Morningstar has estimated that KiwiSaver members moved $1.4 billion to more conservative funds in March, about 2% of all the money invested in the scheme.
For many, that will have locked in losses at the bottom of the market.
Providers reported fielding hundreds of inquiries – and some industry commentators expressed concern that many investors were moving funds without a full understanding of the implications.
Asked whether the regulator was happy with the industry response to the switching behaviour, spokesman for the Financial Markets Authority said it had engaged with KiwiSaver providers throughout the Covid-19 outbreak to understand how they were responding to the crisis and helping investors.
“We are aware that many providers have been making efforts to advise customers or encourage them to pause and consider their options before switching funds. We have previously said that KiwiSaver providers should be providing general (‘class’) advice to members at this time.
“We note that switching behaviour may have been influenced by many providers offering easy online switching options, often without human interaction. Additionally, investors who have their KiwiSaver with a bank are usually able to see their KiwiSaver balance from their banking app.
“The market volatility has revealed that some KiwiSaver members were likely taking on more risks than they could afford, given their age, risk profile or investment goals. Some members may not have known their risk tolerance until the recent market volatility.”
Adviser Clive Fernandes has estimated that switching behaviour could have cost investors $3.5 billion over their investing lifetimes.
The FMA had emphasised to the public that it was a long-term investment and they should think before switching, he said.
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