While this is the retirement that most of us dream about, many of us also put off planning the entire thing. The reality is that if we continue to delay retirement planning, we go against our own vision of the future. As with all good things, preparing for retirement requires sensible financial planning, hard work, and persistence.

Here at Collaborative Consulting, we believe in providing resources that empower people to bring their retirement dream to life. Here are some basics on retirement planning to get you started:

Step 1: Set Realistic Goals
We cannot work hard to achieve something if we don’t know what we’re reaching for. The first step requires setting realistic goals and finding out what retirement really means to you. Not everyone’s dream retirement looks the same, so list down the things you may want to do or achieve once you reach retirement, then plan to save money accordingly.

Step 2: Evaluate How Much You Need
Before you start putting money away, you must figure out how much you will need. Contrary to popular belief, there is no such thing as a “magic number” when it comes to retirement savings – only you can measure what’s enough. Adequate financial requirements depend on many factors, including:

• Standard of living during retirement
• Projected annual living expenses
• Medical costs
• Target retirement age
• Life expectancy
• Income sources

Assessing your needs will help inform your choices at the next step:

Step 3: Figure Out Where The Money Will Come From
Your retirement funds can come from a variety of sources. Generally, most retirement funds come from employment savings, KiwiSaver and NZ Supers. Here in New Zealand, we’re fortunate enough to receive government pensions paid to Kiwis over the age of 65 through the NZ Superannuation. However, it’s never safe to rely on the bare minimum, as unforeseen medical expenses and other life changes can disrupt our financial stability.

Investing your savings to make them grow faster is another well-trodden path to generating passive income during retirement.

Step 4: Build A Retirement Nest Egg
Creating an investment portfolio that will fund your future retirement is essential. It’s about creating a financial investment strategy that works for you and fulfils your personal financial goals. Talk to a financial advisor who offers independent advice on savings and investment planning to help you create a comfortable nest egg for retirement.

Collaborative Consulting: Retirement Planning Experts

While we’ve provided a quick breakdown of retirement planning basics, there’s much more to it than what we’ve listed, including asset and estate planning, how to leave a financial legacy for your family, and much more.

If you need help reaching your retirement goals, we’re here to help. Together with our Auckland financial advisors here at Collaborative Consulting, we can help you secure your financial future. Contact us today for a free consultation at 0800 225 665!

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A Strong Investment Philosophy Builds Discipline

An investment philosophy is a set of beliefs and principles that guide an investor’s decision-making process. Since investing is a long and winding road, and the journey can be challenging and frustrating, a strong investment philosophy acts as an anchor from which investors base their decisions. Over a lifetime, investors will face many decisions that are prompted by events within and outside their control. Without a strong investment philosophy to inform their choices, these events can lead them into making poor decisions, damaging their long-term financial well-being.

Ultimately, an investment philosophy is a stronghold that helps maintain investment discipline no matter what surprise events may temporarily shock the market, gently guiding their reactions toward market events and positively influencing outcomes.

A Strong Investment Philosophy Develops Consistency

David Booth, Founder and Executive Chairman of Dimensional Fund Advisors, offers this advice for those pursuing their financial goals:

‘The important thing about an investment philosophy is that you have one you can stick with.’

An enduring investment philosophy is built on solid principles backed by decades of reliable empirical academic evidence. These principles help investors maintain discipline, react better to market events, and resist the siren calls of new investment fads. Only through understanding how markets work and maintaining a long-term perspective on past events can investors focus on ensuring that their responses to events are consistent with their long-term plan.

It is, therefore, crucial to have an investment philosophy you can stick with, and one that can help you stay the course even as market conditions change.

The ‘Collaborative Understanding’ Investment Philosophy

Here at Collaborative Consulting, our investment philosophy is in our name. The ‘Collaborative Understanding’ investment philosophy is centred on learning what matters to you and creating a tailored financial plan that helps you fulfil your personal financial goals. This guides our team of expert financial advisors throughout every step of the way, from the initial consultation through to implementing independent investment strategies that help investors prosper in their financial future.

Giving you personalised financial advice designed according to what your life and lifestyle will look and feel like in the future allows us to develop a realistic goal-driven roadmap to get you there. This collaborative philosophy is based on the main principle that everyone’s journeys and goals are different, and that the best financial results are always achieved through building trust and successful collaboration.

Our team of financial advisors act as experienced counsellors when responding to events and provide the foundation of a strong collaborative investment philosophy that has served us and our clients well throughout the years, helping many achieve their own versions of financial success.

To set you on a path to investing your money wisely, contact the team here at Collaborative Consulting for a free consultation today!

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We’ve compiled some common key takeaways that retirees have said when asked, “What would you do differently if you could go back in time?” to provide some helpful advice for would-be retirees. Read some of these retirement planning takeaways from actual experts below:

1. Focus on what you can control.
This starts with your money. Having money doesn’t give you happiness, but not having any money at all is sure to give you troubles, and this is especially true during retirement. Controlling your finances can be difficult and requires a lot of discipline, but as with all financial plans, financial control starts with saving.

Most retirees will assert that simply saving isn’t enough – one must save diligently. This means putting as much money away as you can, as early as you can. Another way to save is simply to not spend – living beyond one’s own means and spending needlessly will make you fall behind. Most successful retirees still drive their old cars and refuse to buy new ones. Just because you have money to spend doesn’t mean you have to spend it.

Another way of accumulating money is investing – it’s part of any comprehensive financial plan.

2. Prepare for what you can’t control.
Life generally never goes 100% according to plan, so the best we can do is to prepare for the unexpected. Accidents, health problems, family issues, and other unprecedented events can cause economic shocks in our lives, making the best of us dig into our savings way earlier than we would have liked.

As an extension of the previous advice, retirees assert that they could have prepared for these sorts of events by saving way more than they thought they needed. Saving those extra dollars act as a cushion to help you deal with life curve balls. Having adequate insurance cover will also help you prepare for any unforeseen life events.

3. Think about life in retirement.
You can become so engrossed with ensuring your retirement plan is on track that you forget to think about what your retirement lifestyle will look like. Do you imagine yourself travelling or staying at home looking after your grandkids? Will you be involved in any sort of charity or community organisation? What will keep you busy, and what sort of contribution do you want to make in this world?

Regrets often sound like this: “I should have done…” or “I would have done this differently if only…” Retirement can give you time to explore some if not all of the things you’ve always wanted to do but never made the time to, such as learning new skills or taking up a new sport. Simply worrying or mulling over your retirement plan can take the joy out of experiencing life with your family and friends as well, so aim to strike a balance between the two.

At the end of the day, there is always a “lesson learned” regardless of whether people experience success or failure in their day-to-day lives, including those who are currently in retirement.

If you need a comprehensive financial plan to help you prepare for a fulfilling and comfortable future, we can help you. Contact us right here at Collaborative Consulting to arrange your free initial two-hour consultation. We’ll work together to achieve realistic life goals that allow you to prosper in your financial future.

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Financial planning is intricately tied to a business’ core processes. It’s a necessary practice for any business owner and should be done regularly, ideally before every start of a new financial year.

Financial planning means budgeting for your business on a grander and much more complex scale. The process includes analysing past reports, forecasting net revenue, estimating operating costs, understanding risks, and much more.

A realistic financial plan should be at the core of any business strategy. Here are some reasons why financial planning is so important for any business:

1. Financial planning creates a revenue model.
A good financial plan acts as a revenue model, which includes calculating potential profit and loss. Tracking your cash flow and comparing it with your financial plan helps you analyse where your business is currently at. Having a plan allows you to measure actual progress relative to where you envisioned it to be at the beginning of your financial year.

2. It sets realistic goals and growth opportunities.
Financial planning is a way of setting goals that are realistically attainable for your organisation, as it projects a certain amount of revenue after an extended period of time. It acts as a wide, long-range lens to ensure that the business continues to grow. This makes it essential in facilitating growth and expansion programs to ensure a company’s long-term survival.

3. It provides logic for sound decision-making.
Your financial plan is a guide to running your business – it helps you create a realistic strategy with well-defined steps for achieving profitable growth. You cannot make a bold business move, whether it’s an investment or a purchase, without first consulting this guide. A financial plan enables proactive decision-making, as well as financial stability and control, which can be achieved only with careful, professional planning.

4. It ensures adequate funds.
Running a business requires many resources. A financial plan ensures that the many aspects of your business such as marketing, labour, equipment and many others, have been allocated adequate funds so it continues to run smoothly. Your plan should also account for a set amount of emergency reserves to remedy unforeseen issues. If your cash reserve is adequate, you’ll sleep peacefully at night knowing you’re prepared.

5. It tracks your liabilities.
Financial planning requires analysis of your company’s liabilities, long-term debt and owner equity. We may only want to look at current assets, but liabilities need to be monitored carefully to further aid you in resource allocations and budget planning. Your financial plan will schedule any debt repayments, or help you when considering new liabilities, ultimately empowering you to fully understand your business’ finances and profitability.

Financial planning for your business can feel like a daunting, aimless and unscientific task. At Collaborative Consulting we work closely with you so you can create a measurable, results-driven financial plan geared towards significant growth. Feel free to get in touch. We always love to hear from business owners.

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From April to June 2017 diversified portfolios again delivered generally positive returns, although at a more subdued rate than investors have become accustomed to in recent quarters.

For much of the second quarter major markets were relatively benign, perhaps distracted by the prolonged attention given to two very important elections in Europe.

The first was the victory by 39 year old Emmanuel Macron’s upstart En Marche! political party in France.

This result was the latest in a recent string of good news for Europe.

Already, Macron is shaping up as just the tonic Europe needs. A fierce critic of Brexit, he wants to ensure that the UK gets no special treatment during its upcoming divorce proceedings.

He also champions Greek debt relief, an issue which has plagued the euro zone for years because of Germany’s fierce opposition to it. If Macron can help Germany and Greece inch forward on this issue, it would do wonders for EU morale.

Economically speaking, Europe is already in much better shape than it was a few years ago. Every country in the EU is now growing (even Greece…just). Data for the first quarter of 2017 showed the euro zone economy picking up more momentum, even as UK and US growth rates fell short of their forecasts.

In terms of its politics, Europe is looking more progressive. Austria, the Netherlands, and now France have all voted in pro-European leaders, rather than inward-looking populists. Next cab off the rank is Germany, which heads to the polls in September and where Angela Merkel – one of the EU’s biggest supporters – is a short odds favourite.

Unfortunately, the uplifting result in France could not have been in greater contrast to the almost farcical outcome of the UK elections in early June.

In mid-April, when Theresa May called for an early election to attempt to shore up her position at the Brexit negotiating table, the Conservatives held a 19 point lead in the polls. Only seven weeks later, they suffered the humiliation of having to form a minority government.

In what has been referred to as ‘the revenge of the remain voters’, the Conservatives embarrassingly saw their parliamentary seats fall from 331 to just 318; below the 326 needed for an absolute majority.

It was far from the unifying result Theresa May had hoped for. With inflation on the rise and Britain, for the first time since the mid-1990s, holding the mantle of the slowest- growing country in the European Union, the Conservatives headed into the Brexit negotiations with their tails between their legs.

In any summary of political events we, of course, cannot forget about Donald Trump. The US election may have been in November last year, but it seems the world is still struggling to come to grips with ‘The Donald’.

The best thing Trump supporters can find to say about the US president is that ‘he does what he says he will do’. That might have been perceived as a bigger virtue, except the things he says he will do are usually divisive, often strategically and ethically questionable, and nearly always controversial. Scrapping US involvement in the Trans Pacific Partnership trade deal and failing to ratify the Paris Accord on climate change are two examples.

While global investors might well be concerned about some of the policies emanating from the Oval Office promoting increased US separatism and greater racial inequality, that hasn’t translated into any reduced demand for US business output or debt securities.

In that sense, the market response is entirely rational. Regardless of the latest Trump tweet or seat-of-the-pants policy initiative, the demand for Big Macs, or iPhones or Cadillacs, hasn’t been affected, and is unlikely to be. Consumerism is inherently apolitical.

As if to reinforce this, the headline US S&P 500 Index registered a gain of 3.1% for the quarter and is now up 17.9% for the last 12 months, and 14.6% pa for the last five years. Other notable equity market results for the quarter were in Japan, where the Nikkei 225 gained 6.1%, and in France, where the CAC 40 Index gained 2.4%. In fact, it was a solid quarter for most developed share markets, with only five of the 23 developed markets tracked by MSCI indices returning negative results.

Emerging markets were, in typical fashion, more volatile. Thankfully, that volatility was more positive than negative this quarter, with the MSCI Emerging Markets Gross Index up 6.4% in US dollar terms. Some of the notable individual results contributing to this performance came from China +11.0% and Korea +12.8%. At the other end of the scale, the Russian sharemarket fell -6.0%, hurt by ongoing oil price weakness and by the Trump administration, against expectations, not repealing sanctions imposed in 2014 which punished Russia for its role in the Ukraine crisis.

The local New Zealand sharemarket delivered a strong result, with the S&P/NZX 50 Index (gross with imputation) gaining 5.9%. This was comfortably ahead of the result of our Australian neighbours, where the S&P/ASX 200 Index returned -1.6%.

New Zealand’s strong sharemarket performance may partly be a reflection that economic conditions here continue to look solid and business confidence remains strong. Positive business sentiment certainly bodes well for the future growth rates and profitability of New Zealand facing businesses. On the other hand, while overall Australian data also generally continues to beat expectations, the tailwinds supporting economic growth in Australia appear less consistent, as a spate of company earnings downgrades in June served to highlight.

In the midst of all of this, the New Zealand dollar strengthened over the quarter against both the US dollar (up 4.5%) and the Australian dollar (up 3.9%). A stronger NZ dollar has the effect of reducing the New Zealand dollar value of any unhedged assets denominated in either US or Australian dollars, and that contributed to slightly lower reported returns this quarter.

Global bond markets had been relatively uneventful for much of the quarter, although this changed rather sharply towards the end of June when European Central Bank President, Mario Draghi, announced that “the global recovery is firming and broadening and a key issue facing policymakers is ensuring that this promising growth becomes sustainable.”

These comments resonated strongly with the market, as they coincided with comments made by Bank of England Governor, Mark Carney, about the potential need to reverse the post Brexit rate cut in the UK, and comments from Bank of Canada Governor, Stephen Poloz, about the potential need to reverse the post oil price crash (2014/2015) rate cut in Canada. In addition, earlier in the month the US Federal Reserve had already signalled its determination to progressively remove stimulus in the US by lifting the Federal Funds rate from 1.00% to 1.25%.

What was less anticipated was the Federal Reserve retaining their future rate projections of one increase in 2017, followed by three hikes in 2018, and another three hikes in 2019.

This is almost the exact opposite of the approach being taken by our own Reserve Bank. In last month’s Monetary Policy Statement, the Reserve Bank looked through a string of firmer New Zealand inflation indicators and maintained their earlier projections that New Zealand rates will remain at record lows until 2019. It is apparent that the Reserve Bank believe raising rates too early – something they regretted in doing in 2014 – could undermine domestic growth.

Even though all bond markets felt some impact from Draghi’s comments and spiked upwards over the last week in June, it was not a sizable enough reaction to impact returns greatly. By the end of the quarter the Citigroup World Government Bond Index 1-5 Years (hedged to NZD) had gained 0.59%, while the slightly longer duration Bloomberg Barclays Global Aggregate Bond Index (hedged to NZD) advanced 1.22%. These were both satisfactory results, given the still compressed global yield curves.

All in all, while it was an extremely interesting quarter on the global stage, it was a relatively quiet quarter in the markets.

The ‘glass half empty’ view of this would be that we didn’t get another three months of the kind of excellent returns we have experienced with surprising regularity in recent years. The ‘glass half full’ view would be that diversified investors still came out ahead for the quarter, and we got a non-painful reminder that markets can’t be expected to only ever go up, and in large leaps.

For all long term investors, this was simply another positive step along the road towards the achievement of your ultimate investment goals and objectives.

And, by that most important of all measures, it was another successful quarter.

Note: Unless otherwise stated, all index returns are quoted on a home currency returns basis.

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An assumption that most people make when allocating their money is that because a physical object lasts longer, it will make us happier for longer than a one-off experience such as a concert or a holiday. It turns out that assumption is not necessarily correct.

Dr. Thomas Gilovich, a psychology professor at Cornell University, has been studying the question of money and happiness for over two decades. Gilovich says, “one of the enemies of happiness is adaptation. We buy things to make us happy, and we succeed. But only for a while. New things are exciting to us at first, but then we adapt to them.”
Rather than buying the latest iPhone or a new BMW, Gilovich instead suggests we derive more happiness from spending money on experiences like outdoor activities, learning a new skill, or travelling. His findings are the synthesis of studies conducted by him and others into the Easterlin paradox¹, which found that money does buy happiness, but only up to a point.

This was measured in a study that asked people to report their happiness with purchases of major material possessions compared with purchases of experiences. Initially, their happiness with either purchase was ranked about the same. But over time, people’s satisfaction with the material possessions went down, whereas their satisfaction with the experiences they spent money on went up.

It’s initially counterintuitive that a physical object that you can keep for a very long time doesn’t keep you happy for as long as a one-off experience. Ironically, the fact that a material possession is ever present in our life works against it, making it easier for us to adapt to. It fades into the background and becomes part of our ‘everyday’ existence. In contrast, while the happiness from material purchases diminishes over time, our experiences become an ingrained part of our identity.

According to Gilovich, “our experiences are a bigger part of ourselves than our material goods. You can really like your material stuff. You can even think that part of your identity is connected to those things, but nonetheless they remain separate from you. In contrast, your experiences really are part of you. We are the sum total of our experiences.”

Shared experiences also connect us more to other people than shared consumption. For example, you are far more likely to feel connected to someone you took a holiday with in Vietnam than someone who also happens to have bought a large screen plasma TV. “We consume experiences directly with other people,” says Gilovich, “and after they’re gone, they’re part of the stories that we tell to one another.”

Even if someone wasn’t with you when you had a particular experience, you’re much more likely to bond over both having visited the Mekong Delta than you are over both owning Fitbits.

It’s an interesting concept – that the things we buy probably won’t make us as happy (over the long term) as the things that we do – especially when we consider it in a financial planning context, which itself is commonly focused on trying to identify our future spending goals and objectives.

While it’s probably easier to budget for the future purchase of a car or a boat, it’s much less obvious how much to budget for future spending on experiences. But if happiness is our ultimate goal, then perhaps this is exactly what we all need to take some time to try and work out.

¹named for economist and University of Southern California professor Richard Easterlin, who discussed the factors contributing to happiness in his book titled “Does Economic Growth Improve the Human Lot? Some Empirical Evidence”. Easterlin presented data showing that, among developed nations, reported happiness was not significantly associated with per capita income levels.

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Perhaps we are less sceptical. Living in the world of financial markets, we know that probability is only ever as the name suggests. It represents something that is likely or probable to occur, and so is very different to the word certainty.

Markets quickly adjusted as reality set in. Overnight, S&P 500 futures markets were down. It has rebounded though, and is up 1.4% at the time of writing. All that means is that, ironically, investors don’t know what this means. Will the American business community reign Trump in, or will he be allowed to follow through on his election campaign promises? Trump won’t be able to pass law, but he will be able to put a block on securing trade deals (such as the TPPA), for example. Many New Zealanders that are anti-TPPA would also be very anti-Trump, and yet he’s very likely to kill the deal that they didn’t like. It shows how complicated this election really is.

From the perspective of your portfolio, it’s intriguing to look at the relationship between the US president and investment returns. Historically, markets have done better when a democrat is president rather than a republican (9.7% growth as compared to 6.7%). However, the same data shows the markets do best when the republicans control both the House of Representatives and the Senate.

Source: http://time.com/money/page/2016-presidential-election-clinton-trump-affect-finances/

After this election, the republicans hold the House, the Senate and the presidency.

But there is more to the data. When the US president has a negative approval rating the markets have done 4% better than when the country gives the president positive ratings.

In reality, the data indicates that the relationship between investment markets and the presidency is a fairly weak one. What drives markets are businesses that innovate, solve problems and continually provide better goods and services at lower prices. Businesses have been doing this for hundreds of years and will continue to do so for many more.

Someone almost universally regarded as being one of America’s worst presidents was Warren Harding, the 29th US president (1921 – 1923). Amongst his many blunders, he appointed a number of corrupt officials. One of his cabinet secretaries went to prison for corruption.

[1] Beyond this, President Harding was an accused adulterer and fathered a child with a mistress that he didn’t acknowledge.
How did he get elected? Author Malcolm Gladwell suggested in his book Blink that people believed Warren Harding would be a good president because he appeared stately and presidential. It was a “blink” decision.[2]
Why do we bring this up? Only because between 1921 and 1923, the Dow Jones returned around 32%.[3] An article in US magazine Money put it well:

“Conventional wisdom says a president’s economic policies matter greatly to Wall Street. But… investors since the Great Depression have managed to make money in war and peace and under successful and failed administrations.”[4]
Many of our clients are invested in portfolios built to last 20 to 30 years. Over that time frame, both good times and bad times are a given. That is the nature of capitalism which funds, what we can see in retrospect, are both worthwhile and worthless economic ventures. We believe history shows us that a globally diversified, low cost portfolio is a ship that can and will survive the storms of politics, because it is founded on the success of business. Presidents come and go, but business in aggregate has never gone out of business, and won’t in the future, whatever president-elect Trump does.

So we encourage you to relax, to tune in to the news as an interest, but know that your long term plans are based on something much more solid and stable than politics.

1 https://en.wikipedia.org/wiki/Teapot_Dome_scandal
2 http://content.time.com/time/specials/packages/article/0,28804,1879648_1879646_1879696,00.html
3 Based on data found at http://www.automationinformation.com/DJIA/dow_jones_closing_prices_1921_to_1930.htm
4 http://time.com/money/page/2016-presidential-election-clinton-trump-affect-finances/

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