Equity crowdfunding explained in simple terms; an interview with Snowball Effect’s Josh Daniel

And now for something completely different.  No, no lectures on how to save during the Silly Season. Been there done that. You can check out some of my previous blogs on that subject.

This week’s blog is dedicated rather to a subject that’s been making news for some time in other jurisdictions but is relatively new to New Zealand; equity crowdfunding. To be clear, equity crowdfunding differs from regular crowdfunding where funds are made voluntarily towards some cause you support or were corralled into supporting financially.

Equity crowdfunding comes with a return, or at least the potential of a return at some unknown time in the future. Essentially, it’s an alternative form of investing. In what?  Well, that’s your call. At the moment, there is not a huge variety of choice, at least the only folks working in this space have three Kiwi start-ups they assisting with capital raising; one of them a brewery, another a filmmaker and the third a company that manages to turn industrial waste into good use.

To find out just how equity crowdfunding works, the risks for investors, what kind of impact it’s having in New Zealand and what the future holds, I asked Josh Daniel of the  Snowball Effect’s head of platform and investor growth to join me for an interview.

You’ll note this is not a studio production quality, but you’ll get the gist nonetheless.

Cool outfit and I’ll be sure to come back to Josh at a later date to find out just how big the Snowball has grown. Check it out.




Win a free 4-day pass to Wanderlust Great Lake Taupo. What is your passion and why in 500 words or less.



A question that gets asked regularly around my house is: “What would you do if you won the lottery?” and also “What do you love to do most?”

They make a good match those two questions.

Seems we all love to dream about endless holidays, the dream house, dream car, dream bach or what have you. Daydreams are free after all, so why not get swept away…  Still, have you ever noticed that it’s a question that tends to elicit a response that has more to do with what stuff we’d buy if we had sudden wealth, not what we’d do with our ample free time.

The second question is a more substantial one I think because it forces you to reflect more seriously on how you would like to spend your life.  I guess it’s more realistic. It’s a question that we should all be asking of ourselves on a more regular basis I think, unshackled from the thought of it making us “rich” because in reality, what makes us “rich” has more to do with the stuff we love doing and the people we love being with, and less about externalities.  I’m not minimising the importance of money here rather  placing the value of money in a  wider context.

My answer,  no surprise,  has to do with yoga. More classes, more training, more retreats… I’d do it if I were rich, or poor, happy or sad, old or young. It’s why I quit a full-time job sitting in front of a computer doing another skill I’d honed over 20 years but at the expense of my passion. No, there wasn’t enough time for both, not when you add in two kids and a dog.

When you take these new age quizzes about how to find your purpose or passion, at the top of the list is a question about what you most love doing. That’s meant to hold the key.

In my book, I make a similar point. The original title for the book was “Find Your Flow.” My hypothesis? When you find your flow, the money will follow. Don’t worry, I’m also hugely practical and realistic so the book is full of pragmatic stuff too that falls outside of the Law of Attraction principles. I’ve tested this theory and found it to be true, by and large, however I would qualify my findings and add that doing what you love is no guarantee of becoming a millionaire, at least not overnight. Neither is the road to success, however you define it, a linear one.

Simply put, research has shown that by doing what you love, you end up (through a whole lot of repetition) becoming very skilled at it, which in turn increases the likelihood of you earning a decent living from it.

Clearly, some skills and services are more in demand and more specialised so it’s not an equal paying field. The consolation for those individuals who love what they do but operate in a saturated field with a low barrier to entry and little remuneration, i.e. yoga, is that they are at least happy on the job. I can attest to this too.  Admittedly, there are many happy but frustrated yogis (and other low wage job lovers) who wish for more money in their lives.  Money management is a suitable cure for most of what ails these folks, although there is no doubt it’s a harder road relative to other more lucrative professions.

So… because I know so many people who are stuck in jobs they either hate or are simply a means to paying off the mortgage and financing holidays that they google and plan for while slogging it out 9-5,  I thought I would invite readers to craft a short essay to inspire some passion and purpose.

The reward for the most inspiring story (to be issued at an upcoming Auckland-based event I will be involved in – the details of which will be announced next month) will be a 4-day pass to Wanderlust Great Lake Taupo, Jan.29-Feb.1 It’s worth about  $550 in value. I will also throw in a free copy of Money Matters; Get your life and $ Sorted.

In 500 words, or less, please tell me what you would do if you won the lottery and why, not in terms of the material stuff you’d buy but how you would spend your time. You don’t have to be a yogi to join this contest either. I invite people from all walks of life. Just bear in mind if you are an international reader, the ticket doesn’t include airfare to NZ:) If you have no interest in the ticket and want to share your story, I welcome that too as I know many of you live outside of New Zealand.

You can post and share your story in the comment thread or drop me an email at info@amandamorrall.com. Please ensure you leave an email where I can contact you if you are the successful Wanderlust ticket winner.





The price of living in paradise — is it really worth it? Amanda Morrall on the lunacy of Auckland’s housing bubble


Something is rotten in the City of Sails. I’ve known it for some time but when you are living in paradise, it’s easy to forget about foul odours, even if they are sweeter than Rotorura.

Okay, so this isn’t a Shakespearean tragedy I admit but it’s no less dramatic for me and thousands of others priced out of this ridiculous housing market. (How much can you afford?)

It’s hardly news, I know. World “experts” have been warning for years now that we are living in a housing bubble. The Economist, in one of its most recent issues (see NZ Herald report here) waved the red flag again but virtually no one seems to care, save journalists maybe.

It’s inevitable I suppose. You live with something long enough and eventually you become immune to the conditions, even if they are toxic. We’re like frogs in a slow boiling pot here, ignoring the shouts of bystanders urging us to get out, or stay out, but we’ve convinced ourselves that we’re luxuriating in a spa bath.

Two years ago I was writing about this bubble and the epidemic that had house crazed New Zealanders blindly piling into the market like zombies. Back then, the market was tagged to be more than 20% over valued, relative to incomes.

Now, according to the Economist, it’s risen to 30 per cent. We were ranked fourth behind Canada (32 per cent). Australia incidentally wasn’t much better at 33 per cent. Belgium took first place. Is it any wonder New Zealand banks, and their Aussie parents, are making record profits.

Regardless of the warnings, many (myself included) continued to dismiss these reports. What do foreigners understand about our patch of paradise at the bottom of the world?! We have land scarcity, we have beaches at our doorstep, we have hokey pokey ice cream and  Dan Carter dammit.

Well, this week I was jolted out of my yoga bubble back into the bleak financial reality of our housing bubble.

After being put on notice of my rental house being sold (the fifth since moving to New Zealand) I decided it was time to follow the herd.  Despite friends urging me to leverage up for the sake of home security and a good school zone, I couldn’t quite bring myself to marrying my bank for 30 years.

I decided to look outside my current neighbourhood (which clocked one of the steepest price increases in two years in Auckland) to find a more affordable crib for me and my kids.

It didn’t take long before I fell in love. A cute little alpine sweetie that  backed onto an old growth Kauri forest. For once, it was a property as billed. “Tranquil and secluded” and charming to boot.  It  ticked all my hippy boxes, then some.  I shelled out more than $25K above the asking price in hopes of realising my dream home. It wasn’t meant to be I guess. I was outbid, by how much I’m not sure. The sellers refused to say.

I’m still drying my tears but I feel like the fever has started to break at least.

What insanity convinces us that paying more than 30% above CV is normal and that $720K (the average in Auckland  now) is situation normal. When I last checked, average annual combined incomes were around $50K.

What kind of fool expects that house prices have no ceiling given their dramatic increases over the past decade. Have we learned nothing from the GFC?

Eventually, average New Zealanders won’t be able to afford their own homes, (even with their parents generous support) and eventually we’ll be bemoaning the loss of our best and brightest who will understandably fly the coop in search of jobs that can accommodate house prices.

My friends are in consolation mode. “It’s the same story everywhere. You’re not alone. Don’t worry, your dream house is out there.”

I’m a natural optimist so believe this to be true but I tell ya, it sure as heck isn’t easy to keep one’s spirits up in the City of Sails when the sun ain’t shining. Stories reporting on renter’s woes like this  certainly don’t help either.

I have one thing to thank for house prices in Auckland I guess; It cured my writer’s block.


Flowing amid the chaos and cross currents of life and finding money and joy along the way.

Flow is about more than cash flow. It is about life flow. Each of us creates our greatest wealth when we are in our own personal flow. Roger Hamilton



There’s a reoccurring theme running through my life that goes something like this:  “let go.”  Go with the flow  might be another way of stating it.

I hear myself uttering the words whilst teaching yoga, I repeat them to myself silently when I feel myself stiffening with stress or disappointment at something not going the way I’d planned and observe the process in nature  and watch with wonder and envy at the ease of flow in its purest state.

It got me thinking about how one can “just let go” from the rigid ideas we have about how to earn and grow money, the strict targets, the discipline and structures that all help one to achieve greater wealth and dissolve into a state of non-worry that gets us to the same point, financially.  Is that really possible?

On one hand, there’s the mainstream thinking that reinforces the 9-5 pm. paradigm where we work not for love but for money, routine and results…in the form of a regular pay cheque and maybe the odd promotion. On the other, there’s this idea of pursuing your passion, allowing money to be a secondary concern and thriving on a perpetual wave of uncertainty where opportunities knock on your door, not the other way around.

But does it have to be one or the other?

As with most things in life, it’s a balancing act that involves letting go of fixed notions and attachments to ideologies of any extreme.  Letting go is not a synonym for abandonment rather I see it simply as a way of releasing fixed ideas and opening the mind to possibility.

Can such a mindset be fairly said to apply to money and wealth management?

There’s very few I know who would said that money doesn’t matter and fewer still who would say they want less of it than more. In fact, the only person I can think of is my meditation instructor, a Thai monk in his 90s whose relinquishment of all worldly stuff ironically attracted to him money by the truckloads. But even this enlightened monk realised that money wasn’t something to be treated lightly. With the money that did flow his way, he created ways to channel it back to the people who needed it most; hospitals, daycare centres in the poorest areas of Thailand, to women who needed to learn skills to help them earn income for their families.

Naturally a monk who has no material desires beyond shelter, food and transportation to reach his temples across the world obviously has a lighter grasp on money than most of us yet his handling of it was very deliberate, measured and clear.  I believe this was the case because he knew very clearly what its purpose was, unlike most of us stuck with wants without fully understand why.

For anyone wanting to attract more money into their lives, I think this is a crucial question because it speaks to intention and then makes more obvious the pathway by which to achieve it.

When we know what are targets are, then we can aim to achieve them more precisely whether it is saving for a first time home, having enough for a great holiday every year, a new car,  money to start a new business or send a child to university so they don’t have to go into debt to get an education.  The details around the bigger long-term goal all of a sudden begin to take shape, removing some of the obstacles that stand in the path of our flow.

The why and what for is not an easy question to ask because it forces us to be honest with ourselves about what we want out of life instead of just imagining a better life that comes from being ‘rich.’

My journey through yoga over the past decade has helped me to see more clearly in this regard.  When I find myself thinking of the conquest of money, I remind myself to take stock of what I already have, and the real abundance in my life that has nothing to do with it.

In letting go of this idea that I need more, I discover or return to a place of truth and honesty with myself about my wants, and needs and what I long for most in my life. When I strip it down to basics, it’s about love, family, friends and living at peace with myself. More money would afford me more time with my family who lives across the world so I don’t minimise its worth or delude myself that it doesn’t matter. It absolutely does but within limits.

In practical terms, a way to navigate one’s way through the chaos and cross-currents of the turbulence is to make a list. Establish firstly what is truly important and why. Then attach to those things a figure where necessary. In this way, you can begin to make sense of how much you need, and set in place some ideas, methods or means of making money that are in line with your inner values and goals. From that you begin to develop a greater sense of mindfulness about what it is you are doing, and why and from that an energy of flow.

P.S.  Just in case you were curious whether you are being properly remunerated for that job you are doing, here’s a link, with love,  from me to you.





7 spiritual laws of success and how to stay focussed on what matters most

giving and receiving
A great quote came my way yesterday by spiritualist/writer Byron Katie.

“Nothing comes ahead of its time, and nothing ever happened that didn’t need to happen.”

It’s a reassuring thought amid the uncertainty and confusion of life and during those times when we are plagued with the whys, and whens and hows and grating impatience at things not happening in the time frame that we want or expect.

During those times, it is important to return to the present, to one’s intention and also the breath. While we can dream, scheme, plan and action our desires, there are times, many in fact, when you just need to sit back and let things unfold in their own sweet time, trusting that they will come when you are ready to receive and others are ready to give.

So today, I thought I would share some sage advice on this subject from Deepak Chopra, who authored the book “Seven Spiritual Laws of Success.”

In addition to having a deliberate, well considered action plan to help you realise your dreams and goals, there’s an underlying mindset, behaviour and ethic that will help you get there more smoothly and possibly even faster. Something I need to remind myself of constantly as patience is not my strong suit.

With due credit to Deepak, here’s a brief summary of those seven laws.

1. The Law of Pure Potentiality: Take time to be silent, to just BE. Meditate for 30 minutes twice a day. Silently witness the intelligence within every living thing. Practice non-judgment.

2. The Law of Giving: Today, bring whoever you encounter a gift; a compliment, or flower. Keep wealth circulating my giving and receiving care, affection, appreciation and love.

3. The Law of Karma: Every action generates a force of energy that returns to us in like kind. Choosing actions that bring happiness and success to others ensure the flow of happiness and success to you.

4.The Law of Least Effort: Accept people, situations, and events as they occur. Take responsibility for your situation and for all events seen as problems. Relinquish the need to defend your point of view.

5. The Law of Intention and Desire: Inherent in every intention and desire is the mechanics for its fulfilment. Make a list of desires. Trust that when things don’t seem to go your way, there is a reason.

6. The Law of Detachment: Allow yourself and others the freedom to be who they are. Do not force solutions – allow solutions to spontaneously emerge. Uncertainty is essential and your path to freedom.

7. The Law of Dharma: Seek your higher Self. Discover your unique talents. Ask yourself how you are best suited to serve humanity. Using your unique talents and serving others brings unlimited bliss and abundance.

I keep this list posted on my fridge or at my desk to remind myself when I get impatient about the underlying internal drivers of “success.” You don’t have to be a yogi, or a Buddhist, to put these principles into practice. They are universal and you’ll recognise the truth of them I’m sure from your own experiences already.

Challenge yourself to put them into practise as part of your game plan for achieving whatever it is you are hoping to gain; whether it’s more money, a better relationship, a new job or a better living situation and always, always remember to give thanks for the abundance that you have already attracted into your life.

As a side note, I will be teaching this Sunday at Lululemon in Britomart so come on out to enjoy a complimentary yoga class. I will be bringing along copies of my book Money Matters; Get Your Life and $ Sorted to purchase and signing after class.

Oh and if you’re wondering why seven is the magic number, here’s an article published in the Daily Mail that sheds some light on the matter.

Shaking your money maker with words that count


Last week I wrote about overcoming self limiting thinking and self-doubt. I think that mountain is possibly more challenging than Everest. Mental mind traps are the greatest obstacles to success. It’s not lack of money, or shortage of time, or x, y, z that holds most of us back. It’s fear standing in the way of you realising your full potential, and your dreams.

I’m still climbing that mountain and here’s the depressing news: Unless you are fully enlightened (and not many are) that journey never ends. You either give up and give into the herd mentality and behaviour or you keep climbing, deflecting those toxic thoughts as soon as they come your way. It gets easier and easier to defeat them when your awareness of them grows.

On the bright side, and this is where you always want to return to when negativity starts clouding your mind, is that it’s an open road of possibility when you detour away from self-doubt. So, this brings me to today’s topic: Writing for a living, something I’ve done my whole professional life. It’s been a long journey so I will spare the full story of how I got from A to B. Suffice it to say, there’s been a whole heck of learning along the way.

While I have managed to make a living from writing, it’s never been a lucrative one, at least not so far. Does that mean you should abandon your dreams to become a writer? No. Because most of my writing has been in the field of journalism working for the media, there have been parameters around my income from writing. It paid enough to pay the bills but never really much more, which is fine if you want to stay on that treadmill.

I came to an important realisation recently while contemplating my relationship between money and writing. Outside of writing book reviews, and now blogging, I never used to write for the love of it. I wrote for my paycheque. Looking back this is where I went wrong. I know money is a huge motivator for many people, and even a passion for some i.e. Warren Buffett but even for Buffett (one of the wealthiest men in the world) his passion wasn’t money, it was investing which is far more interesting and exciting. Money was the byproduct of his passion and skilfulness at investing.

What I’m trying to say here is that if you want to write, don’t do it for the money. Do it for the love of it, or use the written word to convey what you are passionate about or perhaps knowledgeable about with a view to a) inspiring others b) helping others c) having fun or d) all of the aforementioned. When you are motivated in these ways, the money will find its way to you. If it doesn’t, then maybe your heart wasn’t really into it in the first place or maybe there’s just something you are more passionate about that needs your attention.

After reading through some of the comments on my site recently, I came across one that asked for tips about blogging. My apologies to that person, I only discovered your comment recently. As I am new to this blogging business, I don’t feel like I’m best placed to answer that question fully. However, a few weeks ago a book arrived in my letter box, written by someone who does. Serena Star-Leonard, author of “How to Retire in 12 Months” writes about making money from blogging and how she did it, in her first book. I haven’t read it yet so I can’t give you my review of it however I did read her second book “How to Succeed in Creating a Life you Love in 12 Months” and I can confidently say there’s some good information there for individuals looking to break out of the 9-5 routine.

Importantly, if you want to write, write. Just don’t think about it.


If you need five cents, don’t ask for three; aim big, be clear and go for it

My BF has a lot of original ideas. He’s one of those idea junkies. He also has a lot of one-liners that he enjoys tossing around; some good, some bad but they still evoke a smile or at the very least a smirk.

One that I never tire of hearing even though I hear it a lot is “No ask, no get.” We haven’t known each other too long but I assume he’s asked a lot over the years, because he has always seems to get his way. Not only does he have a lot of stuff but he always seems to rope people in doing stuff for him, usually free.

I suppose I’m a master at this in my own way, although I would consider it less skillful persuasion than reciprocation as I like to do things for others which manifest itself in an exchange system of sorts. I’m a believer in karma and the principle that what goes around comes around. It’s why I blog. While I don’t get paid for it, I like to share my thoughts and knowledge and hopefully inspire others to chase their dreams.

This morning as I was dragging my dog on a run and listening to music, I heard a great line which I stole for my headline above; “My mama always said that if you need five cents don’t ask for three.” It’s from a De la Soul song.

It got me thinking….

I’m not shy at asking for what I want but when it comes to dreams and desires and goals, I’ve tended to be a bit thrifty. Others might see me as ambitious but I’m what the BF calls a “quiet achiever” or a “doer.” That’s in contrast to the “dreamer” who wishes and fantasises about what they want but doesn’t take the necessary action to achieve their desires. In my own way, I’ve been able to go after what I want, usually with good results, but the targets have never been massive. I don’t like to be disappointed, so I suppose I’ve tended toward the conservative side of dreaming.

Toward the end of my run, I came to the realisation that I’ve been short-changing myself on goals lately. It’s not that my goals themselves are too skimpy, rather it’s been my attitude that’s been lacking. Some part of myself has been self sabotaging in the respect that I’ve felt I somehow wasn’t deserving of the things on my wish list. I also realised that as a result of my innate conservatism, I wasn’t taking the risks I needed to get what I wanted. In other words, while I wanted five cents, I was thinking I only deserved three, so there was disconnect between my goals and my belief in my ability to achieve them.

So what do I want presently that I’m not getting. A few things I guess:

While, I’ve been wanting to grow the number of followers on my blog, I haven’t been blogging regularly enough to attract them. When I inspected my stats recently I found that actually for the few blogs I have posted, I have some amazing traffic. So my perception was totally out of alignment with reality and that’s encouraged me to step up my game.

On the personal side, I’ve also been going in circles trapped in a pattern of negative thinking that was inadvertently holding me back from the direction I wanted my relationships to go. I’ve adopted a new attitude here and hopefully some new behaviours as well and already I’ve seen encouraging signs of change.

So what does any of this have to do with money? Everything.

Money is a byproduct of intention, action and energy. When your efforts are out of synch from what you want then your energy is also affected because you are working at odds with what you want to achieve. When the two are matched, your energy is a positive one because you are in a state of flow.

When you are working in a state of flow, quite often you don’t even need to ask. What you want lands on your doorstep. This is the magic of flow and why I love yoga so much because it encourages this state of inner and outer connectivity.

Find your flow and the money will follow but it never hurts to ask.

Why do we keep doing dumb things in the face of bad consequences? The Money Paradox

By Amanda Morrall

What makes some people better savers than others?

It’s a question experts have pondered long and hard about particularly in the face of the looming demographic problem of too many old people living longer and longer and too little Government savings to support them all in retirement.

The solution that many OECD nations have adopted, including Canada, the U.K., Australia, Japan and the U.S., is to extend the age of eligibility for Government superannuation schemes, forcing people to work longer (and thus pay more taxes to feed pension funds) and to save more for themselves.

Curiously, New Zealand is an exception to this rule. It’s consider political suicide. Ironically, the voters who disdain the idea the most wouldn’t be affected by it.

It’s younger generations that have the most to lose from Government’s continued neglect of this issue. If current health care cost estimates (like 40% of GDP!) and longevity projections are anywhere near accurate, the NZ Superannuation won’t be around in its current form. It will either be means tested (i.e. if you earn or have assets above a certain amount of money you won’t qualify even though you paid into the scheme for years through your taxes) or it will simply be lower than it already is, and it’s not a huge amount to begin with folks. If you are mortgage and rent free with no debts, you’ll be able to pay your food and power bills essentially but don’t count of booze or fancy ice creams being in your shopping basket.

You can check the current entitlements here.

KiwiSaver has been presented as one solution to this potential savings dilemma and some encouraging strides have been made thus far. But will it be enough? According to many of the providers of these products, the answer is no. Naturally, you could expect them to say that as the more money you save into KiwiSaver, the more money they stand to make from the fees they pull in year after year (regardless of performance) from your hard earned savings.

This is why how much you pay in fees is REALLY important over the long-term. Many would argue that fees are actually a bigger deal than fund performance because they are constant. That’s not to say that how much you pay into savings isn’t important. After all it’s your savings and the more you pay yourself the more you’ll end up with in old age.

Right now the minimum mandatory is 3%. I’m talking about KiwiSaver still. That compares to 9% in Australia and that figure is changing to 15% eventually. Overseas, among those working in the savings area, there is a general view that a safe savings rate should be anywhere between 10 and 20% of GROSS income. In New Zealand, we’re nowhere near that but it’s difficult to know how many will fare given there is such a massive investment in the property market, as form of potential retirement savings.

Most of us know that, just like eating healthy, saving money is a good thing. The problem lies in our knowing what is good for us and us acting to effect those positive changes. For vast chunks of the population, there is a huge disconnect. Humans are perplexing creatures because despite our huge intelligence, we tend to make really bad decisions for ourselves, particularly where money is concerned.

Anyway, rather than focus on the negative, it is generally understood these days that’s it better to look at the positive so we can understand what we are doing right and encourage more of the same in ourselves and others. No one wants to be chastised or belittled or be made to feel bad because ironically, it just brings out the same bad behaviour.

Where savings are concerned, there is some interesting work and researching being done comparing saving rates and behaviours among different countries. Experts have wanted to understand why the Finns, Chinese and Japanese are so savings savvy relative to the countries to New Zealand and the U.S. In 2012, New Zealand’s net national savings rate was around 2% of Gross Domestic Product, or about 15% gross. (Source NZ Treasury).

So what can we learn from OECD nations where national savings rates are 20-40% of GDP?

According to Keith Chen, who explains more in this interesting TED talk, language has a lot to do with it. Chinese is apparently a futureless language; that is, it doesn’t distinguish between past, present and future. When this comes to money behaviour, this has a significant advantage because there would appear to be less distance mentally between the idea of getting old and actually saving for that eventuality. Retirement is not something that exists in the far away future but is accepted as an immutable part of present reality.

No one wants to think of getting old but obviously it’s a fact of life. Presented with that fact, or perhaps being reminded of it would appear to promote good savings behaviour. Experiments along these lines have supported this. The TED talk linked to above also references a study where individuals presented with an image of themselves in old age saved way more when reminded regularly of who they were saving for.

It’s fascinating stuff really. Accepting our paradoxical behaviours, our human limitations and silliness with money is all the more reason to implement systems aimed at saving us from ourself and importantly educating ourselves on these topics. Still more people would rather talk about sex than money I guess. Go figure!

Monkey See Monkey Do

Amanda Morrall on why public ignorance on fees really is bliss — for the financial services sector


Okay, I’m the first to admit that fees on financial products is probably the least sexiest topic on the internet (except to advisors and fund managers maybe) but really it ought to be and I was reminded again why today in a conversation with a so called “wealth manager.”

Let me just say firstly that I don’t blame the investing public for not taking more of an active interest in this area. I mean the industry is so rife with technical jargon and mumbo jumbo that it’s hard for a financial journalist to follow the plot on fees let alone someone who is just cutting their teeth on KiwiSaver.

Management expense ratios, trailing fees, embedded costs, active vs passive funds manager…and that’s just the beginning.

In journalism we have this saying: there is no such thing as a stupid question. I’ve heard a few doozies in my day and I’ve undoubtedly asked a few dumbs ones myself, but it never ceases to amaze me how the one that is usually on every journalist’s mind but everyone is too scared to ask for fear of coming across a dunce ends up being the Big Kahuna.

During a long overdue phone call that I had to initiate (NOTE: you shouldn’t have to if you are paying 2.5% in fees!) to find out how my kids education funds were performing, I was left with a bad taste in my mouth. While I’m comfortable now talking to advisors in their own language, you really shouldn’t have to. The industry is old enough now and the problems of financial obfuscation so well signalled since the Global Financial Crisis, conversations that advisors have with their clients should be understood by a high school student.

I’m willing to bet not many high school age students, let alone university graduates would know what the heck a management expense ratio is let alone how to calculate one. Then again, I bet not many advisors know how MERs are calculated either. However, one thing you can be assured of is they know how to price in their costs.

If management expense ratios (the sum cost extracted from your investments and paid to the managers) weren’t bad enough, where there are advisors involved there’s another fat layer of fees.

It depends on advisor relationships with fund managers just how much each party gets but the key thing to remember here is these fees are a permanent part of your portfolio and that’s regardless of how well – or poor – your fund does. Managers and advisors continue to take their fees, every year, well usually every month actually because they, more than most, understand how compound interest works. The longer you stay invested and the more money you invest, the bigger their take. This is why KiwiSaver is a gravy train for the funds management sector in New Zealand, with savers locked in till 65.

Under new regulations in New Zealand, financial advisors and a whole raft of other operators slogging products are required to tell you up front how much they are paid and how their payment system works. These legal disclosures, now so extensive and weighty in scope, can take the better part of an hour so who can blame the client for their failure to understand even at the end of these well intentioned truth telling sessions, particularly if the language used to communicate it is financial speak.

Oranges, apples and lemons

Another key thing to note is unless you have a proper benchmark for comparison, how the heck is anyone to know whether the fees being charged, even those that are clearly spelled out and communicated, are low, medium or high?

In my case, my advisor (advisor is a stretch of the definition) casually declared (after I had to ask) that fees were 2.5%. Knowing as much as I do about fees (and I don’t consider myself an expert) I called him on it. In a what I construed to be a belittling tone, he explained that in addition to the investment costs for the funds under management, I was paying that premium for the “advice.”

As I hadn’t talked to him in two years, or received any reports either for quite sometime, I had to question whether the value I was getting for that premium.

Clearly, he didn’t like the question and couldn’t get me off the phone fast enough after that. To my mind, unless you are receiving advice, and good advice at that, you shouldn’t be paying anything more than 1.5% max on managed funds. Yes, there are some exceptions, where you are making long-term above average returns but believe you me, not many are. That’s why most active fund managers, invest their own money in index tracking funds that have the lowest fees.

In their defence, advisors will talk about making “apples to apples comparisons” reminding you that all these increasingly scathing reports on fee gauging has to take into account, whether managed funds are built in with an advice component. They rationalise their above average fees but suggesting that without their good advice you’d be all the poorer, having made ostensibly poor investment choices.

You don’t know until you try I suppose.

To find out how much you are paying in fees, relative to other funds (be they KiwiSaver fees or other types of managed fund) consult the league tables (published by the likes of the NZ Herald) or else go to the Morningstar website.

At the end of the day, ignorance really is bliss no more so perhaps than for financial industry operators who get rich off the backs of investors and or consumers who don’t know any better.

For more on fees, how to avoid getting burnt by them and to sharpen your financial edge without the usual dull tomes that line the business bookshelf, order a copy of my book Money Matters; Get Your Life and $ Sorted. It will pay for itself in saved fees and then some.

And for more reading on this topic, check out this story by the Financial Post in Canada.

An insurance story with a happy ending? Amanda Morrall on how not to get ripped off by your insurance company

In the financial media, it’s good sport to slag insurers. Let’s face it, they’re easy targets.

We pay, and we pay and we pay… and then when we make a claim, they tear it to pieces with loopholes and exemptions written in microprint on the back page of page 10 and we’re left high and dry, and still paying. Okay, yes there are exceptions and there were some happy stories to come out of Christchurch, although they were more like War and Peace length epics by the time the pay outs were made.

So what am I on about this week and why?

Here’s the back story:

I fulfilled a long held dream a few weeks ago purchasing a very cute second hand Vespa. Why buy new when you can save a get a really good barely used one? Anyone who has read my book (you can order now off my site) or my blogs will know I’m big on dream fulfilment and doing what you love instead of just imagining it all the time.

But I digress. When I went to insure the new yoga transport, I started making the requisite calls. I was a little startled to find out, that it was going to cost $10 more for a 50 cc than my Honda Jazz. Big deal right? No, because when I made the call I also discovered that due to a postal code change that somehow slipped their attention my premiums on the car almost doubled!

Before I committed, I told the operator I was going to shop around, as you really SHOULD DO when shopping for insurance, or anything else for that matter.

A quick phone call, to a very efficient, and yes reputable insurer with an investment grade rating and I managed to get the car – and Vespa – insured for an extra $10 a month from my original bill. I had to pay for the whole lot up front (they promised to reimburse me if I sold either vehicle) but I put down the phone happy in the knowledge that a) I’d be driving my scooter soon (the roading costs of which I will easily regain in petrol savings) and b) knowing that one phone call saved me $600. This is not a small margin folks. It’s HUGE.

Of course, the devil is in the detail with these insurance covers and probably without realising it I was paying for all the bells and whistles on the last package which I’d blindly agreed to when I was probably in the position of most customers; completely in the dark about how seriously ripped off you can get by not knowing what you are paying for exactly and not shopping around.

Don’t get me wrong, I’m not suggesting that going to the lowest cost insurer is necessarily the best move. I saw several businesses and residential home owners in Christchurch suffer after going that route via unscrupulous brokers who got paid a tidy commission for selling cheap insurance on behalf of dodgy insurers, one of whom had actually been blacklisted in Australia. I kid you not. Our reputation as the Mexico of the South Pacific is, sadly, sometimes deserved.

Now before I get letter bombed by insurers, PLEASE NOTE lots has changed in the regulatory world in recent years to raise the bar in New Zealand, and in doing so, holding financial service sector operators more accountable to their customers.

The bottom line here is:

1) Know how much you’re paying – RELATIVE to similar policies with competitors

2) Understand the terms and conditions and whether the policy you are paying for actually serves your needs (you might need less, maybe you need more)

3) What your deductible is going to be if and when you claim (the higher, the lower the premium usually)

4) How long it will take to get paid. TIP: if you go for a longer period, it typically lowers your premiums but ASK first!

Using a reputable broker can help in these matters if you are feeling out of your depth but for your own knowledge and understanding, it’s really best do you your own research.

What do you have to lose? I gained $600.

For more helpful tips on “How to get your money and life sorted”, check out my book Money Matters.”