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Smartshares offers new KiwiSaver fee solution

Smartshares is launching a new KiwiSaver structure today that allows advisers to set the fee their clients pay for their advice - and have the manager collect it for them from client accounts.

Monday, April 2nd 2018, 6:00PM 2 Comments

by Susan Edmunds

Head of funds management Hugh Stevens said there was a lot of discussion in the market about how KiwiSaver advice could be provided to those who wanted it.

He said the old structure of trail commissions and other fees built into the overall amount investors paid made the fund charges more expensive and not well targeted.

“Everyone pays whether they are receiving advice or not. The control is not with the member but with the manager. The adviser and member don’t have much say in how that’s structured.”

He said Smartshares wanted to make its low-cost KiwiSaver scheme available to independent advisers and their clients. 

Advisers can access a range of model portfolios or customise their own KiwiSaver solution for their clients, using Superlife’s more than 40 investment options.

It will not offer commission but the adviser can agree with their client on what is a suitable fee. Smartshares would then calculate the fee daily and deduct it from the member’s account at the end of each month, to pay it to the adviser.

“We sign an agreement with each adviser. They agree to undertake ongoing monitoring of the account and provide an opportunity for an annual review of the investment strategy. In return we do all the fee collection.”

Advisers agree to contact their clients at least once a year.

The fee could be set at anything up to 50 basis points or $500 but Stevens said his organisation was willing to work with the Financial Markets Authority and the industry to determine what was reasonable.

There was strong interest in the idea, Stevens said. Although the product officially launched on Tuesday there were already three agreements ready to go by the end of last week.

He said it would be difficult to justify charging for KiwiSaver advice if advisers were only guiding members into a conservative, balanced or growth option, but Smartshares allowed advisers to take a more granular view of members’ needs and piece together the best KiwiSaver solution.

Members could also opt to receive no advice and pay no advice fee.

Tags: KiwiSaver Smartshares

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Comments from our readers

On 3 April 2018 at 7:27 am MPT Heretic said:
Firstly congratulations Smartshares on coming up with an innovative product structure for providing advice in the KiwiSaver market.

Unfortunately (assuming he was quoted corrected) Mr Stevens then goes on to completely destroy the value proposition they are trying to build around advice.

Advice is not about playing at being a fund manager by piecing together the investment solution.... advice is guiding members into the right solution, ensuring it continues to meet investor objectives and that they stay invested.

That will be money well spent for many KiwiSavers. Its a shame fund managers and the Govt officials cant seem to grasp this
On 3 April 2018 at 8:43 am Nyoman Wardani said:
A fee of up to $500 seems high on top of other regular/ standard fees even for a one off orcas needed.
I like the idea that KiwiSaver managers contact investors at least once a year. I called my manager once in a while otherwise there will be no communication for years or ever that’s initiated by the manager.

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