whakatane most of our business comes from Auckland.

Our fee structure is amongst the lowest in the market for a full portfolio management service.  We are fee-based advisors so don’t take any commission from product providers.  Instead we charge a fee on the initial amount invested.  On a typical $1 million portfolio our initial fee to purchase the assets is around 0.8% of the value of the transaction.  We share this fee with the stockbrokers whom we use to buy the bonds, property or shares listed on local and overseas stock exchanges.  We charge an annual monitoring and reporting fee of around 0.35% pa on the first $500,000 then 0.25% pa thereafter.  The fee on amounts over $1 million is negotiable.   We understand that most of our competitors, private banks etc, charge about 1.0% pa on $1 million portfolios which makes our 0.35% pa relatively attractive.  In fact our fees are in line with what robo advisers charge in the US and UK so we are effectively providing a human interface at a robo advice price.  In line with the views of most academics we believe that the best forward estimate of outperformance is low fees. 

Whilst fees are the easiest point of difference to understand, the most important aspect of our advice, which is different from that of many of our competitors, is the fact that we embrace best practice – we look at how pension funds locally and overseas invest and copy these strategies.  The most important of these strategies is diversification – owning, through low-cost managed funds a large number of stocks instead of just 20 that your financial advisor thinks are “good”, (see the two attached reports).  In bond portfolios, the major difference between our strategies and that of competitors is that we focus portfolios on high-quality bonds that will survive a depression.  As regards diversification it is worth noting that NZ’s largest investor, the NZ Super Fund, invests in global shares using a low-cost index funds, owning 5,000 shares so even with all its resources it clearly doesn’t think it can beat the average by picking stocks.  Additionally, because we have no investment banking division we are not compelled to compromise stock selection to accommodate underwriting obligations i.e. unlike many of our competitors we didn’t recommend Feltex or My Food Bag to our clients.

RAISING THE STANDARD

As some New Zealanders know to their cost the standard of investment advice in NZ can vary from good to very poor. Besides earning a living one thing we have enjoyed doing over the years is highlighting some of the dodgy, stupid or humorous goings on in the NZ financial planning scene through the occasional article in the newspaper, letters to editors or, if all else fails, our weekly report to clients. Available below are a few of the more recent of these which readers might find interesting, hopefully informative, and perhaps humorous.  

Diversify the golden rule

Everyone has heard the old warning about putting your eggs in one basket – but many investors aren’t listening …

Mastertrusts take return out of risk & return

INVESTMENTS: High hidden fees take the gloss off this type of investment vehicle …

Stabilise your shares - and mind

Investing “properly” is often easier said than done but these strategies may help …