Ben Brinkerhoff: When to take a look at your KiwiSaver

You're listening to the Weekend Collective podcast from News Talk sedb it.

But it don't too far because you know it don't matter anyway, So money money won't get your no barget too far.

To take.

What is.

This is on?

I started talking before I was really ready. There, Welcome back to the Weekend Collective. This is smart Money. I'm Tim Beverage. And if you've missed any of the previous hours, we had Jude Walter in just now for the Health Up talking about keeping your brain active and fit and healthy and avoiding stress and just basically keeping your cognitive health on top. So if you want to listen to

Gid a Ben.

How are you going good?

Dan?

How are you not too bad? Nice to thank you for coming into the studio.

Good to see you. It's good to be here.

What's been keeping you out of mischief.

And the money scene?

I mean, but it's a strange way to put a question. It sort of is.

I think the best way to stay out of trouble is to read the newspaper as little as possible, right, Yeah.

I might just get you to just pull your microphone just a little closer there, So there we go, there

We'll side that. That's a question with a couple of layers. But let me just peel back a couple.

Yeah.

There's an awesome paper written in the past called myopic lossid version, and my opic just means short.

I'm going to write that down myopic myopic that's short loss a version, right, okay.

And the premise of this paper was that basically people's point of view is very short sighted. That's what myopic means is short sighted. And the more short sighted your view of your performance is, the more likely you are to make bad decisions. And so I wrote a paper once called It's Okay to look Away, Yeah, and I wrote it during the COVID time period, where was pretty challenging. And the other waying premise was don't look at your account balance. You want to set things up to be

Well, it's like it's like, if you're buying and selling shares and it was your hobby to do your own make your own choices, probably following them every day wouldn't necessarily lead you to the right decisions. Of course, then again, if they suddenly went up in value a lot, it would have been useful to follow them. But that's not the game.

Machan, the number one person that looks at car ads car sellers, people that just bought a car or really, yeah, so you just buy a car and you're looking at ads, why just to make sure you've got a good deal. I think when people make when they change their investments around, they're going to look at them a lot, decide to make a good choice and make a bad choice. I think it leads to a lot of people being unsettled overall. I don't think looking at your key saver balance that often no idea.

Are there actually investments it does if you are taking hands on approach, are there investments where it does pay to keep a regular eye on them? Because of course, key that's the thing with key we Saver people aren't key we Saber managers because they're idiots. They are on the job for you all the time. But whereas I guess, if you are managing your own personal, individualized investments, then obviously you're you're going to keep an eye on that.

Completely different game. And by the way, don't don't don't do that. Don't don't that you're Key we saver balance on ten stocks.

I No, I wasn't saying that. I'm just talking about different the reasons you might keep an eye on your investor totally.

If you're in and yet and they're in that kind of situation and you are basically the manager of your own investments, yeah, then maybe maybe it makes sense, you know, But I just suggest that that the key Saver is one area where we're diversification and maybe taking a different approach.

Piece are You've raised a couple of things there which I might I wouldn't mind digging into, because how many people do you think actually have a goal with the key we save it? And and the reason I asked that is because we generally have If you are an employee, your employer may put in I'm not sure what the rules are because I'm self employed, which is, let's not dig into that, but say three percent or something or

Oh you've hit I don't know if you if you thought about that too much ahead of time, but you've actually completely hit on the issue is that with keysaver, you want to have, you want to be intentional, what do you actually want to achieve? And you think about you don't have a huge number of choices to make in kiv saver, but boy that it can be dramatic the impact of the choices that you make over maybe

I am California because you can check out, but you can never leave.

Exactly.

Let's not get into the deep spiritual sense.

That's on California.

Yeah, yeah, yeah, okay, anyway.

Carry on well, and you talk to people about kivsaver and you say, well, based on what you want to spend in your future, what amount of what you need is ever we're going to cover? You know, is it going to cover forty percent of what you need? Is it going to cover sixty percent of what you need? Is it going to cover everything that you need? And what's your plan to fund the difference?

I reckon people find that, and I'm probably speaking personally as well, there's a part of I think there's a huge amount of I'm not sure if the word is procrastination or avoidance, because people don't want to know what that means when they set their goal this is what I want, It's like, well, this is how far away from that you are? How often do people avoid it because they just you know, we're living in high we've

You know that's right, that's right.

Well, listen, you know, if you don't have a plan, You'll get somewhere. It just may not be where you intended.

Right, So sounds like that, it sounds like a lyric from that song again, But it's probably not.

As long as that's an acceptable outcome, that you you end up where you ended up, and perhaps that's okay because you wouldn't have known the difference. But when you actually know where you want, or you have an idea of what you want. I talk to some people sometimes and they're just desperate because they think I'm not going to be successful. I've I've waited too long. It's it's

And I says something to be said for even if you know maybe it's not the answer you want, the fact of taking control of your finances, it's actually in its own right, no matter how good or bad the outcome is, there's something about it that is actually liberating because you're finally in control and you know what you're doing absolutely.

You feel you feel like, well, this is where I'm at and I'm not in denial anymore, and I actually have a strategy to make the best out of the choices I have left.

We Actually, i'd like to hear from you on this. I eight one hundred eighty t and eighty. Have you stopped to think of a particular financial goal or do you sort of just do different things, Like I'll stick a bit of extra money into ki we sab because I think I need to save some more, But you have no idea what that's going to amount to in the end. You just sort of think this is what

I ran the numbers recently, and well, if you took like a thirty year old and I know that this sounds like like a big salary, but I want to think about it from the sink of a professional, because that was the audience I was thinking about. A thirty year old who was on one hundred thousand dollars a year and just put in three percent. Poor, you're putting three percent and you know, saved age sixty five. That

Same person's going to be bitter them that you just said, Actually I thought that was going to be I was surprised at what it was that much.

Three and fifty thousand dollars balance. It isn't as much as it should be because you know that's that's three and fifty thousand and thirty five years from now. What's the purchasing power of that. It's not as great as it sounds. It's maybe half of what it is now. If that same person allocated into an aggressive portfolio and put in six percent, they'd end up with three or

So you did well there.

But Brent Ben Brenkerhoff is my guest. He's head of advice at Concilium. You can check out Concilium dot code on ZID. They also have their own Keiwi Saber Fund, which is key we rap as in wrapping a present dot code dot nz. We'd like to take your calls any questions you've got about Kiwi Saber and Ben and I have lots to talk about. So we'll be back in just a moment. It's so eighteen minutes past five news talks.

He'd be and welcome back.

My guest is Ben Bronkohoff, head of advice at Concilium. Actually I say Concilium, Ben, just quickly, what does Concilium do?

What's your bag?

Baby?

So Concilium's job is basically to help independent advisors stay independent. So we provide a lot of the services, consulting, a lot of the research and software required for an independent advisor, not out to sell someone's stuff.

So excellent.

So, look, we've got a lot of questions about can we say we went to the break just with the questions around aggressive funds? And I mean there are generally three types of fund are there is three or four? There's conservative, balanced and aggressive and maybe there's somewhere but.

There's there's some nuancewers there ten but you you can stick with those if you want.

Okay, So aggressive, you were talking about over a you know, say a thirty year old decides they're going to stick a certain percentagen and the difference between being in a more conservative fund to aggressive and the potential money that they could end up having. I guess the first question would be over what time period? So aggressive? Obviously you are more susceptible to the rises and the falls in

I think people that invest in keV saver mess this up, and I'll tell you how they mess it up because they think I'm going to reach sixty five and then oh, I got ten years until sixty five. Therefore my time arison is ten years. I'm fifty five. Well, no, when do you want to spend the money? Your time horizon is not based on when you reach the age of

They're a buyer.

If there was a recession and prices went down, they're not harmed because they're buying at low prices. Now who are they buying from. They're buying from people that are selling. Yeah, well, if if there's a recession of prices are down, you're

So what I'm hearing there is if I was what even my fund is, Let's let's pretend I'm in a conservative fund and we should aggressive, we should talk. I'm not in a concert fund, don't worry. I'm in balance. But I'm a bit passive on this because you know, mortgages and all sorts of cost of expence. So I haven't been a great contributor. I'm hearing that right now. The GDP data and all that sort of data data is we're not rocking and rolling as an economy at

You say?

Yeah, I kind of think about fifteen years if you're an aggressive portfolio, that would be ninety percent or more in shares as opposed to cash and bonds and things. So if you have that kind of time horizon. Now, I think the idea of when you should be in and we should get out is really tricky because the share market is a prediction. It's a prediction of future prices, so it's really hard to know when to get in and when to get out.

And you are reminding me of our earlier conversation as well, because it was about people watching the shear market and thinking when's a good time to buy, and you are like, the market is always going to be ahead of you.

Buddy, That's exactly right.

So I don't think that that's a good idea, but I do think that when people are regularly buying, they they're partially insulated from the effects of down markets because if the markets are down, then they can purchase at low prices and that helps to blunt the effect of those low prices.

But if you're constantly buying, you're also buying when the market is inflated as well.

That's right, but no one cares. When the market's in flavor, they're super happy because they look at their balance and there they're an aggressive allocation and it's it's done really well, So psychologically.

They are they're happy.

Now.

The problem with us that with the idea of when the market's high is the market, over any length of time generally trends one direction, so it's always going to go get higher. So the idea when it's high, if it's at an all time high, does that mean it's going to fall? No, that doesn't mean that at all. It's very hard to know these things.

Because the issue that you've.

Maybe touched on is it's one thing to decide when you're going to get into an aggressive fund. And I guess the answer is as early as possible.

That's the answer.

Okay, as possible that that is the answer.

You know, but of course I listen.

This isn't advice and not if someone someone, if someone is has a has a frame of mind that when markets are volatile they really lose sleep and it's highly uncomfortable for them, then they should understand that that they can go more conservative to balance or a conservative but the implication of is that they will likely, over a long period of time end up with less money. So here's the tension.

What is risk?

Is risk the fear or the risk of prices going up and down a little bit or even a lot over a short term time period. Or is risk that I might not have as much money as I want when I want to spend it.

You know that that is what is risk? Well, actually that is also inadvertently. There's another question that comes out of that is we all understand risk in our own lay person sort of way, like I might hear aggressive fund is more risky. But do I really have any idea what the actual risk is and what that means because we all just have our own subjective Because some of us I've got I mean, I've got a maide of mine who's I produce concerts from time to time, and I consider that pretty risky?

What a mine?

Who does it all the time? And he will have moments where he thinks, oh, that's not very risky. That would terrify someone else. So his perception of risk is completely different. So how can we, ever, as key we savor investors, which most of it many of us are, How can we really understand what the risk is because it's almost Some people might think, okay, you've got conservative. Let's just pretend there's three. We've got conservative, balanced and

There's no way.

So how do we under stand what risk is? And can we Saiva?

Well, the number one thing I think you should do is get an advisor, right because the ultimately what you're trying to solve, the question you're trying to ask is is the two types of risk I'm trying to trade off is the risk of price movements to go up and down, and that makes me uncomfortable when so when markets go down, how much is my portfolio likely to go down?

Or could it go down?

But the other risk that no one ever talks about, or pays attention to, or knows intuitively, is what's the risk that I won't be able to spend what I want to spend when I want to spend it. And what's the risk that's actually the more salient risk of the two price movements? You know, does anyone care now

Okay, I will.

Drill into one more question. I'm dying to ask that about that even the you've sort of probably answered a question if you know how with statistics there's a bell curve. Yeah, and at the fringes, you know, the majority of action takes place in the middle, sort of thirty forty percent

You absolutely can take a kV server allocation that can be at the ends of those those you can you can be virtually all in cash or you can be virtually all in just a few shares, depending on the keV server that you're thinking about. So yeah, there's a wide spectrum. But the question you should be asking yourself is does the allocation I'm in is it likely to achieve what I want?

And how do you know?

I think?

I think, I think for most people they need to get advice. But if you don't want to get advice, you certainly avail yourself with the tools on sordid dot co dot nz and and take and take those sorts of tools available to you. But like on our website kivi RAP, we have a list of advisors you can go to. All these people give advice on retirement portfolios and it's good and those are the kind of people

With Actually I've just gone on to your the Kiwi rap site that you guys have for your kiwisaver, and it says find an advisor And my head's spinning because there's a lot on there. So you know, how do you how do you make a choice there? And and how does it work with the funcial advisor? Because I have had people who are personal personal financial advisors who say, to be honest, it's expensive sometimes if you want to get personalized financial advice, how does it work?

Well, I have a lot to say about that.

Well that's good because we're here to talk.

So see.

You know, advice is not a commodity. It varies widely in quality, and I understand how intimidating that is. You know, so you you don't how do I know if I'm getting really really good advice? And how do I know if maybe I should switch an advisor. I think one of the first things you want to think about in terms of the quality advisor that you're with is whether

H Okay, so how do you know that? Do you just say, do you have the questions you should ask a financial advisor?

So I was recently, I advisor send me, you know, a blacked out version of someone's statement where all the personal informations blacked out, but I can see what they're invested in. This person has five million dollars invested, and every single thing they're invested in began with three letters because the three letters were the institution they were they had been working with. Yeah, so basically that institution had

See, I'm instantly just thinking, okay, how and where do I go? I mean, I would find that bewildering because yea, ideally what we all want is some magic guru mentor and I call them up and say, look, who's a good financial advisor? When they say this person is great because they're not tight and they give you their answer. But you have to do It's not that straightforward. Not many people have a financial risk.

Question you're asking is a great one. How do I find an advisor? How do I find an advisor? And you know what, there isn't a great answer to that situation. I mean the best I can give you is look at our website right there, because all those people are great advisors, and so that is a great place to choose from. And they do talk about what location that they operate in, so you can always look at your geography as a way.

Oh, in terms of people want to have face to face sort of advice, absolutely, yeah, now' it's I'm gonna have a look at people qirap dot, Curtin and Z because anything where you start making some exploration on this stuff is probably the step in the right direction. But is it important the individuals who are within a company as well? Because it's a bit like any organization. There'll be people who are absolutely rocking and rolling at what they do and the people who are maybe not so good.

Let me give you some intuition on this. If you go and you talk to an advisor and they spend a lot of time telling you about how they're their their investments that they use are amazing, and they spend a lot of time convincing you that they know how to pick the best investments, be very concerned because that sounds like a sale. Be very concerned. If you talk to an advisor and they spend a lot of time trying to understand you, what what are your what are

So if they're trying to sell you something first time, first sign of trouble.

That is a that is a sign of that is a sign of trouble.

Yeah, look, we're gonna be back in just a moment.

If you've got any questions for being Ben brink Off ahead of advice, it's going to sell him some great information and conversation. We're going to continue it in just a moment. It is twenty three minutes to six news talks. He'd be te.

What's see what's the same name?

And shine the pressure.

A billion there and there's the theme for the show when I'm a billionaire. I'm not sure we're going to return into billionaires. It's a lot of money. By the way, when you think I'd like to be a billionaire. It's like, would you really ten million be enough? How much money would be enough that will save that for another show? How much money would be enough for you time? Make a note of that. I'm Tim Beverages, a smart money. We've got Ben Brinkoff, head of advice at Concilium in

Ben.

It if I take out Key WE Saver in a lump summit retirement, does it get taxed again? If it does, at what rate? Would it be better to stop putting in and put in savings account at some point to get some interest instead of penalty of tax taken off again? I think they mean does it keep getting taxed on the interest or something? Once it's I don't know what.

When you're with draw key WE Serve, it's not taxed. No, it's taxed on the way through.

Yeah.

So whatever money you see in your kdcver account at sixty five, if you pull that money out, there's no tax do Yeah.

But if you invest it in a savings account, then you will get taxed on the interest. Correct.

Yeah, you're gonna get You're gonna get taxed on the interest in either account, so it's not that's not gonna.

Yeah effect, no lump sums to worry about the account. And I think is the moral of the story with the American Fed cutting the interest rate, I was on the conservative and my keywi Saver, I'm now considering going to balance rather because people will now be investing in stocks rather than bonds. Is that a good idea from Sue? I think the way Sues expressed itself is the way a lot of people just think broadly. It's just like I reckon, this is down seul shoven in here and

Yes, Sue, So you know, when I think about a situation like this, I don't make any changes at all based on things like what the Fed does. And I'll tell you why, what do I know about what the Fed just did? Markets haven't already priced? Yeah, markets have already priced set information in. In order to actually get an advantage on the markets, you've got to know something the market doesn't know. And what the market knows more than anything is what the Fed does. They that is

Did the markets know that the feed was going to be dropped or was it by point fifty bases points or whatever? Did they know that or not?

What the market will do is that people have differing opinions. That's why there's a buyer and seller right.

So bleeding obviously, but it's good to remember.

So so what happened is it will it will factor in a rate cut of some variety, and then when the and when the news becomes certain, then they'll have maybe a small correction right in that moment. But generally people have already anticipated these things before they happen.

When those announcements are made, are they people sitting at computers ready ahead a button.

Just like I mean, the fact that you say there's a person hitting a button is like it's it's it's it is an algorithm, my friend. Right, So for the for the most part, people have already factored these things in. It's already priced in. That's a very hard thing to understand, and I understand, I get why that's not intuitive.

Actually it's funny. I think the moral of the story that you comes from last time. It's a people are and when we discussed about making your own investment choices, and the point you made quite well it's stuck with me was that unless you really, really really I fe with stocks and you're passionate about a particular investments, then you don't do your own investing because there's the market is always going to be ahead of you, unless you are just blind lucky like a lotto ticket.

I guess that's absolutely right.

So what am I? If I buy something, someone's got to sell it. Why does that person want to sell it?

Yeah?

What do I know that the seller doesn't know? What we both don't know is the news happening in the future, right, And the news will happen. It will be good or it will be bad and one of us will end up better off in the transaction.

But if either of us or both of us.

Knew that information, you know, we would factor that into prices and it would already we wouldn't neither of us would win.

It does always fascinate me when things are really in a boom and people are thinking, well, I'm definitely going to sell because it's not going to go any further. But and the fact that there are still people to buy. But that's the whole supply and demand and just that.

That's what makes the market such a beautiful thing, right, is that it's that information needs to be processed so that there's buyers and sellers, so that what you're left with is the buyer takes risk the reward for that, the seller takes cash and they're happy with that. And depending on how much uncertainty there isn't a price as how what someone buys when they buy, So the more uncertainty, generally speaking, the more return you have to offer me to take that on.

Now, another question that's come through and from a few texts, is when is the time to take your money out of an aggressive fund? So you've decided you've had the window you've had fifteen years or twenty or thirty or whatever, and you're getting maybe a few years from retirement. There's a part of me that sort of thinks, well, look if i've been it for fifteen years and when I just hang on to it and take it when I

It's a very individual question because it does depend on when you want to spend how much you want to spend. So again, these are things you sit down with someone and you you work all that out and you figure out what an allocation is appropriate. But when it's in your mind that you could spend some of that money, when you when there's when there's something on the horizon you can think of, Okay, you know, I could see I'm going to start to spend some of this money.

Who decides when it comes to qcyber providers, Because you were saying that there is the complete spectrum. You can go incredibly conservative or you can go and credible aggressive. Absolutely Who decides the language to describe their funds?

I know, right? Like it's it is so confusing. I hate the word aggressive. You wants to be aggressive? Most people think Americans are aggressive? Wow, you know, and and they do so in a in a fairly derogatory way. Right where the word growth that's or balanced. I want to be balanced. I'm much more balanced, right.

Well balanced?

It doesn't sounds good.

That sounds a bout of a snooze though, does it?

Okay?

No, I mean it sounds it sounds like you're having a bubb each white.

You know, there's a there's a study ones I love academic studies, and they they gave they gave these two different groups of people two different funds to choose from. They said, you got to make a portfolio from these two funds, right, and one of the in one case the fund was fifty fifty percent shares fifty percent bonds and the other and they had to balance that with someone that was one hundred percent shares. Well, do what they did.

They just kind of took.

Fifty percent of each and they got about seventy five percent shares. The other group they gave two funds, one was a hundred percent shares and what was one hundred percent bonds, and that group kind of just took fifty percent of each and end up with fifty percent shares. So what happens is people people when they don't know, they just kind of they kind of just take an advert on the.

F So, but is that right for you?

I feel like people are just feel like.

Oh, that's the whole point.

That's why I'm saying, it's even people's understanding of risk, mild risk or whatever.

And so what happens is they take these these surveys of five or six questions and that it tells you oh, you should you should be in eighty percent shares, You should be in fifty percent shares, you should be in thirty percent shares. Five or six questions? Right, No one ever describes, Oh, by the way, in twenty years time, you're gonna have one hundred thousand dollars less because of that choice. Right, No one actually takes you through that logic.

No, Right, We're gonna take another break, can come back? We got because time is flying. It's ten to six, but this is news talks. He'd be back, soone center.

Welcome back to the weekend collective.

Of course, if you do want to have a good retirement, write a song like Hotel California. And it's probably a license to print money, isn't it, Brand Brinkerhoff? So yeah, look are they just we've got about I've got three minutes left. But are there particular warning signs or signs that people should look out for that it might be time to change their advisor or their their plan.

Yeah, there are.

If you don't know what you need to do to have the retirement that you want, and if your advisor has in contacted you in the last year, then change very simple. Okay, if you know if good advice needs

What about your key we saber fund? Are there signs that you should reach?

So if you don't know why you're in the key we severy you're in, then consider a change, or at least people why am I in? What am I? I guess I'm in at a fault or or I'm I went down to the bank and they signed me up with something I don't really know. Why consider a change? You're not there on purpose, are they?

The sort of dot org dot nz website is one that gets referred to frequently?

Does it?

Is there any sort of external website and maybe that's the one that actually assesses the risk profiles sort of from a third party point of view of different funds, Like so because one one one funds aggressive fund maybe completely different in terms of risk profile to another.

This is what we do. A Kiwi wrap is you work with an advisor. In the advisor actually as five hundred or more different options that they can use. So so the advisor sits there and looks at everything that's available to and then they determine what is the right mix of those things for you. And I think that that is because I think it is an overwhelming thing and likely to be something that people avoid because they feel uncomfortable with it.

Hey, believe it or not, that brings the art or close that has flown by, hasn't it. Well, that's that's why I love about radio and having a good conversation. Hey, thanks so much for joining us, Ben. If people want to check out you want to check out Ben's company, here is what's what's your job description again?

Financial head of.

Advice at Concilium.

There we go. It's a Concilium dot co dot NZ. That's c O N S I L I U E M. If you're curious about those pages I've referred to in our conversation, that's on the the key we sabor page. It's kiwi rap as and w A R sorry w R A P. And you can see the list of the drop down list of advice and a whole lot of an interesting information on there, which I couldn't begin to describe any further given we've only got thirty seconds left, so Ben, we'll catch you again. I hope we'll get

For more from the Weekend Collective, listen live to news talks he'd be weekends from three pm, or follow the podcast on iHeartRadio.