by Nick Stewart

Zero tax and zero risk sounds brilliant, doesn’t it? Unfortunately (as a retired Waikato man recently found out the hard way), if someone is offering you this deal, it’s a scam.

Investing inherently involves risk. There are options with higher risk and lower risk, which you should discuss with your financial adviser to determine the best long-term plan for you and your loved ones.

Furthermore… income in NZ, including income from investments, is taxed. Even KiwiSaver is taxed on what your investments earn. There are T&C’s around koha, inheritance and prize money; but in general, if you make money, you’re going to be splitting it in some way with the taxman.

Two for two. Not a thing, though it does sound fantastic(al).

With scams on the rise and growing ever-more sophisticated, we need to exercise a very healthy amount of scepticism. In this case, the investor did a fair amount of due diligence. He even asked an investment expert, although the adviser in question has been quick to stress that he was giving informal feedback when he said it looked legitimate. Note the careful avoidance of the word “advice”.[i]

That informal feedback still cost Hawkins $150k to scammers. It’s not a good look, informal or otherwise.

You may remember the story about the Emperor’s new clothes. A pair of swindlers, an elaborate scheme that only worked so long as no one questioned it, and a loss of both face and money by the end. A lot of scams work in the same way. If you go along with the idea, you can easily become convinced to put everything you have into it – even the shirt off your back.

These more elaborate scams (the ones pretending to be banks like HSBC or Citibank, or even the NZ Post or Waka Kotahi scam texts that have circulated in the past year or so) work because they make it seem like the contact is a trustworthy source. What’s safer than a bank or a government agency? We feel like we can trust the source, so we do.

Then they might play on greed or status. If you invest in XYZ, you’ll get this much back and you’ll be able to afford all these lovely things for yourself and your family. You end up with a source you think you can trust, who only tells you good news. The scammers exploit people’s desire to grow assets and do well. That can be enough to override caution and cause someone to make poor decisions.[ii]

These recent scams are largely conducted remotely, via the phone or online. If you can’t meet the adviser or promoter in person, that’s a red flag. Another good check is looking them up on the Financial Services Provider Register (FSPR); the individual and their employer. You can also look up pertinent investment information and legal documents on the Disclose Register.

If you’re investing to get rich quick, you may as well buy Lotto. Even if a get-rich-quick scheme was ‘investment’ (likely stock picking, which is about as reliable as buying Lotto) and not depositing money directly to scammers’ pockets, it’s still highly dubious you would get the return you want from it.

Investing is not a competition. Investing is not even a skill. It’s a discipline. This is revealed with the passing of time, not short-term spurts of speculation. Guessing the market on the daily gives you no better odds than flipping a coin. On a monthly basis, 63% are positive. On a 12-month basis, 75% are positive. One a five-year basis, 88% are positive. 95% of 10-year periods and 100% of 20-year periods.[iii]

Remember the golden rule: If it sounds too good to be true, it probably is.

If you’re thinking of investing your hard-earned money, start with a chat to a trusted fiduciary. One who will take you through the proper advice process and help find the solution best for your timeframe and goals.

And when someone does give you an opinion which you lean on as advice – best ask for it in writing.

·         Nick Stewart (Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha) is a Financial Adviser and CEO at Stewart Group, a Hawke's Bay-based CEFEX & BCorp certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions. Article no. 309.

·         The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

[i] https://www.nzherald.co.nz/nz/gutted-pensioner-loses-150k-in-bogus-hsbc-branded-eco-bond-investment-scam/3BC3QB7I2NA77PG23LE7I4YFSM/

[ii] https://www.stylist.co.uk/money/scam-psychology-tactics/623933

[iii] https://www.stewartgroup.co.nz/we-love-to-write/2021/2/13/be-wary-of-financial-advertisers