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Stubbs launches not-for-profit KiwiSaver scheme

A new, low-fee KiwiSaver scheme being launched today will be a good fit for financial advisers who work on a fee basis, its managing director says.

Monday, August 1st 2016, 6:00AM 3 Comments

by Susan Edmunds

Former Tower Investments boss Sam Stubbs is launching Simplicity, a not-for-profit scheme run in the style of health insurer Southern Cross.

It will be run by a charity and its launch is being funded by Stubbs personally.

Stubbs said he wanted to create a “Vanguard of New Zealand” – a low-cost model that would shake up the KiwiSaver industry in this country. He said the providers had been allowed to become too complacent and members were paying too much as a result.

“There’s the Vanguard effect – as soon as Vanguard enters the market, the whole thing changes.”

He said KiwiSaver had become a “gravy train” for the big Australian banks in New Zealand.

"Compared to similar savings schemes in other developed countries, fees are very high. Profits for KiwiSaver managers are at $150 million now. Without change, we think they will be at $1.3 billion by 2030."

Simplicity will charge $30 a year in administration fees and 0.3% in fund management. Stubbs said that was less than half the industry average. The same fee will be charged across all of Simplicity’s funds. Of that fee, 15% will go to a charity that will work to improve financial literacy.

Simplicity will offer advisers no trail commission, unlike other providers such as Generate and Grosvenor, but would suit those who worked for fees, he said. “If they can add value for their clients by using the product and maximize returns, then that helps them justify their fees. For fee-based advisers, this is very suitable. For those on commission, it’s less so.”

Simplicity intends to have more than 9000 investments in 23 countries in each fund. Overseas investments will be managed by Vanguard. Each investor’s savings are held in custody by Public Trust.

Stubbs said he also had plans to branch out into other financial products eventually, including life insurance, which he said was much more expensive than it needed to be.

Simplicity trustees include Peter Neilson, former chief executive of the Financial Services Council and Craig Richardson, chief executive of Wynyard Group.

Directors include Kirsty Campbell, formerly of the Financial Markets Authority, and Mark FitzGerald, former director of private banking and wealth at Westpac.

Tags: KiwiSaver Sam Stubbs

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Comments from our readers

On 1 August 2016 at 9:07 am Simon Hassan said:
Well done, Sam! It will be interesting to see how advisers and other providers respond to the challenge.
On 1 August 2016 at 11:33 am Brent Sheather said:
Just when you think the whole industry is stuffed, that regulation has been captured, and the situation is hopeless (like after reading Mr Everett’s comments that some clients interests can be put less first than other clients) you get some good news like this. Congratulations to all concerned. Although we don’t recommend KiwiSaver we will be telling our clients that this low cost model looks attractive.
On 1 August 2016 at 1:52 pm crossman said:
Great stuff- well overdue. The fees on most kiwisaver schemes are outrageous. Hope they do well.

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