Digital financial adviser National Capital has hit $100 million in KiwiSaver funds under advice.
National Capital founder Clive Fernandes says with the KiwiSaver total approaching the $100 billion mark ($971 billion in Q1 according to the Reserve Bank), a huge proportion of New Zealanders are still not getting any advice on their KiwiSaver accounts.
He thinks while advising on KiwiSaver has not historically been a viable business model for independent and small firm advisers, the advance of digital tools means this may no longer be the case.
National Capital has built its business giving digital or robo advice through its inhouse-built platform. It has spent close to a $1million building and refining its system and now has a development team of four programmers and designers.
Fernandes, who was 20 years in the IT industry prior to starting National Capital, is also involved in the development side. He started the Auckland-based firm four and a half years ago when it became one of the first financial advice companies to get a digital advice exemption from the Financial Markets Authority. In 2021 it was acquired by Auckland-based financial planning company Saturn Advice.
Fernandes says National Capital now has close to 2000 clients, with an average account balance of $50,000. Over the past two years there has been growth in six figure balances and, in the demographic approaching retirement age, $1 million accounts.
“Approximately the revenue is about 0.2% per year. That just isn’t enough money for a human adviser to go out there and give advice one client at a time. A small adviser wouldn’t be able to use that model so we need to encourage advisers to use digital tools.”
Fernandes says with $100 billion in KiwiSaver funds the industry doesn’t need to compete for a slice of the pie.
“There is no way one company can advise on all of this. We should be working together to build a knowledge base and offerings to do a better job.”
He says National Capital wants to talk to independent or small firm advisers and is willing to share its digital knowledge to see if there are suitable tools available in the market, or if National Capital could partner with them.
“At the moment it’s nothing specific, more a conversation. Financial advisers should start collaborating to find solutions that smaller advisors can use.”
National Capital is paid by KiwiSaver providers that include advice in their management fees. This includes AMP, ANZ (ANZ and OneAnswer), Booster, Fisher Funds (Fisher Funds and Fisher Funds TWO), Generate, Mercer, Milford, Nikko and Pathfinder.
“It’s similar to the way mortgage and insurance brokers work but we don’t need to move someone to a provider to get paid.”
National Capital also gives advice to clients of providers that don’t include advice in their fees, such as Simplicity.
“They will still get a basic recommendation of what type of fund is suitable and which provider, but not ongoing advice on the recommended fund or updated recommendations.
“Our whole business model is based on the fact that we are giving a lot of automated advice.”
Fernandes says there are a range of issues including people not properly understanding what KiwiSaver is, confusion about the range of providers and funds, and among those closer to retirement age, worry that they don’t have enough in their accounts. “It starts as an educational journey and then we recommend the right fund.”
He says while many of the banks and providers now offer digital tools, most are risk profilers.
“They ask how comfortable you are with volatility which I don't think is how advice should be given. That is not what a real life financial adviser does. They give advice based on the person’s situation, income etc. This is what the National Capital system does.”