Opportunities for advisers in KiwiSaver requirements

Banks will be hard-pressed to offer advice and education to their thousands of default KiwiSaver scheme members, commentators say.

Wednesday, October 23rd 2013, 6:33AM

by Susan Edmunds

When the KiwiSaver default schemes are decided for the next seven-year term, those chosen will be required to offer investment education and impartial financial advice to their members.

This is designed to reduce the percentage of fund members who are inappropriately in a conservative fund.

Schemes tendering for a default position will have to show how they will meet the requirements.

Commentators say that could provide an opportunity for independent advisers – although how providers could outsource advice without the risk of clients being advised to shift to another provider will need to be addressed.

Allan Yeo, of Grosvenor, which recently bought Fidelity Life’s KiwiSaver book, said some banks might think sending out newsletters or occasional communication qualified for advice and education.

“The challenge is to demonstrate that whatever is sent to the client is relevant and understood. That’s where advisers have a key role to play. Most people when given financial documents to read just turn off. That’s where advisers can help people to navigate documents and understand them.”

He said he liked to think that banks would engage financial advisers to help but there would be resourcing problems because of the number of clients compared to the adviser forces available to deal with them.

Institute of Financial Advisers president Nigel Tate said it would be hard for big KiwiSaver providers to offer financial advice that met the requirements of the Code of Professional Conduct for Authorised Financial Advisers.

“They will require substantially more AFA or QFE advisers who are able to work in that area.”

Tate said the AMP/AXA scheme was large in terms of members but had few employees. “They will need to allocate this out to contracted advisers, that could be a challenge for them.”

Some work might end up being passed out to independent financial advisers, Tate said. “Having said that, one would suspect that if they were passing out default scheme KiwiSaver members to advisers, some may say that the member is in the wrong fund and maybe the wrong provider as well, that may cause some issues.”

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