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Economist Cameron Bagrie says with markets and economies going through significant change investment strategies need to be reviewed.
Bagrie says people need to rethink their investment approach a markets go through significant change. He says that the next 10 years will not be like that past 30 years.
He told advisers at the Lifetime conference in Wellington this week that passive investment strategies won't work in this changing environment.
He also questioned whether "standard portfolios are fit for purpose given the structural changes (going on)?"
The answer to his question was no.
Advisers needed to consider the reintroduction of cash and also take on risk.
"Economic sanity is starting to return and you need to take real risk to make real money," he said.
One positive he took out of the changes is his view that "housing is no longer a one way bet." New Zealand looked to be at an inflection point and moving away from property as the main form of investment to the productive sector."
Another warning was that the implementation of ESG carries costs for businesses.
Bagrie also told advisers that the growing cohort of retirees, including the baby boomers, had a lot of money, around $542 billion, and how they spent it would have a significant economic impact.
"I would be stopping interest rate hikes," Bagrie said if he was the shoes of the Reserve Bank governor.
The impact of interest rate increases still had some time to flow through to borrowers as the majority of fixed home loans were still on low fixed rates.
"There's still a lot of pain to come," he said.
Bagrie said the economy was not in good shape and one of things that was required to tackle inflation was to get unemployment up off its historic lows.
"We need bad news to deliver good news," he said.
While he warned there were lots of issues that needed solving his overall takeaway
One of his warnings was about the plethora of multiple units being built in various urban areas around New Zealand.
He says too many are being built and this sector has "train smash written all over it."
Last week he issued a round "hallelujah" when the Financial Markets Authority issued a warning to property development companies issuing offers to wholesale investors.
He also said there was now a growing divergence between housing consents being issued and Code of Compliance certificates being granted. The gap is widening which suggest there are some problems emerging in the construction sector.
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I would suggest that the industry (including advisers) must work ‘differently’ than they have previously and understand that many of the positive attributes that have existed over the past 3 decades no longer exist. Now more than ever advisers must embrace a changing consumer, more volatile markets, normalized returns (if you’re lucky), and increased value sensitivity rather than being complacent. This will require a pragmatic (pun intended) approach to portfolio design.