KiwiSaver

A financial adviser is re-launching a KiwiSaver scheme in partnership with Forsyth Barr.

Martin Hawes is chairman of the investment committee for Summer KiwiSaver.

He said he wanted to grow the investment culture in New Zealand.

He said New Zealanders could miss out on tens of thousands of dollars in retirement unless they became more actively involved in driving their investment choices.

“New Zealanders are notoriously disengaged with their KiwiSaver. One quarter of KiwiSaver members don’t even know what kind of fund they’re invested in*. That’s dangerous. If you’re still 10 or 20 years from retirement you risk missing out on thousands in retirement,” he said.

Hawes, an AFA, d will lead communications with the scheme’s members. Forsyth Barr’s funds management team will handle day-to- day investment management.

Hawes said his move into KiwiSaver was a natural extension of his mission to reach as many New Zealanders as possible with the message that the small decisions you make today can have a massive impact on your lifestyle in retirement. The scheme was named Summer in reference to Hawes’ 2006 retirement planning bestseller 20 Good Summers – and to acknowledge that retirement can be the best years of your life if your finances are well organised.

He said a danger to many New Zealanders achieving the retirement they aspire to is to is being disengaged from their KiwiSaver account.

“For many New Zealanders KiwiSaver will be their most significant financial asset outside the family home. That’s why it’s critical to get involved with your KiwiSaver investment now and take charge of it to create the future you want,” he said.

Summer KiwiSaver members will have the opportunity to learn about investing from Hawes’ regular communication with them. They’ll also have the chance to put that into action by deciding the weighting of their investment allocated to different investment classes.

“With Summer, you can get involved as much or as little as you choose. We offer the Investment Selection option for members who would rather let us make the decisions for them and keep them informed along the way. Those who like to be more involved can allocate their investment across different funds that invest in cash and domestic and global fixed interest and shares, depending on how they read the market at any given time.”

A working group has already begun to look at ways that KiwiSaver fees could be reported with more transparency.

There has been criticism raised over many providers’ habit of displaying fees as a percentage or basis point calculation, rather than a dollar amount.

CFFC group manager of investor capability David Boyle said there was clear consumer demand for fees to be presented in an easier-to-understand way.

He said New Zealand could be among the first in the world to move to a dollar-figure representation.

There was strong Government interest in making it happen, he said. He is part of a working group that is looking at how the transition could be made. “It looks like it will happen here.”

New low-fee provider Simplicity said there was a need for change.

“Alarming reports of widespread misleading fee disclosure practices is an opportunity for the entire KiwiSaver industry to come clean and commit to full transparency and disclosure,” said Simplicity managing direct Sam Stubbs.

“New Zealand can become a world leader in disclosure and transparency of fees if we learn from this experience.”

New low-fee KiwiSaver provider Simplicity has started accepting enrolments.

“The platform has been thoroughly tested, and has passed with flying colours. It’s now fully functioning, industrial strength and ready to make Kiwis richer in retirement,” said managing director Sam Stubbs.

He said customer demand had been strong.

“We’ve already reached our 12 month targets. Thousands have registered interest, and we are now making Simplicity fully available to them’,” he said.

Simplicity has been appointed by power company Genesis Energy as a preferred supplier, and is being recommended by two financial provider networks.

Simplicity is also a finalist in the NZ Innovation Awards.

“We are delighted to have been recognised for our 100% online, lowest cost, nonprofit model, which could make the average KiwiSaver $65,000 richer in retirement. See our website for the calculations and assumptions,” Stubbs said.

Flows of KiwiSaver money into New Zealand equities are putting pressure on the market and could make it hard for managers to cash out if they want to, it has been claimed.

Sam Faulkner, of Russell Investments, has written a report looking at the rapid growth of KiwiSaver assets and their effect on the New Zealand equity market.

KiwiSaver assets have grown from $1.2 billion in 2008 to $35.6b this year and it is expected to continue to grow rapidly.

Faulkner said the value of New Zealand listed equities within KiwiSaver had mirrored the growth of total KiwiSaver assets but the market capitalization of the NZX50 had not.

He said Russell estimated there was that there was about $10b of institutional actively managed capacity in the New Zealand market, and AUM was at $9b.

“We estimate that the average New Zealand equity manager believes it can successfully manage around 1.7% of the total market. Some already manage well in excess of this proportion,” he said.

“There could be some pinch point in terms of capacity over the next two, three or four years.”

If New Zealand were to follow Australia’s lead, the trend would only increase and the issues would get bigger, he said.

That capitalization squeeze could be countered with more listings on the NZX, providers dialing back their allocation to New Zealand equities, or more passive investment.  “Our experience has been that these things aren’t happening,” Faulkner said.

Russell managing director Alister van der Maas said the home bias was prevalent around the world. but in other countries there was not so much of a capacity and liquidity issue because of the size of the market.,

“The challenge is when there’s a market event of some form that causes asset allocation changes en masse, if they no longer want growth assets and want income, what can you do about that if you are at capacity and there is no liquidity in the market?”

He said that was one of the risks fund managers would have to consider but it was not accurately reflected in the new risk indicators, which provide a rating based on historic performance.

Faulkner said a small-cap manager would have to invest contributions into less-frequently-traded stocks and with a low level of liquidity this could move the price of the stock.