Financial planning still new for N.Z.

Press, 26 April 1988, Page 42

Financial planning still new for N.Z.

By

ROGER A. LEWIS

The financial planning industry is ‘till relatively! new in Nev Zealand. In its formati”e stage, it j would be fa r to sad that there stil appears to be; some reticence for people to use fidaiicial plapners in making for personal nyestment.-. There may be a number of reasons for this. We believe! that one of them is an innate pride in doing things for oneself, which is perhaps a national characteristic. Yet, in reality we all need and use specialists in our diay to day lives. For example: i Problems Severe pains in the abdomenal region. Solution: Dp you ; read family handbook! on household ! ailments of consult your doctor? Problem: Acrimonious dispute witfi neighbour on fencing fights. Solution: Do you consult a personal guide on property matters

or refjr; to your lawyer? Pro >lem:Uncertainty as to the tax deduction of certai iJ items. Solution: Do you consult Staples tax guide or seek advice from your accountant? Problem:. Sparks and harsh jl grinding moise eman iting from a vehicle engine. Do you read I a trade j publication ijfor your model or take j the vehicle; to car servicing speciilist? ; iCleirly in all these situat ons, we tend to refer to the person most likely to provide an effective lolution to the prob-: lem. There is no loss of! digni y I in using these; people. Rather therej is simply a prudent recogni-! tidn that whatever our! own skills may be, they! dp not extend to a specialist knowledge in alii the; diverse areas that make up life. (Likewise in the matter of personal investment' planning, there are a

number of questions that people should be asking: Can I calculate my changing cash needs in retirement? How will the proposed tax treatment on offshore funds aiffect returns? What is the most cost effective method of insurance funding? W'hat are the! present advantages and disadvantage of both corporate and personal superannuation plans? Do I understand what type of annuity would best suit my needs? Is property a good investment vehicle for retirement planning?

These questions are not ones which the! average person can answer with any particular degree of accuracy. There is a growing realisation that there is indeed a need for independent advice in these areas.

In this respect. New Zealand is onlyi following

a worldwide (trend ah ready strongly establishes in many other countries where financiail adi’isors are seen as jusl one of a number of professionals with whom you must: have a good working relation!ship during vour working life.'

Why then, Ido people tend to avoid |the use of financial planners? We suggest that, firstly. the inertia principle applies, and that many jjeopl e have not realH perceive I the urgent needs that thev do have for some professional advice. ' Many of these will onlr appreciate the need who i their retirement years corrie but by then t will be (far too late to db anything by way of pratt - cal (remedy. : Secondly, there may) be some scepticism as to e) th.e real professionalism '' Of financial planners. I

There have certainly been some unwise and unsound investment re-

ports given to people in the past. In this regard wei do suggest that There are several matters: that may i help to ensure that a' person has selected a suit- ( able advisor: | 11 © Do check (with sevD eral practices before you: make your decision. I!

© Check on jthe background and credentials oil the people with:whom you will be dealing. (Remember there 'is no substitute for experience). I, ® Does the organisation have any perceived , links with certain institutions or investment companies that may cast ( doubts oh the impartiality of thei'r advice? .1 , || ® Will you receive a written report which yob can compare with others, and does the report accurately address your position? ® Will there be ongoing advice in the form of future reviews? J (( : Granted that these questions may be satisfactorily answered, we believe the time has come for people to use trie services of financial planners in making their personal investment decisions.

There are just too many pitfalls, too many problems and too many questions that must Be answered, and answered professionally, to allow for a person to maintain a “do it yourself strategy/’

Remember you will only retire once and therefore you only have one working lifetime iin which to do it properly. Where there is no margin for error, it is sensible* to seek the help of professional advisors.

Roger A. Lewis is| (a director of the Optima Group.