KiwiSaver

Sharesies is a recent arrival on the KiwiSaver scene but says it’s finding favour with customers who access all their investments in one place.

Sharesies is a recent arrival on the KiwiSaver scene but says it’s finding favour with customers who access all their investments in one place.

Thirteen months after launch of its KiwiSaver offering, the wealth app this week celebrated the 10,000 member milestone for its scheme, which offers access to base funds managed by Milford, Pathfinder, Pie Funds and Smart, alongside individual company and ETF picks. The Sharesies investment platform has around 750,000 customers.

Sharesies’ GM of Super and Funds Matt Macpherson says customers’ desire for consolidation has been a major driver of the scheme’s growth, as it was with the banks in the early days of KiwiSaver.

“People wanted their KiwiSaver in the same place they’re logging on to do their other banking and it made a lot of sense for them, because they didn’t have to worry about another sign in, they didn’t have to worry about tracking it somewhere else,” he says.

“We’re actually seeing that working to support customers switching to us, they want to see all their investments in one spot.” 

However, it’s not just existing KiwiSaver investors the company is targeting, with around 10 percent of business coming in the form of customers new to KiwiSaver, says Macpherson. 

“We’re engaging people to get involved, maybe they’re in their mid-forties or fifties even, and they’re signing up because we’ve made it more convenient and an easy process.”

The ability to maximise US exposure appears to be another drawcard for investors, with most gravitating towards the US 500 in their individual picks. So much so, Sharesies is turning it into a base fund option for KiwiSaver investors.

Macpherson admits it’s been a more challenging road to market than the company expected, but says he hopes to see it continue to grow at a sustainable pace.

“We’ve got things like kids accounts we don’t currently support, our ambition is to try to complete the product, it’s probably about three quarters of the way there.”

KiwiSaver members will likely be keeping a closer eye on their balances as their pot grows but for most a straightforward management approach remains the best fit, says Milford Asset Management’s Head of KiwiSaver and Retail.

Reflecting on the evolution of KiwiSaver and recent innovation in the sector, Murray Harris tells Good Returns that it is only natural for savers to become more interested in their invested savings and how they’re managed as their balance grows larger.

“We've seen some very specialist emerging market funds, and I think for a small percentage of the KiwiSaver membership, they'll be interested in that and obviously cryptocurrency and Bitcoin has been an area people have got an interest in too.

“And we're seeing innovation in the product side, which is good to see as well.

“But for your average KiwiSaver member a good, well-diversified fund with a bit of equity to bonds and equities for the main is enough.”

Those more interested in long-term investing and taking on more risk would likely continue to seek advice and look at whether a growth fund primarily in equities is a good solution, says Harris.

“But for your average KiwiSaver member a good, well-diversified fund with a bit of equity to bonds and equities for the main is enough.”

“I think, as in all markets, you see innovation, some of it gets traction, some of it doesn't.

“But I think the core of the KiwiSaver market really is your traditional, diversified fund-type investor,” he says.

Receiving the right advice at the right time remains crucial for KiwiSaver members, says Harris.

“The experience in Australia was when super balances got to about the value of a new car, that's a lot of money, and people don't want to muck it up – it’s going to be their retirement.

“They want to make sure that they've set the right goal, they are aware of the risk profile, and they're in an appropriate fund and contributed enough.”

Staying ahead of the pack

Heading into 2025, Milford will work to maintain its position as one of the top performers in the market, says Harris. Growing competition in the KiwiSaver landscape and the maturing of investors has been beneficial for independent brands like Milford, allowing them to step out from the shadow cast by the major banks. 

“In the very early days, there was a large land grab by the banks, because they had great brands, and people recognised them and saw them as being a safe place to have their money.

“But I think as balances have grown and people's maturity has grown around KiwiSaver, they're starting to look outside the banks and the mainstream players and saying, hey, you know, who do I really want my money managed by? Are they experts in managing money? Are they providing great service? Do they have great tools and access to advice?

“And so I think that's why you're seeing, you know, when you look at the flow stats, money flowing to some of the smaller independently-owned providers.”

KiwiSaver providers are questioning whether they are adequately equipped to deal with hardship applications, with some wanting to see a centralised service established for savers who need to access their funds.

In a roundtable discussion for Good Returns’ sister publication ASSET Magazine, providers spoke of the influx of applications they had received as economic conditions deteriorated and recent weather events left people struggling.

“The cost of living crisis has exacerbated the demand and the tension that’s building with those that need their money,” says Fisher Funds’ General Manager David Boyle.

“We’re seeing behaviour, and I understand it, where clients are becoming desperate, almost threatening.”

David Boyle suggests an industry-funded service, administered by Work and Income, might be a more consistent approach than providers taking applications directly.

“They should be a source of truth about whether the client is going to meet hardship requirements before it even goes to our supervisors.

“If everything is in a one-stop shop we can track it, they are in a safe environment, they’re dealing with and being supported by people who are trained to manage high stress circumstances.

“We’re training our staff to deal with these high stress situations but it’s very hard,” says Boyle.

The idea of a centralised service has the support of Kernel Wealth’s chief operating officer Stephen Upton.

“I’m uncomfortable and I’ve always been uncomfortable with a fund manager making determinations whether someone is in hardship or not and having any influence over that process.

“I'd be much more in favour of either the supervisors taking the frontline responsibility on this, because there's only three, or I like the idea of it coming under WINZ, in a model based off Australia’s Centrelink.”

Stephen Upton says clients then get an independent decision made by an independent body rather than KiwiSaver providers carrying the burden.

Pie Funds’ chief executive Ana-Marie Lockyer says it is crucial KiwiSaver members experiencing hardship are offered wraparound support, especially in cases where they sit outside the strict criteria for withdrawal.

“I think WINZ has more to offer them, because there are other support mechanisms that may be available, and they may be disadvantaged because they haven't gone down that track.”

Fisher Funds’ David Boyle says it would ensure everyone gets the same treatment.

“I guess it's a way of delivering a consistent service across the board, on a national basis, rather than those knocking on the door coming into your one office, if you're a small provider.”

New Zealand’s largest provider, ANZ Investments, has also seen hardship requests rise, says managing director Fiona Mackenzie.

“These are incredibly difficult calls to listen to, so for example early last year when we saw weather events there were customers calling in who were underinsured, their house was damaged, their car was a complete write-off, they couldn’t get to work, they were in a difficult space.”

Mackenzie says ANZ Investments has invested heavily in training and customer support and is in the unique position of being able to work closely with the banking side of the business to offer a range of solutions for clients.

“I think there are merits in thinking about a centralised solution, but because customers when they're in that moment are so vulnerable, I would have to be incredibly confident that the customer experience they would get from a centralised model would be up to the standards that we're offering our customers right now.”

Opening a discussion with supervisors is the next step in generating further support for the idea, says Fisher Funds’ David Boyle.

The KiwiSaver pot grew by $7 billion to $117.6 billion in the third quarter of this year with QuayStreet, Milford and Generate highlighted as some of the strong performers over the long term.

According to research firm Morningstar’s latest KiwiSaver survey, the third quarter saw a mixed performance across the various asset classes, with some benefiting from easing inflationary pressures and softer monetary policy. Others experienced headwinds from global economic uncertainties and domestic factors.

All multi-sector funds had a positive performance in Q3, with funds’ returns ranging from 2% to 5%.

“The Kernel balanced fund has performed quite strongly, Westpac had a bounceback quarter, they’ve been a bit sluggish over three to five years and that’s come through this quarter as well,” said Morningstar Asia Pacific Data Director Greg Bunkall.

“ANZ had a bounceback quarter as well, they performed in the top five this quarter, but the numbers between the best and worst aren’t that different this quarter.”

Some provider names were prominent over the 10-year time period, he said.

“Milford, Generate and QuayStreet tend to show up quite strongly in those numbers but there seems to be a bit of clustering at the moment.”

As for market share, ANZ still leads the pack with $21.8 billion funds, ASB moves back up to second this quarter, with Fisher Funds in third, then Westpac and Milford.

Of the default funds, Fisher Funds and Westpac topped the table with the best returns of the quarter. Most of the default funds achieved 16%+ returns for the year, compared to the average conservative fund which was around 11%.

“We continue to see the balanced over one-year performing strongly compared to conservative, which is positive because we did have that change a few years ago around default options, so people sitting in default options are having a better outcome,” Bunkall said.

“BNZ default over one-year is at 18.1%, Booster default is 18.2%, Simplicity 18.1% – they’re performing strongly especially in relation to where clients would’ve been if they’d been in conservative.”