KiwiSaver investors will soon see the fees they pay displayed in dollar terms – but advisers are not convinced it will have any effect.
From April 1, fees will have to be made clearer.
If a customer has a balance of $10,000 in their KiwiSaver account, until now they might have seen the fund manager’s fee expressed as 1.28%. That will now be spelled out as $128 per year. According to the KiwiSaver Fund Finder tool on the Sorted website, total fees on $10,000 in a balanced fund range from $52 to $174 per year.
Adviser Stephen O’Connor said that would make fees stand out more to investors.
But he said few people were interested specifically in what their KiwiSaver manager was charging them. They were more interested in the overall return.
“Provided the return is reasonable, given the market, they’re not too worried about the fee.”
Another adviser, Simon Hassan, agreed it was usually the outcome that mattered.
He made fees clear to clients and explained what they could expect to get in return.
David Beattie, chief investment officer of Booster, said the change would be challenging, from a perception perspective.
Booster’s fee includes a component to cover the cost of personalised advice for each client.
“Consumers struggle to ascribe a value to that.”
He said the recent long run of strong market returns made it harder for pricier active managers to outperform. But when markets turned, they could be expected to show the benefits of their approach.
Having fees expressed as a dollar figure would lead people to think they were more significant than they were, he said.
Some investors had a mistaken belief that everything in the investment world could be commoditised.
Beattie said fund comparison tools already in the market put an emphasis on fees because other factors were harder to put a value on.
“Transparency is a good thing but it needs to be contextual.”