KiwiSaver

Big KiwiSaver managers continue to ramp up use of digital tools to steer jittery investors and beleaguered KiwiSaver members onto the right investment path.

New Zealand’s second largest KiwiSaver provider ASB is launching a new KiwiSaver advice tool on its mobile app and online banking platforms and Kiwi Wealth has incorporated the Atomic.io messaging system into its online portal.

ASB Head of KiwiSaver Distribution, Hamish Davidson, sees ASB has seen a lot more correspondence in the past 12 months around market volatility.

“With Covid, KiwiSaver customers right across New Zealand tended to overreact and change their funds which may or may not have been the right thing to do. So we’ve tried to engage with a lot more people over the phone. This time not as many have moved to more conservative funds as they did when Covid broke out.”

Davidson says partnering with BlackRock has provided more access to information which the bank has shared with customers.

“We know for a fact there are still a lot of people in New Zealand who don't necessarily understand KiwiSaver or don't use it as effectively as they possibly could.”

ASB research in the third quarter shows Kiwi are not confident in their retirement plans with 64% believing they need to be saving more for retirement and around a quarter (27%) having a clear idea how much money they’ll need. Of the almost 1000 New Zealanders surveyed, only 23% say they have a good overall understanding of KiwiSaver.

The digital tool will allow customers to do a bit of a sanity check themselves and self-service with personalised information on the right KiwiSaver fund and contribution level. They will also be able to make changes but if they still need to talk to someone they will call and talk to a specialist.”

Meanwhile Kiwi Wealth says it is already seeing customer behaviour change through use of its new messaging platform.

Chief executive, Rhiannon McKinnon, says during periods of market volatility, making short-term decisions can cost investors significant returns over the long run.

“Our commitment to reach customers on their terms and with the right support helps them make good decisions to grow and protect their long-term wealth.”

Kiwi Wealth has sent 1.4 million targeted, personalised messages with information. McKinnon says of the viewed messages, 25% have led to direct action, such as using digital advice tools to review their fund choices and risk appetite.

A recent test showed a 22% increase in customers using digital advice to help them select the right fund.

Kiwi Wealth joins ANZ, BNZ, Kiwibank and Southern Cross Health as users of the Atomic messaging platform. Digital advice tools are also available from BetterSaver, kōura Wealth, Nikko Asset Management and Milford Asset Management.

Sharesis has been granted a managed investment scheme licence and plans to roll out a KiwiSaver scheme next year.

Sharesies will be launching a KiwiSaver scheme in the first half of 2023 with Kiwis able join the waitlist for early access.

The KiwiSaver scheme is described as a natural step in Sharesies evolution since it launched in 2017 and its co-founder and 3EO, Leighton Roberts says it was always their intention to broaden offerings to include a range of money opportunities so everyone can grow their long-term wealth whether they have $5 or $5 million.

“KiwiSaver is an amazing initiative and we’d like to see people become more engaged with theirs. It’s where most Kiwis are regularly investing, yet when we asked people about their Kiwisaver account many didn’t feel connected to this investment.”

Since launching, Sharesies has helped to build a more confident and experienced community of investors by removing the barrier that prices and jargon people out of other financial markets and it aims to do the same for KiwiSaver members.

“Sharesies believes in encouraging and supporting people to take more control of their financial destinies. We’re starting with the basics like we did with share trading by offering a choice of funds and in time we’ll be adding more fund options,”

We’ve partnered with a number of experienced fund managers to provide a range of active and passive managed funds, covering conservative, balanced and growth style, plus an ethical focus.” says Roberts.

Mint Asset Management head of sales and marketing, David Boyle says the scheme is an iteration of where KiwiSaver is evolving and it comes down to distribution channels and the range of platforms and ways to access it.

“I see it as part of the way we get more Kiwis saving. I think it’s a good start and the thing about getting more people connected to their KiwiSaver is not a bad thing if they haven’t been before, but as balances grow they are going to need more face to face with an adviser in the future I think.
He says the scheme shouldn’t be a surprise given Sharesies large customer base-especially with younger people.

“I don’t see it as a negative or something that will materially impact the advice sector, I just see it as another area of access to a product and we want to see more Kiwis use it. But we need it to get started and all credit to any organisation that has the ability to give face to face advice or an option that sits and fits with people's current needs. It's an evolving industry and digital is just part of it.

It's not a silver bullet when it comes to advice but I think it’s a great way to compliment it. “

Sharesies wil provide practical information and educational content to help grow confident investors and it aims to be as transparent as possible which includes letting members look under the bonnet of their KiwiSaver account to see how it ticks.

For the first time, responsible investment KiwiSaver provider Pathfinder is included in the three year return numbers for Morningstar’s KiwiSaver Report – topping the numbers for Conservative, Balanced and Growth funds.

Pathfinder, a boutique fund manager with a focus on sustainable and impact investment, entered the rankings in 2019 when it was founded by John Berry and Paul Brownsey. In Morningstar’s data for the September quarter, Pathfinder’s three year returns came in at Conservative 2.8% v -1.9% average, Balanced 5.2% v 1.4% average, and Growth 7.9% v 2.3% average.

CEO Berry puts its performance down to a number of factors; a change in adviser attitudes towards RI, a greater number of ethical investment products on offer, and growing client awareness. A generational shift in investor behaviour also plays a part, says Berry, as wealth transitions down driving more demand. He notes however there are many older people who think about what they’re leaving for the next generation when choosing investments.

“We’re finding that advisers want to incorporate RI within their business these days and front footing rather than waiting for clients to ask them about it. The world is changing fast and climate change is prevalent. Everyone from superfunds to small boutiques are thinking about how their investments have an impact. And of course it’s also a reflection of performance.”

Chief investment officer Brownsey says apart from the feel good factor, RI fund managers still bear the burden of proof. “The vast majority of people still want to see evidence that it’s working and they’re starting to realise there’s no cost to being an ethical investor. You could argue there has been a benefit over the past three years. In the end it comes down to three things: am I avoiding things I don't want, investing in things I want, and getting good returns?”

What makes Pathfinder’s success more notable is that it is an impact fund manager, actively seeking investments with the intention of generating a measurable beneficial social or environmental impact alongside financial returns.

“There are different shades and approaches to implementing responsible investment,” says Berry. “At a very light level you might exclude controversial industries which is the most common way to do it, for example excluding fossil fields. The positive approach would be to not only exclude fossil fuels, but over weight towards renewable energy. Then you can go a step further with impact investing where you find private companies which are harder to access, which are doing good things. An example for us is a New Zealand company, Wool Aid that has made a biodegradable band aid from merino wool. That’s a lot less plastic going into landfill.”

Challenging underlying market conditions experienced over the September quarter were evident in returns listed in the Morningstar KiwiSaver Survey Q3.

Average multisector category returns ranged from –1.3% for the Conversative category to –1.8% for the Growth Category. KiwiSaver assets ended the quarter at NZ$83.5 billion. Top performers over the quarter against their peer group includes: Milford Conservative 0.5% (Multisector Conservative), InvestNow Mind Divresif Inc

1.3% (Multisector Moderate), InvestNow Milford Balanced 1.2% (Multisector Balanced), QuayStreet Growth 1.6% (Multisector Growth), and Milford Aggressive 0.4% (Multisector Aggressive).

Taking the longer view, in the past ten years the Aggressive category average has given investors an annualised return of 8.5%, followed by Growth (8.0%), Balanced (6.4%), Moderate (4.3%), and Conservative (3.9%).

Morningstar Director of Manager Selection and report author Tim Murphy said globally, as financial conditions tighten and policy-induced recession becomes more likely, the trade-off between growth and inflation has become increasingly clear.

ANZ led the market share with more than NZ$17.07 billion, with ASB in second with a market share of 16%. Westpac was third ahead of Fisher Funds, with Kiwi Wealth fifth. The six largest KiwiSaver providers accounted for approximately 69% of assets on the database.

The MSCI World Index was up 3.12% in the September quarter, helped by the depreciation of the NZD.