Chris Wilson: KiwiSaver changes need some tweaking

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Yes, and welcome back to the Weekend Collective, I'm Tim Beverage.

If you have just joined us, and this is Smart Money.

Where we talk, as I said last day, I say we talk about all things to do with money,

and of course we don't talk about everything to do with money in the show.

We usually have a couple of focal points.

And we are going to have a bit of a chat.

There's big changes happening in the world of finance at the moment for Kiwis.

The Kiwis save a change is coming very soon.

And from April 1st, the minimum default contribution rate is going to move up to 3.5%.

We're also seeing, so that's one thing we're going to talk about.

We're also seeing unavoidable impacts of markets as a result of, yes, yes,

the war, despite where they want people on a call at a war or not in the Middle East,

the whole situation with the run.

That's what we'll call it.

We'll call it the situation with the run.

But we're going to get into the TV savers side of things first.

Anyway, and maybe have a chat about how the war has impacted on your investment habits or decisions or everything you do.

Because, by the way, if you're thinking of changing to a more conservative fund,

because trouble's broken out, you're too late.

You need to know when the trouble's coming.

You need to be a sooth saver or a fortune teller and guess.

And then you'll be all right.

But if you're responding to bad news, it's too late.

But anyway, we want your participation as well.

I know 880-1080, your text 929-2.

And now our guest, he is the co-CEO of Harbor Asset Management.

And he's with us here for smart money.

And his name is Chris Wilson.

And actually Chris, but just to get things rolling, you've got a little bit of good news from the for Harbor Asset, haven't you?

Yeah, thanks Tim.

Thanks for opening with that.

No, we were really stoked to win the fund manager of the year award,

overall fund manager of the year for Morningstar for the second year in a row just in the last week or two.

So it's been a big week for the business.

Wow.

It's been pretty excited.

Wow.

Is there a lot of, how many people would consider themselves up for that award?

Oh, look, I think most people in the investment industry,

so you think of those QEs have providers, people who manage money professionally.

Yeah.

And it's taken out of that pool.

So, you know, within the industry, it's something we look towards.

Yeah.

I think the ban on the street may not have heard of it as much,

but it's what we're proud of.

How, um, what did you win?

Oh, this is the time to, this is the time to roll in the barrel.

Oh, look, it's, it's one of those things.

I think it's, we've got a great team adept right across the different massive classes that we manage.

And, uh, they're consistent team and discipline, investment, discipline behind what we do.

Uh, really comes through and, uh, you know, obviously in some strong returns helps.

And, uh, yeah, actually recognition.

Is it, is it, is it just done on you guys have nailed the returns?

You know, like, you're the wine buffets of these.

Not just that.

Not just that.

So no, look, it does, it does have an impact, but there's not the sole driver.

They are looking for consistency over, um, over longer periods of time,

rather than just one year's worth of returns.

There's a curiosity with harbor asset.

I mean, you guys, we, we speak to you regularly on the show.

Um, the, when you, when you have a team of investors and you are,

you are running a company like you do, I hate the expression mission statement,

because it's such a corporate thing.

But there would be a mission sort of statement as to how you would define,

with the way you do your job.

What's, what's the, yeah, we're, we're most trusted, um, to be the most trusted investment manager in New Zealand.

And that's, uh, that's what we seek to do for our clients all the time.

So, yeah, we want people to, yeah, feel comfort and feel trust that we're doing the right thing for them all the time.

So that's, that's, that's really quite a good one, isn't it?

Because whenever you come up with a decision and you've got some to think about,

and you just remember, well, does this feed into us being well trusted or not?

Yeah, absolutely.

So we, we always take the view of, um, you know, every, everything we do is visible and, um, understandable.

And, you know, our clients want us and we're on our client side, you know,

when we, when we do well, they do well.

Good stuff.

Well, congratulations, man, that's fantastic.

Hey, um, Kiwi Sava, uh, the minimum default contribution rates moving to three and a half percent.

Um, well, this, this is not the final, this is not the final destination, is it?

It's just a station on the way of the destination.

Where do you want to see this head?

Yeah, look, we'd love to see this go towards the Australian numbers.

So up near 12 percent.

I think the positive we have seen, uh, as the, as the parties have started to reach policies,

uh, you know, the election, uh, there seems to be some, some consistency in, you know, across both sides of the,

the political spectrum around moving towards a higher contribution rate.

And so look, the three and a half percent to start, it's a good start.

Um, but we'd love to see that go further.

Yeah, there's a couple of other things that we think, uh, could happen and could change within Kiwi Sava.

And so, you know, if we can see 12 percent being, you know, applied across, right across the political spectrum and people buying into that,

hopefully we'll see the discussion, the selection around one of those other things that could be down around the Kiwi Sava.

What is 12 percent mean? Does that mean 6 percent employer, 6 percent employee or?

Yeah, there's media waste to skin that.

But, um, you know, the concept of the employee giving a little bit and the employee giving a little bit, um, does, does feel good as well.

Uh, you know, there's always that argument that it all comes out of the employee's pockets because it, you know,

uh, you know, stymies and wage inflation. And so arguably, um, yeah.

These are difficult conversations to have in a way when you're looking at the pressures that our economy can come under, isn't it?

Because, um, it's another obligation for employers just to have a bit more of money.

I'm actually, actually, how, um, just remind us how this is being implemented because is it three and a half percent, and it's from employers, but they can contract that.

So if you get, let's just go with around figure a thousand bucks a week.

The employer can simply contract and say, right, that extra 0.505 percent or 0.5 percent.

Sorry. That's coming out of your wages. So it's the employee who pays it.

Yeah. And look, and that's the total rim thing and, and how do people look at total rim packages?

And so, you know, we think that's one of the changes they need to make.

Um, they need to change. They do need to change how that, how they can be treated.

So that you can't say, look, we're paying your thousand bucks a week. And by the way,

well, I guess doesn't it just mean that employers will negotiate, okay, your, your salary is going to be 900 and such and such dollars a week plus, I mean, they just either way, who's going to pay for it?

Absolutely. And look, and I think that's why it can't be a sudden change.

You know, we're not talking about going to a 12 percent number next year.

This is about having a long pathway and a glide path towards higher contributions over time.

You know, once you're at that level, and it's once an embedded part of the, um, you know, the wage negotiations each year.

Uh, those, those are easier conversations to have. But obviously today, talking about going to 12 percent is a very tough one just from a, uh, employee perspective.

And, you know, obviously when the economy is in a tough position, it's a hard one to try put in.

But that's why we view is that this should be something that applies over, you know, next 10 to 15 years.

So not, not straightaway.

Because the conversation is often around, you know, wanting more people to be in Kiwi Saver.

I guess, look, I'm self employed. I'm in Kiwi. Actually, I'll be honest.

Um, I joined Kiwi Saver because of the government contribution because I thought all this free money going.

I'd be an idiot not to put that in.

But, you know, when times are tough as a self employed person, you know, it's probably one of the things you're not turning.

You know, I haven't turned the heat up much on that.

No, and that's one of the things that we think needs to work around Kiwi Saver.

So if you're employed, it, it makes sense. You, you know, you feel like you get that employer contribution.

Um, you know, taking aside that total room comment earlier.

Um, you know, you feel like the employer contributed a bit of your self employed and you're paying both sides.

It's a dual one pocket. And so, you know, we do think you need to think about how you need to think.

Well, you need to think, I know what I should be doing.

Yeah. But then, you know, the argument for a self employed person is that, you know,

investing into your business or into your employment is, is actually growing for your retirement.

And so, you know, there are arguments and so how do you incentivize self employed people to start saving for retirement?

Do you think, actually, I mean, I know this is not necessarily the way you're going to be thinking on this.

But, you know, we have to pay ACC levies for getting injured.

Do you think that there's, would be room, it's difficult with companies.

Of course, if you ever have a contractor, you're generally a company.

And I asked for them and then revenue digging into how many people are, you know,

actually getting the financial benefit of a company.

Yeah.

But do you think there would be a case?

Oh, that would be contentious, wouldn't it?

If you said we're going to have ACC levies, which or whatever they are.

And I get my ACC bill at the end of the year and go, how much?

Is there a case for having that sort of levies on companies for self employed people as well?

I mean, that is not how you define it.

But that is one way to get there.

You know, but you are back into that original question of, you know, whose decision is it?

And politically, how sellable is it?

Well, actually, the easy way would be that if you are a contractor and you've taken some drawings from the company,

I confused it at the start.

It's way easier to just say, okay, you've paid yourself a salary of, I don't know.

Yeah, you essentially tag into your income.

Yeah.

Tag into your income.

Yeah.

I think the other thing that, you know, you have seen changes around the contribution rates from government.

So you talked about the kickstart.

You know, when you joined up originally, I'm sure it was a few years ago now, Tim.

But, you know, when you joined up, it was probably about five hundred bucks from me and five hundred bucks from the government.

Yeah.

Was the minimum.

And ten bucks a week.

You got the five hundred, or was it twenty bucks a week?

I can't remember what I put in, but I just, I just instantly did an automatic payment,

because I thought, well, I'm not even going to miss that.

And then I don't know what extra I've done on top of that, actually, to be fair,

but it's no one else's business, but mine to be stressed about it.

No, but with time that, you know, that thousand dollars a year does add up.

And so one of the, you know, when we look at the changes that can be made, you know,

we think where those contributions are applied, you know, something that can be looked at.

Those contributions being applied much earlier is something that we see some value.

And so, you know, that's the kiwi saver at birth type cont.

You know, so rather than giving someone five hundred dollars or a thousand dollars when they turn eighteen,

why not do it when they're born?

You get an IAD number, you have a kiwi saver product law, you have a kiwi saver balance.

And it helps with your financial literacy as well.

You know, you start to get educated around what investment markets do, what savings means.

And hopefully you see that balance by the time you hit eighteen, nineteen, start to grow.

It is interesting the power of, you know, of course this is an old lesson for finances, isn't it?

But the power of compounding interest because when I was working in Australia and musical theatre,

I was there for, I don't know, three or four years.

And I never paid any attention to any of that because it was automatically done as part of my contract

that there was a certain amount that went into super.

And I'm sure it was, I think the expression is bugger all.

But then I got, for some reason they tracked me down in New Zealand and I managed to hook up my media super.

And I got the statement. And I kept, it's not a fortune.

But I was surprised at how much it had grown to.

And actually the fund managers had done must have had quite an aggressive fund going.

Yeah, time and contributions do help.

And so, you know, if you look at kiwi saver and if you're going to be in kiwi saver for thirty, forty years,

there's a reasonable chance to make a significant balance.

And, you know, those savings have it starting earlier and much more important.

And so, you know, we look at it and it's great to hear that the financial literacy is going to be educated in schools.

But what more can be done to support that around investment markets and other things?

You know, we do a good job with maths.

I was doing mathematics with my daughter this morning and it's not easy.

But actually, I don't often get asked questions around finance or investing.

So that doesn't seem to be a part of her curriculum at this stage.

Actually, we could throw this for talk back, actually,

because I reckon that this generation is going to be way more waste smarter or better informed on money.

I was listening to my daughter's, my daughter with a friend of hers in the back of the car.

And it was a conversation about money and I thought to myself,

oh, you guys are not going to have any problems,

because they were just so dialed into what they, the conversations that they're being,

and I think it's because the environment that they are growing up in

is different to the one where the environment that I grew up in,

where, you know, parents often with their work had superannuation sort of things built in.

Yeah, and I think your access to information is so much higher than it was

when I was growing up and I grew up down south.

You really only know about jobs that people you know do.

And so, you know, your experience or understanding of what exists in the world

was kind of constrained as to who you knew and what your parents did for jobs.

And that's what you see often see people go into the careers that they're parents did.

But actually, with financial literacy education, with education

and the access of information on the internet,

actually, those doors are somewhat more open, which is great.

You know, I think it's great that the information's out there, you know,

you can learn, you can understand, you know, there's a lot of people trying

and doing a great job at educating people around education,

around so financial literacy, but more can be done.

Yeah, I love that expression you said, I'm from down south.

That's not great.

I mean, it depends where you are in New Zealand.

If you're in Auckland, you just say from down south, it's like, okay,

it probably means the south island.

If you're from Nelson and you say from down south, people think,

south of Christchurch.

If you're in Christchurch, same down south, we say,

we're talking to Dan Eden and Vicarga.

Where are we talking to Dan Eden?

Oh, Dan Eden.

Oh, Danes, that's right.

I think I knew that.

Now, just let's get back into that thing about the scheme being fairer though.

So, you know, as we said, employers will simply just redefine them

in the generation packages so that the employee is paying effectively

what the increase is.

I mean, is there any way around that?

Because in the end, if I'm an employer, I'm going to go,

here's my pot of money that I'm going to be able to pay for this employee.

The government's saying I need to have X% for super.

Well, I'm just going to take that into account and that's how it's packaged.

So, the real take home pay for employees might be slightly impinged.

Is there any way around that?

Having a compulsory, so where employers can gain that is by, you know,

the Wink Wink nod nailed out the back to say, look, if you don't,

don't ask for Cubisehave contributions.

Oh, you're taking home payable increase because I'm not contributing.

And so your salaries are impacted by that.

So, whereas if you have a compulsory scheme,

where everyone's saying for saving for Cubisehave,

and there's not that option of not paying contributions for certain stuff,

that removes some of that ability.

Is there a difference in defining, there's no way around it

and it's the way you define it.

Now, I'm just remembering all those years ago in Australia,

that literally my agent negotiated a fee and it had no reference.

And it was around, there was a round figure and Bingo.

And then I just found out later on it's like,

oh, there's an amount that the employer will be paying to super.

And that's just so...

And that's...

And that's...

It's embedded, whereas here it feels like

the embedding is going to be...

Well, I think that's the practice change that we need to see.

And so, you know, right now, you have to ask.

So, you know, you'll go and you'll get your bonus,

you'll ask your salary, and then you actually need to think about it

and be smart enough to know, well,

it's this inclusive of my Cubisehave employee contributions or not.

And then, you know, how does that impact my team?

Whereas in Australia, it's just on top of.

And so, you know, if you're getting it,

there's contributions that go on top of that.

And so, again, that's just having that consistent practice

that applies right across the economy.

Okay, we love your calls on this, because actually,

just before we go to the break,

so you mentioned also that the other thing that got my attention

is that the idea of actually giving...

And it's clicking that motivation for people to understand

what's happening to their money,

like, starting kids off with some sort of contribution

to their Kiwi saver.

Even if it's not a regular one,

but just some sort of small lump sum

that when they turn, I don't know,

there might even just turn 13,

and you'll go, guess how much is a new Kiwi saver?

It started off at, I don't know, a hundred or five hundred bucks

and look how much is there now.

Imagine if there is something in that

that people, it's a great way of learning

that, at least, and I described it as a compounding interest

by simply, how much was it?

And how much is it now?

Yeah, and it really is.

And we've seen that with Kiwi saver over the years,

New Zealanders love rental property

and they have done,

and they've had a passion for investment properties for many years.

And when Kiwi saver launched,

suddenly people had exposure to investment markets.

I remember fairly early in my correct Kiwi saver journey

or working with Kiwi saver,

I'd often have the conversation of, you know,

do you have any investments?

And the answer would be no.

But I've got Kiwi saver.

And so people are starting to understand

that that investment, that investment exposure,

they have grew through Kiwi saver,

is investing in share markets,

it's investing in bonds, you know,

what happens around is impacting on them.

Well, and so you do get that education.

That is something that does,

it pops up quite regularly on this show.

It's like people say,

I don't have any investments.

It's like, do you have Kiwi saver?

Will you've got to stake in this?

Yeah.

We love you, of course, on that.

Actually, that's an interesting question.

Should there be, there isn't at the moment.

But should there be some sort of contribution

to a creation of a Kiwi saver account

when a child is born?

That they get a lump sum in there.

I don't know how much you'd put in there

because, I don't know how many children are born

and how many children are born each year

and what it would cost.

So that's, that's my statistical lack.

But would you, would you support something like that?

Because it's a great lesson for kids.

If they find out,

they've got a Kiwi saver account

and it's already got so many thousand bucks in it

because of the power of compounding interest

by the time they're a teenager.

Oh, 880, 1080,

text 9292.

My guest is Chris Wilson.

He's the co-CEO of Habrasic Management

who won the Morningstar Fund Manager of the Year.

I think I got that right, didn't I?

If I got it wrong,

you could have just corrected me

and he would have mentioned it again then.

Chris.

Anyway, if you'd like to join the conversation,

we'd love to hear from you.

Oh, 880, 1080.

But we're also going to dig into

apart from the conversations around Kiwi saver

and retirement.

We're going to dig in a little bit too

what's happening in the Middle East.

Dear I say it,

and how does it impact markets

and where you put your money

or what your returns are going to

are or aren't going to be?

We'll be back in just a tick.

It's 25 past five news talks there'd be.

News talks there'd be with Tim Beverage

and Chris Wilson.

He's the co-CEO at Habrasic Management.

By the way,

the other question Chris,

and I know you haven't necessarily

planned to discuss this.

But I had a discussion

with some people through

a bunch of connecting with banks

and economists and things.

And I've heard that there are some fairly

interesting opinions out there

that we really need to deal

with the elephant in the room

when it comes to Kiwi saver.

But it's a retirement age.

I mean,

I know it's an old chestnut

of a talkback subject.

But what do you think of the arguments

around what we need to do

with the retirement age?

Because I just think it's surely

just a fact of life

that it's going to have to move at some stage.

But it's going to take someone

who's willing to lose an election over it.

I don't know.

Yeah, look,

it's always been a very challenging

election topic.

And you'll see in it

it's been weaponized against

any party who's raised it

as a concept.

Look, I think one,

you know, really

of the step is if you bring it back

to Kiwi saver that you can make

is decouple Kiwi saver

from superannuation age

and just take some of the heat

out of it that way.

Hang on.

What is decoupling

from the superannuation age?

So you can access your Kiwi saver?

Yeah.

Potentially head of superannuation.

So you're no longer say

you can only get your Kiwi saver balance

at 65 for both at the moment.

Well, it's the other thing

is that your employer's obligations

on Kiwi saver stop

at 65.

Is that something

that I'm out of date with?

No, that's true.

Because should you be

as long as you're working,

you should be able to, you know,

receive those contributions.

And some employers

and look out, I'm sure we do.

We are one of them

who will contribute

for employees over 65.

But that's a bit

of a top.

That would be something

you negotiate.

Or you've just got a policy on it.

We do.

It's the right thing to do.

So if you work

for harbor asset management

it's like, don't worry

when you're,

just when you're really hitting

your straps as a fund advisor

or when you're 66.

No, it's so good.

Mine, of course.

One might say that if you're

being a fund advisor

and you've got that amount

of experience,

you shouldn't really care

about that extra.

Because you should be said, shouldn't you?

They would be funny

if you're having a conversation

with a fund advisor

and you're saying,

I'm really worried about my retirement.

The fund advisor will be like,

yes, I'm like,

I'll be like,

next.

It's a really interesting one.

Not a current role,

but I have had that conversation of,

what's the perfect age

for an advisor?

Do you have to have enough

great years to be able

to trust you?

But then also client

who say, well,

if the fund advisor is not

richer than I am,

why would I take their advice?

So seeing both sides

to that one.

Actually, it is a funny question

and I know it's not quite

on the topic again.

I keep saying that,

but it's just a bit

of a conversation.

But I wonder how many people

are genuinely happy?

Because look,

what you don't live

in a third world country.

I'm not on a third world income.

So compared to people

in a lot of other countries,

I'm loaded.

And I should be fine.

But I'm worried.

And I look at my situation

and go, well,

I'm not going to have what I want.

But when would I be happy

with what I've got?

It's an interesting question

because if you have,

say, if you've got

five million bucks in the bank

and you bought a nice house

and, you know,

on the shores of Queenstown,

well, you've got nothing left.

And then you're not happy

all of a sudden.

So when are people happy?

No, look,

and that's comparison

as the thief of joy,

as they say.

And so, as you've just bought

your five million dollar house

in Queenstown,

your neighbor's probably

got a 10 million dollar house.

And so, you know,

that can.

And you find, you know,

there is that disconnect

of wealth versus happiness

that comes as, well, you know,

once you get, obviously,

through poverty

and through, you know,

basic standard of living points,

having more money at that point

doesn't necessarily make you happier.

Is that part of the,

is that part of a conversation

you have with clients in a way?

Because you've got to get

to the philosophy of what,

you know,

what they,

you know,

what they're after.

Because as you,

you know,

you are always chasing that

next thing, aren't you?

I mean,

it's a property of the week

last,

yesterday,

was the ultimate fantasy

harm in Queenstown.

And I couldn't begin to guess

what it was worth.

They had to be 20 or 30 million.

And so,

somebody who's just one

powerball,

they got 15,

if they had,

15 million, say,

they can't even buy half that.

And so, do you,

is that,

is that one of the challenges

for fund managers is just,

you know,

working out

what who your clients

really are,

what they need,

or what they think they need.

Yeah, look,

and one of the things

you often see is

people's worry about

do they have enough?

Yeah.

And how that normally presents,

you know,

in a client and a client conversation,

you're not,

it's not something we have,

it specialises.

But, you know,

from my experience,

I'll have a touch on it briefly,

is just around,

you know,

people worrying that they can run out.

And so, you know,

a good advice conversation

will normally help them

understand, actually,

what they can do.

Of course,

I mean, you're specifically

on Macro,

sort of point of view,

I've got distracted there

with my own genius.

Let's get on to the Middle East day.

I've sort of was

putting it off too,

because it seems to be

in the headlines.

But anyway,

currently,

what's happening in the Middle East,

we see what's happening in the headlines.

You've got to be,

you know,

keeping in the up-to-date newsfeed.

But where are we at?

And it's impact on markets now,

with,

and we're talking around, obviously.

And it's, yeah.

Yeah, look,

it's absolutely,

having an impact.

You've just seen the,

the volatile little spike.

You've seen a real flight to safety.

But then,

the impact of oil and,

and the impact of, you know,

the clothing of the

Strait of Hermans

is just a really interesting

dynamic,

and the potential impact

that has on,

and flows through.

Yeah.

You know,

Trump, I think,

today calling for other nations

to send ships

and to protect the Strait.

Yeah, I'm not sure,

like you,

but I've seen many,

many pictures of canals

and various other ways

of Mad Max type approaches

of getting oil

across, through,

to buy,

counting off the Strait,

by going across.

Well, there are other things,

but,

when we're talking about 20%

of the world's oil supply,

it's not going to solve the problem.

No.

And those,

and that has downstream impacts,

and you're seeing it,

geopolitically,

you know,

I think,

with the producers

and the refiners now saying,

actually, they're potentially going to stop

sending exporting

and refining products away

to protect their own industries,

you know,

the potential slowed down on growth,

the enterprise,

but then it's that interesting

dynamic of,

the potential inflation shock as well.

So, you know,

often you'll see,

with a slow economy

and an expectation of rates cuts,

a flight to safety

and interest rates going down,

what we're seeing is actually risk of rates going up,

because of an inflationary shock

from oil prices rising.

Actually,

this is quite recent.

I think I opened the menus feed this morning,

and I saw something where Trump is,

there's something about worrying about,

you know,

the up and downing of

the oil price,

according to whatever announcements are made,

and somebody was,

somebody was threatening a catastrophe,

economically,

a biblical proportions of people

lose faith in the oil market.

Did, have you caught up with that sort of,

you know, I haven't been,

I mean, the oil market in Trump is,

really important, you know,

going into use in election,

the impact on oil

and fuel prices in the states is huge.

The impact on potential growth

is huge as they go into election.

And so, you know,

as the big thing we're really,

as being discussed in markets,

and what we're seeing is,

things move up and down,

as how long does this last?

And how long, you know,

how long does the conflict last

around all the situation

around as you referred to it earlier?

And, you know,

an extended period

will have a really strong impact,

domestically,

for Trump and the US.

Because I think there was something about,

if people,

I didn't go into it in too much detail,

but it was,

if people lose faith in the oil market,

and I was thinking,

I don't know how you'd ever lose faith in your market,

there's always,

it just would become volatile

and less predictable.

And that would be about it, wouldn't it?

But I mean,

it's not something where people

are going to lose faith

in investing in oil,

because we love oil.

I mean, is the stats on the million,

you know,

hundreds of million dollars a barrel

that the world needs,

a period day,

or whatever it's...

Yeah, and...

Until there's repressions

for that, you know,

it is still required

to produce the things that we consume

and move the things

that we consume around the world.

And so, you know,

not having oil just means

to slow down.

You're starting to see that

as it flows into New Zealand,

I think, you know,

like you, I'm sure you've seen,

like me, I'm sure you've seen

the, you know,

petrol stations running out of fuel,

you know, people rushing to think.

Well, we have very cross-chain Jones,

who was very unhappy with gull

and the news that they'd run out

or something.

But I think the truth

somewhere around the middle

that maybe a station

had run dry and gull

had said, look, we've got plenty.

I haven't caught up with that yet,

it was just...

Yeah, no, I think that's right.

But again, it's a bit like

a toilet paper during COVID,

you know, the fear of not having

forces the rush of people, you know,

moving to the vegetation

and stocking up much faster.

What's your reaction to it,

just as someone...

I mean, because, you know,

obviously in your role,

you keep...

you guys keep it closer on these things.

Do you also have just a human

emotional reaction

of whether you're worried

or not?

Are you quite circumspect on this

and it's like, oh, well, you know...

Oh, no, I mean, absolutely.

And look, that's the first thing,

you know, we sometimes come across

a bit cold because the first question

that people ask us is always, well, what's the impact?

I'm like, can you save a balance

or what does this mean for financial markets?

And, you know, we don't often get asked

about the actual human impact

and, you know, the challenge that this has.

And, you know, it is a tragedy.

You know, we're in a world now

where, you know, there's a lot of people,

and there's a lot of expats

and Dubai, you know,

through the Middle East,

who are now very unsafe.

You know, these people's

travels, plans, impacted.

People aren't getting to and from,

you know, Europe, you know,

people are stuck in New Zealand.

They're sort of emotional and vague.

And obviously, the amount of death

that's occurring, you know,

through the region is just an absolute tragedy.

Um, I was just thinking in terms of,

also the economic impact,

and when you look at markets,

because, you know,

you mentioned that such and such

this would be interesting

in terms of what's happening.

I mean, do you, are you worried

about New Zealand's,

are you worried currently

or are you thinking, well,

tell you what,

just don't look at your key,

we save it right now.

But where are you in terms of long term,

short term concern?

Yeah, look,

and that's, I think, the right way

to think about it.

There's long terms in short term concerns.

And so, you know,

I think in 20 years' time,

will I be looking back

and thinking,

we'll get the date wrong,

but the 15th of March,

I was very, very worried

about oil prices.

And, you know,

what were that was going to do

to my QB Save Abounce?

In 20 years' time,

I don't think so.

I don't think,

to be honest,

I mean, I'm in a slightly more aggressive fund.

I'm not going to look at it,

and I'm, look,

it's not a huge amount of money anyway,

but I'm not planning on

withdrawing that money for, you know,

years and years.

So, I'm just,

it's just there.

Forget it.

Don't even look.

No, that's right.

And, suddenly,

if you're an individual,

think of me,

that's the right thing to do is not,

not panic in situations like this,

and try, you know,

better judge the markets.

From an investment professional side,

absolutely,

we're really focused on the short term impacts,

and where we see that going,

the growth impact on New Zealand economy,

you know,

we see that playing out

into individual stocks.

You know,

if you look at New Zealand's

a great example, you know,

oil and prices,

and they've already announced

that they may need to cancel

a number of flights going forward.

You know, those things have an impact,

and they have an impact

on the outlook for the company.

So, we absolutely have to factor

that into the short term.

Yeah.

But longer term, you know,

again, these things,

unless it's a very prolonged

piece, it's something

that potentially gets worked through.

Hey, yeah.

Actually, all you have to take a break,

I've got lots of more questions for you,

but we'll come back,

and just to take,

if you'd like to ask any,

any questions of Chris,

Chris Wilson,

from a Harbour Asset Management.

We're talking about,

a bit about Kiwi Saver,

which we had a chat about.

We've managed to mingle

the two in with the conversation

around what's going on with the run.

But if you've got any questions

for Chris's reckons,

then give us a call.

0800-810-80,

but we'll be back in a tech

that's 20 to 6.

Yes, that is Harbour Asset Management,

who are a fun manager

of the year with the Morningstar Awards,

and Chris Wilson's with us.

Actually, when we're talking

about the Middle East

and the conflict

and the fact it has on markets,

Chris, it seems,

you know, back in the days

when there have been,

ah, the global oil shocks

or market shocks,

it does feel naively to me

that it used to be very much

in what in the 80s,

maybe the equity cup days,

and it was a wild west,

and so when the market lost,

you know, had confidence

lost in it,

everything just was carnage.

I have this,

maybe it's a naïve hope,

but that things just feel,

at least more measured

and better informed

these days in that

have ever been,

and that there's maybe

a bit of circumspection

when it comes to market reactions,

that we don't see the sort of,

you know, I mean,

back in Wall Street,

the Stock Market Crash in 19,

whatever it was, you know,

is there a different sort of space

where we deal with bad news

in a more measured way

or can it be just as dramatic?

I think it can be just as dramatic.

Unfortunately,

I think, you know,

the annals of time,

it may be softened that one for you,

but, you know,

if you think,

it's similar to your comment

around, you know,

will you be looking back five years from now

remembering the state,

you know, you think of all of the incidents

or severe drops

we've had since,

you know, 1987,

the, you know,

think of the drop

during COVID of March of COVID,

there was a huge drawback in markets,

which, you know,

quickly rebounded,

and so, you know,

that time disappeared.

But, you know,

I think the last week on Monday,

we had a 3% down day,

and then,

and then, it acts.

Which, so that's a fall of

greater than 3%,

and that's happened how many times?

I think about 10 times,

and the last,

last 15 years or so.

So, you know, again,

that is a big day.

And, you know,

that, that doesn't,

it does rebounded back,

and so you do get some normalization.

But those,

those swings can happen,

and you've seen it,

even the months prior,

a hit of the situation around,

you know,

referred to as this,

Sascoff blips,

where companies

that are impacted by AI,

would just,

or industries,

would just see large swings in a day,

as, you know,

a research paper,

a piece of information

came out around that sector,

which took,

which cried just

a very different view on the performance.

How does it,

because the bond markets,

which are seen as being a bit more of a,

I don't know,

if you've bought a few bonds,

you'd like to think you're a bit safe

on the average bear, wouldn't you?

But they don't like the oil,

oil shocks, do they?

No, and they don't,

and they,

they haven't,

and that inflationary impact.

And so, the bond markets,

and that sees rate rise,

and, you know,

obviously, bonds are the funny one,

where the interest rates go up,

and prices go down.

And so, that is,

a worry that the feds,

and, you know,

reserve banks,

will be need to do things

to stop inflation.

So, that inflation,

the price of oil goes up,

the price of things

that you buy goes up,

and inflationary shock.

And so, then,

how do you dampen inflation?

You've got a toolbox,

which is pretty limited.

You raise interest rate.

And so, you know,

I think that's,

you know, an interesting dynamic,

but it is a limited toolbox

that the fed does.

It does.

It feels strange,

the, you know,

that we can have inflation

and all that sort of thing.

And what we do is,

I probably need to have a chat

with an argument about this,

actually, and pick a brains.

But, you know,

that you put the cash rate up

to deal with inflation,

when I sometimes wonder

how much inflation

has an effect on inflation,

because people are having to button

back on what they spent.

You know what I mean?

So, you've made,

you've made

renting and more, you know,

owning a house or borrowing

more expensive,

and it's put the costs

of things up,

whereas inflation's already

putting those things up.

I don't understand

how that works.

But, is that a dumb question?

It is not a dumb question,

and it's been well studied.

And so, inflation expectations

do drive inflation.

And so, you know,

if you think of wage inflation

if I'm thinking,

well, prices are going out,

I need you to pay me more,

because, you know,

I have an expectation

of an argument.

I'm asking you to go up.

So, I want you to pay me

five percent more this year.

And so,

like a dog chasing its tail.

And that then has put

more inflation.

And so, as you get confidence

in inflation,

it's not going out.

Actually, if I've got confidence

that prices aren't going up

as much, then my wage inflation

will come down.

And so, it does reduce.

And so, that's the challenge

out that Dr. Berman has.

It is.

Are there different,

I mean, this is getting

to economist territory,

isn't it?

Isn't it?

You give me that look.

Oh, I tend that to look

that you're going to a good place.

We should follow it down.

No, but, you know,

I mean,

are there situations

where,

because they talk about

tradeable inflation,

non-tradeable and all that,

but are there types of inflation

where it's sort of self-curing?

Like, it's a bit,

I would relate it to,

you get a virus

and your body forms

antibodies to that virus

and you can sort of heal yourself

and ultimately,

for the next time.

Are there types of inflation

where you wouldn't

necessarily see

intervention

from the reserve bank

because this is sort of

self-curing?

Yeah.

I think, yes.

I mean,

sure not to, yes.

There are different types

of inflation,

untreated differently

by the reserve bank

and how they think about it.

Yes.

So, you know,

absolutely.

Some things,

and the length and duration

of impact is,

has it been implemented?

So, again, a short,

short shock.

So, you know,

say a change in attacks

that adds 1% to the price,

or GST change.

No.

Nothing to see here.

Nothing to see here.

Because it's, you know,

it's a one-off,

everything.

And, you know,

a one-off in the sense of it,

just lifts all the prices immediately.

Yeah.

And then, they stay at the new level,

whereas, if you think of, say,

something like,

oh, shock,

it's actually not just the increase

in price on that day,

but within the current growth,

it's the potential other impacts

that flow through as well.

So...

Do we understand everything

that's happening with the oil prices?

Because we did see

some strange fluctuations

based on Trump's rhetoric.

What was it, 73 bucks a barrel

just prior to the conflict?

Then, went up to 115 bucks.

And I think I saw it,

dropped back to 90 dollars

after Trump said something.

Yes.

What is...

And positive thought back up again.

And really,

it's about how they deal with,

you know, production

and who's producing oil,

producing oil and then the release of strategic reserves as well. So what oil is there

about? IEA, which Shane Jones was talking about. Yeah, and there is ability to release reserves

and yeah you've seen a rhetoric around that and so again the trade offers how long does

the strait stay close for, how long does it take for oil production and essentially oil

to start flowing around the world again versus how much of that shortfall and the time it

takes for that to happen is that covered by strategic reserves that are released by the

U.S. and other countries. Do people invest as better on this sort of stuff? I mean the

risk, the ones who aren't too risk averse to be like, well okay it's got up to

under 20 bucks a barrel, I'm going to, I don't know, invest so what is it short the stock

or something and bet that it's going to be down at $90 in about 10 days' time?

Absolutely, absolutely and so it's very, as you've seen the price movement, investors

will try to predict anything that's moving a lot in value because that's where you can

make money. And if you worked in the White House, you'd just hear what Trump says I'm

going to, I'm going to make an announcement to call the markets quick, go short, I mean

I hate to think that happens but. No, I mean you've certainly seen that with

prediction markets, yeah I'm sure we would have seen people betting on, community

diss, no longer being in power was the most recent controversy, someone made bets on

Manjaro coming out of power and one money on prediction markets and so there's been

a lot of talking the media around the role of prediction markets and the use of

information to make money out of world events. Gosh, we'll be back in a tick, it's fascinating

conversation though, all this 10 to 6 news talks you'd be. Yes, welcome back to Smart Money,

I'm Tim Beverage, my guest is Chris Wilson from Harbour Asset Management and we've just

got a couple of minutes to go and look, we've been talking about a bit of that key we save

but of course the conversation around investing is to do with what's going on around and oil

shocks and the price of all and all that sort of thing and it does tend to leave us all

with a slight sense of anxiety and we've seen panic buying and I thought maybe if you've

got a final sort of take on putting things in perspective. Yeah, look I think I'll come back

to you earlier comments, think about this, is this something that can five years time you'll

think back and worry about or remember this event or this circumstance, there's a very high

chance you won't and it's important to not panic in these situations, absolutely check

check your fund, seek advice from your advisor or from your provider if you can but don't panic,

you will see through this stuff over time and there's been incidents, there's been incidents

in the past and we do spend a lot of time thinking about these, we spend a lot of time talking

about these things, that's what we're paid to do but as an investor you shouldn't spend too

much time worrying about this. Actually you said check your fund, is there a school or thought to say

maybe don't? I mean how, because you guys it's, yeah, I mean how does that work? Yeah, check

your fund, not in the context of check your balance and worry about your balance. Okay, check your

funding, you're in the right fund for what you're trying to do as opposed to check your balance

every day to see what's happening with oil and see the impact on your fund. Because with the key

we say, as I said, only because we've heard this advice time and time again, if there's a market

price shock in urna in an aggressive fund, it's not the time to jump into a conservative fund because

you just lock in the lost. Yeah, no, it's sort of a pretty general advice around it is, yeah,

it's not trying to react to market events or pick one when the right time to change funds to

time market events is not the best outcome. Just some context on the three, you know, the 3% drop

that we had in our market in the past week on one day, I think, wasn't it? Yeah. What is that

comparable to other markets around the world? Well, we better worse or, you know, the Dow, the S&P,

50, all that sort of stuff? Yeah, very comparable. Yeah, this is a, this is certainly a global

event, you know, everyone uses oil and everyone's aware of what's going on in the US and what happens

in US markets does tend to drive global markets. Feel slightly consoling, isn't it? I mean, if we were

the only market that we're going, then that would feel very lonely. Yeah, no, absolutely.

I mean, it was always the the foot and mouth disease sort of issue in New Zealand was the case study

we used to do at University of what would happen with foot and mouth case in New Zealand years and

years ago in the impact on the economy, but no, this is this is certainly a global issue that

everyone's feeling at the moment. Oh, good stuff. Hey, thanks so much for coming in, Chris,

good to see you. And all of this, all the show beyond line after six o'clock, you'll be able to

jump on and check out any of the hours we've had has been a great show. Thanks everyone for

the participation. Thanks to my producer Tara Ward, enjoy the rest of your evening. We'll catch

you same time next weekend. Have a great night.