Volatility and Illiquidity to become KiwiSaver norm

Advisers will need to do plenty of client hand-holding as balances increasingly battle volatility and managers delve into more illiquid assets, according to research house Morningstar.

Thursday, April 10th 2025, 6:08AM

by Kim Savage

Advisers will need to do plenty of client hand-holding as balances increasingly battle volatility and managers delve into more illiquid assets, according to research house Morningstar.

As global markets have reacted to the uncertainty of US President Trump’s tariff war, the message to members has been to keep calm and carry on, and advisers play a key role in delivering the message to clients, says Morningstar Global Data Director Greg Bunkall told advisers at the QPR Monsters in March roadshow.

“It’s really important you stay on top of why that’s happened, why they should stay invested in a particular strategy and manage their behaviours around switching and withdrawing,” he told participants in a recent adviser event.

The size of invested capital in KiwiSaver now outweighs the amount of money coming into the scheme, says Bunkall, and overall, portfolios have become riskier with the move to make “balanced” the default fund, and with more aggressive funds on offer in the market.

The allocation decisions KiwiSaver managers are making will have an impact on the role of the adviser tool.

“Alternatives are on the way. There is not a provider that I speak to at the moment who is not thinking about their strategy for how to get into the alternatives space with their KiwiSaver line up.”

“So portfolios will become potentially more volatile and they may become more illiquid so you have to be able to understand and explain that.”

Morningstar looks at fees in the KiwiSaver market as part of its regular research and despite competition ramping up, there’s no sign of movement.

“There’s not a lot of price pressure at the moment in KiwiSaver,” says Greg Bunkall.

“People aren’t necessarily moving to find cheaper products because it’s clearly set around that 80 basis points number as an average.

“From an advisor perspective, that 80 basis point number is something to sit in your mind to say if I’m allocating to a fund that is more than 80 basis points I just need to make sure I can defend that to a client, explain why I think that option is better for them.”

Tags: KiwiSaver Savings