KiwiSaver

The number of KiwiSaver providers in the New Zealand market may be unsustainable, the head of one of them says.

Mercer NZ managing director Martin Lewington said he could imagine a future where KiwiSaver was offered by a few big providers with multi-sector portfolios.

A few boutique businesses would then operate alongside, differentiating themselves with very specialised offers, such as real assets or investments in New Zealand small-cap companies.

“That could be quite a good business model,” he said.

There are 28 KiwiSaver providers in the New Zealand market. The big banks have the lion’s share of the business – almost 60%, excluding the financial adviser-distributed ANZ OneAnswer scheme.

Lewington said it was likely there were too many providers to be sustained over the long-term.

“When there’s too much choice people get confused and don’t make any decision. But I believe in the market and ultimately the market will decide if it’s too many. My personal view is that’s quite a lot of choice.”

He said there was a lot of talk about potential consolidation activity but were no real signs of it happening yet. “But you would expect it.”

Mercer is doing some consolidation of its own, however.

It has added three portfolios to its main KiwiSaver scheme – moderate, growth and shares, aligning it with its employer-based offering, Super Trust KiwiSaver.

The employer-based scheme is now closed to new members and will be combined with the main scheme.

Lewington said the two schemes had been set up to offer the same product, one as a default operation and one for people who signed up via their employer.

But he said legislative changes meant they no longer needed to be kept separate. The moves were just an in-house tidy up, he said. “The end game is that members benefit from reduced costs and reduced complexity. There were eight single-sector type KiwiSaver offerings and the market wasn’t there so we are consolidating.”

In February, the employer scheme cut its 14 portfolios down to seven.

Smaller providers will have to differentiate themselves to stand out in a KiwiSaver market dominated by banks, an investment analyst says.

Mark Weaver, of actuarial firm Meville Jessup Weaver Investments, said banks controlled 58.5% of the KiwiSaver market, not including ANZ’s OneAnswer scheme.

There are 28 KiwiSaver providers, six of which are banks.

He said ANZ, ASB and Westpac had experienced growth of more than 40% in funds under management in their KiwiSaver schemes over the past 18 months. ANZ had 53% growth, ASB 44.4% and Westpac 41.9%.

BNZ experienced 304% growth because the scheme only launched in 2013.

Growth was helped by strong market performance which lifted balanced funds 15% to 16% on average.

The top three banks in terms of scheme member numbers were the same as the top three for funds under management. ANZ is in front, followed by ASB and Westpac.  ANZ had higher member growth than Westpac and ASB over the 18-month period, at 18.4% compared to 11.8% and 14.6% respectively.

Only Kiwi Wealth members recorded a drop in the average balance size, which MJW said could be due to the scheme attracting new members.

OneAnswer had the highest average member balance, which Weaver said was likely explained by the membership profile of the scheme, mainly financial adviser clients who would make higher regular contributions and one-off amounts.

He said ANZ and OneAnswer had a much higher allocation to growth investment options than the other banks. “Perhaps ANZ have been more active in moving members of their default fund into a more appropriate investment strategy.”

With banks having such strong distribution models for their KiwiSaver offerings, Weaver said other fund manager providers would have to show what they did differently or better than the banks.  “Distribution is everything and banks have got that.”

FMA is assessing a complaint about Milford Asset Management’s marketing activities.

Fisher Funds boss Carmel Fisher says she is disgusted at Milford’s tactic of “ambush marketing” – using the Fisher brand name in a Google AdWords marketing campaign.

Milford is believed to have paid to have had the Fisher Funds brand name as one of its Google AdWords keywords, used to attract customers to its website.

When someone typed Fisher KiwiSaver into Google, they would get an ad for Milford.

Fisher said she had been told it had been happening for some time and was not happy about the brand being misused.

The FMA confirmed it had received a complaint.

Spokesman Andrew Park said: “The FMA has received a complaint about certain marketing activity by Milford, which is being assessed. There is no connection between this complaint and the current ongoing investigation into Milford.”

Milford managing director Anthony Quirk told Good Returns that the “ambush marketing” was not meant to have happened.

He said Milford had contacted other KiwiSaver fund managers to explain.

“It has never been our intention to use such tactics in our marketing. The instances reported occurred without our knowledge. In fact, we were shocked to learn of them because we had taken normal precautions to protect the brand of other companies from this sort of incident involving Google search. When we learned what had happened we instructed our web marketing agency to stop Google keyword searches while we investigated and resolved the issue. We have also contacted the other companies involved to tell them what we knew of the incident and assure them that it was not the result of any deliberate action on our part.”

Quirk said the company was taking action to prevent similar breaches occurring in future.

Women need to be encouraged to think about their retirement savings plans, and regularly check they are on track, ANZ’s general manager of wealth products says.

Ana-Marie Lockyer said there were big challenges for women planning their retirements.

“Women are coming from behind in saving for their retirement,” Lockyer said. “On average, women live longer and retire earlier, meaning their retirement savings need to stretch further.”

She said that nearly eight years into KiwiSaver, average balances for women members of the ANZ KiwiSaver Scheme were almost 28% lower than men at $8918 and $11,396, respectively.

She said the gap was getting bigger – a year ago it was a 26.5% difference.

“There is little to suggest that women will close this gap – in fact, it could widen over time as 85% of New Zealand women typically take career breaks to raise a family. We estimate that women on average are likely to retire with $144,000, compared to $203,000 for men – that’s significantly less money, particularly when you consider it potentially needs to last longer.”

Lockyer said some action would need to be taken if women were to have equal opportunity to save for their retirement.

Providers, employers and advisers should encourage women to have a plan and regularly check whether they were on track, she said.

Women could start making bigger contributions early in their career to make up for any periods out of the workforce, she suggested.

But she said from a national perspective, it was also important to think about how women were supported during maternity leave from an employer or government perspective.

Lockyer said it was not something that any country had worked out an adequate solution for yet.

Possible solutions could include shared contributions, so if one half of a couple was off work, their KiwiSaver contributions could be spread across both parties.

“We have to start thinking at a national level,” she said.