by Susan Edmunds
New low-fee KiwiSaver provider Simplicity has launched a calculator on its website that is designed to allow members of other KiwiSaver schemes to check how much they are paying in fees.
“Many KiwiSaver managers obscure the fees they charge, leaving their members thinking the only cost they pay is an annual membership or administration fee. That's often less than 20% of the real cost,” founder Sam Stubbs said.
He was angry that some providers had chosen to wait another year to start disclosing their fees in dollar terms. He said default providers in particular had an obligation to be open about what they charged.
Providers have until 2018 to meet the new disclosure requirements. Some had argued they needed time to make the required system changes.
Stubbs said that was disappointing. “It’s obfuscation at best and hiding fees at worst.”
But David Beattie, chief investment officer and joint chief executive at Booster, said Simplicity was putting too much emphasis on fees.
He said KiwiSaver should not be seen as another commodity product to be bought for the lowest price.
Each provider would have its point of difference and the onus was on them to show the value they offered members, he said.
“Our value proposition is based around giving people access to advice… New Zealand is poorly served in terms of access to advice.”
He said nearly half Booster’s fee went to advisers to support ongoing service of their clients.
Someone with $20,000 in Booster KiwiSaver might pay $100 a year for access to an adviser whenever they needed one, he said. “There is no way they are going to pay for that directly if it was removed from the equation.”
He said, even if clients were willing to pay, what advisers could offer for $100 would be limited, and roboadvice “can only go so far. Who will hold their hand when the next downturn happens?”
But having an adviser on hand meant KiwiSaver members had someone to turn to when the market hit volatility or when they had concerns about their investment. “That’s when advisers really come into their own. It’s frustrating to see such a huge emphasis on fees.”
He said members should focus on comparing their net result after fees were removed
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