FMA confirms RFAs can sell KiwiSaver

The Financial Markets Authority (FMA) has released its final guidance on the sale and distribution of KiwiSaver, confirming the circumstances in which registered financial advisers (RFAs) can continue to sell the scheme.

Sue Brown, the FMA head of primary regulatory operations, acknowledged there had been concern within the financial services industry about the extent to which KiwiSaver services could be provided by advisers who were not authorised or part of a Qualifying Financial Entity (QFE).

“FMA’s position is that there are limited circumstances in which a person selling a particular KiwiSaver scheme to a client will not be considered to have provided an advice service,” she said.

“There is broader scope to provide class advice, given the incentives available to join KiwiSaver and the investment options available within KiwiSaver schemes.”

The FMA guidance note outlines what it deems class advice, personalised advice and no-advice, and who can offer each.

The guidance described class advice as generic to a group the investor belongs to, though not tailored to their specific circumstances, and says it may be provided by RFAs.

The move to allow RFAs to give limited KiwiSaver advice had been backed by both the Institute of Financial Advisers (IFA) and the Professional Advisers Association (PAA), both of which made submissions to the FMA on the draft guidance note.

“Perhaps the best outcome is that the document makes it clear that RFAs can sell KiwiSaver in tightly controlled circumstances, by setting the framework for RFAs in particular to continue to sell KiwiSaver with confidence,” said the IFA.

Brown said she expected KiwiSaver providers “to consider the implications of this guidance note and make appropriate changes as soon as possible.”

“We expect these to be in place by March 1, 2013.”

Changes to KiwiSaver reports

The government is proposing changes to KiwiSaver fund reporting to help members better understand their funds

The public will get a chance to have a say on proposed new rules for reporting of KiwiSaver funds.

Commerce Minister Craig Foss said the rule change, signalled in this year’s budget, would help investor confidence.

KiwiSaver schemes would be required to report information on returns, fees and costs, assets and portfolio holdings, liquidity and liabilities, and key personnel.

That will be done through five disclosure statements per provider, per year, including a disclosure statement relating to the tax year and four shorter statements relating to to the 12 months preceding the end of each quarter of the tax year.

Foss said: “At the moment, it is difficult for KiwiSaver members to make direct comparisons between funds. This is the next step in continuing to improve investor confidence in the financial sector. It is imperative that KiwiSaver providers offer transparent information for investors.”

He said consistent reporting would allow investors to make better comparison.

Submissions close November 5.

Savings confidence drops despite KiwiSaver growth

The continued rise of KiwiSaver has failed to prevent an unexpected drop in retirement savings confidence, but commentators say it is too early to tell whether the result is a temporary blip.

ANZ’s latest Retirement Savings Confidence Barometer found 56% of New Zealanders who are saving toward their retirement are not confident they will reach their savings goal, representing a 5% fall in confidence since April.

KiwiSaver is set to reach the 2 million member milestone in the next few months and it appears to be having a positive impact among younger people, with 53% of 15–29 year oldsconfident compared to 35% of 45-64 year olds.”

Of the 61% of those surveyed who are saving, 85%of younger people and 77% of those earning under the average wage say that KiwiSaver is their primary means of saving towards their retirement.

“The deepening debt crisis in Europe and prolonged patchy growth in the New Zealand economy have probably contributed to the drop in confidence,” says John Body, managing director ANZ wealth and private banking.

“While the survey found that almost two-thirds of New Zealanders are saving in some form, this drop of confidence is still surprising.”

ANZ general manager funds management David Boyle said many New Zealanders hadn’t given any thought as to the income they would like to have in retirement and how much they would have to save to achieve this.

“I think the 5% drop may be aligned not only with the current environment but also as people start realising what they want and what they can achieve there’s a bit of a disconnect.”

Boyle also said it was important for people to be realistic about what they could achieve in terms of retirement savings.

“Nearly 40% have chosen over $500 a week [retirement income on top of NZ Super] which as a lump sum is going to be quite significant and in most cases very difficult to achieve.”

Kiwibank KiwiSaver to operate under GMI brand

Kiwibank has confirmed its KiwiSaver scheme will be replaced by one managed by Gareth Morgan Investments (GMI), but it hasn’t decided whether the scheme will be rated by Morningstar.

GMI, which Kiwibank bought earlier this year for an undisclosed amount, is one of the few major KiwiSaver schemes that do not take part in the research house’s KiwiSaver Performance Survey, which measures returns after fees and before tax.

Kiwibank head of wealth product Joe Bishop said it was “too early” to say whether the scheme would put itself under Morningstar’s microscope: “that’s a discussion we’ll probably have at some point in the process.”

GMI manages a total of about $1.3 billion and had $715 million funds under management in its KiwiSaver scheme at the end of March according to its annual report.

Kiwibank general manager of wealth and insurance, Stuart Bremner said the intention is for members of the existing Kiwibank scheme to transfer, but that the processes for this are still being worked through.  Members will be kept fully informed throughout.

“Drawing on the GMI expertise will provide Kiwibank customers with benefits such as improved transparency, customer service, in-house investment and detailed reporting while retaining access via Kiwibank Internet Banking and a simple, competitive fee structure.”