Q. In mid-2007 my wife and I had $2 million, enabling us to retire. This was the direct proceeds of the agonising decision to sell a long-held and much-loved family waterfront bach.
The money was with NZ Funds in a very conservative on call account and was earning a good
A. Now it's my turn to be shocked, for three reasons:
From what you say, it seems that you were given the wrong information on such a key point - that the preference shares do not have a fixed term, which means you can't count on getting all your money back.
* You say that the adviser recommended putting your $2 million into just two securities - and both the same types of assets. To keep risk down, your money should have been put into a much more diversified mix of investments - as the adviser's colleague realised when you went back.
* You were "strongly advised" to buy the preference shares. But not long afterwards their value dropped considerably. And unlike most shares - which we would expect to be more volatile anyway - some experts see little likelihood of the Rabobank or Origin preference shares returning to their par value - unless Rabobank and Origin buy them back, and there's absolutely no guarantee of that.
The experts might turn out to be wrong, but at the very least you have a worrying time ahead of you.
What can you do about the situation? This is worse than the recent case in this column, in which an ASB adviser recommended his clients put all $250,000 they were investing into ASB preference shares.
The big difference is that you say you were explicitly told that the preference shares had terms. Admittedly in the Rabobank case, your adviser said that the 10-year term is implied by the rate-setting process, which suggests it's not definite. But given that the adviser is supposed to be the expert, it seems fair that you relied on that to mean you would be able to get your money back after 10 years.
What can you do about it? If the adviser is a member of a financial advisers association - which would probably be stated in their literature - you could try to seek help that way. But you may not get far.
How about the Government? No luck with the Ministry of Consumer Affairs or the Securities Commission, neither of whom handles this sort of problem.
The Commerce Commission says you could register your complaint with the commission, "where it would be assessed to see firstly whether or not there are any issues under the Fair Trading Act and secondly, what, if any, action would be appropriate for the commission to take".
"The Fair Trading Act prohibits people in trade from engaging in conduct 'that is misleading or deceptive or is likely to mislead or deceive'," says a commission spokeswoman - so it sounds as if it might apply.
You can contact the Commerce Commission on 0800 943 600 or email contact@ComCom.govt.nz. However, while the spokeswoman says "correspondence from consumers and businesses is an important contributor" to its work, it receives about 15,000 complaints a year, and can't take action on all of them.
What's more, "The commission does not offer legal advice, nor will the commission take action on behalf of individuals."
So it doesn't sound as if you'll get direct help from there - although if the commission took action against the adviser that would surely strengthen your case against him.
But your best move now - according to a lawyer with experience in this area - is to hire a lawyer to write to the adviser asking him to make good your losses.
According to the Commerce Commission spokeswoman, the Fair Trading Act "provides a right for consumers to take private action where they believe that they've suffered loss as a result of a misleading representation", so the lawyer may want to quote that.
It might also be useful to look for any publicly available statements, such as on the adviser's website, to see what they say about their own policies if clients have any grievances.
The lawyer I spoke to suggests I don't name the adviser at this stage, but give the adviser a chance to do the right thing by you. I will get back to you next February to see what's happened, and will run an update in this column then.
By the way, after the Financial Advisers Act is implemented, probably in late 2010, there will be a disputes resolution system that hopefully will make this sort of situation much easier to handle.
But that's not much help to you.
Q. Your page last week listed Christmas charities through which you can "give" donations as gifts. I have been using these for years as it's a great way to give back.
However, your list did not mention Caritas Aotearoa NZ, www.caritas.org.nz, which also offers similar Christmas gift programmes, but the big difference is Caritas takes no fees for admin. One hundred per cent goes to where it should go - the end cause.
Every year the list grows, but nobody from Caritas has ever contacted me. So thanks for the info.
I must say, though, that I'm a bit wary about this issue of whether charities put every donated dollar into the cause.
Somebody has to pay for running the place. I'm thinking of telling "my" charities to use my dollars specifically for admin - so that your dollars can get to the frontline.
Some charities are actually quite open about the fact that, if you "buy" a chicken for a poor family through them, your money might not specifically purchase a bird. I like that honesty, and I reckon they know best about how to make the total dollars go furthest.
Sure, some charities squander money. And I'm not in a position to audit the ones I've listed. But there are people who check up on these things, so I suppose we'd hear sooner or later. Meantime, I have enough faith in people to assume most donations do good.
Q. I'm currently saving 8 per cent of my wage, which I started at the beginning of KiwiSaver. I earn $39,000 per year. I wish to drop to the lowest contribution of 2 per cent.
Is this the best option for me?
And have you any further advice?
Well done to save 8 per cent of a relatively low wage. Whether you should continue to put that much into KiwiSaver depends on how much you want to save for retirement and whether you are disciplined about not spending your savings.
To work out your retirement savings goal, use the retirement calculators on www.sorted.org.nz.
On the discipline issue, if you would spend savings if the money were accessible, you might want to stick with KiwiSaver, where generally it's not. Otherwise, though, it's better to take part in KiwiSaver only enough to receive all the government and employer contributions, and make further savings elsewhere. Then, if you have a good reason to dip into the money - perhaps to start a business, study or help family members - you can do so.
Note, though, that if you put just 2 per cent of your pay into KiwiSaver, you would save $780 a year. That means you wouldn't receive the maximum tax credit, which matches your contributions up to $1043 a year. It would be best, then, to make a $263 extra contribution - direct to your provider - by June 30 each year, to get you up to the $1043 maximum.
Mary Holm is a seminar presenter, part-time university lecturer and bestselling author on personal finance. Her website is www.maryholm.com. Her 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 (pref daytime) phone number. Sorry, but Mary cannot give financial advice.
<i>Mary Holm:</i> $2m nest egg on shaky branches

From $2 per week
Pay just
$15.75
$2
per week ongoing
BEST VALUE
Pay just
$449
$49
per year ongoing
30
AdvertisementAdvertise with NZME.