Four ways an adviser can take the stress out of investing.
There are strong advantages to investing in a diverse set of assets, but people need to enter the wider world of investments with their eyes open and with access to the best advice, writes Ian Stewart.
I’ve spent the last 25 years protecting the finances of Kiwi businesses and families, but I still get a buzz from helping first-time investors begin their journey and grow their portfolio.
There will always, understandably, be a particular nervousness around investing, and answering questions and guiding those new to the markets on how to invest remains at the centre of what I do.
Here are four key advantages of investing in partnership with an adviser.
1. Experienced And Efficient Handling Of Diverse Assets
Establishing a good investment strategy together is important for every client. With that in place, our clients can be confident they are holding money in reserves that can grow.
I always encourage my clients to invest in a diversified portfolio, where one plan can give them a dozen different assets. This may initially sound complicated, but with consolidated reporting, this tends to work out simpler than ‘going it alone’ and dealing with all the required paperwork.
Alone, a conservative investor may choose a bank savings account, thinking they will benefit from a reasonable return. However, most banks run on a two per cent margin, meaning that whatever the banks are selling your money for (in the form of loans to others), they’re taking two per cent off the top and you only receive the remainder.
One of my top recommendations to clients is to have a KiwiSaver investment, but that they don’t commit too much of their discretionary income into it because of KiwiSaver lock in. Instead, aim to build up some other assets, including those that can be quickly liquidated in an emergency.
This is why the Lifetime Group provides a ‘model portfolio approach’ for investors. That means we can develop bespoke investment choices for individual clients that best meets their needs, while also making sure there is cover for unforeseen expenses.
For example, low-risk investors might want a mixture of cash bonds and debentures, or we might recommend to others to chase real diversity and the potentially higher returns. Lifetime therefore might recommend a client get exposure to potentially higher growth assets. We can help clients access thousands of different shares through various fund mixtures.
We can reach a level of diversification through an MSCI-related share index. The MSCI World is a stock market index of 1,645 'world' stocks. This might sound like a large number, but by buying into the index, you are buying into shares like Microsoft, but with less complexity faced by a person purchasing individual stocks.
There is also safety in diversity. Small investors can get low-risk exposure to otherwise hard-to-access asset classes like Government bonds and units in listed real estate vehicles that include commercial property.
Advisers and fund managers are always selected based on their area of expertise and they have access to the top tools and systems to assess the relevant markets and make informed decisions on your behalf.
2. Saving Time And Money
When managing many individual shares, details such as tax obligations become a very onerous task for a small investor. However, f you work with an adviser and a fund manager, the back office work is taken care of and you can concentrate on watching your investments perform.
Teaming up with an adviser also helps costs, as smaller investors usually face paying higher brokerage fees than those that choose professionally-managed funds. Ultimately, an adviser saves clients time and money so they can do the things they want to do in life, which is the very reason they are investing.
Working together also gives people peace of mind, knowing they can pull money out of a number of the investments as and when they need it.
...Lifetime Group provides a ‘model portfolio approach’ for investors. That means we can develop bespoke investment choices for individual clients that best meets their needs, while also making sure there is cover for unforeseen expenses.
- Ian Stewart, Authorised Financial Adviser, Lifetime
3. Using Liquidity To Your Advantage
Although it seems just as safe to put your hard-earned money in a long-term bank investment account, when an expensive emergency arises clients will be penalised with a loss of interest if they cash a term deposit early.
The funds we use have liquidity, which allows you greater flexibility, while using a banks term deposit facility is likely to lock up your money.
We know that unforeseen expenses can occur and other urgent financial events do happen. Investing with an adviser in a diverse range of assets gives you options if access to your money if required quickly.
At Lifetime, we discuss with clients the different average returns from taking either a diversified fund or a bank deposit option. Although that return may appear similar, after the numbers have been compared the liquidity and access issue is often an important and deciding factor.
We all need to be able to use our money when we need it most.
4. Consistent Access To The Best Rates
A huge advantage of using an adviser is flexibility when it comes to the duration requirements and commitments of investments. With a Lifetime Group adviser and funds manager, your investments aren’t locked in to a time period, meaning you can take advantage of getting the best rates as and when they occur.
We do understand that some clients have the time and investment expertise themselves, and they enjoy managing some of their own investments. When this is their passion, I encourage them to do so.
However, for many, self-management and monitoring is not an option and working together literally pays better dividends.
Article by IAN STEWART
As we navigate a rather turbulent time in the market, many of us are wondering what impact this will have on our KiwiSaver come retirement, and what, if anything, we should do. Lifetime Adviser Michael Heriot explains.