KiwiSaver 2.0 - Financial advice for all
The future of KiwiSaver could involve universal financial advice for all members but it's not without its pitfalls.
Friday, December 10th 2021, 6:32AM
by Matthew Martin
Adam Boyd
ASB Bank's Adam Boyd says holistic financial advice and offering incentives to save for retirement would benefit KiwiSaver members and increase the nation's financial literacy.
But he says access and affordability to financial advice are some of the barriers the scheme would need to overcome first.
Boyd made the comments during a Financial Services Council conference webinar this week when a panel of experts met to discuss the future of New Zealand's retirement savings scheme.
The panel rated KiwiSaver at an average of 6.5 out of 10 - fit for purpose, but could do better - with Boyd saying low participation rates could be improved.
"People who access advice get better returns...but good holistic advice takes time and is expensive. Even digital advice is not cheap.
"If fees go too low you won't get high-quality advice...and those who need it won't get it."
He says Kiwis find it hard to save and ideas like lower tax rates, matching contributions and advice being embedded into KiwiSaver products could be powerful levers when it comes to encouraging people to save more for their retirement.
Auckland University's Susan St John says free financial advice for those who need it would also help reduce the inherent biases of the scheme that works against women, casual and part-time workers.
"It delivers very well for the baby boomers...but it's not designed well for women who work less during 20 to 40 years of age."
St John says reinstating the $1,000 kick start government contribution could also help encourage people to save more.
Core Data chief executive Andrew Inwood says good service and low pricing don't go together well and there are good arguments for incentives as well as for compulsion.
"Financial advice is not an evenly distributed skill - there are bad advisers who are only in it for the money - so [members] could potentially be exploited."
Mint's David Boyle says contribution rates are still a concern and access to financial advice for those who need it is a good idea, as well as being in the right fund for individual circumstances.
"There will come a time when access to personalised advice will be important. I support better access to advice, but it has to be affordable and it is not affordable for everyone."
Boyle says there has been a lot of research done on KiwiSaver and it should be acted on, especially on why people are not saving as much as they should be.
"People need more support during tough financial times."
He says using KiwiSaver to build financial well-being and literacy could help stop people from accessing their emergency savings and toxic debt.
The Financial Markets Authority's Paul Gregory says people who get financial advice are better off all round and as the global investment scene changes KiwiSaver, fund managers and products need to change too.
He says directors, managers and investment teams need to look at adding more value for less cost, but that's a fine balancing act and there's also the issue of the "missing million" who are either not in the scheme or not contributing at all.
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