Mary Holm 's Opinion

Mary Holm is a personal finance columnist for the NZ Herald.

Mary Holm: Check rollover rate on term deposits

7 comments
As interest rates start to rise it pays to ask your bank what they are offering on savings investments

These days, asking for more seems like a really good idea.
These days, asking for more seems like a really good idea.

Q: Not sure if you'd like to just put a snippet in your column regarding the importance of checking available maturing/rolling over term deposit investments.

I received a term deposit maturity advice from ANZ informing me that a term deposit was maturing and will be rolled over for the same term.

I checked the internet and was considering transferring the deposit to Rabobank (offering a higher interest rate).

I thought I would check first with ANZ to see what it could offer. I was told it's due to be re-invested at the same rate and term.

I asked, "Is that the best you can offer? I might have to consider changing banks." Very quickly, I was offered (and I accepted) a higher rate for 180 days.

I asked, "So what would have happened if I hadn't rung in?" "Nothing, we can give you this rate because you rang in."

So may I suggest any of your readers with maturing term deposits should always check with their bank for better available rates.

A: We've come a long way from Oliver Twist. These days, asking for more seems like a really good idea — especially for someone armed with information on higher interest rates being offered elsewhere, as you were.

"Essentially, there's no guarantee a customer will get a better rate because they got in touch with us," says an ANZ spokesman.

"However, a level of discretion to move on rates is available to some staff depending on the customer's banking history, the range of products they have with us and a number of other factors."

It's well worth a try. And I suspect the same would apply to other banks.


Genesis Energy shares

Q: Like your reader last week, I am also cross with the way Genesis Energy shares are distributed.

Firstly, I could not work out how the allocation scaling was carried out. It was all over the place. I know that the first $2,500 worth was given to the applicant and amounts over that are scaled, but how that was done was a mystery.

There was enough information that very few Genesis Energy shares were reserved for mum-and-dad investors. Given the publicity in the final days before the closing date, there was speculation that the scaling was going to be severe as there were many last-minute punters who jumped in. The attractiveness of up to 13.8 per cent dividend yield plus the bonus shares equalling 6 per cent makes Genesis Energy a very lucrative prospect.

Your reader should have spread around his $30,000 to as many $2500 lots as he could. Apply the shares in his spouse's, children's and friends' names. I know there is a risk of not getting back your money. I think with almost 20 per cent annual return, I would take the punt.

By the way, after one year you can call the share registry for forms to do an off-market transfer to your name, for free.

There is a limit on how to diversify risk. You need a lot of funds to achieve that. I nearly want to say it doesn't apply to small investors.

Firstly, you need to spread to various areas: deposits in banks (cash), listed companies in different sectors, in different countries and property and resources as well. Secondly, there is a cost of investing overseas, and who would have the experience? This applies unless you can afford an adviser, who would not have time for you unless you have $1 million.

Really, your comment on diversification is only good in theory.

PS: We applied under five names and received 12,000-plus shares. Happier now I have written and I am more successful than others. I wished I could find more trustworthy people who were not applying themselves already.

A: That's a new one for this column - that writing a letter has made you happier. Perhaps I should start charging for therapy.

While I'm working on what sort of couch to buy, let's look at the question of how Genesis Energy shares were allocated. Here, the Government explains the allocation clearly.

On your next point — about spreading your purchase around several people — there's nothing to stop you doing that. And share registry Computershare confirms that you can, later on, transfer the shares to your name for free — obviously as long as those who bought them are okay about it.

I'm a bit worried, though, that you might be assuming you'll continue to get really high returns on Genesis Energy shares. I haven't looked into this in depth, because I don't think amateurs can accurately predict share returns no matter how much research they do. But I do know that unusually high returns have a tendency to dwindle.

Of equal concern are your comments about what I said about diversification — that it's not wise to put more than a few per cent of your savings into any single share.

Tiny holdings in different shares aren't viable, because of minimum brokerage and so on. So, as you say, you need a lot of money to buy a widely diversified share portfolio. But you ignore the other way of doing it, by investing in managed funds. I reckon that's the only good way for people with savings of less than, say, $100,000 to hold reasonably diversified shares.

You're right that it's particularly tricky for smaller investors to directly invest overseas, but managed funds definitely come into their own in that realm. With one investment, you can be in hundreds of shares from around the world.

Diversification is totally realistic in practice as well as theory.


Tax on share sales

Q: With reference to recent Q&As, what is the tax position of the sellers of Genesis Energy shares?

In order to sell on the first afternoon of trading I suggest one would have to have planned the sale of the shares from the time of purchase.

A: I'm sure you're right. And Inland Revenue says it monitors activities such as share floats as part of its compliance programme. "The tax consequences arising from the sale of shares will be determined on a case-by-case basis, depending on the facts of each case," says a spokesman.

"Generally, if the shares were acquired for the purpose of resale, or if the person is in the business of dealing in shares, then any profits made from the sale of the shares will be liable to income tax." He adds that any losses may be deductible but that wouldn't apply in this case.

Shares for good causeI'm the CEO of Crimestoppers and up until the end of May we are asking Kiwis to donate unwanted share parcels to us to be turned into much-needed cash. In return they will receive a 100 per cent tax-deductible certificate from us as we're a registered charity.

Kiwis often think about a shares transfer as being a complicated process, but in this case it isn't. It takes no more than three minutes online, and all they need are their FIN and CSN numbers to donate.

This is a chance to get rid of those small parcels of shares you sometimes end up with - perhaps through an inheritance or a dividend payment made while you're selling a larger parcel, or just because the share value has fallen lots since you bought.

These shareholdings might pay a dividend too small to bother with, but they're not easy to sell at reasonable brokerage.

The programme is called Shares For Good, which describes itself as "a pro-bono collaboration between JBWere, NZX, Computershare and Link Market Services; 100 per cent of proceeds from the sale of your shares goes directly to the recipient charity."

The charity will change over time.


High quotes

Q: I'm writing in regard to your correspondent two weeks ago who is struggling with the quotes she received for painting her house and doing up her bathroom, and your comment, "But that rise in your quotes over 11 years seems extraordinary. According to the Reserve Bank's inflation calculator, wages of $9,000 11 years ago should be about $13,000 now," but quotes for painting rose from $9,000 to $20,000.

A lot of my friends and customers are architects and for the past six months or so, I have been hearing more and more stories from them how quotes and tenders from builders and even assessments from quantity surveyors have been coming in much higher than in the past. They all feel that something is going on in the building industry to cause this but no one is saying what exactly.

Another common related thread I have been hearing from people in the industry is the cost, arbitrariness and unpredictability of dealing with local councils/authorities in trying to get a consent approved. Everyone is saying that this is also driving up costs and risks.

I think this would be a worthy subject for an investigative reporter from your paper to spend some time on.

Back to your correspondent's situation, I think she should try to add the additional room. I think she should find a recommendation for an architect from a friend who can get an external shell built and then she does the rest herself with family. (This leads us back to the issue of why the Government changed the law to reduce the scope of what homeowners can build themselves.)

A: It seems you hadn't read the Weekend Herald all the way through when you wrote.

On that very day, the paper ran a major feature cleverly called "House of the Rising Sum". It pointed out that building materials are much more expensive here than in the United States and Australia, and discussed many other contributing factors to high building costs.

The Government is looking into changes that should help, so here's hoping.

You're not the only one suggesting that our correspondent and her family get into DIY. Read on.


Renovation costs

Q: A bathroom is supposed to cost $27,000 to $35,000? Paint the house for $20,000? Is this for real? What kind of extreme luxury bathroom is being quoted on here? Must be the size of my house, or am I just an out-of-touch, naive Pom?

I'm an electrician and I've been over here now just over two years. I'm amazed at what people will pay for renovations — $20,000 should do a whole house, pfft!

Totally agree with your suggestion to get the kids to paint the house. Why not? Get off their backsides and pick up some tools. Do the bathroom, too. It's not rocket science.

A: Could I volunteer you to go and show them how?

Not everyone is born handy. But perhaps our reader has friends or family who could do a little coaching.


Mary Holm is a freelance journalist, member of the Financial Markets Authority board, director of the Banking Ombudsman Scheme, seminar presenter and bestselling author on personal finance. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it.

Send questions to mary@maryholm.com or Money Column, Business Herald, PO Box 32, Auckland. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Sorry, but Mary cannot answer all questions, correspond directly with readers, or give financial advice.

- NZ Herald

Mary Holm

Mary Holm is a personal finance columnist for the NZ Herald.

Mary Holm is a columnist, best-selling author and seminar presenter on personal finance. She is also a director of the Financial Markets Authority and the Banking Ombudsman Scheme, and holds an MBA in finance. Previously she was business editor of the Auckland Sun and Auckland Star, and has worked for the NZ Listener, Australian Financial Review and Chicago Tribune. She has been called “The nation’s favourite investment agony aunt.”

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