KiwiSaver

A Canterbury law firm specialising in wills and estates is petitioning parliament to enable executors of wills to access funds of up to $25,000 without needing High Court paperwork.

When a person dies with $15,000 or more in their KiwiSaver fund,  executors have to apply to the High Court for probate (of a valid will) or letters of administration (if there is no will or executor) before then can uplift the funds from any financial institution.

Kiwilaw partner Cheryl Simes says the current probate/letters of administration threshold of $15,000 is too low and executors are having to pay thousands of dollars to access funds, especially from KiwiSaver accounts. She is asking for the threshold, which was set in 2009, to be adjusted for inflation to $25,000.

Simes says the threshold applies to any account held with a financial institution, but KiwiSaver tends to catch people out.

“Generally if people have any wealth they may have it in a family trust or joint account. KiwiSaver accounts are always held in a person’s individual name, and often the balance is not very much but more than $15,000.”

Simes says most lawyers charge more than $2,000 and applicants must also pay a High Court fee of $200. Unless the deceased made separate financial provision for their funeral expenses, that $15,000 includes the funeral costs, as well as any debts.

“Getting High Court approval can cost up to $6000 or more in legal fees, especially if there is no will and there are legal complications. When there is no valid will, legal complications can include your loved one’s permanent home being overseas, or next of kin not speaking English, or the surviving spouse or de facto partner needing a compulsory ‘notice of choice of option’ to choose between the law of inheritance and the law of relationship property.”

Simes says she often deals with cases involving young men who statistically are more likely to die through accident (car or work) or suicide. In one case the balance of the KiwiSaver account was $15,013.

She says she is asking for an inflation adjustment to the threshold rather than for the level to be raised as that would mean a policy change.

The Administration [Prescribed Amount] Regulations 2009 which prescribes the actual figure for the purposes of several sections of the Administration Act says financial institutions can’t release anything above the prescribed amount without probate or letter of administration.

“The law of inheritance is being reviewed and big changes are coming but in the meantime this small change could and should be made. It involves a short, simple, regulation.”

“When someone dies, their Kiwisaver should go to their loved ones, not to lawyers.”

Fisher Funds has announced it will remove performance fees across all its KiwiSaver and managed funds’ multi asset portfolios on July 1.

Fisher clients were told performance fees will go in their monthly performance update. CEO Bruce McLachlan says Fisher wants to leverage the scale it has achieved through its acquisition of Kiwi Wealth last year.

The $310 million buyout maneuvered Fisher into the number three spot of the country’s largest KiwiSaver fund providers behind ANZ and ASB. Fisher gained Kiwi Wealth’s 270,000 members, and says client numbers now stand at more than half a million and funds under management are at $22 billion.

Currently Fisher’s KiwiSaver Growth Fund has a performance-based fee based on a hurdle rate of return of OCR+5% per annum. The hurdle rate is the minimum return the fund must achieve before the client is charged a performance fee. This means clients might pay a performance fee even when the fund’s performance is below the market index.

Dropping fees is good news for clients who last month faced the unsettling news that Fisher Funds KiwiSaver was among the many local schemes which lost millions of dollars through Signature Bank Investments. This was confirmed by Fisher to be around $50 million from its select international portfolio and NZX-listed investment company Marlin Global. A Fisher Fund spokesperson said at the time that this would equate to a loss of $320 on a $50,000 balance in the KiwiSaver Growth fund.

KiwiSaver returns for the last three months are 3.1% for conservative, 5.7% for growth, and 4.7% for the balanced strategy.

KiwiSaver providers should tell clients about exposures to Silicon Valley Bank and Signature Bank and put them in context to restore confidence.

Investment advisor Chris Douglas of My Fiduciary says KiwiSaver fund managers have an obligation to provide full and frank disclosure to investors and even prospective investors.

His comments come in the wake of multiple KiwiSaver schemes losing money through investment in the failed US mid-tier banks Silicon Valley Bank and Signature Bank.

“Too often people feel that funds are opaque. That’s changed a lot over the last few years with greater transparency from regulation and quarterly reporting, but with KiwiSaver in particular, there are incentives to join; it’s government sponsored, there’s the tax credit, and so there’s a higher level of obligation from fund managers to really make sure they engage with the public and with the media, on what they're doing and why.”

Last week Newsroom reported that the Fisher Funds KiwiSaver scheme had lost $80 million through Signature Bank investments. Signature Bank was in its select international portfolio and its NZX-listed investment company Marlin Global had advised a 3.3 per cent weighting to market. Fisher said across the portfolios with exposure to Signature Bank, holdings ranged from 0.2 to 0.6 per cent. In its blog Fisher advised clients it had written the value of its Signature Bank holdings down to zero.

This week the NZ Herald revealed that ANZ saw a loss in value of $31m from exposure to SVB across KiwiSaver and non-KiwiSaver with total funds under management of $30.5 billion. ASB Bank had exposure to both US banks as of February; SVB was worth less than $2 million and Signature Bank was less than $1m across total funds under management of more than $20b. The impact on client funds was estimated at less than 0.01 per cent. Westpac’s KiwiSaver manager BTNZ had small exposure to SVB with around $100,000 in shares and $2 million in bonds. It sold the bonds for around half their original value and estimated the impact at around 0.004 per cent for growth and 0.015 per cent for conservative funds. Milford said it had a small exposure which had minimal impact on funds, and would advise clients through the usual updates. It wouldn’t put a dollar value on its investments.

Although there is no legal obligation of KiwiSaver providers to tell members if they lost money on a single investment unless it was material in the context of the investment portfolio, Douglas says right now is the time to give investors confidence that they are in a well diversified portfolio, that the US regional banks are a very small part of the wider economy, and that the regulator has stepped in to give a tremendous amount of confidence to deposit holders in all banks.

“I understand why they don't necessarily need to always be putting out notes to investors. They have to balance between scaring people and worrying about what's going on within the markets and assuring them they should be focused on the long term.

How they think about engaging with clients is really important because the reality  is they have to strike a balance. With KiwiSaver people can easily switch out and move to another KiwiSaver provider.”

In 2007, Milford Asset Management entered its retail phase, originally built on a network of direct clients.

It has steadily established a following among third-party advice businesses and recently have switched to multi-channel distribution.

Despite having a multi-channel distribution strategy prior to joining, Milford head of intermediary distribution Michael Robson says his role four years ago was focused on the intermediary channel- business direct to financial advisers, but switching to a multi-channel model has seen a significantly positive effect on Milford’s third-party distribution market – specifically Kiwisaver.

He says dealing directly with independent financial advisers had contributed to Milford’s then $200 million Kiwisaver scheme but opening the multi-channel distribution saw the scheme grow to $1.73 million which he attributes to continued engagement with advisers, resolving transparent advice fee and client rebate issues a few years earlier, and technology.

Robson says having the option of digital platforms has been beneficial and embraced by clients and advisers.“ It fits in with our multi-channel distribution that clients may want to access Milford through a range of different ways. We’re supportive of clients being able to access us in the way that suits them.”

Robsons says while Milford are not relying directly on the use of technological advice alone, they do have a direct offering but if clients have relationships with advisers who feel they need that ongoing advice, they can support that.

“Now that we’ve set up that distribution channel, they also have access to Milford funds, they can also choose to have an adviser support them on their investments, like their Kiwisaver journey.”