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Lombard 11%


My husband and I have $100,000 which we wish to invest. He is semi retired and we have a reasonable income for our present needs from his salary and 4 rental properties in Auckland. We have thought about buying another rental but prefer to diversify a little. The money has been with an investment manager for the last 10 years but has done VERY little. It is time for a better return that we have control of.

The share market is not an option as we have little knowledge in that area.

Presumably a term investment is our best option?

Whatever we do, the money must be secure, but banks give so little return. The savings rates that were quoted in the Aucklander e.g Lombard 11% are much more attractive although we would want to split the the total 100,000.

What can you suggest?

Yours faithfully,

John and Linda Lewis


You have done well to accumulate an asset portfolio that I guess is heading toward $2.00 million or more. The investment component of the portfolio should be supplementing your income needs well on top of the semi-retired salary level. Income should not be problem.

Let’s have a quick look at the facts. I guess semi retired means somewhere about age 60 - 65 years and I have no idea of a part time salary figure but it seems not huge from your comments, say around $35,000.

The rental properties could have done you well over the last few years and you maybe rightfully comment that the managed investment portfolio has not performed as well. However, it is now time to carefully look at just what, the performance of your assets has really been and, more importantly what the future may hold.

First, take all the details of the property that you own and carefully analyze what actual returns you are achieving.   This will include rental cashflow, expenses including a proper repairs and maintenance program, proper management costs, vacancy allowance and all expenses to run the assets.

There will be two components to this figure, firstly the growth you have achieved in annual percentage terms and then the annual cashflow returns from rents. Be sure to make a proper allowance for taxation purposes. It is totally naïve to think you can pocket the capital increases from these investments (if and when you sell) and not pay tax.

Then do the same with any other investments. Use a spreadsheet if you can drive one or get one of the younger generation to show you how to set up a simple analysis.

Now you will be able to compare just what is happening in an accurate and balanced manner. You might be really surprised at the numbers you now have expressed as percentages per annum after tax and expenses.

Adjust these figures for inflation (do say both, 3.00% and 5.00%) and you now have real returns. If that figure is better than 4.00% or 6.00% per annum you are doing really well. You can be reasonably sure that you will not run out of funds.

Growth is great until you try to pay for the groceries with it.  The low income and sometimes lack of liquidity of some assets (residential property) is a barrier to their full benefit when you are in the unwinding phase of life as apposed to the asset accumulation phase.

Very little is understood, generally, with regard to the best way to cope with income replacing cashflow and lump sum capital demands in later life. As assets are unwound to provide these needs, costs are an issue that needs careful consideration.

It is not a good idea to be selling down assets to cope with day to day demands in a fire-sale fashion. Liquidity must be planned in advance. So it seems to me that a range of assets is best.

Which assets? Well that depends hugely upon all manner of things: previous experience, personal bias, family upbringing and knowledge and the market cycles.

Most of all I take from your comments that you are in the main do-it-yourselfers.  This is an attribute that Kiwi’s have prided themselves with. It is sadly also why many are much worse off than they could have been had they been willing to pay for good advice - and I emphasis ‘good advice’.

While we are changing slowly it is a really bad trait. We tend to try to be among everything else: doctors, lawyers, accountants and car mechanics. It’s funny but we seem to be learning the lesson not to fiddle with cars, first - it can be expensive!

You ask with regard a specific advertised asset. I suggest I help you form a new habit – take some impartial advice or at least go purchase the KPMG financial institutions performance report I mentioned in a recent column.  As a wee hint, we do not invest in that particular investment offering.

Original Article published October 2005

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