KiwiSaver

Advisers can use new behavioural research to glean tips on how to drive new connections with clients and deepen existing ones, the Financial Markets Authority says.

It has released the results of the second phase of its KiwiSaver trial, run in conjunction with the Ministry of Business, Innovation and Employment and ANZ.

It focused on getting action from KiwiSaver members who were turning 56 and in the ANZ Lifetimes KiwiSaver fund.

The aim was to see if behavioural prompts would make them more likely to take financial advice, make an active choice and which fund they were in, or increase their contributions.

The trial had two phases, from June to October 2017 and January to July 2018.

The second phase found that a revised version of a letter sent in the first trial made members more likely to use online tools – but still no one contacted the advice service.

Follow-up phone calls were more successful, encouraging members to talk to an adviser.

Scott McMurray, FMA acting director of external communications and investor capability said there were clear messages for financial advisers from the research.

"A few simple things can make a reasonable difference."

While many AFAs saw KiwiSaver as a challenge, there was a big opportunity that would increase with time.

Making it easy for people to access information and advice would make them more likely to engage, he said.

If they could click on an emailed link they were more likely to follow through than if they were required to take part in a more complicated process.

But he said something as simple as picking up the phone at the right time in a client's life could help.

People seemed more open to advice conversations around significant milestone birthdays.

McMurray said a theme from the research was that people felt they lacked the time to talk to an adviser, they worried they would not be confident in the conversation, and were not sure of the value that would be offered.

But those who did get financial advice were much more confident about their financial prospects and had better outcomes.

McMurray said advisers needed to clearly demonstrate the value they could bring.

There would always be demand for advice, he said.

The Tax Working Group’s recommended tweaks to KiwiSaver are proof that any capital gains tax shouldn’t touch shares, retirement policy researchers say.

The group released its final report last week, recommending a broad capital gains tax across all investment assets, including shares and business IP.

It would mean fund managers would have to apply a capital gains tax to Australasian shares bought and sold by their funds.

The group tried to offset the impact of that by making KiwiSaver more appealing to low-income people – suggesting a refund of the employer contribution tax credit for low-income earners, a reduction in the two lowest KiwiSaver PIE rates and increasing the rate at which the $520 member tax credit is earnt.

But Susan St John, director of the Retirement Policy Research Centre, said the group  should not recommend tinkering with retirement savings policies to solve the problems a CGT might create.

She said it indicated that there were reasons to doubt the wisdom of any CGT regime that included shares.

St John said there were issues with all the suggestions, but the worst was the tax rate adjustments for the KiwiSaver PIE rates.

It would be a great pity to introduce these selective tax incentives with no analysis as to their impact or effect. One obvious problem is that to constrain the lower PIE rates to KiwiSaver alone would mean that people would potentially have two PIE rates. There would be inevitable pressure to extend the favourable treatment to all PIE schemes which would be very expensive and compound the inequity between PIE and non-PIE saving.

“None of these suggestions has been analysed for its distributional or gender effects. Retirement income policy should be left to the experts in retirement income policy,” said Claire Dale, research fellow at the centre.

There are concerns that a bill that would make it easier for foster children to access KiwiSaver may be stopped in its tracks.

The private member’s bill was introduced by National P Hamish Walker and would allow any foster parent to approach a KiwiSaver provider to open an account for a foster child in their care.

Financial Advice New Zealand had offered its members’ services, pro bono, to any foster kids who wanted advice with their KiwiSaver enrolment.

The bill passed its first reading and is before select committee.

But it has been reported that Oranga Tamariki opposed the plan.

Sam Stubbs, founder of Simplicity, said that was outrageous.

He said the plan should have been a no-brainer.

"You couldn't do a more innocuous thing for a kid."

He said, if it were stopped, it would be a "triumph of politics over children's welfare".

KiwiSaver would be a safe place for them to put their money, or for other people to put money for a child, he said. 

"The only losers [if it doesn't go ahead] are the kids. Denying them their financial welfare."

He said he had dealt with one mother who had been trying for five years to set KiwiSaver up for her foster kids. Normally, parents can do it in minutes.

Financial Advice NZ chief executive Katrina Shanks said she was keen to see the bill proceed.

"We talk about wellbeing and inequality – this is a way to amek it better for these kids."

A spokeswoman for Walker said he could not comment on "privileged information relating to his KiwiSaver (Foster Parents Opting in for Children in their Care) Amendment Bill, while it is working through Select Committee".

An authorised financial adviser who has been granted an exemption to offer personalised roboadvice says the process was an involved one.

Clive Fernandes is director and founder of National Capital, a financial advice firm that focuses on KiwiSaver.

It is the fourth business to be granted the exemption by the Financial Markets Authority, behind Kiwi Wealth, Nikko Asset Management and Cigna Life.

He said he had been working "behind the scenes" for the past seven months on the application process to be approved to offer financial advice, and building the KiwiSaver roboadvice service.

"Our digital advice service is aimed towards solving the issue of everyday Kiwis not having access to personalised advice for their KiwiSaver investments," he said.

"We currently have a working digital product which we are rolling out to an initial set of users. Users can start the advice process by going to our website and use the service there. We're working with a group of KiwiSaver providers and may add more as time progresses.

"Right now every piece of advice that goes out will be vetted by an AFA to ensure that the SoA is fit for purpose for the user based on the data provided and matches what a human adviser would recommend based on that data. Both data collection and delivery of the final recommendation happens online."

Schemes are ehortlisted using the FundSource performance tables and FundSource star ratings.

National Capital then uses Morningstar's quarterly KiwiSaver surveys to determine if the fees charged are reasonable. The highest rated fund is then recommended.

"We started off with the intention of using as many or even all of the KiwiSaver providers in our universe of funds taken into consideration," Fernandes said on his website.

"However, as we progressed on evolving the business model, we realised that it would not be feasible for us to monitor all 217 KIwiSaver funds. We then decided it would make more sense both from our and the clients perspective if we were to focus on a select group of providers that we were happy would be able to provide us with a good range of options from which to select appropriate funds for our clients from.

"We initially made contact with all the retail KiwiSaver scheme providers. We shortlisted those who had business policies that allowed and encouraged them to work with external financial advisers. We then had a series of meetings with representatives from all those schemes."

National Capital now works with Aon, ANZ, Milford Asset Management, Fisher Funds, Generate and Booster Investment Management.

On its website, it says it will not market itself as independent because it will be paid commission.

Fernandes said the process of applying for the exemption had been a long one.

"The application process was not an easy one, but it was well worth it. It has taken us six months to go through the exemption process, and part of the process was ensuring we had the right processes, policies and structure in place. I do not feel that the process could or should have been faster. We're talking about a service that could affect the lives of tens of thousands of Kiwis and I was impressed by the FMA's thoroughness and support through the process. 

"As a company, our focus is on good client outcomes, and having a robust compliance regime to ensure those outcomes. We've built our processes and structure not for what we are as a company now, but for what we aim to become. We're 100% focussed on KiwiSaver for now, since we believe it's an area we can effect the most good."