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What to make of the Kiwibank deal

Rumours had been circulating for a while that Gareth Morgan’s KiwiSaver business was on the market. Today we learnt that Kiwibank was the successful buyer of this business plus the other funds management and advice offerings from GMI.

Wednesday, January 18th 2012, 4:01PM

by Philip Macalister

The deal looks like a good one for Kiwibank – depending how much they paid for it. It may too have some pluses for advisers in the short term. Both brands push their New Zealand owned pedigree strongly. They too like to pitch themselves as standing up for the average Kiwi. Kiwibank’s proposition is about lowering the cost of banking for New Zealanders, while Morgan is pretty big on the philantrophy (think Happy Feat and the Blanket Man) as well as pushing issues like fishing. It’s smart for Kiwibank as it allows it to get into the KiwiSaver game. The recent 4th annual ASSET Magazine KiwiSaver survey showed that banks are winning this game hands down. When they focus on a product they can make big gains. Kiwibank as a relative late comer to the KiwiSaver business was a laggard. Just 15,000 customers and $50 million under management. In our survey it ranked number 18 while GMI was up at sixth spot. One of the curious things is that Kiwibank will continue to run its KiwiSaver business as is and will offer GMI separately. Over time you would expect them to come together but that isn’t on the agenda short term. With KiwiSaver being a category one product there is a need for AFAs. While the bank builds its advisory force there is an opportunity for other advisers to talk to the GMI members. Where things don’t fit is fees. The two organisations are oil and water. Kiwibank trumpeted its low fee structure at launch while GMI is one of the more expensive. Take administration fees for example. Kiwibank is $1 a month or $12 a year, while GMI is $50 a year. Likewise the fee analysis in the KiwiSaver survey shows each provider is at opposite ends of the scale. The other potential opportunity for advisers is that each organisation appears to target different demographics. GMI’s annual member balance is around $10,000 while Kiwibank is around $3500. That would suggest GMI scheme members aren’t natural Kiwibank customers. The deal was big news for the start of the year and potentially it heralds more rationalisation in the overcrowded KiwiSaver provider market.

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ANZ 6.34 5.59 6.05 6.29
ANZ Blueprint to Build - - - -
ANZ Special - 4.99 5.45 5.69
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BNZ - TotalMoney 6.39 - - -
CFML Loans 7.25 - - -
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China Construction Bank Special - - - -
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Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 5.35 5.85 -
Heartland Bank - Online 4.60 4.79 ▼5.15 ▼5.14
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HSBC Premier 6.34 5.09 5.34 5.59
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HSBC Special - - - -
ICBC 6.00 4.79 5.15 5.69
Kainga Ora 5.85 5.31 5.58 5.97
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 6.00 5.95 6.45 ▼6.59
Kiwibank - Offset 6.00 - - -
Kiwibank Special - 4.95 5.45 ▼5.69
Liberty ▲5.34 - - -
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Nelson Building Society 6.95 5.55 6.15 -
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SBS Bank 6.29 5.39 5.79 5.99
SBS Bank Special - 4.89 5.29 5.49
Select Home Loans 6.89 - - -
TSB Bank 7.05 5.65 6.09 6.39
TSB Special 6.25 4.85 5.29 5.59
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Westforce credit union - Special - 5.35 5.85 -
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Westforce credit union - Standard 5.85 6.05 6.55 -
Westpac 6.39 5.55 6.05 6.29
Westpac - Offset 6.39 - - -
Westpac Special - 4.95 5.45 5.69
Median 6.34 5.35 5.79 5.83

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