KiwiSaver

Fisher Funds is now the biggest New Zealand-owned and managed KiwiSaver provider, after the acquisition of TOWER investments.

The $79 million deal settled today, leaving Fisher Funds with 269,000 customers and $5.5 billion under management.

Managing director Carmel Fisher said: “We are proud of Fisher Funds’ journey to date, one that has seen us attract a large and loyal client base as a result of excellent investment returns and our commitment to servicing our clients. We look forward to extending this high quality customer service to all TOWER Investments clients.”

She said TOWER clients would not notice many differences over the short term.

“Over the next 12 months, we will select the superior elements from both the TOWER and Fisher Funds offerings to provide a range of best in class Fisher Funds branded products and services for current and future clients to choose from. As we go through the process we will keep our clients fully informed, explaining the impact and benefit of any changes.”

TOWER Investments is the fourth KiwiSaver provider acquired by Fisher Funds in the last three years taking its market share to about 10%.

The acquisition of TOWER Investments was fully funded by bank debt, Fisher Funds’ existing shareholders and the addition of TSB Bank as a 26%shareholder. No client funds were used to fund the purchase.

Only 9% of New Zealanders think the country’s superannuation is enough to live on in retirement, survey results released by the Financial Services Council show.

About 65% said it was not enough to live on. Ten per cent said they were not sure and 15% were neutral.

NZ Superannuation provides an individual $349 a week.

FSC chief executive Peter Neilson said despite that, New Zealanders were not doing enough to save for their retirement and standard KiwiSaver contributions were insufficient.

“Whilst 2 million New Zealanders have enrolled in KiwiSaver most are currently contributing at 2 per cent for the employee and 2 per cent for the employer respectively. At a 2 per cent contribution from employee/employer individuals will fall below the savings threshold that will provide them with a comfortable retirement.”

He said people needed to save 10% of their income from the time they started working to achieve a comfortable retirement.

The option to withdraw KiwiSaver fund to buy a first home should be retained but other changes made if default funds are changed to “life stages” settings, Mercer says.

Mercer, one of the default providers, has about $800 million under management in KiwiSaver and Mercer’s New Zealand boss Martin Lewington said the first-home option has been used by only about 1% of its members so far.

But he said home ownership was important for New Zealanders and KiwiSaver members should still be able to use it for that purpose.

“We know New Zealanders want to buy their own home; it’s part of the New Zealand psyche even if it is getting expensive.”

Lewington said Mercer also supported switching the default funds to “life stages” or “whole of life” settings, meaning investors’ asset allocation was automatically adjusted as they aged.

“What we’ve observed in the USA and the UK is whole of life offerings have a higher probability of delivering much a better outcome than a set and forget conservative option.”

The problem, he said, was that many prospective first-home buyers were in their 20s and 30s, meaning their default setting under a “life stages” approach would be very aggressive.

But if they were going to pull their money out in a few years they would need to focus on capital preservation.

Mercer’s suggested solution is to include a question for members asking whether they think they will buy a house within the next 10 years.

“You’d be put within a relatively conservative fund for 10 years then your risk profile and amount of exposure to growth assets would be increased and then gradually decline again along the whole of life path as you get closer to retirement.”

TSB bought into a stake in a KiwiSaver fund manager without having any authorised financial advisers on staff.

TSB became Fisher Funds’ second-largest shareholder, with a 26% stake, when it backed its acquisition of TOWER’s investment business last month.

But its first priority now is upskilling its staff as it does not have anyone qualified to advise on investments.

Morrison Co, previously Fisher Funds’ second-ranked shareholder after the Fishers themselves, was shunted down the ranks and did not inject any capital into the deal.

Kevin Murphy, chief executive of TSB, said the bank has no authorised financial advisers. Training staff to be able to offer KiwiSaver products was a priority.

TSB had offered KiwiSaver products through SuperLife. Murphy would not say how many customers it had placed with the investment provider.

Murphy said despite the existing relationship with SuperLife, TSB had been looking for a way to have more presence in the KiwiSaver market. “It worked well but we were looking for greater impetus.”

He said Fisher Funds’ products, distribution and presence in the market were a good fit for TSB.

Whether the relationship with SuperLife would continue in any capacity, he would not say. “It’s early days, we’re still working through that.”

TSB would not offer Fisher Funds KiwiSaver products in its branches until staff were sufficiently qualified, he said.