Q: The attached letter, published in the local Whangārei paper, The Leader, may interest you. It is eye opening to me and should be to anyone who reads it.
A: The letter is from two Aucklanders who bought a Whangārei house to retire to later, and in the meantime they are renting it out.
They wanted to be good landlords, so they chose as tenants a family with three children, as the house is big enough, and set the rent at $400 a week — slightly under market value three years ago. They have not increased the rent and don't plan to for at least one more year until the tenants finish their studies.
However, they got sick of their property manager's repeated rental appraisals "with the goal to suggest a rent increase". They have since changed property manager, but the same pressure has continued from the new one.
"It took some strength and going back to our core values to reject the ongoing money drumming — which of course serves the companies as an income increase," the letter says.
"We feel that there needs to be light shed on the questionable behaviour that shows no sympathy with tenants whatsoever."
The letter concluded: "Landlords and landladies are often portrayed in a bad light, but we have experienced just how hard it is to withstand the greedy property management companies."
I must say the letter made me wide-eyed too.
Rents around New Zealand are rising faster than incomes. In the five years from the end of 2015 to the end of 2020, wages rose 16 per cent according to the Reserve Bank's inflation calculator. But the Trade Me Rental Price Index rose 21 per cent.
I thought that was because newly purchased rental properties cost more and more, so new landlords want more to cover higher mortgage costs. I hadn't realised that at least some property managers, who typically receive a portion of the rent, are urging landlords to charge more.
I've sought comment on this from the Property Managers Institute of New Zealand, but they didn't get back to me by my deadline.
So here we are, already watching those in the real estate industry receive huge commissions for selling properties — at a percentage that I understand is considerably higher than in many other countries. This letter will add to the public's anger.
If it's any comfort, a recent Inland Revenue press release says the department, "is turning its hidden economy focus on to the real estate sector, including both the under reporting of income and the overstating of expenses."
It adds, "After all, tax pays for the essential things that make New Zealand a great place to live. If we all pay our fair share there'll be more money to help with things like the health and education systems." Yep.
Waiting on Bonus Bonds
Q: Isn't it about time ANZ Bank advised its Bonus Bond investors when they would be likely to get their money back, and whether there's an additional share of the final pot for distribution or not?
Isn't it time investors complained en masse to the Banking Ombudsman? I think it's disgraceful that there has been no messaging whatsoever from ANZ for months.
A: You're not the only one complaining. But it sounds as though your wait is almost over.
"The Bonus Bonds financial statements, which will include an indication of the reserves available to be distributed to investors, subject to actual costs to wind-up the scheme and any investment income earned after 31 October 2020, are scheduled to be released to the public at the end of March," says an ANZ spokesperson.
"We will be communicating with investors via a range of channels including email, mail, public notices and posting the results on the Bonus Bonds website and NZ Companies Office Disclose Register.
"ANZIS plans to start distributing payments to investors in the second half of 2021. We will be communicating with investors prior to that in order to collect bank account details to process payments into. Investors should expect to hear from Bonus Bonds in the coming months with instructions on the best way to provide account information for the wind up."
The interesting part, of course, will be to see if it was wise to wait in the hope of receiving a larger payout than those who cashed in their Bonus Bonds last year.
Q: Please note for your readers who want international share fund investments that there are several long established closed end funds (investment trusts) listed on the NZ market. These have several advantages over open end funds (unit trusts) and they offer low-fee global share investing.
Examples include Australian Foundation, Bankers, F&C, JP Morgan Global. Yes, shareholders have to deal with FIF tax, but this isn't difficult.
A: Good point. But first, what's the difference between closed end and open end funds?
KiwiSaver funds and many other NZ share funds are open end. When investors put in more money, the managers buy more shares.
A closed end fund is more like a company listed on the stock exchange. At the start, the managers buy a whole lot of shares, but then stop purchasing. People invest by buying shares in the fund from other investors, through the stock exchange.
I don't know a lot about the investment trusts you mention, but authorised financial adviser Brent Sheather, who is also an investment writer, shares your enthusiasm.
"I have been investing in investment trusts both personally and for clients since about 1990, and when I was with Craigs we organised the local listing of a number of UK funds on the NZ Stock Exchange to make it easier for New Zealanders to invest," he says.
Here's why Sheather thinks "they are a great investment for most New Zealanders":
• "They have genuine low fee structures — on average much lower than most NZ managed funds including KiwiSaver funds.
• "They have independent boards who will fire the fund manager if they underperform and will negotiate low fees.
• "They are closed ended, which has advantages." One advantage "is that the buying and selling actions of the fund manager are not constrained by the flows of funds into and out of the fund. This is particularly important for illiquid assets and shares generally.
"For example, in New Zealand about 30 years ago a small cap fund run by a fund manager you will probably have met had to be suspended because they couldn't sell the underlying assets to fund redemptions.
"What happens in a crash when people want their money out is that fund managers of an open ended fund have to sell their most liquid positions. A closed end fund doesn't have to do this.
• "They benefit from a much better regulatory environment, including full disclosure of fees unlike New Zealand. The regulatory environment for all the UK funds is based in the UK and the regulator is the FCA.
• "They also have significant tax advantages for larger investors."
He adds, "there are a lot more funds than those outlined. There are large markets for closed end funds in the UK, the US and Asia, with many trading at material discounts to net asset value, offering exposure to lots of areas unavailable locally. The trick is to buy the specialised funds when they are out of fashion and trading at discounts."
When a fund is "trading at a discount", you can buy shares in the fund at less than the market value of all the fund's underlying investments.
"The best way for readers to find out about these funds is to read their annual or interim reports," says Sheather.
He adds that the funds can work well for someone with, say, $50,000 to invest. However, readers might want to seek professional advice before investing.
In their own words — readers on the need for advice
It really was hard to choose the winners of my new book, A Richer You — how to make the most of your money.
The most common theme in readers' entries — which had a maximum of 12 words — was along the lines of: "I need to give the book to my financially ignorant children or grandkids or young renting neighbours" — or in one case, a 74-year-old Mum. One woman expecting twins is seeking guidance before they are even born!
Other entrants were in worrying situations. They've been made redundant, or their partner spends too much, or they are approaching retirement with no savings. One said, "I am a scammer's dream ... would love to win a real competition!" Another complained about long waiting lists for my books in libraries.
Some entries made me smile, such as: "With my network I am your cheapest form of advertising ever."
Other entrants have had letters published in this column and want to see if they made it into the book, which is based around column Q&As.
To the nearly 200 people who entered, thank you. If you weren't lucky, it would be great if you would head to your nearest bookshop or maryholm.com and "invest" in a copy!
The six winners, with my comments after each entry, are:
• "Stepdaughter, 18, first job (short-term), discovers afterpay. Iphone 12, many shoes ... job ending ..." — Miriam Barnett.
A classic example of a concerned parent.
• "Help needed, I have lost money 'investing' in meme stocks" — Chulachek Soonthornsaratul.
Meme stocks are popular with online traders, mostly millennials, who perhaps trade more on hype than fundamentals.
• "I am on a saving spree, and freebies are my special friends" — Sachi Sellasamy.
I love the saving spree.
• "My husband loves you more than me, but I don't mind!!" — Valerie Wong.
Thanks for sharing — your secret and your hubby!
• "Dear Mary, I'm still in need of your help! Your ex-student, Rebecca" — Rebecca Rickard.
I've got a soft spot for my former Uni of Auckland students.
• "So I can be the next Donald Trump but without orange hair" — Simon Harmer.
Made me laugh. But please, Simon, make it without a few other Trump characteristics too.
• I've also decided to send copies of the book to three special people. The first one said this: "Nurse, Covid tester, vaccinator. Mortgage still by 65. Want retirement" — Brian Begley.
The other two broke the 12-word rule, but still ...
Their messages are: "35 years supporting people with an intellectual disability (on a low wage) has not made me rich. Your book can save me as I only have eight years to retirement!" — Karin Duxfield.
And "Thanks to your column I became interested in economic and financial matters as they affect the ordinary person in society. This began a process of self education. Eventually I went through a training course with The Commission for Financial Capability and became a financial mentor with a West Auckland budget service. If I were to win a copy of the book, I plan to donate it to our budget service as a resource all the financial mentors at the service can share.
"Thank you for all the good knowledge I have gained from reading your column over the years. I often share insights I have gained from your column with clients" — Miriam Scriven.
- Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. 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. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.