1 Comment 1 Commentby Susan Edmunds
The report, its first NZ Funds Management Industry Update, was produced in conjunction with Morningstar and contributed to by ANZ, Challenger, the Commission for Financial Capability and NZX.
John Kensington, head of KPMG New Zealand Financial Services, said the industry had changed a lot over the past decade and KiwiSaver had been a game-changer.
He said as KiwiSaver grew, so too would the spin-off effects for the funds management industry. The New Zealand public would become more financially literate and better educated and there would be a steady development of more of an "investment culture", he said.
Kensington said at first the growth of KiwiSaver could channel funds away from other investments that investors would previously have been interested in. “People don’t have an endless supply of funds have they have to put money into KiwiSaver.”
But he said as the scheme grew and financial literacy increased, people might take note of the benefits and limitations of KiwiSaver and decide they wanted a similar investment they could access more freely, driving them to look at other managed funds.
But he said financial advisers were caught in a no man’s land. They were undervalued and had their reputations tarnished, he said.
“Financial advice is very much in limbo, almost teetering. People don’t want to pay for advice. [Advisers] are having to become more independent but if we don’t pay them commission they won’t work for nothing."
Managing director of ANZ Wealth John Body contributed to the report and said the level of trust in advisers had risen.
But he said regulation was too complex.
“The issues with the Act were brought into stark relief during the recent round of privatisations. New Zealanders were asking for advice on these new issues but the Act meant advice could only be given on an individual’s entire financial position. A similar position has emerged with KiwiSaver, where members find it difficult to get KiwiSaver-only advice.”
He said research showed only 15% of people had consulted an adviser in the past year.
Body said the industry would know the system was working when people had confidence in advisers and valued their service, sought their advice and were prepared to pay for it.
"Clearly we have a long way to go before we can tick either of those boxes," he said.
Kensington said he expected more consolidation within funds management as well as the development of more niche managers to cater for less vanilla investing appetites.
The report also suggested more uniformity was needed in KiwiSaver risk indicators and questioned whether more flexible lifetime annuities products might help retirees decumulate.
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We have rarely found clients reluctant to pay reasonable fees for advice. And far from 'teetering', this year we have been as busier (and more productive) than ever. I suspect that reluctance may vary by firm and adviser type.