Financial advisers are not significantly influencing the rate at which new KiwiSaver members are enrolling in the scheme, a new Treasury report says.
The report by Treasury analysts was released this month.
It says four out of five new enrolees join the scheme via banks and the impact of financial advisers on KiwiSaver is limited.
“The data suggests that the role of independent financial advisers is minimal in new enrolments in KiwiSaver and therefore that competitive pressure from financial advisers using their comparative advantage at selecting the most optimal fund on the basis of risk, return and cost also appears to be minimal,” the report says.
It said KiwiSaver appeared to be competitive but there was a growing level of concentration in the market, driven by the dominance of banks and a number of mergers and takeovers.
Whether that would lead to cost reductions and efficiency gains would depend on the financial capability of members, the report said.
“Certain trends such as a growing significance of large banks could detract from this and should be monitored to ensure that contestability in the market exists.”
Between 2007 and 2014 the major banks increased their share of the KiwiSaver market from 59% to 65%.
New Zealand’s banks have a larger chunk of our super savings market than their parent companies across the Ditch.
The five largest and ten largest Australian superannuation funds by assets in 2013 accounted for 16% and 27% of total industry assets, respectively.
In comparison, the top six providers by AUM in the KiwiSaver account for 91% of the market.
The report said New Zealand’s banks had the benefit of a strong branch network that was not available to other financial services providers.
They were able to leverage their other relationships with consumers to boost their KiwiSaver reach.
“Numerous media reports in addition to the Commerce Commission have noted the direct sales strategy of the major banks, for example packaging KiwiSaver products with other financial products such as mortgages, insurance and personal banking so that the consumer has all their personal finance products with one institution. “
The report said KiwiSaver fees were high by international standards and returns were mixed compared to the investment performance of Crown financial institutions.