Advisers could better tap KiwiSaver market

KiwiSaver has massively increased the market for financial advice in New Zealand, one analyst says.

Tuesday, December 1st 2015, 6:00AM

by Susan Edmunds

Collin Nefdt, formerly of Morningstar and now operating NZ Trends, has released new research looking at performance consistency of the KiwiSaver schemes.

He analysed AMP, ASB, Fisher Funds, Grosvenor, Mercer, Milford, OneAnswer and Westpac and compared their ability to beat their peer group averages, using rolling three-year returns.

His research showed OneAnswer was the standout performer.

Its growth and balanced funds had beaten peer averages in every period surveyed.

Milford also achieved 100% success with its conservative and active growth funds.

None of the others surveyed achieved 100 per cent success by this measure. Nefdt said consistent outperformance was unusual.

He said the same performance consistency would apply to ANZ and ANZ default schemes. “What this converts to is that, as the largest provider with a 27% market share of members, ANZ 's results are having the maximum impact in the industry.”

But he said people needed to be wary of attaching too much weight to past performance. “Members should be more concerned with planning properly, having well-thought objectives and a investment strategy to match. Past performance analysis is highly complex and mean reverting in many instances. I try and stay away from making performance forecasts and projections and suggest that others do the same. One can succeed with KiwiSaver without having to make a single forecast. Experts have been talking about the 'low return' environment for a number of years when what transpired is that markets have performed superbly.”

He said, considering Government and other incentives, KiwiSaver offered good value for every dollar of member contributions.

But he said advisers could be playing a bigger role. “KiwiSaver has massively increased the market for advice and has made just about every KiwiSaver participant a person in need of professional financial advice. A fee-based environment should mean that advisers can scour the entire KiwiSaver market for solutions that best fit their clients. This is potentially a massive win-win scenario. During periods of volatility that may tempt members to want to switch and invest emotionally, advisers can play the vital role of behavioural coach. In this role advisers can keep their clients focused on the long-term and set realistic expectations about market s and performance and let members know that volatility is part and parcel of the long-term investment journey and must be expected."

Tags: financial advisers KiwiSaver