I have a hobby, saving money, and it has led me to become possibly the last kiwi to own a copy of the extended version of the Lord of The Rings on DVD. I got it knocked down in a Wellington CD Store last week and I finally got to watch some of it on Sunday. The movie is on heck of a lot better in the extended version. The common theme in the extended and added scenes is that they are dialogue intense, ad a lot to the understanding of the plot, and make up for some of the clunkier narrative devices to enable us to get through 1100 pages of literature in 'just' three films...
All this talk about KiwiSaver has prompted me to look about for more background information. This is a link to a history of behavioural finance.
Preparing for our executive forum on KiwiSaver I have just completed a telephone briefing with Nicholas Hillman from the Association of British Insurers. He will be arriving on Sunday and will be with us for a week including two days in Wellington and a day at our KiwiSaver meeting at Hotel du Vin on the 9th.
Most pension providers / fund managers in the UK are members of the ABI and as such they have an important role in the pensions debate in the UK. The recent Turner commission on pensions has recently drawn attention from International and New Zealand media for drawing on some aspects of New Zealand's superannuation environment. Not just the planned KiwiSaver, but also the provision of a basic universal pension at age 65. By not means-testing the basic pension you remove one potential penalty for those saving and therefore encourage more people to save for their retirement - even though their means may be very limited. The Turner commission has made other recommendations, including a series of enhancements to Stakeholder Pensions, which are seen as some to be en evolutionary dead end, and by others to have been a stepping stone in the development of the KiwiSaver initiative.
Our briefing discussion ranged mainly over the consumer behaviour expected. Nicholas was able to provide some fascinating background from the experience of companies most successful at selling Stakeholder pensions - especially in an environment where no advice is provided, and the clients are uninformed and suspicious of financial products. The best example was from the UK building industry, where some clients were so suspicious they never signed anything, another large group signed everything sent to them - both the application forms and, fifteen days later, an offer to cancel which must be sent by law!
We also discussed what we know of the speculation around the fee subsidy and tender process. But those subjects are evolving and we do not want to prejudice the discussions at the forum on the day.
If you would like to meet with Nicholas during his visit please drop me a line, his experience will be of special interest to insurers, fund managers, and anyone who cares about pension provision.
Financial advice firms look sure to rise out of the cottage industry we have at present. If you think you should be running one of these we are planning a training programme for May - drop me a line for more details.
The Sydney Morning Herald had a column recently called 'mythbusters' by Barbara Drury. Look here. I thought it was a solid column, particularly around such old things like 'sell half' of a winning stock - but keep all of a loser. This is 'dumb rebalancing' and looks for all the world like ill-informed fiddling with one's portfolio. But I did have to take issue with the assertion that you can't buy the market with only a few shares. In fact, provided your shares are reaonable well spread (sector, size, and management) you can get virtually all the benefits of diversification holding only 15 or so shares. That's in a market with some real choice and liquidity.
Excellent article on house prices. Read it through! http://www.sharechat.co.nz/news/scnews/article.php/2e2dfa40
This has been followed up by a swift response from Local Government. What they do is claim that property price rises are a result of higher interest rates and greater demand. They move on to defend the practice of getting developers to pay connection fees to services. These are entirely reasonable - and only a tiny component of the problem. It is not the $4,000 per property to connect to services, it is not even the 'reserve contributions' that add horribly to the development costs. It is regional plans, land use constraints, and resource management hearings that take months and leave expensive capital tied up in knots - that is where government has the biggest impact on home affordability.
It turns out that we are doing something interesting about pensions. It is not often that New Zealand gets quoted in International publications as a model to emulate. With pensions policy we are not just being mentioned - but it seems that our policy debate is breaking new ground and is informing and shaping the debate elsewhere. If you want to find out more about that you should look into this:
The influence of the New Zealand model on the UK Pension Commission's report of November 2005, A presentation by: Alison O'Connell
Alison O'Connell has been involved in the pensions debate in the UK as Director of the PPI, an independent research institute. The PPI has taken a prominent role in the pension reform debate, including bringing lessons from New Zealand Superannuation to the UK.
A Pensions Commission in the UK, chaired by Lord Turner, has just reported recommending, amongst other things, something very like 'KiwiSaver'. Come and hear an expert's analysis on the state of pensions in the UK.
The cost of the breakfast is $30 (GST inclusive). Please email acceptances by 1st Feb to firstname.lastname@example.org
No, we don't have a Scoop, and I am sure my modest readership would be entirely unused to anything other thatn my derivative musings. However, as a consequence of holding the KiwiSaver Executive Forum, Scoop the news organisation has posted our announcement of same. Link here.
The Economy probably shrank in the last quarter of last year. I heard Helen Clark say on the radio this morning that her big focus for the year would be the economy. Imbalances is the word that most comes to mind when thinking about the economy. Irrational exuberance about residential property coupled with a lack of investment in perhaps more productive areas of the economy. These perceived imbalance look likely to be a target of governments.
Indeed in the financial services sector we will likely get a lot of government attention this year, as a part of this focus. Not that we should be seen as a problem - but that we are seen as a control mechanism, or conduit, which can be affected by policy and therefore used to make changes. Some of those may be minor - such as using disclosure to help consumers make better assessments of risks. This example of the 'soft power' of government is a good one. It leaves the decision to take those risks or not firmly in the hands of the client and the companies making the investments.
Yet already the signs are that the industry will slow down deliberately to absorb this change. Regulation to 'correct' perceived imbalances will likely slow other sectors as well.
I loved the title. The article is most interesting too - in which countries is it easiest to launder money? Write your answers down before clicking on the link.