Personal Finance

  • Insurance broking and advising industry shake-up will not, after all, include a ban on commissions

    The Government appears to have backed away from the possibility of banning commissions paid to Financial Advisers and insurance brokers.

    As part of  its review of the Financial Advisers Act 2008 and the Financial Service Providers Act 2008 the Government earlier touted the idea of following the Brits in banning brokers and advisers from receiving commissions.

    However, in a just-released options paper prepared by the Ministry of Business, Innovation and Employment, a ban is not included in any of the three proposed 'packages' of changes. Minister of  Commerce and Consumer Affairs Paul Goldsmith recently gave strong hints that he was against a ban on commissions.

    And the latest MBIE options paper, in saying that a ban is "not currently a preferred option", goes on to say that such a ban could "could limit access to advice to those who are not willing to, or cannot afford to, pay upfront for advice".

    It goes on to say: "Relative to a broad ethical obligation, it can be difficult to design a ban or restriction without the possibility of advisers finding a loophole in the requirements."

    The options papers follows an issue paper on the review, released earlier this year, which asked the public to give their feedback on restricting, or altogether banning commissions.

    Submissions are now being sought by February 26 on the latest paper. The final report on the operation of both of the Acts will be provided to the Minister of Commerce and Consumer Affairs by 1 July 2016. This report will include any recommendations for changes arrived at after the options paper consultation process.

    The three proposed, alternative, 'packages' outlined in the paper range from very minor tweaks in the rules to slightly more prescriptive changes.

    These are outlined in brief in the graphic below.

    Goldsmith said the Government's aim was to increase consumer confidence in financial advisers and the advice they give, "so that people can make informed decisions about their money”.

    "We hope to make improvements to this regime so that all New Zealanders, including those with simple questions and without large sums to invest, have access to trusted financial advice should they want it. 

    "We’ve heard, for example, that the current regime is overly complex and that this has reduced access to financial advice. Another complicating feature is that people don’t always know whether they are getting genuine advice or whether they are being sold a product, such as insurance or investments.

    "Current rules around the disclosure of commissions and potential conflicts of interest are inconsistent. The options paper canvasses different approaches to achieve greater consistency across the board.

    "This paper outlines options, ranging from minor changes to more fundamental reform, for simplifying the regime and addressing the issues that were identified in the initial consultation phase.

    "I encourage the users and providers of financial advice, across all sectors of the advice industry, to give feedback so that we can get a regime that is workable for the industry and helps improve the financial wellbeing of all New Zealanders."

  • Statistics NZ figures confirm big jump in home insurance costs since 2011

    By Gareth Vaughan & Jenée Tibshraeny 

    New Zealanders are paying more than 70% more to insure their homes now than they were in 2011, Statistics NZ says.

    In its June year Household Economic Survey, released yesterday, Statistics NZ says weekly spending on building related insurance rose an annual 9.9% to $28.70. The increase was even higher in Canterbury, which was hit by big earthquakes in 2010 and 2011 followed by a series of aftershocks, where costs rose 16.1%.

    "Since 2011, building-related insurance payments have increased by over 70%. On average, households now spend $12.10 more a week than in 2011," Statistics NZ says.

    The new Statistics NZ data comes with major insurers still feeling the effects of the devastating and tragic February 2011 earthquake that killed 185 people. This week Tower posted a $6.6 million annual net loss after tax having increased its provisions for the quake by $36.2 million after tax. And there's still anger and frustration in Christchurch over the slow resolution of some earthquake related insurance claims.

    Insurance Council of New Zealand (ICNZ) chief executive Tim Grafton says, "There's no doubt the earthquakes in 2011 have seen a very sharp increase in the insurance rates right across the country. 

    "In part that reflected an almost doubling or tripling of reinsurance costs in 2011 and 2012, because the industry suffered very significant costs globally during that time."

    Grafton also notes there are a number of Cantabrians, who through the repair or rebuild process have made upgrades to their homes, which have seen the value of their sum-insured increase. 

    Cantabrians have also been taking out additional contract works insurance, while work has been done to their properties.

    Looking beyond Canterbury, Grafton says the combination of building costs going up, and more people getting assessments done on their sum-insured, may have hiked premium prices. 

    Figures from the ICNZ's 2014 Review shows last year general insurers parted with the smallest portion of money they received through premiums, to pay for claims, since at least 2004 (when started collecting this data).

    Insurers paid an average of $60 in claims for every $100 they received in premiums. This saw their loss ratio drop to 60%, from 68% in 2010, 112% in 2011, 68% in 2012 and 62% in 2013.


    *Statistics NZ defines building related insurance as when a household pays premiums to an insurance company or broker for coverage in the event of damage occurring to a dwelling. The definition can also include premiums paid for house contents and vehicles.

    Meanwhile, the Household Economic Survey also shows average weekly household mortgage payments of $400.20, a year-on-year rise of 3%. Rent payments rose faster, up 4.2% to $301.

    "The increase in rent payments was particularly strong in the Auckland region, up 10.9% to $395.30 per week. Households in Auckland continue to spend more on rent than households in other regions. The average weekly rent payment in Wellington was $296.10, followed closely by Canterbury, at $292.10," Statistics NZ says.

    Statistics NZ says 33% of households reported making mortgage payments, and 36% made rent payments. 

    For the purposes of the survey, mortgage payments include mortgage principal repayments, mortgage interest payments, and application and service fees for mortgages. Rent payments include rent paid for primary property, and for other properties, plus other payments connected with renting being bonds, ground rent, and easements.

    Elsewhere in the survey the chart below shows the gap between average total income and average total housing costs narrowing significantly since 2013.

    *A version of this article was originally published in our email for paying subscribers early on Friday morning. See here for more details and how to subscribe.

  • Markets move against the yellow metal as physical demand sinks, costs of holding it look set to rise, and the US dollar rises. China sentiment doesn't help either

    The price has fallen sharply in London today.

    It is now at a six year low, down more than -1% to US$1,057.40/oz. That is down from US$1,071 yesterday.

    In local currency it is down to NZ$1,618/oz.

    Much of the drop is because of the strength of the US dollar. In NZD terms it is only a six month low.

    But the slumping US dollar price has a huge impact on overall sentiment.

    The imminent Fed rate rise compounds the problems for the yellow metal. Rising interest rates raise the opportunity cost for holding the commodity because it does not generate a return. It costs money to store it, and the only profit comes from capital gains. Capital losses undermine its investment value.

    Physical demand factors are not good either.

    India's gold buying in the key December quarter is likely to fall to the lowest level in eight years, hurt by poor investment demand and back-to-back droughts that have slashed earnings for the country's millions of farmers.

    China has been buying more, but the most recent data on flows through Hong Kong show declines.

    Precious metals funds posted their biggest net outflow last week in around four months, said Bank of America Merrill Lynch.

    Other precious metals - silver, platinum and palladium - were all heading for weekly declines.

    All this comes on the same day that Chinese stocks took a tumble, down more than -5% in Shanghai.

    And Japanese unemployment reached a 20 year low with employment levels near record highs - but pay isn't responding to rising labour demand. Other data showed that household spending fell -2.4% year-on-year. Deflation is stubborn against the Abenomics medicine.

    We have detailed gold, silver and other precious metals data updated daily on this service. Here are the direct links to this daily data ...
    gold coins,
    gold bars,
    gold scrap, and
    international precious metals prices.

  • A drop in lower quartile house prices and lower mortgage costs have improved housing affordability but first home buyers will still struggle in Auckland

    By Greg Ninness

    Life became slightly easier for first home buyers in many regions last month thanks to a small drop in the lower quartile selling price and the ongoing slide in mortgage interest rates, according to the Home Loan Affordability Report.

    The report said the REINZ's national lower quartile selling price dropped back from its all-time high of $309,000 in September to $305,000 in October, with falls occurring in Auckland, Waikato/Bay of Plenty, Taranaki, Canterbury/Westland Central Otago/Lakes and Southland.

    The biggest falls were in the two most expensive regions, with the lower quartile price in Auckland dropping back to $611,500 in October from its all-time high of $630,500 in September, and in Central Otago Lakes where it dropped back to $334,400 in October, compared to $368,700 in September and it's all-time high of $403,800 set in June.

    However six regions, Northland, Hawkes Bay, Manawatu/Whanganui, Wellington, Nelson/Marlborough and Otago, went against the trend and posted increases in their lower quartile selling prices in October compared to September, and lower quartile prices hit new all-time highs in four of those - Northland, Manawatu/Whanganui, Wellington and Nelson/Marlborough - leaving first home buyers in those regions with little to cheer about.

    Mortgage interest rates have also continued to fall, with the average of the two year fixed rates offered by the major banks dropping to 4.84% in October compared to 4.97% in September and 5.95% in October last year.

    That combination of falling interest rates and lower prices saw the mortgage payments on a lower quartile-priced home in Auckland drop from $791.12 a week in September to $755.19 in October, providing a saving of $35.93 a week.

    Auckland home ownership out of reach for many first home buyers

    Unfortunately while the improvement in affordability would be welcome, housing in Auckland is now so expensive that even with the latest fall in prices and interest rates, owning their own home will remain out of reach for many first home buyers.

    Housing is considered affordable when the mortgage payments take up no more than 40% of take home pay and the Home Loan Affordability Report estimates that the combined take home pay of a typical first home buying couple in Auckland (both aged 25-29 and working) would be $1529.65 a week, which means mortgage payments of $755.10 a week would consume 49.37% of their take home pay, and that's before adding other property-related expenses such as rates, insurance and maintenance.

    That means the lower quartile selling price in Auckland would need to fall about 20% before mortgage payments could be considered affordable for typical first home buyers, even at the current record low interest rates.

    However even before they could take on a mortgage to buy a home, one of the biggest hurdles first home buyers in Auckland would have to overcome would be scraping together a deposit.

    A $122,300 deposit

    A 20% deposit on a lower quartile-priced home in Auckland would be $122,300 and although lower equity loans are available, these usually come with an interest-rate premium, meaning buyers with less than a 20% deposit probably wouldn't be able to take advantage of some of the fiercely competitive specials many banks have been offering, because these are usually reserved for buyers with a deposit of at least 20%.

    According to the Home Loan Affordability Report, Auckland remains the only region of the country where housing remains severely unaffordable for first home buyers.

    In Wellington where the lower quartile price was $349,600 in October, making it the second most expensive region for first home buyers, they would only need to save $69,920 for a 20% deposit and the mortgage payments of $407.83 a week would take up just 26.04% of a typical first home buying couple's take home pay.

    In Canterbury the lower quartile price was $346,000 in October, which would only require $69,320 for a 20% deposit and the mortgage payments would take up 26.6% of a typical first home buying couple's take home pay.

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  • Financial institutions must develop a culture owned and understood from the boardroom to the call centre to meet FMA's new sales & advice expectations, says EY's Rebecca Sellers

    By Rebecca Sellers*

    The Financial Market Authority's just-released report on sales and advice indicates a tougher line on conduct and culture.

    Ticking the boxes required to comply with the financial advice regime is no longer sufficient.

    The FMA will be viewing sales and advice conduct through a new lens.

    The financial advice regime was a child of the Global Financial Crisis. Although only in force for five years, the regime has not aged well. The lines between sales and advice are blurred. This lack of clarity increases costs for consumers, who can find compliance processes frustrating. Phoning the bank for knowledgeable guidance can mean a customer spends hours completing a needs assessment. Process is more important than conduct. Indeed the only conduct required could be summarised as “not negligent”: a financial adviser must, when providing financial advice, exercise the care, diligence and skill that a reasonable financial adviser would exercise in the same circumstances. 

    This report shows that the FMA is moving on. “Not negligent” is not good enough – conduct is king. The FMA’s future focus is to work collaboratively with the sector to help participants improve their sales and advice systems and ensure those systems are aligned with the intentions of the new financial markets conduct regime. The FMA expects that the same care and attention is given to sales practices as is given to financial adviser services: to minimise the risk of customers being mis-sold financial products. All conduct associated with selling insurance or investments must meet the fair dealing requirements. 

    The focus on sales rather than advice is appropriate. KiwiSaver now accounts for more than $28 billion of New Zealander’s savings. The report reveals that when people buy KiwiSaver, they rarely receive financial advice that takes into account the investor's individual financial situation. For every 1000 sales or transfers of KiwiSaver products, only three sales were recorded as being sold with personalised advice. Most New Zealanders bought their KiwiSaver on the basis that “KiwiSaver is a good idea because it will help you save for your retirement”. 

    The FMA states that a key theme of the report is “putting customers’ interests first”. What does it mean to place the customer first? Clearly, the old adage of “buyer beware” is no longer appropriate for product providers, although increased financial literacy by consumers would help develop a mature market. Putting customers’ interests first and acting with integrity is a minimum standard of behaviour for Authorised Financial Advisers. QFE customers must have their interests put first where they receive personalised advice on a complex product.

    Although product providers must deal fairly with a customer, there is no universal law that customer’ interests must come first. Regulation consists of hard and soft rules and the FMA’s expectations play a part in that matrix. Putting the interests of customers first demonstrates the conduct that the FMA want to see in the market. For each institution and product line, there will be a different answer to the question - what does it mean to put customers’ interests first?

    The process of answering that question is part of developing a strong and healthy culture within an organisation – and a strong and healthy market. The FMA has an agenda to increase access to financial advice. The report emphasises that access to appropriate advice is important for more complex financial products such as derivatives and where customers are making instant decisions that will have long-term significance for them. Particularly for KiwiSaver, the FMA is concerned that consumers are not always receiving the support they require or desire. The FMA expects that when determining whether an information-only, class or personalised service will be provided for a KiwiSaver sale or transfer, the best interests of the customer must drive this assessment.

    The FMA is not a lone voice calling for access to appropriate advice. In the UK, banning commissions has reduced access to advice. Last month, the UK Treasury and Financial Conduct Authority launched an investigation on how to improve consumers' access to quality and affordable financial advice. The study will examine the kind of financial advice that consumers want and whether there are gaps between what customers want and what they can access and afford.  

    The news that the FMA will be updating its “impractical” 2012 guidance on the sale and distribution of KiwiSaver and personalised advice is to be welcomed. However, in order to meet the standards of conduct expected by the regulator, organisations must develop a culture that is owned and understood from the boardroom to the call centre.

    Everyone involved in sales and advice must be able to justify how they put the interests of customers first.


    *Rebecca Sellers is special counsel - financial services leader at EY.

  • The Co-operative Bank trims 3 and 4 year mortgage rates; CEO says customers want longer term loans not the short term ones other banks are pushing them towards

    The Co-operative Bank has trimmed 10 basis points off both its three and four-year mortgage rates giving the bank the lowest carded, or advertised, four-year rate currently on offer from any NZ bank.

    The bank's three-year rate is being cut to 4.75% from 4.85% and its four-year rate to 4.89% from 4.99%.

    The move comes a day after rival SBS Bank introduced a headline grabbing 3.99% one-year rate

    Announcing the reductions to his bank's three and four year rates, Co-operative Bank CEO Bruce McLachlan noted "many" other banks were enticing customers to take shorter-term mortgages. 

    "However, we are seeing the market indicate that home buyers want to secure attractive rates for their home loans on a longer-term basis. We put our customers before profits, and our focus is solely on what’s best for them. We believe that reducing long-term fixed home loans rates is absolutely the best thing to do for our customers," said McLachlan.

    Co-operative Bank's new four-year rate is the lowest from a bank. However at 4.49%, ASB has the lowest three-year rate although ASB customers require equity, or a deposit, of at least 20%. See all banks' carded, or advertised, residential mortgage rates here.

    All Co-operative Bank's fixed-term rates are below 5% with McLachlan saying "many" customers are choosing the 4.99% five-year rate. The new rates are available to new and existing Co-operative Bank customers from November 25.

  • Regulator wants to see financial institutions reward staff just as much for serving customers' interests as for meeting their sales targets

    By Gareth Vaughan

    The Financial Markets Authority expects banks and other financial institutions to reward staff for conduct that addresses customers' best interests to the same extent as rewarding them for achieving sales and bonus targets, the FMA's director of regulation Liam Mason says.

    Mason told this was one issue the regulator was trying to emphasize in its first monitoring report on practices in sales and advice in the financial services sector, released this week.

    The report notes vertically integrated distribution models, where a business is the provider, manager and distributor of a product, can exacerbate conflicts of interest. Remuneration and incentive arrangements can also reinforce conflicts of interest, especially when sales staff are remunerated on a volume basis or through bonus structures, the FMA says. Firms often lack systemic approaches to conflicts of interest, the report adds, noting examples of cases where customers were sold life insurance or KiwiSaver when their original intention was to get a credit card or home loan.

    "That (potential conflicts from vertically integrated models) is something we've highlighted in our strategic risk outlook as being an inherent driver of risk in financial markets in New Zealand and other places," Mason says.

    "And what we're saying with this report is not stop doing this necessarily, but we expect firms in the future to show us how they're balancing any conflicts of interest that are built into their distribution models. So how they're balancing one set of incentives with another, how they're rewarding conduct that looks after customers outcomes just as much as they're rewarding conduct that is based on sales or volume targets."

    'Not seeing QFE system making it easier to provide advice to customers'

    The report notes there are 26,000 advisers working for 57 organisations such as banks known as qualifying financial entities (QFEs). Mason says many financial sales and advice providers couldn't tell the FMA whether advice, class advice or personal advice, was being provided to customers or not. Cascading up through the institution that makes it "incredibly difficult" for the board and senior management to have a focus on how their processes improve customer outcomes, Mason suggests.

    "And that very much comes through within the QFE system where this is a model designed to make it easier to provide advice to consumers, but what we don't see from this data is that that's coming through to advice being provided to consumers."

    The FMA report also notes about half KiwiSaver sales in the six months from May to October last year were transfers between schemes, or switching. There were about 70,000 transfers over the six months with the net effect being non-banks losing market share to banks. Asked whether this switching volume was higher than expected, Mason says the FMA doesn't have a view on what an optimal number could or should be.

    "One of the things that we have to keep in mind whenever we're looking at KiwiSaver is it's a built in part of the KiwiSaver system that people can easily transfer between schemes," says Mason.

    "KiwiSaver rules do allow certain types of incentives and the focus there really is on minor incentives and also on things that aren't external to a KiwiSaver scheme. What we're looking for and what we're engaging with firms to talk about is we're looking for incentives that aren't a distraction from the advice or assistance that can help consumers to make their choice based on merits of the scheme and the scheme that's the best fit for them."

    KiwiSaver members transferred without their consent

    The report highlights, as "an isolated area of concern," KiwiSaver members being transferred without their consent. The FMA says it doesn't have evidence that this is widespread, but has "followed up with one provider in particular to improve their controls." Furthermore it notes two providers who had a high percentage of member requests for transfers out that were subsequently stopped saying, "we will follow up and monitor switching and retention tactics to ensure members are being treated fairly."

    Mason declined to name any of the firms involved and confirmed the FMA's not currently taking enforcement action against any KiwiSaver provider. 

    "The firm in question (in relation to members being transferred without their consent) engaged with us very willingly and very well to improve their systems and that's what we want to encourage. We want effective improvement and that's what we're seeing," says Mason.

    And the FMA is still engaging with the two firms who had a high percentage of requests for transfers out stopped, with the percentages being 12% and 26%, much higher than the average, Mason notes.

    "These are firms where the member has been transferred from their scheme and then transfers back. So what we're wanting to talk with them about is to ensure that we're not seeing any overly aggressive retention tactics."

    No systemic mis-selling

    Despite the concerns raised and improvements sought, Mason says the FMA isn't seeing any systemic mis-selling in the KiwiSaver market.

    "We're not seeing widespread the context of mistreating customers or illegal practices, we're not seeing that," says Mason.

    The FMA wants to see KiwiSaver members engage both with the product and their provider, he says, asking for advice if they need it.

    "And they should expect to be given advice or to be directed to where they can get advice."

    FMA's going to have 'much higher expectations'

    For financial service providers the FMA's signalling a need for improvement in governance, compliance, supervision and reporting, Mason adds.

    "We understand this is a change that will take some time to come through because we are looking at behavioural and cultural change within firms. So we do want to work with them to achieve that."

    KiwiSaver providers have got until the end of 2016 to transition to the new regulatory regime under the Financial Markets Conduct Act.

    "We're signalling that we're going to have much higher expectations coming under that," Mason says.

    'In terms of the standards that we're signalling here, licensing gives us a real range of tools that we can use."

    Revoking an entity's licence will be the most serious option available to the FMA. Other options will include censures, warnings, slapping conditions on licenses, stop orders and directions to improve standards and comply with the new standards.

    The charts below detail the membership growth of bank run KiwiSaver schemes, and 826 complaints recorded by KiwiSaver providers during a six month period reviewed by the FMA.


    *This article was originally published in our email for paying subscribers early on Thursday morning. See here for more details and how to subscribe.

  • Elizabeth Kerr looks at charity, tithing, and gift giving and where it fits within your money machine goals

    By Elizabeth Kerr

    Have you heard of the John Templeton Foundation?  It’s an organisation which supports scientific research on spirituality and the BIG life questions such as ‘Will the free market corrode moral character? Or ‘Will science make God obsolete?

    It’s bloody fascinating stuff. 

    This week they’ve come out saying that children who grow up in non-religious homes are more generous than those in religious homes.  

    Hands up if you thought it would be the other way around?

    I have no opinion on whether this is true/right/wrong but this got me thinking about generosity – specifically where might charitable donations, tithing and gift giving fit within your money machine goals.  

    It turns out if you want to build a money machine one of the surest ways to get there is to give your money away. 

    No, I haven’t lost my marbles. Just keep reading…

    Starting with Science!

    Researchers at the University of Columbia analysed people’s budgets and discovered that those who spent more money on other people than they did on themselves were so much happier and content with their lives than the others.

    So imagine that you have $20 and you are in a florist shop and you can spend the $20 on a bunch of flowers for yourself or on a bunch for someone else.  

    If you spend it on yourself then you are at the mercy of Hedonic Adaption.

    You buy the flowers, take them home, put them in a vase, admire them for a day or two and then you forget them until they are wilting all over your tablecloth and you have to throw them out. Within a year you quite possibly have forgotten you even brought them.  

    However, spend the time choosing the perfect bunch for someone else and you get a time bank of warm fuzzies, which will last forever because gift giving isn’t subject to hedonic adaption. You get joy from picking the flowers, joy from imagining the surprise of the recipient, joy from their happy reaction and afterwards the awesome feeling of knowing you made a good impact in that person's day. Now every time your brain recalls giving that gift you will feel all of these feelings as clearly as you had when you originally gave the flowers, no matter how long ago it was.

    Now pay attention, the punch line is coming up!!!  The really great news about this phenomenon is that this giving needn’t cost you a fortune.  A small $5 to someone who really needs it delivers the same return on investment in your own gratitude and contentment as say $200 might. 

    So, why we aren’t all selfless gift givers or charity donators?  It’s because we are all a bit arrogant and stupid!. The researchers probed a little further and found that we actually think it’s the other way around – we think that buying stuff for ourselves will make us happier than giving it away. Given the choice in the florist most people will choose to buy flowers for themselves first. But as I’ve illustrated, the happiness is only short lived.

    Charitable Donations

    The complexities for how this all fits inside your money machine goals are subtle and worth understanding. 

    You see, after you’ve paid for all of your non-negotiable needs and set aside money for your money machine, anything that is left over could be wasted by buying cheap clothes or unnecessary goods and services that eventually clog up our landfills. 

    Or it could be used to support things that you feel passionately about, and in turn bring about a deep content for your own good fortune. 

    A while back I talked about how the way you spend your money is a reflection of your values. I like to think of donations as empowering people to do the things that I physically can’t do right now in this season of my life, but which I think are really important. No, I’m not referring to a gardener or cleaner, I mean the scientists and community workers who actually have an impact on people’s lives. The people who run breakfast clubs in low decile schools, support women at Womens Refuge, provide gumboots and jackets to those who need them, and house and educate teen mothers. I can’t do any of those things right now so I get pleasure from knowing I’m supporting those who can. Empathising and supporting those who really need help with their own non-negotiables like this can bring you a huge sense of peace with your own financial place in the world.  

    Should I tithe or donate before my money machine is completed?

    This is a very good question. My surface answer is that ‘it depends’. If you have calculated when your Money Machine will be ready (for your early retirement) based on your current savings percentage AND you are happy with that progress knowing that it includes tithing’s and donations then you have your answer.   

    My personal take on it is that giving begets receiving.  Financial karma is a bit harder to demonstrate in an excel spreadsheet. But if you look at most wealthy people the really happy ones are always giving their money away and lack for nothing. The Bible goes into great detail about this – but I’ll save that for another day (unless you tell me otherwise). 

    Taxes and your donations

    Donations that are over $5 are subject to tax deductions provided the donation is made to a registered charitable company. Most churches are included in this so if you are a regularly tithing then be sure to keep your receipts or ask your church for a statement at the end of the financial year outlining your contributions. Loose change in the offering basket is harder to prove as yours, so, you need to use a giving envelope or internet banking transfers.

    A valid receipt must contain:

    • the name of the donor(s)
    • the amount and date of the donation
    • a clear statement that it is a donation
    • a clear statement at the top of the page if the donation is a payroll giving donation
    • the signature of an authorised person, and
    • an official stamp with the name of the approved donee organisation.

    As we close this week, I leave you with this: Giving money away to worthy recipients makes you realise just how lucky you are with what you have; and contentedness is the biggest weapon you can have against aggressive consumer marketing.

    As we enter into the biggest consumer drive in the lead up to Xmas, try to stop for a moment and think about how you can bless those around you rather than buying into the crazy Xmas shopping chaos. Science guarantees you will take more long-lasting pleasure in the gifts toward those in real need than you will in any for yourself.

  • Insurance sector warns most NZers will be seriously strapped for cash if they get too sick to work; financial literacy expert says insurers should swap 'product-based' approach for 'needs-based' approach

    The insurance industry’s sounding the alarm bells, following its latest poll showing just how strapped for cash many New Zealand households will be, if their breadwinner gets sick.

    A poll of 2540 people, commissioned by the Financial Services Council (FSC), shows around half (47%) of employed 18-64 year-olds can’t survive for more than a month after using up their sickness and annual leave.

    With only 26% of those surveyed having some form of income protection, the remainder will be at the mercy of their family, friends and the Government to keep them afloat if sickness strikes.

    What’s more, the poll shows the Government may not be as supportive as many think.

    The FSC says the average family needs $683 a week to make up for a main income earner not being able to earn because of sickness, but the maximum Job Seeker Allowance (previously the sickness benefit) available for a family with dependent children, is only $340 a week.

    Some people may also qualify for an accommodation supplement to go towards mortgage or rent payments.

    But there’s a catch, which the survey results show 51% of 18-64 year-olds are unaware of. If you get sick and your partner earns more than around $30,000 a year, you will be excluded from receiving some, or all of the Job Seeker Allowance.

    As for ACC, the survey found one in five New Zealanders wrongly thinks ACC covers all long-term sickness, not just those related to long term workplace exposures.

    So essentially, the low uptake of income protection insurance, coupled with the weaker than assumed government safety net available, leaves a number of New Zealanders vulnerable in the event of them getting sick.

    You’re more likely to have to stop working due to illness than an accident

    The FSC poll shows seven in every eight households struck by serious illness preventing employment for six months or more, didn’t have income protection insurance in place when it happened.

    FSC chief executive, Peter Neilson, says coverage of income protection insurance has increased from about 20% in 2010, but remain low compared to the uptake of other types of insurance.

    Around 80% of households have a vehicle insured, 70% have home and contents coverage and 60% have their homes insured.

    Neilson says this can partly be explained by many people not realising their income, rather than their home, is their most valuable asset.

    An income of $50,000 a year over 40 years comes to $2 million – much more than the value of most homes. 

    He says New Zealanders also typically underestimate their likelihood of being off work for a long period caused by sickness. 

    Survey results show more than 1,000 families a week (54,800 a year) experience a sickness that prevents a main income earner from working for three months or more.

    Furthermore, 60% think they have about the same or greater likelihood of being off work long term following an accident rather than following sickness.

    In fact for the population as a whole you are 2.2 times more likely to be off work for six months or more from sickness compared with an accident.  For the 18-64 year olds it is 1.8 times more likely.

    Industry needs to change tact

    A financial literacy expert says the life insurance sector needs to change its sales tactics if it wants more New Zealanders to see the value of insuring their lives.

    The director of Massey University’s Financial Education and Research Centre, Dr Pushpa Wood, says insurers should exchange their “product-based” approach, for a “needs-based” approach.

    They should be focusing on the types of cover their clients need, and the budgets they’re on, as opposed to fixating on the types of products they can sell them.

    She says insurers have made improvements, but still have a way to go targeting the right products to the right audience.

    Furthermore, she recognises income protection can be a hard sell, as the loss of income can be more “invisible” than the loss of a house for example. 

  • Max Rashbrooke warns taxes on wealth are needed to stop inequality from further compounding

    By Jenée Tibshraeny

    There are renewed calls for trust fund babies, rich kids, silver-spooners and inheritors of old money, to give some of what they’ve been given back to society.

    Journalist, researcher and author, Max Rashbrooke, says New Zealand needs to start taxing wealth, in addition to income, to curb inequality.

    In his book released this week, ‘Wealth and New Zealand’, he proposes introducing a new tax regime that could include a wealth, inheritance, gift or more robust capital gains tax.

    “It’s one thing if people have worked for their income, but when they’re inheriting it, that’s self-evidently unfair because lots of people don’t inherit anything,” he told in a Double Shot interview.

    “That sense of compounding inequality going forward, which really restricts the opportunities for the next generation; I think that’s what has people worried.”

    “It’s not entirely new – there’s always been inherited wealth… but the point is it’s almost certainly getting worse.”

    Rashbrooke explains, “New Zealand is about as unequal as most other developed countries. Our wealthiest 1%, that’s about 34,000 adults, have about a fifth of all the wealth in the country.

    “You expand that out to the wealthiest 10%, they’ve got over half of the wealth in the country. That’s pretty much what you’d find in countries like Germany or Canada.

    “That’s a huge concentration at the upper end. What I think it tells you is that although we like to say we’re an egalitarian country, we actually aren’t.” 

    Wealth inequality both worse and more ‘in your face’

    Rashbrooke, who’s also authored, ‘The Inequality Debate: An Introduction’, says we talk a lot about income, but policymakers need to direct their attention to wealth.

    He describes income as a river and wealth as the reservoir this income flows into.  

    “Income is what gets you through the week, but having wealth to draw on is what gives you stability, it gives you security, it gives you the chance to ride out the tough times and plan for the future,” he says.

    “The fact that a small number of people have got a very large amount of the wealth, and a huge number of New Zealanders – you know half the population – have got virtually no wealth at all, makes an enormous difference to what kind of lives people can lead.”

    Rashbrooke believes wealth inequality has become both worse and more pronounced due to social media over the last 30 or 40 years.

    While there isn’t hard data on how wealth inequality has changed over this time, he says there’s data showing income inequality has shot up.

    “Not everyone has a problem with that, and you can make an argument that that’s because of merit and hard work and stuff, but what we are now seeing is that generation of older people, who became much richer over last 30 years, they are now handing that over to the next generation, and I think that’s what really gets people concerned,” he says.

    Housing the locus

    Rashbrooke admits, “Housing is where you see all those factors of the last 30 years, of those growing gaps… coming together.

    “It was about 20 to 30 years ago that you started to have this big shift in shares of income going towards the rich. And that came at about the same point that house building rates started to taper off, in part because of a very big reduction in the amount of social housing that got built.

    “You’ve got all these things, which are compounding, and they come together, and the locus of them is the housing market. Disproportionate income shares, inheritance and lack of housing means there is a very limited number of houses going, and yes, they will inevitably go to people who’ve got parents who can help them.”

    Tax at one end, handouts at the other

    Rashbrooke says, “New Zealand is pretty extraordinary in that fact that we don’t tax wealth in any meaningful way.”

    He notes that without an inheritance, wealth, gift, land, or real capital gains tax, the wealthy keep getting wealthier.

    “If anyone’s done well in New Zealand – if they’ve generated wealth – normally there’s a lot of hard work and effort in it. But they’ve also driven on roads everyone’s paid for, and are employing a workforce educated at the public’s expense. So there’s an argument for putting a bit back to the common pool of resources, and that’s the tax.

    “Whatever you did, logically you would then try to find a way of channelling that to the people at the lower end of the scale, who don’t have any assets.”

    For example, Rashbrooke suggests giving cash grants to everyone when they enter adulthood, or initiating a savings scheme where the government matches any savings parents put in a fund for their children.

    He denies cutting down the ‘tall poppies’ in his work.

    “Any wealth that’s been created; no one’s done it all by themselves as an island. They’ve done it by drawing on the common pool of resources that society provides; the infrastructure, the health system, the education, whatever else. If that common pool of resources is going to be there for the next generation, you have to feed back into it, otherwise it just gets depleted.”

  • NZ's leading insurance fraud expert reveals how to spot a fraudster; says industry is using new data mining technology to crack down on offenders

    By Jenée Tibshraeny

    Dust off that moral compass and picture this:

    Your iPhone gets stolen from your hotel room while you’re lounging on a beach in Thailand.

    You’ve forked out tens of thousands to pay for contents insurance over the past 20 years, never to have made a claim before. You’ve also done what all sensible people do, and taken out travel insurance for your holiday. Do you:

    A. Capitalise on the fact your iPhone’s covered under two insurance policies, so make two claims for the one stolen phone. You have after all paid two premiums, so deserve to get your money’s worth, right? Plus your contents and travel insurance are with different providers, so they’ll never know.

    B. Milk your misfortune by claiming your laptop was also stolen from the hotel room. It’s a totally plausible story – things get stolen from hotel rooms in Thailand all the time – and what’s an extra $1,500 to a big insurance company anyway?

    C. Keep things simple and make one claim for your stolen iPhone.

    I have no doubt readers are good and honest people, so will select option C, but options A and B could be justified couldn’t they?  

    The reading on your moral compass aside, the manager of New Zealand’s Insurance Claims Register (ICR) Dave Ashton, says there’s no grey area; options A and B are fraudulent and the likelihood of offenders getting caught is going up as technology improves.

    Delivering this stark warning to those gathered at the Insurance Council of New Zealand Conference on Wednesday, Ashton explained the ICR is an electronic register that holds a central record of around 90% of the fire and general claims lodged with the major insurance companies in New Zealand.

    Companies can access a claims history of a client when underwriting new business and processing claims, for the specific purpose of checking for fraud.

    Likelihood of being caught increases with better data mining technology

    Ashton warns the consequences of being red-flagged for a seemingly minor insurance fraud offense can be major.

    It can see you pay higher premiums and struggle to get insurance, which really becomes an issue if you’d like to take out a mortgage. It can even land you in prison.

    What’s more, the ICR just last week upgraded its systems so insurers can better pre-empt, identify and track fraudulent claims. They can access claimants’ details in real time, and use data mining tools to see geographical areas claims are being made from.

    The ICR has over seven million records in its database, and is adding about 300,000 to this each year. It has flagged around 8000 claims as potentially fraudulent.

    While insurance companies usually shy away from talking about insurance fraud, to avoid making their clients feel judged or challenged, Ashton notes the public are becoming less tolerant towards fraudsters.

    He says people are increasingly dobbing in their friends and family for making fraudulent claims, as they recognise insurers are likely to offset losses made to fraud, by hiking premiums for all their customers.

    He notes it’s hard to say exactly how much insurance fraud is committed, but estimates it could be between $150m and $250m a year in New Zealand. Internationally it’s thought to be between 10% and 20% of gross written premiums.

    Tricks of the trade

    Ashton identifies the following ways people commonly commit insurance fraud:

    - Breaking the ‘moral seal’. People often start making fraudulent claims once they’ve made their first legitimate claim. They realise how easy it is to get their goods replaced, so break that ‘moral seal’ and become repeat offenders, often after years of making no claims at all.

    - Making fraudulent claims when new technology is released: Ashton says the number of insurance claims made after new high value technology is released increases by around 25%, as people try to get their goods upgraded, courtesy of their insurer.

    - Making fraudulent claims during major weather events.

    - Non-disclosure: Purposefully denying the fact you’ve had a car accident for example, when taking out a new car insurance policy, in the hope of paying a lower premium.

    - Double dipping: making a number of claims on the same loss. Ashton says while people often genuinely believe this is fair, it’s illegal and breaks insurance laws around ‘betterment’.

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