Owning shares in their company can give staff an extra incentive, but it does come with some risk
I'm an employee at a publicly listed company. I'm interested in investing in this company as I believe it has good potential for growth.
Are there any rules around this I need to be aware of first? Also, am I obliged to disclose this purchase to my employer? I assume I would be listed on the shareholder register.
I should add that there is currently no employee share scheme, and they have resisted my efforts to have shares included as part of a salary package.
That's a pity about the lack of an employee share scheme. They often seem to work well, giving employees an extra incentive to work efficiently and care about the company's performance.
But you're going to do it alone, and why not? Well, actually, I can think of a couple of reasons for caution.
* Lack of diversification. I suggest you don't invest more than 5 or 10 per cent of your savings in the shares. If the company hits hard times, you could lose both your job and your investment.
* The danger of insider trading. The Financial Markets Authority defines this as "when a person with materially price-sensitive information about a public issuer that is not generally available to the public buys or sells (or encourages others to buy, hold or sell) the issuer's securities to make a profit or avoid a loss".
If you are in a position to learn about company changes that could affect the share price, you shouldn't trade shares until that information is made public. Otherwise, you have an unfair advantage over the person you trade with.
This is serious stuff. Breaking the insider trading law is a criminal offence with severe penalties.
John Hawkins, chairman of the NZ Shareholders Association, recommends that all employees tell their manager if they plan to buy or sell shares in the company. "This is because most public companies have a requirement that trading requires the consent of the company if the person is 'restricted' [potentially able to have access to any inside information]", he says.
"We don't know the level of seniority of this employee, but that may not matter. An overheard conversation, or a misdirected email could easily make the most junior employee into an insider. If there is any possibility that they may have inside knowledge it is important they follow this approach."
You should also ask your boss about "trade blackouts" - periods when you should not trade the shares because insider trading is more likely to happen.
Each company sets their own blackouts. "The most common is from one month before the end of a financial period until one day after the period's results are released to the market. This applies to both annual and six-monthly results," says Hawkins.
He adds that, "being open about your intentions will reinforce your commitment to the company and may earn you brownie points. There is no downside, and the fact that many companies utilise staff share schemes shows they value their employees taking pride in ownership. Outside investors also like the alignment of interests when the people running the companies they are investing in have some 'skin in the game'."
Insider trading worries aside, once you've bought the shares it's probably best if you hold them anyway, rather than getting in and out of the market. Buying and holding is cheaper, and it works better for most investors.
Paying ANZ mortgages
We are interested in your comments about recent notifications regarding changes to our ANZ mortgages.
Currently we choose to pay more than the minimum amounts off our home mortgages. We pay $315 more a month than required off our two fixed-rate loans, and approximately $300 extra off a smaller variable-rate loan. We do this because all budget and economic advice is to reduce debt faster.
Now the ANZ is introducing new technology, which it says won't be able to accommodate extra payments and that "our repayment amounts will need to reflect the original term of our loan agreements".
It says if we want to pay extra we can either change the term of our loans or make a single one-off payment (which is confusing).
Surely as customers it is our right to pay extra off our loans if we wish to? Can the ANZ bank bring in new technology and then demand these terms?
We would like to know what our rights are here. Surely the ANZ has brought in this new system for its benefit, not the customers'. What the ANZ is doing just smacks of profiteering.
Apart from changing banks, what else can we do?
Firstly, good on you for paying off your loans fast. It's a great idea. And ANZ assures me it encourages customers to do that. But it obviously hasn't communicated its messages clearly enough to you.
The reason for the changes, says a spokesperson, is that, "We are moving ANZ customer accounts onto the same technology system that successfully serves the needs of National Bank customers." He adds that, "This will bring significant overall improvements for customers." But clearly you are yet to be convinced.
The spokesperson continues, "ANZ customers can still repay their loans at higher amounts if requested. Moving forward, their loan term will simply be reduced to reflect the higher repayments."
There's no profiteering in that. You are currently making regular extra payments. If you were to continue that, your mortgage would be repaid faster - in, say, 20 instead of 25 years. The bank is just formalising that, turning your 25-year loan into a 20-year loan in our example.
It should make no difference to any amounts paid. And, says the spokesperson, "No fees or charges will be incurred as a result of restructures to loans as part of our system changes."
What if you want to make lump sum payments sometimes? That's still acceptable, he says.
And what if, somewhere down the track, you're short of money and want to go back to your old payments? The bank has "a simple and quick process to assess requests to reduce repayments and extend the term of a loan," says the spokesperson. He adds, "there is no charge for a customer to restore their original loan term at a later date."
It seems, then, that there'll be no significant change for you. This is not one of those Big Bad Bank stories. But if you're still concerned, talk to ANZ, which says it encourages customers "to contact us directly so we can help tailor payment solutions".
By the way, you say you are paying extra off three mortgages at once. If they have different interest rates, you'll get the most bang for your buck if you put all your extra payments into the loan with the highest interest. When you've repaid that one, switch to the next highest-interest loan. Perhaps discuss that with the bank, too.
Go it alone
I have just graduated from university with two degrees (one in commerce) and have my first full-time job. I don't know what to do about KiwiSaver as I am in two minds. I feel as if I have the discipline and sufficient financial knowledge to make my own retirement plan, yet I do think KiwiSaver has its benefits (employer contribution, for example).
Do you think going it alone is too risky or makes less financial sense, or should I look at doing both or only KiwiSaver as I plan for my retirement?
KiwiSaver not only gives you employer contributions, but also a $1000 kick-start and a tax credit of up to $521 a year - gifts from the Government. You might also be eligible for a subsidy of up to $5000 to buy a first home. For details, see www.tinyurl.com/kiwisaver firsthome.
For all these reasons, it's silly not to take part. The incentives make it really difficult to do better elsewhere without taking big risks and being lucky.
Still, if you have other good ideas for investing, I suggest you contribute to KiwiSaver only enough to receive all the incentives.
Generally, this means making sure your contributions total at least $1043 per KiwiSaver year, July 1 to June 30. But in your first year, that should be adjusted for the proportion of the KiwiSaver year in which you are a member. For example, if you join on October 1, you'll be in for three quarters of the year. So you should contribute at least three-quarters of $1043, or $782, to get a maximum tax credit of three-quarters of $521, or $391. Ask your provider for help with your numbers.
If the deductions from your pay aren't enough, you can send more directly to your provider.
Doom Merchant said last week, "I refuse to wake one morning to learn the NZ dollar has been devalued 20 per cent or more."
Isn't there an equivalent risk, though, of a 20 per cent collapse in the price of gold at any time? Why not? I also hope that there isn't a major fire at the bullion storage facility, in which case Doom Merchant might have to sift ashes to recover his or her wealth or, dare I suggest, rely upon a financial product like insurance.
Gold in heaven
A very rich man died and went to heaven. He begged St Peter to allow him to take in some gold bullion. Peter agreed, but was somewhat bemused that anyone would want to bring in paving stones!
Wealth beyond money
On the subject of financial collapse I like most the sage advice of Charles Eisenstein. When someone asks if they should hoard gold, he notes that, "if you have gold the men with guns will come and take it away".
Instead he suggests that the best way to create security for yourself and your family is not to build big mansions and high fences but to give your time and support and help to those around you in your community. Then when you are in need, help will be there.
Eisenstein speaks, on many YouTube videos and in his book, Sacred Economics, about the history, rise and potential fall of the system of money. He talks of how we can create wealth that goes far beyond what can be bought and sold. Maybe we need to stop talking just about money, and start considering the nature of real wealth.
An excellent note to end this debate on - although I'm afraid we have one more reader's prediction to check out, on the price of silver, in a couple of weeks.
Mary Holm is a freelance journalist, part-time university lecturer, member of the Financial Markets Authority board, director of the Banking Ombudsman Scheme, seminar presenter and bestselling author on personal finance. Her website is www.maryholm.com. 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 firstname.lastname@example.org 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.