Some thoughts on the Bluechip affair by Peter Dredge, BSc

I’ve been working with a Bluechip Investor with several properties.

I am acting in my capacity as a Residential Property Investment Advisor.

Our joint aim is to weather the current storm whilst protecting my clients’ retirement plans.

The key short term issues we have identified:

1.

Cashflow: arranging new rental agreements now (Well covered by now by Paul Dale et al).
2.

Take control. Reputable rental agents will help here.
3.

Arrange contingency funding to manage the shortfall. See your funder urgently. You must have contingency funding in place.
4.

Reconcile rates, insurance and body corporate accounts immediately. The last thing you need as an investor is a black mark with a credit reporting agency.
5.

Keep your risk management up to date. Do not view this as a discretionary item. If you get sick the whole deck of cards could collapse. See your risk advisor.

The key point is to have access to cash reserves. Business failure is mostly due to lack of working capital. Medium to long term:

1.

Remember why you did this in the first place and that you are in for the long term. Review your portfolio in relation to your long term plans. Specifically: what is your desired income in retirement (future value)? $50,000 in today’s dollars will require an income of around $110,000 in 20 years to have the same spending power. You will need net investment portfolio of around $1.4m (assuming 4% inflation and 8% return in the income phase of your investments). Take a reality check and review how you would cope on $20,000 joint income tomorrow, if you have no home mortgage. A good planner should be able to help here. To date you have been seeing sales people not planners.
2.

Keep your head! Fire sales will help nobody. I see most groups with structural issues are seeking further information. Having been in the building industry I question any delay that can lead to further deterioration of the building. Take advice here as to how to resolve these issues and protect your investment at the same time. Be aware that the vultures are circling looking for bargains. Be wary of low quotes on your property.

The key people in your “circle of advice” right now:

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Lawyer (legal matters)
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Accountant (tax matters)
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Funder (bank or mortgage broker)
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Action Group (join now)
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Risk Advisor (protection of your estate)
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Planner (where to from here?)
*

Friend/mentor/shoulder to cry on.

There will be other advisors particular to your situation. Be wary of free advice. Look for written statements of advice in all areas. As of 29th February, all advisors in the financial services area will be required to have a disclosure document on hand outlining specifically: their areas of competence, their experience, associations and relevant interests. Planning: Some key points to watch for:

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Is the whole process transparent? Is the plan based on full, correct, pertinent information? In other words, was sufficient information gathered to competently make recommendations regarding your financial future?
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Is the plan relevant to your targets in retirement with a specific program to get you there?
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Does the plan outline the investment risk and account for your specific risk profile?
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Does the plan keep you fully informed? Is full due diligence in place to make sure your risk is reduced and that you have all the required independent information to make a good decision.
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Does the planning process involve your other advisors at the right time?
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Most importantly: does the plan involve an ongoing monitoring process to keep you on track. Conditions change continuously and will have an effect on your future directions. Do you have easy access to ongoing advice as required?

The above list is not comprehensive.

My observation is that a number of very important basics have been missed in the Bluechip program.

Don’t panic, seek help! As anyone who has been through a rough patch in business will tell you, it’s not the end of the world.

It just seems that way at the time.

I am more than happy to offer a free consultation to any individuals of the investor group to see whether we can help.

If I feel that we can be of any assistance I’ll offer that with no pressure or obligation.

Cheers and good luck
Regards Peter Dredge BSc
Professional Investment Services, (NorthshoreSuite)
1Level 16 / 48 Emily Place
Auckland 1010
Ph: 303 3305
Fax: 303 3306
peterdredge@nzpis.com