Advisers’ limited role in KiwiSaver revealed

These are among the findings of research conducted for the Institute of Financial Advisers (IFA) and the Financial Services Institute of Australasia (Finsia) as part of Financial Awareness Week.

The report makes clear New Zealanders value the scheme, with 57% of respondents believing KiwiSaver should be compulsory.

“There appears to be a general reluctance to make use of financial advisers, with the advice of family and friends often preferred,” said the report.

“Few New Zealanders have joined KiwiSaver or made changes to their KiwiSaver account on the basis of a financial adviser.”

However, the report highlighted the fact advisers appeared to play a more prominent role among those switching schemes.

Of the 18% who have switched since joining the scheme, “The main reason given for changing KiwiSaver provider, from the list provided, was to get higher returns (14%) followed by making a change because the member’s financial adviser recommended it (12%).”

The lack of a wide spread engagement with advisers is also highlighted in some of the survey’s findings around the type of funds held.

“A relatively large proportion of KiwiSaver members do not know what kind of fund they are in, which raises the question of how they can know whether the fund type is appropriate for their needs and risk tolerance level.

“Less than one quarter of KiwiSaver members obtained financial advice to help them choose the most appropriate find for their needs.”

One quarter of respondents were unable to identify what type of fund they were in, and “many were unable to estimate the proportion of their retirement savings represented by their KiwiSaver account.”

The fact that nearly a quarter of respondents are in the six, more conservative, default funds was an issue highlighted by IFA chief Peter Lee.

“While this could be fine for some people, it’s likely many will be in the wrong fund and missing out on a bigger pool of money in retirement,” he said.

“This means many aren’t making the right decisions, or getting good advice on what to do.”

Comments from our readers

On 18 August 2011 at 11:20 am Lisa said:

It doesn't help KiwiSavers when the banks are all about getting customers to transfer, particularly out of an adviser's recommended provided - who's funds are doing much better than any of that banks funds. How can that be giving good advise and when are the banks going to be held accountable for doing just that?
We can only hope that when the individual KiwiSaver's funds get over $25k they will seriously start looking at their options - with an adviser that knows about more than one provider's funds.

On 18 August 2011 at 4:58 pm Jones said:

That's a sweeping statement about banks transfer kiwisaver funds and adviser recommended funds doing much better. A quick look at Morningstar Kiwisaver performance survey for balanced funds (as that seems a fair average) shows over the last year the Westpac Kiwisaver fund is rated number 1, Onepath (owned by ANZ) is rated number 2, ASB is rated number 3 ... Even over a 3 year period you still have a Onepath fund rated number 1 and a Westpac Fund rated number 3. Perhaps individuals are in fact taking an interest and switching to where consistant returns are to be found, and where they feel they have transparency and control??

On 19 August 2011 at 11:15 am John said:

Maybe the debate should be around bank sales targets on their staff and the fact these and their bonus structures don't need to be declared to the client - unlike an AFA who is required to provide full disclosure and quite rightly so in my opinion.

Should not all self interest be on the table, regardless of what form it comes in!

On 19 August 2011 at 12:15 pm Smith said:

Loooking at the Disclosure regs as set out by the FMA - QFE members are required to disclose comms - unlike an RFA.

On 19 August 2011 at 2:42 pm Lisa said:

You missed the point Jones, the 2 banks funds that I was talking about were not doing better than the provider they were already with (I checked on the Morningstar)!
My own experience with ASB at the front counter was Q: How are the funds doing compared with others A: Well everyone is picking this fund or that one - and we nearly have 1 million KiwiSavers!
Reply for John: as an RFA I am quite happy to disclose how much commission I get and was doing so up to 1 July! Under the new regime I am not required to - perhaps because I don't charge a fee to my clients as well as take the commission.
Reply for Smith: QFE advisers don't tell us their salary/wages though in my experience recently.

On 19 August 2011 at 8:09 pm Jeff Royle said:

Last I heard an RFA could not advise on Kiwisaver. Something that Pero brokers seem to have forgotton.

On 19 August 2011 at 8:22 pm collin said:

Adviser's as a group have not taken the KiwiSaver opportunity that was presented to them via the preferred provider mechanism. Those that took a long-term view and serviced preferred providers will have very lucrative KiwiSaver businesses while those who took the short-term (selfish) view that there was nothing in it for them will lose out

On 20 August 2011 at 11:47 am w k said:

When a complaint is laid, valid or otherwise, advisors not operating under QFE lose heaps in dollar terms and time. Does anyone know if the same happened to a bank staff, will he/she still be paid a salary during investigation, and who pays for the mediation process?
Just want to see if my perception of an unlevel playing field is correct.

Advisers’ limited role in KiwiSaver revealed

Less than one quarter of KiwiSaver members sought financial advice, yet of the 18% of people who have switched schemes, 12% did so after a recommendation from a financial adviser.

Thursday, August 18th 2011, 6:53AM 8 Comments

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