Are your Investments costing you? BEWARE of the hidden costs!

Are they tax optimised?

Investment returns (real returns) are influenced by a number of factors including:

• Cash return.
• Capital gain.
• Taxation (& often double/triple taxation).
• Fund manager/advisor fees.
• Compliance costs of reporting returns (eg accounting fees).
• Value of your time monitoring investments.
• Inflation rate.

All this is on top of the risk of investment loss – either permanent impairment by financial collapse; or partial impairment via fund or market devaluation.

At McIsaacs, we are becoming increasingly concerned about the number of clients who have poorly structured investments or portfolios that are under-performing for more reasons than merely market factors.

In particular, the imposition of the Portfolio Investment Entities (PIE) regime for many NZ domiciled funds; along with the Foreign Investment Fund (FIF) regime for the majority of overseas funds and investments – these matters have resulted in additional compliance requirements for investors; the fund managers; accountants; Inland Revenue Department. And guess who gets to pay for the majority of these costs? Yes – you!

On the positive side, the PIE and FIF regimes also open many (Ed: unintended?) doors of opportunity for thoughtful consideration to optimising investments – in terms of:

• Structure – which entity type is preferable for which investment or class of investment?
• Portfolio mix – which investments are costing me more in compliance than others?

To assist clients in this regard, we have developed a special Compliance Review of Investments service for our investor clients. This entails a comprehensive analysis and review of the portfolio; an assessment of the costs of compliance; recommendations for restructuring of classes of investments. Whilst the service does not provide investment advice in regards to the investments themselves (we work with your nominated Investment Advisors in that regard), it does provide an overall assessment of the tax effectiveness and compliance costs associated with the differing classes of investments you may have.

In undertaking such reviews, we are finding that clients become better informed as to the real returns being achieved (Ed: or sadly not!) and in a position to effect changes that may improve after-tax returns by significant multipliers of the cost of this service. Any changes typically need to be effected now to gain benefit in the current financial year – so if you have investments and wish to review them – you need to act immediately.

Please contact us to commission such a review.