Consumer NZ has released an inaugural ‘Yeah, Nah’ awards list based entirely around the “most disappointing businesses, products and services” this year .[i] And while sometimes you get what you pay for, the overarching lesson I took from it was to read the back label, not just the front .
Much like buying a can of creamed corn that only actually contains 40% corn, it pays to look a little deeper into financial products and services before you commit .
1. What’s in the tin?
It’s all very well to want to put your money into a term deposit, or into a new type of savings account with a snazzy name like FastSave Supreme Saver (just an example but not far off!) . What do you get out of it though, apart from a name that sounds like something you want and a fuzzy feeling from doing something about your savings ?
Like the canned cream-style corn debacle, it pays to compare apples to apples… or kernels to kernels ? Certainly you should compare savings schemes to savings schemes, and then compare those to your other options for financial returns over time .
The problem with term deposits is that you need to be confident that the returns after tax on your deposit will outpace inflation . Otherwise, it’s of little to no benefit – especially if there is an unforeseen event and you need to break the term, resulting in penalty fees .
Speaking of fees – make sure you understand these before committing to opening a new savings account or signing up for an investment fund . If your money isn’t making headway against inflation, you definitely don’t need high fees eroding it too .
Is a term deposit better over time than a savings account ? Possibly, depending on the offer . But again, you’re committing to tucking that money away where you can’t use it – so make sure if you do go this route, you still have some accessible fiscal padding for rainy days .
If you’re looking to grow your money over time even with inflation factored in, consider investing in a balanced and globally diversified portfolio instead .
2. How long will it take you to reach your goals ?
As with a certain dryer which took almost four hours to dry one load of washing, some offers won’t get you where you need to be in the time you have .
Financial planning is typically through a long-term lens, so the metaphor is a little less direct in that unlike the dryers, you should be wary of anyone saying they can get it done in half the time .
However, your financial plan needs to take your unique goals, timeline and lifestyle factors into consideration to make sure they all align .
The longest period of your life is going to be the accumulation period . This is when we’re earning regularly and can contribute to savings, investments, pay down debt; all the things that a steady income from employment helps with .
De-accumulation is retirement, where you no longer have your main income . By the time you get to this point and start drawing down to cover your living costs, you want those clothes to be bone dry and ready to go – not still circling the drum, half-damp .
This is where working with a financial adviser can help . A one-on-one relationship with your adviser can guide your journey, and adjustments can be made to your investment strategy as needed to compensate for changes in your lifestyle or circumstances . An adviser will keep you on track, and more importantly, on time for planned retirement .
3. What’s your ethical stance, and is it being matched ?
Another area the Consumer NZ awards highlighted was greenwashing – two products marketed as the eco-friendlier option for waste bags were not so ‘green’ .
Terms like ‘ESG’, ‘sustainable’ and ‘ethical’ are used a lot in financial products . Unfortunately, while regulations are tightening, there is still a fair amount of ambiguity in what these terms actually mean .
If it’s important to you that your investments are not supporting certain activities or industries, you will need to get confirmation of this . You should be able to find this information as part of the general information and disclaimers, but you can also ask specifically if there is not enough detail .
If you can’t get a straight answer back – that’s probably an answer in itself .
The Value of Financial Advice
This goes beyond returns. Everyone is unique, with their own goals and outlook on life . Your financial journey is your own… but having a trusted fiduciary financial adviser in your corner is the best ‘hack’ you’ll find .
Good financial advice can offer less exposure to unnecessary risk as your adviser will know when to rebalance, and why . Then there are less easily quantifiable benefits like peace of mind, expertise, and advocacy .
As with the ‘Yeah, Nah’ awards from Consumer NZ, the proof is in the pudding – or rather, the canned goods . Prioritise value over a price tag or flashy branding, and you’ll likely come out on top in the end .
· 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. 378.
· 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 a 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.consumer.org.nz/articles/the-five-businesses-given-a-yeah-nah-award-by-consumer-nz
