When it comes to our financial futures, Kiwis are often under-prepared, under-protected and under-insured. There has been much discussion about whether government policies can solve these challenges, but I believe the best place to start is at the family level.
Kiwis need to take a fresh approach to managing their family finances and the professionals who advise them need to get on board, literally. Kiwi families need a 'family board'.
Businesses, charities and various government organisations are typically overseen by a board of directors, who are responsible to shareholders and/or other stakeholders.
These directors hopefully bring a mix of professional skills and experience that enables them to govern effectively and protect the interests of the organisation. The same principle can, and should, be applied to the family financial situation.
Most families use the advice of professionals such as lawyers, accountants, investment and insurance advisers and mortgage brokers at some stage when making important financial decisions.
But do these advisers talk to each other? Who is responsible for the bigger picture regarding the family financial situation? This is where the family board concept can come in handy, by getting those advisers around the table talking to each other.
Here are five reasons you could benefit from having a 'family board':
1. New Zealanders are financially under-protected
Kiwis are under-insured by an estimated $650 billion, according to a 2013 study by Massey University, commissioned by the Financial Services Council.
This adds up to over $100,000 for every man, woman and child in New Zealand. As the Christchurch earthquakes demonstrated, not having adequate insurance in place can make a tragedy even worse.
Insurance isn't the only aspect of finance in which Kiwis have some catching up to do. An estimated half of all adult New Zealanders don't have Wills, while KiwiSaver has done little to change lax attitudes to retirement savings.
A Westpac-Stuff survey released last year for Money Week found almost half of respondents (43 per cent) had done nothing to prepare for retirement.
2. New Zealand's population is aging
The 'land of the long white cloud' is rapidly becoming the 'land of the old grey crowd', thanks to increasing life expectancy combined with our sluggish birth rate.
From 1981 to 2013, the proportion of New Zealand's population aged 65 and over rose from 10 per cent to almost 15 per cent. By 2063 it is forecast that more than one in four Kiwis will be 65 and over.
This has massive implications for New Zealand's healthcare and superannuation systems but it also poses a challenge for individuals and their families. The average life expectancy is now around 80, which means careful financial planning is needed around savings, insurance and financial protection. The last thing anyone wants is to spend their final years in poverty.
3. Compliance is getting more complex
Increasing regulation and compliance is a feature of many industries and professions in New Zealand. Whether or not all this regulation is of benefit is open to question, but from a family financial perspective it means there are more potholes to trip over.
One example is personal and family trusts: according to an analysis by Perpetual Guardian, many trusts are not adequately structured or managed based on today's standards. More complex regulation will require specialist advice.
4. Advice is increasingly specialised
The growth in compliance is closely related to the increasing specialisation of advice professionals.
Financial advisers are a classic example: before the Financial Advisers Act, it was common for insurance advisers to dabble in investment advice, or vice versa. Now, with the bar (and associated costs) raised by regulation, advisers tend to pick one part of the chain and stick to it.
Accountants can sort out your taxes, investment advisers can tell you about managed funds and insurance advisers can explain your options for life cover, but are they on the same page? Without the full context of what everyone else is telling you, their advice can be contradictory.
5. Financial disputes can destroy families
One of the biggest causes of family break-up is financial disputes. Areas of disagreement can range from people being left out of Wills and trusts to everyday arguments over saving and spending decisions.
They are often a result of personality clashes and differing attitudes to money. A family board could help take the heat out of the process and bring more disciplined, objective decision-making.
There are plenty of reasons why Kiwis can benefit from taking a more structured approach to the governance to their family affairs. However, the family board concept will only work if the professionals we rely on for advice ditch the silo mentality and work together for the benefit of their clients.