David Chaplin 's Opinion

A personal finance columnist for the NZ Herald

Inside Money: The great wall of cash

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Photo / Thinkstock
Photo / Thinkstock

"Believe it or not there's a lot of money out there," an authorised financial adviser (AFA) told me in a carpark conversation last week, "only, people are too scared to anything with it."

Most of the money is here sitting in bank cash or term deposit accounts, slowly compounding in line with the low interest rates on offer.

"People would rather suck up the 4 (or so) per cent than risk losing capital," the AFA said.

As at September this year, bank deposits accounted for over $101 billion of household savings, up $10 billion from two years ago and more than $35 billion compared to September 2006.

On a similar five-year timescale the amount of money households have invested in managed funds (excluding investments via superannuation, KiwiSaver and life companies) has grown, barely, from $26.2 billion in June 2006 to $26.5 billion in June 2011.

The 2011 figure probably overstates the household managed funds as I think it also includes the $6.7 billion invested in cash PIEs, which effectively are term deposits.

But even if you take the figures at face value, the retail managed funds sector has been stagnant for many years, making it a tough market for those selling plain old funds, let alone exotic examples.

That hasn't stopped people trying though, including Clayton Coplestone who over the last couple of weeks has taken four or five investment managers on a road tour of New Zealand pitching fund ideas to financial advisers.

Coplestone's 'Meet the Manager' extravaganza included a take on this century's most publicised growth story as told by Australian financial planner and fund marketer, Simon Wu, head of Premium China Funds Management.

Wu rattled off some impressive, if horrifying, statistics to highlight the China miracle: x number of megapolises under construction; so many months waiting time for a BMW; infinite demand for Louis Vuitton handbags.

But it's too soon to tell whether that will tempt New Zealand's cashed up investors over the wall.

David Chaplin

A personal finance columnist for the NZ Herald

David is a freelance journalist who has covered the financial services business on both sides of the Tasman for over 15 years. David has edited magazines and websites for the financial advice, investment and superannuation industries. Today, he contributes to various publications in Australia as well as his bi-weekly blog for the NZ Herald under the 'Inside Money' banner.

Read more by David Chaplin

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