About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds Other Sites:   tmmonline.nz  |   landlords.co.nz
Last Article Uploaded: Wednesday, August 21st, 11:45AM
Latest Headlines

Advisers hang back from KiwiSaver

If the financial services sector wants financial advisers to deal in KiwiSaver, it will have to make it pay, one fund manager says.

Wednesday, October 10th 2018, 6:00AM 4 Comments

The Financial Markets Authority has released its latest KiwiSaver report. Director of regulation Liam Mason said even small amounts of advice made a difference to investors’ engagement with the scheme, but AFAs were still unlikely to get involved.

He said that was probably because the numbers did not stack up - providers that pay trail only pay between 0.15 per cent and 0.25 per cent of the client's balance, per year.

Adviser Stephen O’Connor said it was hard for advisers to charge KiwiSaver clients an appropriate rate. “It takes time, you are adding value certainly but to turn around and charge for that time is quite difficult – a lot of clients will not be in a position to pay or may not be prepared to pay.”

He said KiwiSaver was often offered as an add-on service to existing clients.

“It’s something that’s almost done as a pro bono. That’s for established adviser, for those who are starting up it would be a bit more difficult. It’s the proverbial question of how do you advise the mass market. It’s one of those things that’s always been an issue, they are the ones that can benefit the most from financial advice but they’re the ones who can’t afford to pay.”

Simplicity founder Sam Stubbs said it would take more money to get a larger number of advisers interested. Most would look for solid trail commission and the ability to “stick a multiplier” on the business and sell it in future.

“Unless the AFA is fee-based but then the asset has to get large enough. The average balance is $17,000 so it’s still not sufficient. It will take a while.”

Simplicity would lobby for the removal of trail commissions on KiwiSaver, he said. “It’s a very perverse incentive because you’re loyal to the person who pays you.”

Some are making it work: Adviser Camilla Gribble, of IKONIK, a recent award-winner at the Financial Advice NZ conference, said her business offered KiwiSaver education services, which were popular and then led on to other referrals.

But she said, even just the KiwiSaver trail was not terrible, especially if an adviser had a volume of clients.

The FMA said as part of its report that it would monitor fees closely this year, including examining the question of what was “reasonable” in the KiwiSaver context.

The average member balance was up 14.4 per cent while the average investment management fee paid was up 19.3 per cent.

Mason noted that the FMA asked last year why fees had not reduced as a percentage as FUM grew.

O’Connor said it was fair to question why economies of scale had not brought fees down. “It’s a legitimate question.”

Adviser Nigel Tate said that was unremarkable.

“Investors are doing far better in actively chosen funds as opposed to default funds and as a consequence the fees they are paying have increased. When looking at the different after fees returns between the groups these fees look like money well spent. Or in short, a focus on higher net returns is better than focusing on lower fees.

“I would be concerned if the FMA where to in any way suggest the fees are too high as, as a percentage of FUM they are very realistic in my view.”

Tags: financial advisers KiwiSaver

« Advice makes key difference to KiwiSaverFNZ in deal worth billions »

Special Offers

Comments from our readers

On 10 October 2018 at 12:05 pm Clive.Fernandes said:
Mr Stubbs has slightly conflicting statements in this article. On one hand, he admits that the average KiwiSaver balance is not large enough to make fee-based advice feasible. And then follows that up with a statement looking to remove trail commissions which currently are the only other way an adviser can paid for giving advice on KiwiSaver.

If the industry and the regulator agree that advice is important to the KiwiSaver investment process, then they need to make it financially viable for advisers to give that advice.

Rather than removing trail commissions, perhaps they need to be standardised as well as changed into an adviser fee. The difference between a trail and an adviser fee being that advisers will not get paid unless they can demonstrate that they have given advice to the client in question.
On 10 October 2018 at 12:08 pm Clive.Fernandes said:
Disclosure : I am a Director of National Capital, a Financial Advisory firm.
On 11 October 2018 at 9:38 am Simon H said:
Nigel is right, on the face of it, to point out the contradiction in Sam's comments. But if we look at the demographic served by a typical fee-based NZ financial adviser - excluding younger, non-contributing KS members for now - the average KS account must be closer to $100k by now. A fee-based adviser offering an annual review (by email or phone if client has no other business with the adviser), plus occasional 'change-triggered' advice, and charging just 200 KC member clients (remember there are two of these in many households) say $500 a year for this (foregoing, or rebating commission to clients) will be adding $100k pa to their practice income. Fee-only KS advice is already viable for this group.
On 11 October 2018 at 7:04 pm Clive.Fernandes said:
Hi Simon, I feel your projections might be too optimistic.

People who need advice on their KiwiSaver accounts the most are young professionals with average balances around the $30,000 mark - rather than the $100,000 you mention. It would be extremely difficult for a financial adviser to find clients in that demographic willing to pay $500 for KiwiSaver advice.

Kiwi's as a whole are not used to paying for Financial Advice. That needs to change, sure - but it will not happen overnight. The industry needs to start building a level of trust for Financial Advisers before it can expect consumers to start paying. Hopefully with the new code setting a standard for all advisers to work in the clients best interest, we are now on a path there.

Sign In to add your comment



Printable version  


Email to a friend
News Bites
Latest Comments
Subscribe Now

Weekly Wrap

Previous News
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.19 4.25 4.49
ANZ Special - 3.69 3.75 3.99
ASB Bank 5.20 ▼4.25 ▼4.19 ▼4.39
ASB Bank Special - ▼3.75 ▼3.69 ▼3.89
BNZ - Classic - 3.69 3.75 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Lender Flt 1yr 2yr 3yr
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
Housing NZ Corp ▼5.19 ▼4.29 ▼4.29 ▲4.49
HSBC Premier 5.89 3.79 3.79 3.89
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
Lender Flt 1yr 2yr 3yr
ICBC 5.65 3.85 3.95 3.89
Kiwibank 5.80 ▼4.30 ▼4.40 4.74
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - ▼3.55 ▼3.65 3.99
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.69 4.79 -
Resimac 5.30 4.86 4.14 4.19
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 3.78 3.78 3.99
Sovereign ▼5.30 4.35 4.29 4.55
Sovereign Special - 3.85 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.79 3.84 3.99
The Co-operative Bank - Standard 5.15 4.29 4.34 4.49
TSB Bank ▲6.09 ▲4.65 ▲4.59 ▲4.85
TSB Special 5.29 ▼3.85 ▼3.79 4.05
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.69 4.79 5.19
Westpac - Offset 5.34 - - -
Westpac Special - ▼3.69 ▼3.75 ▼3.99
Median 5.50 4.29 4.25 4.19

Last updated: 16 August 2019 8:50am

News Quiz

The maximum remuneration model for Australian life insurance advisers is to be set at what?

Upfront 40% + trail 20%

Upfront 50% + trail 10%

Upfront 50% + trail 20%

Upfront 60% + trail 10%

Upfront 60% + trail 20%


About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
Site by Web Developer and eyelovedesign.com