Volatility prompts 500pc lift in switches

KiwiSaver clients who use financial advisers were less likely to react to last month’s market volatility, ANZ says.

Thursday, October 29th 2015, 6:00AM

by Susan Edmunds

ANZ general manager of wealth products and marketing Ana-Marie Lockyer said the bank had noticed a significant increase in KiwiSaver members switching their accounts to more conservative investments.

The rate of switches was up 500 per cent at the peak and 300 per cent on a weekly average over the period of increased market uncertainty.

September was the first quarter in a number of years in which KiwiSaver balances declined.

Lockyer said the majority of switches were made by younger KiwiSaver members. “That’s perfect if they are looking to buy a house soon and wanted to lock it in but it is more challenging if they saw the balance change and thought ‘I don’t like this volatility, I’ll move down the risk spectrum’ because if they sit there for 40 years it could have unintended consequences.”

She said the bank had contacted people who had switched and offered them advice. It would get in touch again in the near future to assess whether the members were still happy with their decisions.

Lockyer said the bank had also experienced an increase in the number of calls from people wanting to check their balances, even though this can be done online.

KiwiSaver members who have financial advisers had a different pattern, she said. Some had moved their investments to riskier assets as the volatility hit.

John Berry, of Pathfinder Asset Management, said people who panicked could hurt their long-term outcomes.

“This month our world equities fund is up 5%. Those people panicking and thinking ‘I’ve got to get out’ have shot themselves in the foot and missed it.”

He said KiwiSaver members would be better to take the approach that when sharemarkets were down, prices were cheaper and they would get more for their contributions. “That’s a mindset change that needs to happen in New Zealand investors. When markets come off they should go from conservative to aggressive strategies to get in at the good entry level. But they are going the other way and missing out.”

Tags: ANZ KiwiSaver