WISEplanning

Our Investment Philosophy


 

Many look “where to invest” to get best results. 

Often overlooked is one important key to investing success – how to invest.

Our investment philosophy has been developed over the last 35 years.  More recently (the last 15 years) our approach was upgraded, and is now based on world best practice around what is commonly known as Value Investing. 

Simply, whilst it sounds obvious, the key to successful investing and our philosophy is to invest in quality assets at a reasonable price.  This usually means investing differently to most others. 

At the extreme end, typically, when others are selling, we tend to buy.  When others are buying, we are sitting tight (or possibly taking profits). 

That said, a key driver of our clients investing success is maintaining a low trading frequency (minimising transactions).  In other words, we are slow to buy an investment because we like to be careful.  Once it is bought, we tend to hang onto it for a long time, because it is quality and it is unlikely that we will need to trade it for another investment in the future. 

We definitely avoid regularly rebalancing portfolios based on market conditions and asset class weightings (quality investments remain quality, regardless of whether the general market is scared, uncertain, brave, happy or sad).  This helps to minimise transaction costs which are a drag on profits.

We invest in quality assets and hold onto them long term because they tend to withstand adversity and also grow long term.  That way, we minimise trading mistakes and trading costs that, over time, damage portfolio performance. 

 

“The Financials” And “The Economics”

Whether it be our clients’ own closely held business, a large business listed on the share market or a rental property, at WISEplanning, our investment philosophy includes strong (proven / market tested) methodology that allows us to differentiate between the financial aspects of an investment and its underlying economics. 

This helps us to avoid chasing the market when it rises, going after popular investments that tend to be expensive and allows us to grow portfolios long term, regardless of markets and economic conditions.  This feature provides us with a strong advantage over many other investment methods and approaches.  We don’t need the markets to be favourable or to “play nice” for us as investors to make money.   

 

Value investing is our advantage.  Here is why …

Benjamin Graham, from the US, is considered to be the father of value investing.  Having invested through the recession that followed the so-called share market crash in 1929, the philosophy then was to look for cheap assets that could be purchased at a discount – not difficult to achieve after strong share market declines and during a recession but not so easy when markets are happy and buoyant. 

Warren Buffett, from Omaha, followed Benjamin Graham’s teachings and eventually met Charlie Munger, whom he worked with for many years. 

Charlie Munger, at one point, questioned the validity of focusing only on buying cheap assets.  His question to Warren Buffett was, “But what about the quality of the asset?” 

Long story short, they modified the methodology to align more with what experienced value investors practise today, which is about buying quality assets at favourable prices (not just cheap assets).

 

Value Investing … Eco Investing

At WISEplannning, this investing methodology has been under development for many years.  We call it Eco Investing.  So called because our investing method is based around Value Investing and because authentic Value Investing investigates the underlying economics of an asset.  

 

For Example, Direct Shares (stocks)

For those investing in portfolios consisting of financial assets like direct shares (stocks), we call it “Ecobus Investing” (the economics of the business – before investing, scrutiny of the asset includes analysis of the economics of the underlying business). 

For example, the sustainable competitive advantage (The “moat” as Warren Buffet calls it) is an example of a business economic.  Important because, successful investing comes from analysing the business (not just the shares (the stock)) and takes into account aspects such as that businesses position in the market.  The more dominant, the larger the competitive advantage, the stronger the pricing power.  This can mean higher levels of profit compared to that businesses competitors and also compared to other non-competing businesses in other sectors across the market as well. 

Better pricing means better profits which means more growth.  That can translate to better ROI (return on investment) for investors.

By the way, similar methodology has been developed at WISEplanning for both rental property and small private businesses that our clients own.  Whilst almost unique to WISEplanning, the combination of the financials and the economics come together to create a simple but reliable combination for investors.

 

1. We have been fortunate to learn from the world’s best and most successful investors.

Whilst we are not able to replicate the skillset of Warren Buffett and Charlie Munger, their ideas and methodology are transferrable and have been rigorously applied across a variety of market cycles over the last three decades.  Warren Buffett and Charlie Munger’s investing success has been well documented over the last 50 years.  Berkshire Hathaway is one of the most successful investment companies in the US and around the world.  Their investment methodology is considered by the few who understand it and apply it to be the benchmark for investing best practice globally.

 

2. We invest in capital assets and therefore we are successful.

Capital assets are simply those assets that have a cashflow. 

Property has rental income, your own small closely held business generates profits and a large business listed on the share market (shares / stocks) also generates profit or earnings. 

Commodities such as gold and silver or currencies, collectibles such as art and the likes tend not to have a cashflow and are therefore not capital assets.  They are inherently more risky offering a lower probability of investing success. 

You may like to invest in those areas – we prefer not to.

 

3. We understand that price and value are not the same thing.

Most investors, whether they be fund managers, brokers, investment advisers, analysts or novices, see the trading price of an asset as being the same thing as the value of the asset.  For them, the trading price is the value.

At WISEplanning, we understand that the intrinsic value of an asset, is based on factors other than the trading price.  Price and value are not the same thing.

For example, at the risk of oversimplifying it, if we compare the rental income on a residential property with how much we pay for it initially, we have what could be considered a gross rental yield.  If we paid $250,000 for the property and it could achieve a rent of $25,000, that would give us a 10% yield (difficult to do in the current liquidity driven environment).  If markets like the idea of low interest rates and feel they can borrow more money, then we have general buoyancy whereby home owners and investors may be inclined to pay more for the same rental income.  In this example, they might pay $350,000 or $400,000, say, for that same rental income of $25,000 per year.  The more they pay, the more the rental yield declines.

The point here is that the economics of that property and the rental income are unlikely to change even though the market is feeling unusually happy and buoyant and willing to pay more. 

Because people are willing to pay more for that property, does not necessarily mean it is better located, has better amenities close by or can attract a better quality tenant.  The financials and the economics of the property determine the intrinsic value of the property, not how much the market is prepared to pay for it. 

Similarly, when we invest in large businesses listed on the share market (true in any country in the world), the intrinsic value of the shares is based on the performance of the underlying business and how well that business uses its capital, not the rise and fall in the trading price. 

So, at WISEplanning, we understand that price and value are not the same thing. 

Price is what you pay, value is what you get.

                                                      Benjamin Graham.

 

4. Uncertainty, volatility and sharp pricing declines are our advantage.

Most investors, fund managers and brokers adopt a defensive approach when uncertainty across the markets prevails. 

Putting to one side the popular media, which is usually overly dramatic no matter what, financial commentators and analysts / fund managers that follow modern portfolio theory (e.g. Kiwi saver), adjust to a negative narrative and adopt a more defensive investing position during market turbulence and uncertainty.

For us, we know that price and value are not the same thing. 

Whilst those who practise and promote modern portfolio theory also promote the idea of rebalancing portfolios from time to time, because of market conditions, there is a tendency for them to overlook the opportunity that lower prices offer. 

For us, as value investors, lower prices mean better buying.  It also means lower risk too.  Value investors regard paying too much for an asset as a risk.  Paying a high price for an asset is the risk, paying a low price is the opportunity for value investors.

We prefer to buy quality assets when the price is low, which of course is at the same time when markets are uncertain, worried and scared. 

Pure mathematics can easily demonstrate that the less we pay for an asset, the lower our risk and the better the chance we have of making above market returns in the long run.  On the other hand, those who prefer investing in assets along with “the herd” when markets are buoyant, run the risk of paying too much and this in turn makes it much more difficult to achieve those above market returns. 

The more we diversify, the more we become the market and the more difficult it becomes to achieve results different to the market.  No problem when markets rise strongly.  However, the problem is that markets move up and down in a random way.  That’s why Value Investors have an advantage.   Rather than adopting a defensive approach when markets are uncertain by trying to minimise volatility on the portfolio, Value Investors can invest in quality assets and can confidently buy more of them when prices decline.

 

5. Risk – we have learned the most effective way to protect our assets from risk.

Diversification is a common approach to managing risk (not it though).  The idea is, if you have all your eggs in one basket and something happens to that basket, then you lose all of your eggs potentially.  Therefore, having different baskets means that if something happens to one basket, you do not lose everything.

The logic of that approach, of course, is valid.  The question though is, is it right for us as investors? 

We also know that people operate on varying levels of investment competency.  Some people are better with money than others.

Those with less experience and competency probably should use diversification to help manage default risk.  In other words, the risk of losing capital is what most inexperienced investors fear.  Diversification is a good way to manage that risk for those without the advantage of the Value Investing (Eco Investing) approach to protect their investments. 

For more advanced investors, investing in quality assets is the key to managing risk but at the same time, being able to maximise investment growth long term.

Many regard diversification as an obvious no brainer, almost the free lunch for investors.  For us at WISEplanning, we know that quality assets protect our capital from default risk.  Also to maximise our returns, investing in those assets when prices are low is appropriate and necessary.  Whilst it can seem counterintuitive, that means investing differently to others at times, is key. 

As one of our clients from Auckland aptly said once, “Peter, I don’t want to swing with the herd.”  He knows that diversification and investing along with others, does help to smooth out volatility but also is a significant impediment to long term investment growth that means lower returns.

That is why Warren Buffett once said … “diversification = diworsification”.

Our client portfolios are tailor made.  Diversification is applied to the extent that our clients are happy about it but kept to a minimum in order to limit damage to long term returns. 

Our more advanced investors are less inclined to diversify and do not lose any sleep over their investments because:

  1. They understand the importance of investing in quality assets that will remain sound even when the world around them is uncertain and downright scary; and
  2. They know too that the lower the trading price, the better the buy. That is when markets are uncertain, very unhappy and prices may be declining sharply.

 

6. We understand a successful investor’s mindset.

We know that there is a significant range of investments available and fortunately, we understand the difference between good quality and poor quality investments.

Our clients have the choice between “starter” (more basic level) services and more advanced programs for those looking to maximise their investment results.

We also know the difference between successful investors and those who are less successful.  Inevitably, it comes down to their mindset.  In other words, this is their investing habits, investing attitudes and their investing behaviour. 

We have set ourselves apart from other analysts, brokers and advisers by including investing training and an investing mindset alignment component within some of our programmes at WISEplanning ( for those who are open to it).  That way, our clients can improve their success as investors and at the same time, improve their ROI (return on investment), particularly in the long run. 

This is pertinent because even 1.5% difference in return, over a long period of time, amounts to a significant amount of money. 

For example, 1.5% per annum improvement in the long term return each year on $500,000 equals $7,500 each year.  Compound this up over even only 10 years and there is a $75,000 difference. 

 

7. We manage, our clients govern.

Working with our clients, our role at WISEplanning is as analysts, financial advisers (and coaches/mentors from time to time as well). 

Our clients have a different role.  Theirs is one of governance.  They determine the long term outcomes they want to achieve, along with the best approach that suits them to achieve it, including the strategy and the plan (which we help them to design).  WISEplanning’s role is to implement it, follow through and manage the whole process. 

WISEplanning is in control, however our clients are in charge.”

 

We Are In It Together – A Team. 

Our investment approach, our methodology is different to most others.  Our relationship with our clients goes beyond “client / advisor” carrying out transactions and managing investment portfolios.

Amusingly, those outside WISEplanning sometimes think that what we are doing is risky (because it is different, or they don’t fully understand it).  They don’t realise that how we invest is fundamental.  Our investments are safe, and they grow.  

Our clients, don’t just invest and transact.  They also become more informed, grow and improve. 

Invariably, the same comment from our many hundreds of clients emerges … “We really like Value Investing and can’t see us ever investing any other way.” 

They have learned that our investing method indeed is a safe, more certain way to invest. 

Investment goals and objectives can be achieved, without trepidation and angst. 

Our clients, as investors, continually increase their certainty around their investing success.

Best of all perhaps, is that investing at WISEplanning is understandable and simple.  That is why our clients invest with confidence (and sleep soundly at night) …  

 

“If the tail of the dog was another leg, how many legs would a dog have?”

(most answer 5)

 The answer is 4 legs because, it doesn’t matter what you call it, it’s still a tail.

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Peter Flannery

“Helping everyday Kiwis who expect more … to live their lives the way they want”

 

Peter was raised on the family farm in Kamahi, near Edendale in Southland. He is an investor, business owner and a first generation financial advisor, having entered financial services in 1983 in Southland.

 

Peter now lives in Christchurch with his family. His hobbies include family time, spending time with friends, exercise, reading a good novel and time on the deck at the bach.

 

Peter founded WISEplanning in 1987. His 500 clients live across New Zealand and a few overseas. The ongoing expansion of WISEplanning now includes offices in Invercargill, Christchurch (HQ) and Auckland.

 

Peter is known among his clients for challenging common practice and conventional methodology.

 

He argues “People tend to follow the crowd, which is interesting, because most people are both time poor and money poor, so why follow them?”

 

He is known to many around New Zealand as one of few to warn in 2004 of the coming global financial crisis (The GFC) that suddenly erupted in 2008. His views were considered controversial at the time. Peter credits Warren Buffett and his partner Charlie Munger for his most useful learning’s about investing.

 

Peter believes education continues throughout life. Some highlights from his recent continuing education include:

 

• The formal Financial Adviser training through Massey University in Palmerston North,

 

• The Entrepreneurial Coaching program through The Strategic Coach in Vancouver, Canada,

 

• The Business Owner/Manager Program through The Icehouse in New Zealand,

 

• The Peak Performance Program through Glazer Kennedy, Baltimore, USA

 

• The High Performance Program through The Elite Professionals Program in New Zealand

 

• The Experts Academy through Brendon Burchard, Sydney, Australia

 

• The Millionaire Mentor Program through Scott Harris, The Gold Coast, Australia.

 

As an investor, he is regularly researching markets and analysing potential investment opportunities and likes to point out to anyone who will listen that discipline around the investment method is key to success.

 

Peter has developed programs and tools that help everyday kiwis who expect more out of life to succeed sooner.

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Miriam Woon

Miriam has been with the WISEplanning team for a few years, bringing with her enthusiasm and extensive customer service skills to the role.

 

She emigrated to New Zealand from the Netherlands and spent her teenage years in the Bay of Plenty before moving to Auckland to begin her studies in Travel and Tourism. Employment in the Tourism industry eventually led Miriam to start her “8 year OE”. Whilst managing ski chalets in the French Alps, she met her future husband. They moved to Cardiff for a few years before moving to Canterbury in 2008, and now works remotely from Nelson.

 

Miriam is the Operations Manager for WISEplanning’s clients. Her passion has always been to work closely with individuals to help them improve their work and life skills.

 

Miriam enjoys spending time with her two sons, husband, family and friends. She has a passion for running, skiing, photography, exercise, reading and really enjoys dealing with people.

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Sean Yang

Sean is the Portfolio Coordinator for Clients at WISEplanning and brings his enthusiasm, professionalism and well developed customer service skills to the role. Sean was born in Beijing, China and obtained his Bachelor Degree in Economics (majored in Statistics) in China and Graduated Diploma in Accounting and Finance at University of Canterbury.

 

Sean has worked in the finance sector specialising in Investment Advisory for more than 10 years. He is experienced in dealing with clients’ queries and providing support to Financial Advisors.

 

He is an organised person with a strong customer focus. Sean enjoys spending time with his two daughters, wife, family and friends. He has a passion for sports such as soccer, badminton and swimming and really enjoys dealing with people.

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Theo Zbijowski

Theo Zbijowski is the Financial Paraplanner at WISEplanning who brings his friendly and enthusiastic attitude to the role.

Theo graduated from the University of Canterbury with a Bachelor of Commerce majoring in Accounting and Finance in 2016.

Now that he has completed his degree, he is looking to continue to develop his skills and knowledge of the industry by becoming a Financial Adviser.

He is a conscientious person who maintains a strong work ethic as well as a professional attitude. Theo enjoys spending his time playing sports such as squash, tennis and table tennis; while also enjoying the company of his friends and family.

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Kim MacKenzie

Kim has been with WISEplanning since mid 2016 and is our Client Services Specialist. She brings enthusiasm for customer service, professionalism, good time management and efficiencies to the role.

 

Kim and her husband have been based in Christchurch for over 20 years and originated from Central Otago where they both grew up. They have three teenagers so Kim know’s first hand how busy managing life, money, kids and family can be.

 

Kim enjoy’s spending time with family and friends, should do more exercise than she does and recently brought a bach where her family and friends are now creating time spent memories that she hopes will carry her kids through to adulthood.

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