Low-fee Simplicity runs foul of FMA with misleading ad campaign

The Financial Markets Authority ordered Simplicity to remove an advertising campaign that claimed its KiwiSaver clients would retire with up to 20% more than the average from its competitors, the market regulator has revealed today.

Wednesday, March 9th 2022, 11:51AM 4 Comments

by BusinessDesk

The advertising campaign was run between August and October last year across television, social media, billboards, and its website.

It encouraged people to switch to Simplicity and included the statement: “get out of the game when you want to, retire with up to 20% more than the average KiwiSaver plan”.

The FMA said the statement was unsubstantiated and was likely to mislead or deceive under the Financial Markets Conduct Act.

“The campaign would likely mislead consumers to believe incorrectly that joining Simplicity would give them a retirement balance 20% greater than the average,” the regulator said.

The claim made in the advert was that Simplicity’s lower than average fees meant a customer would ultimately retire with more money than those who paid the average fee.

However, the regulator said it wasn’t reasonable to assume there would be no changes to the average fee over the 45-year period used in the claim.

It also said it was “unrealistic” to assume that all other factors, such as investment returns, would be equal.

These assumptions were not prominently disclosed in the adverts, the FMA said, so consumers were unable to query those assumptions, even if they had been aware of them.

FMA director of investment management, Paul Gregory said Simplicity had withdrawn the campaign promptly, accepted responsibility, and engaged without defensiveness.

“Advertising can strongly influence investors’ decision-making; this is why the law states that any claims made in advertising must be substantiated,” he said in a press release.

Gregory said issuing the formal direction gave the regulator “additional responses” if other misleading adverts were run in the future.

“It is vital that providers ensure their marketing materials are factually accurate and don’t mislead,” he said.

The FMA said this should signal to the financial services sector that it will sanction providers who make misleading claims in advertising materials.

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Comments from our readers

On 9 March 2022 at 5:26 pm Murray Weatherston said:

Was there any financial or other penalty or was Simplicity free to bank any advantage it had achieved from its campaign.
Or should I read the comment about "additional responses" for future indiscretions mean there is an automatic "get out of jail free" [Monopoly game sense] for a first offence?

On 9 March 2022 at 9:27 pm Gordon Gecko said:

As a not for profit what gains are there? The only ones that may benefit are the charities that receive 15% of all the fees. Surely a directive from the FMA is punishing them and there is substantial brand damage you'd think.

On 11 March 2022 at 2:30 pm Murray Weatherston said:

Oh Gordon
A Wall Street guru like you [and your namesake] would know that there are more ways of taking gains out of companies than by way of dividends and shareprice. appreciation

On 14 March 2022 at 8:12 am MPT Heretic said:

Agree Murray. Nothing against Sam for carving out his niche but given his constant sledging of the industry to build profile and his business he needs to walk the talk.

Not for profits still pay their employees first, can still make money from related party deals and can still be sold for considerable value.

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