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Having been punished for chasing returns from finance companies, investors are now being told they are playing it too safe.
"Most of what we're doing now is about risk management as opposed to managing returns," Tate says. " .
Longer term, the risk is that fixed-interest returns will barely cover inflation.
"By all means, move to a more- cautious stance when things look worrying, but you've to keep a bit of a spread across different assets in case you're wrong," Lister says.
Financial adviser Stephen Fitzjohn, managing director of Milestone Financial Services in Wellington, says risk tolerance has not changed so much as people's understanding that they were taking a risk.
"Repeated risk profiling of clients indicates that the public's risk tolerance varies very little year to year, however, their look through of risk has changed with greater understanding," he says. .
But that may not be what investors are seeing.
"We still hear about debt problems in Europe and the US every day, and we haven't really seen enough of a recovery for people to get too positive again.
"I take my hat off to [KiwiSaver architect and former finance minister] Michael Cullen [because] the worst thing that could happen was that, for the first two years of KiwiSaver, the markets might tank and everybody gets wiped out.
"[But] to me there is every sign that we have got an awful lot in income assets and not enough in growth assets, which is the inverse of Australia.
In the real world, most people have a mixture of assets. Even conservative KiwiSaver funds have a few growth assets in the mix, and the right balance depends on investors' age and other factors.
The impossibility of designing one perfect fund to fit everyone is one reason independent savings advocates have resisted pushing people towards riskier KiwiSaver funds without giving them the chance to choose for themselves.
Yet Thomas says the overall mixture is wrong for the long-term future of savings.
Then there was KiwiSaver, which automatically puts people in the lowest-risk funds (heavy on bonds, term deposits and cash) if they don't turn to a fund for themselves.
Money invested in KiwiSaver is more likely than other managed funds to be invested in fixed interest and deposits, and where KiwiSaver goes, popular trends follow.
Finance company meltdowns, in other words, showed people what risk really meant.
Kiwis were already fond of income assets before KiwiSaver, says Mint Asset Management chief executive Rebecca Thomas, who has managed investments here and in England.
Tate, like most in the funds industry, believes that in the long run a well-diversified portfolio of growth assets will do better than a well-diversified bonds fund.
Tate hopes the Financial Markets Authority will restore several of investors' lost faith in the markets.
In the meantime, "the biggest job for financial advisers is to encourage customers to stick with their programmes," he says.
It might not be easy.
If you believe, as she does, in "the cult of the equity" - that over time, shares, commodities and property do better - New Zealand's investment mix will not provide the best long-run returns.
"The last decade has been an exceptionally bad decade for equities by any long run [view]," Thomas says.
But the shift is making some in the funds industry nervous that people (and fund managers) will miss out on better returns in the long run.
Even so, it was barely enough to make up for the drop-off in other superannuation and managed funds. "Without KiwiSaver, the picture today would be a lot less cheery.
Then there is investor fear. Now many are guarding their future income, says Nigel Tate, president of the Institute of Financial Advisers.
Tate says the official Reserve Bank figures probably miss "the amount of funds that have been pulled out because people got too shy, because they lacked the confidence in returns [coming back]".
"I have had probably half a dozen clients over the last six months who have said `This is not coming back the way I expected, I'm going to pull my money out and put it in the bank'.
Quite a good deal of the movement towards fixed interest is out of the hands of ordinary people. |
Monday, 12 March 2012
NZ investors playing it safe
