by Susan Edmunds
Rebecca Thomas, of Mint Asset Management, said New Zealanders had long been reluctant to put their money into managed funds.
“Individually-built share portfolios or even individually-built diversified or balanced portfolios are not built for individuals with such low sums to invest anywhere else in the world as they are in New Zealand. There’s still a preference for individual, bespoke portfolios for quite low sums of money here.”
That situation was originally created by managed funds' disadvantaged tax position compared to direct investment. "Fees were high and the tax at source made unit pricing incredibly complicated and expensive," she said.
But eight years on from the introduction of the PIE regime, New Zealanders are still sceptical.
Thomas said: "It's still prevalent in some of the private banking arms of the banks here. They want to have a private wealth offering that looks bespoke. It's a very long and slow process to move to funds."
But she said KiwiSaver was helping boost confidence in funds and consumer trust was increasing as transparency and reporting increased.
The shake-up of DIMS would help, too, she said.
Thomas said she expected the DIMS segment of the market to shrink, at least over the short term.
“The future is around building private wealth management businesses with funds rather than bespoke portfolios for such low sums.”
There have been only a handful of DIMS licenses granted so far and Thomas said the new regime was forcing people to think about whether their solutions were viable in the long run.
She said personalised management of client portfolios worth less than $250,000 was not cost-effective for many businesses.
“A number of these people will migrate to other fund-based solutions over time.”
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