SBS Financial Advisory Service
The SBS Financial Advisory Service provides expert advice and investment solutions over the medium to long term (over three years or more). We have a team of qualified and experienced Financial Planners who are dedicated to working with investors to help them achieve their life stage goals. We utilize the SBS Portfolio Service which provides a solution for investors seeking a straightforward and complete investment solution. It has been put together by the SBS Financial Advisory Service, an operating division of Funds Administration New Zealand Limited (FANZ), a subsidiary of the Southland Building Society (SBS).
One decision provides you with an investment portfolio with the appropriate asset allocation, blend of investments and flexibility to meet your life stage and needs. Our portfolios include a wide range of fixed interest options, managed funds and directly traded investments.
Three Reasons why you Should Invest with the SBS Financial Advisory Service
Reason #1: People
We have a team of some of New Zealand’s most experienced investment professionals as part of the team. That means we have experience in both investment market cycles and how to help investors arrive at a portfolio that will meet their current life stage.
Our team includes:
Graham Duston, Executive Director
Graham has over 20 years experience in the financial services industry. Graham has extensive investment management experience. During his time in the industry Graham has been responsible for the introduction and management of some of New Zealand’s most successful investment programmes such as TOWER’s TORTIS Funds and ANZ’s Ascent Investment Programme. Prior to joining FANZ he was the General Manager of ANZ Funds Management and New Zealand Manager of ANZ Life New Zealand and has also held senior management roles with TOWER Trust Services and Armstrong Jones (now ING NZ.) He is a Southlander and holds a Bachelor of Commerce and Post Graduate Diploma in Commerce from Otago University.
Derek Young, Director
Derek Young is one of New Zealand’s most experienced funds management professionals. Derek has over 17 years experience working for leading funds management organisations such as TOWER, ANZ Funds Management and ING in senior management roles. Prior to joining FANZ, Derek was a General Manager for ING as well as being responsible for the operations of ANZ Life (New Zealand). Derek holds a Bachelor of Commerce and Administration and is also a Chartered Accountant.
Iain Smaill, Chief Accountant
Iain Smaill is a leading expert in Funds Management Operations, Accounting and systems. Iain has over 12 years experience in a variety of accounting system and operation roles with leading funds management organisations such as TOWER, and Colonial. Iain has a range of wider organisational experience and prior to joining FANZ was a Financial Accountant for the New Zealand Film Commission. Iain is also well versed in information technology and has been involved in systems implantation and design at a number of organisations. Iain is a Chartered Accountant and is also Microsoft Certified in a number of applications.
Peter Ophuis, Financial Planner, Christchurch, Papanui, Riccarton and Ferrymead.
Peter has over 20 years financial services experience with the last 11 years working as a private banker for a large trading bank. Peter specialises in the investment area and has a wide range of experience. He holds a Financial Planning Diploma.
Alyth Donaldson, Financial Planner Dunedin and Central Otago.
Alyth has over 30 years financial services industry experience. Alyth has worked for a number of organisations during her career including banks and a share broker. She has been a financial planner for the last eleven years and is a Certified Financial Planner. Alyth is also a qualified financial planner and holds a Financial Planning Diploma from Massey University. Alyth looks after the Otago region for SBS FA.
Allison Cooper, Financial Planner
Allison comes to SBS with a wealth of experience having spent 22 years in the BNZ, working in Queenstown, Gore, Winton and Invercargill. Allison performed a variety of management roles for the BNZ during her banking career. Prior to joining SBS Allison worked for six years as an Insurance Broker and Superannuation Consultant for a financial planning firm in Invercargill. Allison looks after the Southland region for SBS FA.
Together we are a passionate team of people focused on helping investors achieve their life stage goals.
Reason #2: We Work for You
We are focused on helping you achieve your goals. We work for you and our fee structure reflects this!
A New Approach to looking at investments - Performance Based Fees
As an investor we know that the goal of your portfolio is to make a return of at least that of a bank term deposit.
We hear a common complaint from investors.....
"When my return is down (or even negative!) as an investor I am taking a pay cut. However, I don't see my financial planner or fund manager taking a pay cut!"
Our approach is to ensure that our fees are aligned with you, the investor. We share both the gain and the pain with investors. We charge on the following basis;
1. Performance Based Fees
A performance fee is charged on the quarterly portfolio return when that return (after tax and fees) exceeds that of a quarterly performance benchmark. The benchmark used is the 90 day bank bill rate as at the beginning of the quarter (1st January, 1st April, 1st July, 1st October). This rate (after tax 33%) then becomes the performance benchmark for the quarter. Should the portfolio return (after tax and fees) exceed the benchmark for the quarter then a performance fee is charged. This fee is 10% of the return. If the performance of the portfolio is less than the performance benchmark over the quarter then there is no performance fee charged.
2. Monthly Administration Fee
This fee is charged on a monthly basis and is designed to cover all the administration costs of FANZ and the Administrator, including custodian, administration and reporting fees, on your investments. The administration fee on your Portfolio will be up to 0.36% per quarter.
3. Implementation Fee
An implementation fee will be charged to set up your portfolio. This fee is 0.70% of the total amount invested or 0.35% should the funds invested come from an existing SBS or FANZ Managed Fund. Brokerage may also be charged on any direct assets bought as part of your portfolio.
The administration fee and the performance fee may be tax deductible for some investors.
Soft Dollar Commissions. The only remuneration that the SBS Financial Advisory Service receives is from the SBS Portfolio Service which comes from any implementation fees and administration fees charged as part of this service. The SBS Financial Advisory Service does not receive any other brokerage and or commissions.
This approach ensures that our interests are aligned with investors.
Reason #3: A Quality Approach to Investment
The SBS Financial Advisory Service has undertaken considerable research and time in developing its investment philosophy and processes. We are focused on delivering quality investment out comes for investors.
Our goal
To help our investors achieve financial independence over the medium to long by the design, implementation and management of a diversified portfolio that suits their current life stage.
Our style
We seek to design portfolios that have multi manager, multi style investment approach. We also take a "safety first" approach in portfolio construction and seek to avoid risk not commensurate with the expected return of each portfolio.
How we structure portfolios
The primary concern is to ensure the portfolio is adequately diversified with built in risk constraints. We build portfolios that have the following characteristics:-
- Diversification across asset classes in optimized portfolios.
- Quality fixed interest assets. Our portfolios do not hold fixed interest assets in them that have credit rating lower than BBB- (or equivalent) but have an overall average credit rating of at least BBB+.
- A "best of breed" Multi Manager, Multi Style Investment Approach. We seek to build portfolios that access a range of investment managers with different investment styles and approaches. This may include both direct assets and managed funds.
- Our portfolio maintains a strategic currency hedge on any international equity exposure to reduce portfolio risk.
- We aim to keep buy and sell decisions to a minimum as we believe excessive trading is detrimental to the interests of investors as it raises costs and increases the risk of under-performing the market.
Overseas diversification
We seek to deliver portfolios that are diversified accross New Zealand and off-shore markets. When investing off-shore one of the key issues is how much or little to hedge back to the New Zealand dollar. We take the view that although in the long term currency movements "wash out" in terms of portfolio performance, in the short term they can dramatically affect the portfolio returns. The chart below provides a compelling view of the annual returns of MSCI Index and the wide variations that can occur between hedged and un-hedged returns. Our strategy is to maintain a 50% hedged international equity portfolio so as to minimize any short term portfolio volatility.
Fixed Interest - A Quality Approach
Every investment we consider must stack up to our quality tests. For fixed interest this focuses on the credit quality of the issuer and liquidity of the security. This quality focus allows us to filter out the vast majority of investments on offer around the world.
We weight our portfolios in a "bar bell" approach. This approach seeks to control risk in the two main areas of duration or maturity profile and default risk. Duration or maturity profile has two components. The first component is around the 90 day area were we use a 90 day term deposits and or mortgage (with 90 day interest re-setting) trusts to build a core foundation for investors' fixed interest portfolios. The second part of the portfolio includes high rated corporate debt securities that start out with a maturity profile of more than three years. The combination of the two sectors reduces duration risk, provides a low risk approach to portfolio construction whilst generating competitive returns.
Default risk or the potential to lose capital from a fixed interest investment is a key issue. With respect to corporate debt it is important to note that default rates for fixed interest securities are exponential rather than linear as the credit quality decreases.
The chart below shows the average five year default rate of debt issues as measured by Standard and Poors for the period from 1970 to 1997.
We construct debt portfolios that have a focus on high grade issuers with a strong interest rate cover. In addition we only invest in issues that have strong liquidity. Our corporate debt portfolios have the following criteria: -
- Average credit quality of BBB+ (Baa1 in chart)
- No issues of less than BBB- (Investment Grade) (Baaa3 in chart)
No more than 10% to any one issuer in any portfolio or investments in a fund that would have more than 10% of the portfolio invested in any one issuer.
Multi Style, Multi Manager Investing
One of the problems for investors over the last five years is that investment style such as growth (i.e. Tech Boom) and value (i.e. out of favour) have come and gone. Our view is that an investment style that seeks to generate returns from a blended approach of some of the best growth and value investment managers is the most effective long term strategy. This approach mitigates "surprises" in terms of portfolio returns.
Another key issue for investors is which investment manager to invest with. The reality is that today's "hot manager" probably will not be "hot" tomorrow. The chart below shows the performance of upper quartile managers who remain in this area over a five year time. Our approach is to construct portfolios that have a range of managers in each portfolio. This ensures that we have exposure to a range of top managers in each portfolio and avoid over exposure to any one manager.
We will seek the services of the appropriate research organisations so as to ensure we hire investment managers who provide consistent performance relative to their investment style and investment mandate.
Investment Strategy
The following investments are recommended within the various sectors: -
a) Fixed Interest
- 90 day fixed interest options include term deposits with SBS and or the Lifestages Mortgage Portfolios. Fund summaries of the Lifestages Mortgage Portfolios are included in the appendix.
- A range of direct fixed interest options that meet the credit control criteria and portfolio weighting requirements. Fixed interest funds may be chosen from time to time as part of this section of the relevant portfolios.
b) International Equities
- Core International Equities is accessed by investing via the Lifestages World Equity Portfolio.
- Active International Equities is to be sourced via a multi manager, multi style investment approach.
c) Australasian Equities
- Core Australasian Equities are accessed via direct Equities listed on the New Zealand and Australian Stock Exchanges or via directly equities managed externally.
- Active Australasian Equity exposure is gained by investing in via pooled investment products or via directly equities managed externally.
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Graham Duston 'We're proud to be a New Zealand owned, look-you-in-the-eye type of organisation.' |
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