ASB: Confidence up, but advice needed

A new survey points to the value of financial advice in making sure retirees have cash to live on, as well as a roof over their heads.

Wednesday, May 10th 2017, 6:00AM

by Susan Edmunds

Chris Tennent-Brown

ASB's latest investor confidence report has been released, which shows confidence up over the past year.

Sentiment hit a two-year high of 29% in February before settling at 25% for the March quarter.

A reading of 0% would indicate that as many respondents were pessimistic as were optimistic.

This time last year, investor confidence was at 3%.

ASB senior wealth economist Chris Tennent-Brown said it was a reflection of recent positive returns from growth assets.

"Despite what has in many respects been a scary year on the geopolitical front, it's been a solid year for many investments, particularly share markets," Tennent-Brown said.

"Significant global events will happen and investors need to look through the noise at investment fundamentals, which have actually been quite positive. Specifically, for global share markets, the economic growth prospects are good, inflation remains contained and interest rates are low."

Kiwis' focus on property remained strong, the survey showed.

The investment providing the best returns in the quarter was respondents' own home, at 20%. That was ahead of rental property at 19%. Term deposits and KiwiSaver came in second and third place, respectively.

Tennent-Brown said he would expect to see KiwiSaver move up that ranking. "Over the long term, we'd expect term deposits to be at the lower end of the returns scale, and be outperformed by KiwiSaver funds with growth assets such as shares."

“Expected investment returns and the pick-up in inflation over the last year are at the heart of why investors, and KiwiSavers in particular, need to check they are in the right types of investment for their risk profile and investment needs.”

He said that pointed to the importance of good advice.

"Buying and paying off your own home is a great start to secure part of your retirement but it's only part of the story."

Retirees also needed investments that would provide cash to live on, he said.

"The dominant focus on the own home is a bit of a concern."

He said advisers could play a role in helping people set up other investment strategies.

"There is a huge role for advisers to put the two strategies together. Where advisers can also play a role is putting some dollar figures around that so people can get an idea of what it will be like in retirement, what amount might be needed and what strategy they should have. Should they save and pay off the mortgage at the same time, or focus on one or the other?"

In March, there was a shift away from term deposits to managed investments providing the best returns, he said, which may have been driven by a realisation that, with interest rates so low, it was worth looking elsewhere.

People would see from their KiwiSaver statements that managed funds were delivering more than term deposits could, he said.

"The high take-up of KiwiSaver exposes people to some of the benefits of investment in long-term assets," he said.

Tags: ASB