After around a decade long bull market in equities it seems that the strong positive returns of the past are not going to continue. At some time there had to be a reversion towards the mean and maybe we are heading there now.
The New Zealand sharemarket has just recorded its first negative year in more than a decade. And the start of 2022 has not been a positive one either. The NZX 50 index is set to finish January down almost 10% having broken below 12,000 points – the lowest it has been since October 2020.
Added to that we have seen stories where some high performing funds have taken big performance hits. At the end of last year Sydney-based Magellan, a manager loved by many New Zealand advisers, has had a tough time.
Were it is going to get interesting this year is to see what happens with the thousands of retail investors who have embraced the online platforms like Hatch, Sharesis and InvestNow.
Into this category we can also throw in Cathie Woods' Ark fund which invests in new technologies and is offered in New Zealand by Nikko AM. Ark has been making headlines in the media here with headlines like: "Beware the negative 46% KiwiSaver return."
And to add even more interest to the year will be the new default KiwiSaver funds. They picked up their millions of dollars from existing managers at the end of last year and have now invested their members funds in balanced portfolios rather than the conservative ones mandated on the previous default providers.
Under the new default rules these members will be experiencing more risk and the likelihood for negative returns is, you would expect, likely higher.
Maybe that is a good thing and these members will actually start to take some interest in their KiwiSaver scheme.
With all this market turmoil, after the relative calm of recent years, maybe more New Zealanders will want to embrace the service of advisers - assuming they can find one with capacity to take on new clients.
Meanwhile, in the mortgage sector there is no doubt advisers are in high demand. Everyone will have read the stories about how new regulations to protect vulnerable borrowers has turned the process of getting a home loan into a lottery akin to getting a place in MIQ.
Added to that the banks continue to implement dozens and dozens of policy changes - again making the process even harder.
Mortgage advisers have been back on the tools earlier than usual this year and it is hard to find one who is not busy.
While there will be the continuing challenges of regulation on the sector, financial advisers look like having a busy year looking after clients.
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