KiwiSaver

Smaller providers will have to differentiate themselves to stand out in a KiwiSaver market dominated by banks, an investment analyst says.

Mark Weaver, of actuarial firm Meville Jessup Weaver Investments, said banks controlled 58.5% of the KiwiSaver market, not including ANZ’s OneAnswer scheme.

There are 28 KiwiSaver providers, six of which are banks.

He said ANZ, ASB and Westpac had experienced growth of more than 40% in funds under management in their KiwiSaver schemes over the past 18 months. ANZ had 53% growth, ASB 44.4% and Westpac 41.9%.

BNZ experienced 304% growth because the scheme only launched in 2013.

Growth was helped by strong market performance which lifted balanced funds 15% to 16% on average.

The top three banks in terms of scheme member numbers were the same as the top three for funds under management. ANZ is in front, followed by ASB and Westpac.  ANZ had higher member growth than Westpac and ASB over the 18-month period, at 18.4% compared to 11.8% and 14.6% respectively.

Only Kiwi Wealth members recorded a drop in the average balance size, which MJW said could be due to the scheme attracting new members.

OneAnswer had the highest average member balance, which Weaver said was likely explained by the membership profile of the scheme, mainly financial adviser clients who would make higher regular contributions and one-off amounts.

He said ANZ and OneAnswer had a much higher allocation to growth investment options than the other banks. “Perhaps ANZ have been more active in moving members of their default fund into a more appropriate investment strategy.”

With banks having such strong distribution models for their KiwiSaver offerings, Weaver said other fund manager providers would have to show what they did differently or better than the banks.  “Distribution is everything and banks have got that.”

FMA is assessing a complaint about Milford Asset Management’s marketing activities.

Fisher Funds boss Carmel Fisher says she is disgusted at Milford’s tactic of “ambush marketing” – using the Fisher brand name in a Google AdWords marketing campaign.

Milford is believed to have paid to have had the Fisher Funds brand name as one of its Google AdWords keywords, used to attract customers to its website.

When someone typed Fisher KiwiSaver into Google, they would get an ad for Milford.

Fisher said she had been told it had been happening for some time and was not happy about the brand being misused.

The FMA confirmed it had received a complaint.

Spokesman Andrew Park said: “The FMA has received a complaint about certain marketing activity by Milford, which is being assessed. There is no connection between this complaint and the current ongoing investigation into Milford.”

Milford managing director Anthony Quirk told Good Returns that the “ambush marketing” was not meant to have happened.

He said Milford had contacted other KiwiSaver fund managers to explain.

“It has never been our intention to use such tactics in our marketing. The instances reported occurred without our knowledge. In fact, we were shocked to learn of them because we had taken normal precautions to protect the brand of other companies from this sort of incident involving Google search. When we learned what had happened we instructed our web marketing agency to stop Google keyword searches while we investigated and resolved the issue. We have also contacted the other companies involved to tell them what we knew of the incident and assure them that it was not the result of any deliberate action on our part.”

Quirk said the company was taking action to prevent similar breaches occurring in future.

Women need to be encouraged to think about their retirement savings plans, and regularly check they are on track, ANZ’s general manager of wealth products says.

Ana-Marie Lockyer said there were big challenges for women planning their retirements.

“Women are coming from behind in saving for their retirement,” Lockyer said. “On average, women live longer and retire earlier, meaning their retirement savings need to stretch further.”

She said that nearly eight years into KiwiSaver, average balances for women members of the ANZ KiwiSaver Scheme were almost 28% lower than men at $8918 and $11,396, respectively.

She said the gap was getting bigger – a year ago it was a 26.5% difference.

“There is little to suggest that women will close this gap – in fact, it could widen over time as 85% of New Zealand women typically take career breaks to raise a family. We estimate that women on average are likely to retire with $144,000, compared to $203,000 for men – that’s significantly less money, particularly when you consider it potentially needs to last longer.”

Lockyer said some action would need to be taken if women were to have equal opportunity to save for their retirement.

Providers, employers and advisers should encourage women to have a plan and regularly check whether they were on track, she said.

Women could start making bigger contributions early in their career to make up for any periods out of the workforce, she suggested.

But she said from a national perspective, it was also important to think about how women were supported during maternity leave from an employer or government perspective.

Lockyer said it was not something that any country had worked out an adequate solution for yet.

Possible solutions could include shared contributions, so if one half of a couple was off work, their KiwiSaver contributions could be spread across both parties.

“We have to start thinking at a national level,” she said.

Questions are being asked about whether KiwiSaver members are switching providers without understanding the consequences.

In the last two months of 2014, more than 30,000 KiwiSaver members changed provider. On an annual basis, that increased from 126,000 in 2013 to 149,407 in 2014.

Commission for Financial Capability group manager investor education David Boyle said he expected those numbers to grow over the next five years as the market matured. “My concern is around people switching and not understanding the reasons why.”

Some might be chasing return, he said. But that did not take into account the fact that past returns did not indicate future returns – or that the risk profile of the high-performing fund might not be right for them.

Boyle said people who were in a conservative fund by default and saw strong returns from a growth fund needed to understand that they would be moving to a riskier option if they shifted.

“It may not be appropriate for their circumstances. We need KiwiSaver members to be aware of what the fund they are in before looking to another provider. The fund itself determines return a lot more than the provider. If you look at conservative funds today, it doesn’t matter who the provider is, growth funds would have outperformed.”

There was also a risk that people were changing because of factors such as being able to see their balance online alongside their banking, he said.

“It has to be a well-informed transfer. There should be more emphasis on providers ensuring the information is getting to customers before they switch so they’re switching for reasons other than convenience.”

It would become more important as balances grew bigger, he said, and advisers could play a role. “Lots of New Zealanders don’t see the value in an adviser so we need to drive that awareness. With a plan or strategy, the outcome can be a lot better.”

FMA spokesman Andrew Park said issues around the way KiwiSaver products were sold was a key focus for the regulator this year.

In its Strategic Risk Outlook, the FMA says it wants to address the mis-selling of financial products including KiwiSaver and insurance.

“Competition for KiwiSaver business is expected to intensify. From a regulatory perspective, we are concerned that members receive appropriate advice and support when they transfer their KiwiSaver. Some of the sales practices we have discovered through our monitoring activity do not reflect the best interests of customers. With this in mind, KiwiSaver mis-selling and particularly KiwiSaver switching sales processes and advice will be key monitoring themes for our team.”