BNZ cuts KiwiSaver and managed fund fees

In efforts to protect its status as a default KiwiSaver provider, the BNZ will lower fees for its KiwiSaver and YouWealth funds to 0.45% at the end of the month.

Thursday, September 16th 2021, 2:48PM 5 Comments

by Matthew Martin

However, according to one industry commentator, a focus on fees is not the silver bullet and could lead to worse outcomes in the future.

From September 28, BNZ KiwiSaver Scheme and YouWealth funds will be reduced to 0.45% per year, except for the BNZ KiwiSaver Cash fund, which will be 0.30% per year, and the new BNZ KiwiSaver Default Fund, which will be available from December 1 and will be priced at 0.35% per year.

The bank was charging 0.63% for its growth fund and 0.62% for its regular balanced fund, a drop of 17 basis points.

The BNZ was the first major bank to drop its fixed membership fee in 2019 after all KiwiSaver providers were urged to reduce fees by the Financial Markets Authority.

BNZ wealth general manager Peter Forster says the new fee structure offers better value for money to its customers.

"These are substantial reductions in fees that mean more money in the accounts of our customers over the long term.

“With the fees for our KiwiSaver and YouWealth options now at the same level our customers can choose to invest in both – maximising the benefits of KiwiSaver while also taking advantage of the flexibility YouWealth provides.

“Our increasing scale means we can continually drive down costs, and we’re committed to frequently reviewing our fees to ensure these benefits get passed on, but never at the expense of the quality of our products."

Forster says the changes to YouWealth are particularly significant, with a fee reduction of more than 40%.

"We believe our unique mix of active and passive management will deliver materially better long-term outcomes for our members at a lower cost,” says Forster.

“Lower fees increase the relative attractiveness of managed funds, but we’ve also been hard at work reducing barriers to entry and making investing in funds more accessible."

Founder and director at National Capital Clive Fernandes says while they have not conducted any in-depth research on BNZs funds yet, "taking into consideration the already low levels of financial education, a myopic focus on fees will lead to worse outcomes for Kiwis in the long run, especially the most vulnerable".

"While the decision to drop fees could be seen as a positive for BNZ clients, we need to think deeper about what this means for the servicing capabilities of BNZ for those clients.

"At 0.45% can BNZ afford to both manage their clients' money and give them advice on KiwiSaver?

"We've seen in the past bank clients were some of the biggest panickers in times of market volatility.

"The money lost by an investor because they are in the wrong type of fund and/or because they panic switch during times of volatility can be much higher than what they would save by a reduction of 17 basis points in fees," Fernandes says.

Tags: BNZ fees funds management KiwiSaver

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Comments from our readers

On 20 September 2021 at 8:46 am Pragmatic said:
Well done BNZ

Looking forward to seeing AMP reducing their KiwiSaver fees to reflect their move to lower priced passive funds (yeah right)
On 20 September 2021 at 9:59 am SteveG said:
Pragmatic - do you want AMP to remove the 0.2% trail commission to advisers at the same time? I believe that is included in their fee. BNZ don't pay advisers for their service. Need to compare advised versus non-advised schemes here.
On 20 September 2021 at 1:46 pm Pragmatic said:
To help explain, let me pick on a single AMP KiwiSaver fund (you can check out the rest yourself):

AMP Balanced Fund - cost 79bps. Probably pays Blackrock less than 9bps to manage - leaving 70 bps to adequately fund stuff like 20bps commissions, operations, and a very healthy profit for AMP (delivering an average return of 7.37%pa over the past 3 years).
On 20 September 2021 at 3:51 pm Dirty Harry said:
sorted smart investor says AMP KS "moderate balanced" has 1.03% management - not 0.79
and the Nikko alternative has 1.08
both have underperformed average returns.
The AMP "global multi asset" balanced fund has management fees at 1.43% and also underperforms.
So no, @SteveG I don't think the old chestnut about advisers get paid for this and bank tellers don't, is at all relevant here. I have never met anyone who works at BNZ that doesn't get paid. Need we re-visit the findings of the FMA report into KiwiSaver selling and mis-selling?
On 20 September 2021 at 4:25 pm Pragmatic said:
@SteveG - a word of advice: don't rely on suppliers to pay your bills forever, as trail commissions will eventually go.

I recall a very prominent fund manager turning off trail commissions (without warning) in the 1990s, leaving many advisers scrambling around to pay their bills.

That same Manager then embarked on a direct advertising campaign encouraging investors to deal with them direct (ie: wave goodbye to their trusted adviser).

A better model is one where you charge the client directly - putting you in control of your revenues. Hope that helps

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