Lots of $2 billion milestones

Three companies have celebrated $2 billion milestones recently.

Tauranga-based First Mortgage Trust recently cracked the $2 billion funds under management.

FMT’s strongest growth has come from existing investors and borrowers sharing their positive experiences. “Most of our new investors come to us through word of mouth, from a friend, a family member, or someone they trust,” chief executive Paul Bendall says.

FMT's has more than 7,000 investors and it offers a retail fund, PIE fund, and a wholesale fund.

More on FMT here.

With little fanfare, except on social media, Kernel also surpassed the $2 billion in funds under management. This is quite remarkable growth as it celebrated the $1 billion mark in June last year. It took five years to get the first billion and just over a. year to get the second.

Milford also rolled out the $2 billion cake saying last week its KiwiSaver Plan now exceeding $2 billion in funds under management (FUM) through its independent financial adviser channel.

"This growth has been driven by strong adviser support, long-term investment performance, and a commitment to delivering high-quality service to the intermediary market," he company says.

This milestone sits within the broader context of Milford’s KiwiSaver Plan, which has now grown to $11.8 billion in total FUM, with the firm expecting to surpass $12 billion in the coming weeks.

“This achievement is a clear endorsement of the relationships we’ve built with independent financial advisers. It reflects not only our long-term performance, but the value created through strong partnerships and a clear focus on client outcomes,” Head of Wholesale Distribution Michael Robson says.

Milford’s Adviser Portal has been instrumental in supporting advisers to deliver efficient, transparent, and scalable KiwiSaver advice to clients. The portal enables approved financial advisers to:

● Seamlessly onboard and service clients
● Monitor investment performance
● Apply ongoing advice and admin fees
● Access comprehensive features to support ongoing engagement.

“We’re proud of the role our team and technology play in helping advisers deliver strong financial outcomes to New Zealanders,” Robson said.

Investors make dramatic shift to riskier KiwiSaver funds: FMA

The Financial Markets Authority says there has been a."dramatic" shift of KiwiSaver funds to riskier assets and one fund manager says that's a good thing.

In an Occasional Paper Series the regulator has observed a dramatic increase in the overall risk categorisation of KiwiSaver funds in recent years.

"The proportion of KiwiSaver invested in risk category 5 funds (high volatility) has quadrupled from around 10% in 2021 to more than 40% in 2024, with the proportion in risk category 3 funds (low to medium volatility) decreasing from 30% to 10% over the same period."

While it does not say whether that is a good or a bad thing it does try to understand the reasons for this shift.

Fisher Funds general manager KiwiSaver David Boyle says, "we think the increase in the amount of KiwiSaver funds invested in higher risk funds is a good thing for investors seeking to grow their retirement savings over the long term."

He says KiwiSaver has turned 18 this year and it – and investors – are maturing. He says there are six things worth noting:

  1. Greater saver sophistication: consumers know more about the role of growth assets for a long-term savings scheme like KiwiSaver
  2. Better education: Fund managers are responding to consumer interest and providing education on the risks and benefits of different fund types.
  3. We’ve weathered storms: consumers have seen the impact of market events like the GFC, Covid and more recently the impact of tariffs. They have seen markets bounce around the generally rally and recover.
  4. The democratisation of investing: the advent of platforms that allow investors to build their own portfolios allows providers to launch single sector specialist offerings that are often at the riskier end of the spectrum.
  5. New asset classes: like our own private equity strategy increases risks, but offer the potential for better long-term outcomes when prudently introduced into diversified portfolios
  6. Low risk choice abounds: Members still have the choice from many lower risk funds and savings options which may hold appeal for those decumulating funds as they enjoy their retirement years.

KiwiSaver is the future of financial advice: Bascand

More than a million people will be seeking advice on their KiwiSaver, Harbour Asset Management co-chief executive Andrew Bascand says.

More than a million people will be seeking advice on their KiwiSaver, Harbour Asset Management co-chief executive Andrew Bascand says.

Speaking at the recent launch of the Evidential KiwiSaver scheme, Bascand laid out his forecast for the growth of KiwiSaver.

“The all-consuming wave is well underway.”

“You can’t avoid that KiwiSaver is the future of financial advice in New Zealand.”

“Under the current KiwiSaver settings I think that KiwiSaver goes to just under $400 billion in 10 years’ time.”

(This speech was made before the Budget announcements).

Bascand’s model assumes members over 65 take money out of KiwiSaver, he has used an average contribution rate of 4.3% and salary and wage inflation at 3% annually. His market return is 4.25% after tax.

“I think in all respects my $400 billion here of KiwiSaver is slightly conservative.”

Under this model KiwiSaver goes from being $2 in every $10 of household wealth to $4 in every $10.

Bascand looks to Australia and how superannuation has grown.

One of the trends he expects New Zealand to follow is that an increasing amount of superannuation (KiwiSaver) will move to managed portfolios on platforms.

He reckons 50% of super in Australia sits on platforms and New Zealand is around 25%. New Zealand will grow, maybe not to the same level as Australia, but in his view it will increase.

More and more KiwiSaver members will start seeking advice making it a profitable sector to operate in.

Surveys show 25% of members have sought advice so far, however Bascand questions the data and whether it is true independent financial advice or just information from a provider to a member.

The key takeout is “people are thinking about (advice).”

Based on his $400 billion growth predictions and 25% of members seeking advice that means there will be $60 billion of funds which could come under advice

He notes Australia has been struggling with providing advice as its superannuation has grown. New Zealand will be no different.

“I actually don’t think there are enough advisers in New Zealand to do this today.”

KiwiSaver contribution rates to increase; Cuts to Govt contribution

The Government is increasing contribution rates to KiwiSaver, but at the same time reducing, and in some cases, removing the member tax credit.

Key Points:

  • Eligibility Extended to 16- and 17-year-olds:
  • KiwiSaver Government contributions and employer matching will now be extended to 16- and 17-year-olds. ​
  • Default Contribution Rate Increases from 3% to 4% by April 2028. ​
  • Government contribution will be removed for KiwiSaver members with taxable income over $180,000 per annum. ​
  • The rate of the Government contribution will be halved from $521 to $260.72. ​

The Government has announced in the Budget that the default contribution rate of employee and matching employer KiwiSaver contributions will rise from 3 to 4% of salary and wages, phased in over three years.

However, members will have the choice of remaining on the 3% rate if they choose.

In a move to save the Government money it has announced that the annual Government contribution rate will halve from $521 a year to $260.72.

However, for those earning more than $180,000 a year the contribution will go altogether.

Finance Minister Nicola Willis says the change has been made to ensure the scheme’s costs to the taxpayer remain sustainable.

The KiwiSaver changes are expected to save the Government up to $3 billion over the next four years.

On the positive side the Government has extended the Government contribution, and employer matching, to 16 and 17-year-olds in the workforce. 

Willis says; “Putting these changes together, the KiwiSaver balances of employees contributing at the new 4% default rate will grow faster than they do at the current 3% default rate, providing a larger balance at age 65 and a larger deposit when people use KiwiSaver to buy their first home.

The new 4% default rate will be introduced in two steps. From April 1, 2026 it will go to 3.5% and, from April 1, 2028 it will go to 4%.

Phasing in the increases will help workers and employers plan ahead, she says.

“The Government recognises there will be times when some people do not feel able to contribute a higher proportion of their wages and salaries to KiwiSaver. Therefore, employees will be able to opt to contribute at a lower 3% rate and have that that lower rate matched by their employer. Their contributions will be reset to the default rate after 12 months, but they can opt down again if they wish.

Changes to the government contribution will take effect from July 1 this year. "The changes will not affect the government contribution for the current year, which will be paid out in July and August this year."