With August being Sorted Money Month, Lily Richards from Pathfinder chats to us about ethical investing, and changing our relationship with money
Before starting this story, I obviously knew that my KiwiSaver is an investment fund. Still, I’ve always viewed it as a retirement savings account with a government contribution.
Now I’m looking at it more closely, what with August being Sorted Money Month – a campaign coordinated by Te Ara Ahunga Ora Retirement Commission.
Lily Richards – Chief Marketing and Client Officer at investment firm and KiwiSaver provider Pathfinder – isn’t directly involved with the Money Month campaign. But she is a big advocate for empowering people – particularly women – with their retirement savings. “Our financial literacy in New Zealand is really low,” she says.
I tell her that research shows that financially induced stress affects women more than men. “That makes sense. Women get paid less, and live longer than men, so we have reason to worry about being poor in retirement.” We certainly do. As the Retirement Commission recently revealed, the ‘gender retirement savings gap’ remains at 25%. Yep, really.
I know several women who don’t want to scrutinise their savings or lack thereof – some even leave handling all the finances to their partner – because they’re feeling disempowered about money. And that’s a vicious circle.
Lily gets it. “There’s long been the idea that money is ‘logical’, ‘rational’ and the territory of men.” However, she thinks there’s an emerging trend of woman becoming more financially empowered. “Like The Curve, or Frances Cook’s podcast Making Cents.”
Relationship therapy
Lily recently took part in a course called Hi Money! Run by therapist Rach Davies and gender-equity strategist Angela Meyer, the online course is built on feminist financial principles and a therapeutic approach, with 12 online modules and four Zooms.
“Hi Money! was extraordinary,” Lily says. “Everyone already has a relationship with money, and it can be positive, negative or neutral. The course teaches you that uncovering your subconscious relationship with money is fundamental to be able to unlock a better relationship – one we’re in charge of, rather than one that’s in charge of us.”
“In the course, when you have a conversation with money as though it’s an entity or a character, you start to realise the nature of your relationship with money. One woman in my cohort had a light-bulb moment where she said ‘I’ve spent thousands of dollars on therapy about men and I should have been getting therapy about money’. I think every woman in my cohort had a lightbulb moment.”
If you can’t do a course, Lily recommends doing an ‘audit’ of sorts. “Ask yourself some questions like, did your parents ever talk about money? Did they ask you questions about money? Did they give you pocket money? Did you earn it or did they just give it to you? Was money a topic of tension?”
“You formed a relationship with money before you had the ability to decide whether or not that relationship was useful or rational. So you could do that sort of audit, then start again.”
When she was educating herself about the financial sector, Lily kept coming across a “subterranean idea that you can’t be both moral and well-off. That if you have a lot of money, you probably aren’t a good person. And if you’re a really good person, you probably don’t have much money.”
Really?
“Yes. I see it in people’s suspicion that you can’t do good things and also make money. The suspicion that you can’t invest ethically and also generate strong returns.”
But is that the case?
Ethical investment
How can you ethically invest through your KiwiSaver?
“As an investment fund,” Lily says, “your KiwiSaver is investing in lots of listed companies – and these companies may or may not be conducting business in a way that aligns with your values. You may be showing up in the world in a way that, if you look into it, you may be deeply uncomfortable with.”
“So someone running an ethically managed KiwiSaver [fund] needs to really actively manage it, so that you’re investing in companies that align with your principles.”
For instance, if you don’t buy cosmetics that use animal testing, why would you invest in a company that does this?
“At Pathfinder, a set of principles guides what we do and don’t invest in. We have an incredibly rigorous set of exclusions. Most KiwiSaver funds nowadays won’t invest in pornography, tobacco or alcohol. We go much further than that. We categorise a variety of different instances of fossil fuel, from extraction through to generation.” They also aim to avoid investing in animal testing for both medical and non-medical purposes.
“We’ll look into how a company manages their environmental responsibilities. How do they manage waste products and mitigate them? Are they anti-union? How do they treat their workers? What about human rights? Is there slavery in their pipeline?” Important stuff.
But people short on money will naturally be wondering whether ethical investment costs a lot. “You do pay extra fees for a managed KiwiSaver fund that ethically invests, because you have a team of people analysing both financial and ethical factors.” But Lily says the goal of this is to “generate as strong a return” as you’d get from a regular provider. Effectively, you’ll be likely to recoup those fees. “If you’re looking at ethical investment, always look at returns after fees.”
Lily recommends the online resource Mindful Money (mindfulmoney.nz), a charitable organisation set up by former Green MP Barry Coates, to bring transparency to New Zealanders across managed funds including KiwiSaver. You may just want to compare and contrast providers and fund types.
Mindful Money also uses publicly available data and analytics to tell you about the companies that your fund is investing in – focusing on sensitive areas. “It shows if you have any exposure to investments that may be of ethical concern to you: including human-rights violations, weapons, environmental harm, fossil fuels, and animal cruelty. It tells you the percent of money invested by your KiwiSaver in those activities.”
Can’t afford it?
With the current cost of living, what if you’re only scraping by financially and can’t afford making KiwiSaver contributions? Lily understands that. But any dollar you can spare, she says, will be worth more later because of compounding returns, so it’s worth contributing even a few dollars a week.
“For many people, KiwiSaver will be the biggest investment they’ll ever have, so it’s about making sure you’re making the most of it.”
It may be as simple as changing the fund type. Why are you in ‘balanced’? Should you be in ‘growth’ because you’re relatively young? “If you have the wrong fund type, or the wrong provider, you could miss out on money, or profit from things you don’t support.”
“If the very thought of putting aside a certain amount makes you want to vomit, these ideas and tools we’re talking about won’t sound like good ideas. They’ll sound like something that other people do.”
Lily has an interesting take on why we may avoid contemplating our KiwiSaver. “I think because it relates to retirement which relates to mortality. Many people don’t want to think or talk about it.”
Something else not fun to think about? Under the Property Relationships Act any contributions made to your KiwiSaver, during your relationship is, by definition, “relationship property” and in most circumstances must be split equally.
Financial advisers?
Lily points out that not many people see independent financial advisers. “I totally thought that [getting] financial advice was the territory of people with a huge amount of discretionary income. But, actually, financial advice is going to an expert the way you’d go to a doctor or a nutritionist. With food, if you don’t understand how the body works, you might not be getting the outcome you need.” The same goes for finances, she says.
“I was intimidated by the thought of looking at a long-term view of my finances. I was scared to face up to it. But going to a financial advisor changed how I ran my life.”
Financial advisers don’t judge you, she says. “They’ll ask questions that uncover what matters to you, your values, what you are and aren’t comfortable investing in, and what your financial goals are. It’s a bit like going to therapy.” Women may prefer seeing a female adviser.
“My financial adviser stretched out everything that I was doing financially over the course of my likely life. They showed me what the shortfall would be and suggested adjustments to cover the deficit. I felt in charge because I could see the trajectory I was on, and change its course.”
What does financial resilience mean to Lily? She says it’s about how you feel. “And it’s about feeling empowered about money. When you really look at your relationship with money, that’s when you can start using the tools to grow your wealth.”