Fund managers have a tough job claming that their returns justify higher fees, researchers say.
Members of AUT’s Auckland Centre for Financial Research took issue with comments from ANZ in relation to its recent white paper and survey.
It said that young people in particular were putting too much of a focus on fees, sometimes to the detriment of returns.
“Choosing a fund solely on fees means members may miss out on greater returns and a larger balance in the long term,” ANZ said.
But Ayesha Scott, a finance lecturer at AUT, said that was potentially misleading.
She said the long-term performance of most managed funds within the same risk category tended to be “roughly the same”. “They all perform in a very similar way.”
That made fees more important, she said. “Think of it as fixed cost versus variable return.. in almost all cases you’re better off long-term choosing a lower fee structure.”
She said fees would vary according to the providers’ fee structures. An online provider would have lower costs than a large-scale one with offices across the country.
“Whether you’re getting much in terms of return for fees is debatable. Some offer more in the way of service.”
It comes as new research released at the Financial Services Council’s conference shows support for increasing KiwiSaver contributions.
Almost 70% of those surveyed supported increasing employer and employee contributions from 3% to 4% by 2021.
“After ten years of KiwiSaver we are maturing in our understanding and appreciation of the scheme. Given the universal support this research shows we now need to have a constructive policy debate on contribution levels and how we can increase them in a sustainable manner,” said Richard Klipin, chief executive of the Financial Services Council.
“With support for strengthening KiwiSaver so high there is a clear challenge for our political leaders two weeks out from the election to show their roadmap for backing what voters want and growing KiwiSaver.
“It is important that these findings are given serious consideration at policy level.”
He said there was widespread support for KiwiSaver members being able to choose automatic increases in contribution rates, and to have extra choices in what they contributed. Most also wanted people over 65 to be able to join.