Financial advisers are stepping in while the Government 'does nothing' to ensure KiwiSaver works for New Zealanders, one market commentator says.
The recent Morningstar KiwiSaver report showed some of the schemes that deal most commonly with financial advisers were lagging behind industry average returns.
In the year to December, default KiwiSaver funds returned an average 1.5%, conservative 1.3%, and moderate funds 0.4%. Balanced funds were down an average 1.3%, growth down 2.1% on average and aggressive down 4.1% on average.
OneAnswer funds struggled to meet that return – the conservative fund was up only 0.5% in the year, conservative balanced down 0.7%, balanced down 1.9% growth fund down 4.4%.
AMP’s LS aggressive fund was down 4.2% for the year. NZ Funds’ growth fund was down 8.3% and Booster’s geared growth fund was down 5.9%.
Chris Douglas, principal at MyFiduciary, said even if adviser-distributed funds were not topping the tables, their clients should end up better off.
“Look at the where the money is invested for the adviser-distributed options and there tends to be a great allocation in balanced- and growth-oriented KiwiSaver schemes, where a large portion of those who are not using an adviser are in the default options earning a very meagre return. As a result, the average investor who has used an adviser would have done materially better than the average investor who hasn't,” he said.
The risk profile of their KiwiSaver was one of the most important decisions an investor could make, he said.
“Advisers have tended to place their clients in the higher risk options which have performed materially better than those in conservative options, as they should over the long-term.
“I think that many advisers are playing an important role in KiwiSaver. As a result of the poorly structured default process, many investors are far too conservatively invested – especially those with 15-20 years till retirement. They are really missing out and should be invested into a balanced or growth scheme, which is where they will get the best potential returns from. So, you could also say that advisers appear to be doing a very important job by ensuring that clients are appropriately, given the government is doing nothing. “