ASSET JULY 2017

JULY 2017

GRTV brings you the latest opinions and views from the industry from those who matter.

Watch the latest episode now at goodreturns.co.nz/grtv

LEAD STORY

UP FRONT

KiwiSaver Turns Ten years on, key industry players reflect on what’s good, and not so good, about the savings scheme.

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04 EDITORIAL

KiwiSaver ten years on.

06 PEOPLE New appointments

08 NEWS

10 Sir Michael Cullen reflects on KiwiSaver.

REGULARS

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20 28

{Open to Question} 05 How many clients do you offer KiwiSaver to?

{ Investment } 28 Raising inflation targets

{ INSURANCE }

{ ASSET ADVISER }

30 KiwiSaver match-up not a no-brainer

20 The business of KiwiSaver 26 Understanding AML

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UP FRONT

{ FROM THE EDITOR }

ONE BIG KIWISAVER CHALLENGE TO TACKLE

I

t doesn’t seem as long as 10 years ago that KiwiSaver was launched. I remember being in the lunch room at work, talking to people about whether we would join.

There were a few key reasons why some of my colleagues were giving it a miss: One wanted to focus on paying down her mortgage first, another was sceptical about whether the Government could dip into her account any time it wanted to, and another did not want the restrictions of having her money locked in until 65.

A decade later, most of these objections have melted away. We now have almost 3 million people in KiwiSaver and $40 billion under management. It’s common to hear people say that there’s no other investment that gives the same rate of return as that first $1042 put into your KiwiSaver account each year.

The biggest problem with the scheme now is that so many of those people are

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not contributing as much as they could or should be.

Some are on contribution holidays, some are in contracting roles where they are left to handle their contributions themselves, and some are self-employed.

Some are just not making the full contribution for reasons that are not yet clear at this stage.

For New Zealand to get the full value out of this scheme, we need to tackle this – and quickly.

When other countries have savings contributions of 10% and more, our 3% plus 3% looks woefully inadequate. But if we are not even getting that in many cases, it is a serious concern.

These KiwiSaver members will hit 65 and get a nasty shock when they realise what they thought was to be a decent nest egg will in fact deliver very little over 30 years of retirement.

KiwiSaver members need someone to check in with them every few years to make sure they are in the right type of fund, contributing enough, and on track to get to the sort of retirement they expect. Once they hit 65, they will need advice again, on how to make their money last. Who better to do this than advisers?

As it stands, though, few advisers are doing much work with KiwiSaver members. The hurdles in the way are the reluctance of some KiwiSaver members to see a professional, and the current lack of reward to advisers operating in this area.

It is something that should be tackled with urgency. Roboadvice will be able to pick up some of the advice slack, but not all of it. Financial advisers, as always, will have a key role to play in helping deliver a better retirement outcome for all New Zealanders.

Susan Edmunds Editor

Head office 1448A Hinemoa Street, Rotorua PO Box 2011, Rotorua P: 07 349 1920 F: 07 349 1926 E: editor@tarawera.co.nz Publisher Philip Macalister EDITOR Susan Edmunds Contributors Russell Hutchinson, Barry Read.

Christian Hawkesby Design Jonathan Harding Advertising sales Kelly Thorpe kelly@tarawera.co.nz phone 07-3491920 Subscriptions Dianne Gordon P: 0800 345 675 E: dianne@tarawera.co.nz ASSET is published by Tarawera Publishing Ltd (TPL). TPL also publishes online money management magazine Good Returns www.goodreturns.co.nz and TMM – The Mortgage Mag All contents of ASSET magazine are copyright Tarawera Publishing Ltd. Any reproduction without prior written permission is strictly prohibited.

ISSN 1175-9585

OPEN TO QUESTION

How many clients do you offer KiwiSaver advice to?

John Wood

Aaron Trevean

We are very proactive in talking to all our clients about KiwiSaver. We ensure that firstly they are in KiwiSaver and secondly that they are realising maximum entitlements. From there we then seek to ensure they are each in a scheme that matches their risk profile and age. I think it quite absurd that a financial adviser would fail to encourage every eligible client to be in KiwiSaver. We presently have about 350 KiwiSaver clients under advice.

I find there are very few people looking for KiwiSaver advice specifically as they believe they have already got it sorted with their teller. I have around 200 existing KiwiSaver clients and provide KiwiSaver advice to all new clients as part of our full service offering.

John Wood and Associates

Rival Wealth

LIZ KOH

MONEYMAX KiwiSaver represents less than 10% of my total funds under management.

What potential do you see for future growth in this part of your business?

Beyond the obvious growth that KiwiSaver balances are generally experiencing, KiwiSaver has exposed my business to a whole new client-set. They have skewed the average age of my clients downwards, positioning our business to help them with the financial decisions they are set to make in their years ahead. KiwiSaver has also served as a door opener with a number of more progressive businesses.

I believe that more and more people will proactively seek impartial KiwiSaver advice as balances grow. With the National Government talking about increasing the retirement age, I also see opportunity to engage people in taking ownership of their retirement planning.

KiwiSaver balances will obviously grow over the long term, but for advisers like me near the end of their careers this is of little benefit.

Although a KiwiSaver book can be sold as part of an exit strategy, given the amount of churn in KiwiSaver, mostly driven by the banks, anybody purchasing a KiwiSaver client base would need to take a conservative view on the multiple paid.

What made you want to start offering advice on the scheme?

Wealth accumulation and retirement planning have always been a big part of our advice business. With the introduction of KiwiSaver and the associated member benefits, we were proactive in advising existing clients to get on board and in seeking new clients who were looking for help and guidance. While many financial advisers took the attitude that there was no money it for them, so why bother, we took a completely different approach and have found that there is a huge market for providing KiwiSaver advice. We’ve never had cause to look back at this early decision.

In my view, KiwiSaver has become a key cornerstone in retirement planning, so advice in the space is not negotiable. Taking a longer term view, helping clients grow their wealth also provides opportunity to offer additional investment advice once KiwiSaver balances become available in retirement.

The advice I have given on KiwiSaver has been to clients who had not yet signed up.

It is not business that I actively seek.

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ASSET UPDATA FRONT ADVISER

a new appointment email details { PEOPLE } Ifandyoua have picture to editor@goodreturns.co.nz network plays in ensuring their clients and our customers have access to the right advice and insurance protection. Adrian and his team will also ensure we’re responsive to the changing customer, regulatory and technological landscape.”

Ruari McGregor

Changes at Harbour and Fisher Adrian Riminton

Fidelity appoints distribution officer

A returning New Zealander has been picked for a wider distribution role as Fidelity Life says independent advice remains key.

Fidelity Life has appointed Adrian Riminton to the new role of chief distribution officer.

Riminton will be responsible for driving Fidelity Life’s unified distribution strategy, including retail, group and strategic alliances. He will start his role in October, and report directly to chief executive Nadine Tereora as part of the firm’s senior leadership team.

Tereora says Fidelity Life values the important role of independent financial advice in ensuring Kiwis get access to the insurance protection they need.

“We are committed to advisers continuing to be core to our distribution strategy.

We recognise and value the important role our 2700-strong independent adviser

Grant Kemble

Complectus boss signs off

Complectus chief executive Grant Kemble has left the business.

In May, when plans were revealed to sell the trustee company to Australian buyers, it was announced that Kemble would stay with it.

But the sale fell through and it is understood that he has now left, after less than two years in the role.

That leaves founder Andrew Barnes to take up a more hands-on role.

Kemble was previously a partner at Russell McVeagh and is a director of Airways New Zealand.

Barnes has been approached for comment.

NOW IS THE TIME! If you are thinking of buying, selling or improving your practice, the middle of winter is the best time to take action.

Harbour Asset Management has pointed Ruari McGregor as its new chief operating officer to replace Jody Kaye.

McGregor joins Harbour from Trustees Executors, where he has spent nine years in various management roles including Senior Client Relationship Manager and Business Projects and Change Manager.

From August 29th, McGregor will lead Harbour's operational and technological systems, managing legal and regulatory requirements and contributing to organisational strategy and long-term goals.

"We look forward to him coming on board, and helping us achieve operational excellence for our clients," managing director Andrew Bascand said.

Kaye said it was a big decision to leave the firm, to take up a new role at Fisher Funds. He will take over as Fisher’s chief financial officer later this month.

Kaye said he had been with Harbour since it was founded. “I am proud of what we have achieved over 7.5 years. I am very excited about the opportunity with Fisher Funds as I have a lot of respect for their people and what they have achieved. They have a strong commitment to client focus and on delivering great outcomes for their clients. I am looking forward to being a part of this.”

Fisher Funds’ current CFO Glenn Ashwell is reported to be “taking a career break”.

He joined Fisher Funds in 2003.

Mike Moore

021 974 231

Maree Porter

021 874 231

maree@mikemoore.co.nz

CONTACT US TODAY! www.mikemooremarketing.co.nz

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UP FRONT

{ NEWS from NEW ZEALAND }

Advisers told: Your voice will be heard First-hand adviser input will be critical for the working group tasked with developing the new code of conduct for financial advisers, its chair, Angus DaleJones, says.

There is only one AFA on the working group, Rebecca Vanderbom, head of financial advice delivery and service at Milford Asset Management.

“I can tell you that the various adviser bodies are not happy with that absence," IFA chief executive Fred Dodds said.

"Two of the three primary objectives of the review were that consumers can access the advice and assistance they need and advice improves consumer

financial outcomes. I thought those advice objections were a proxy for having some financial advice acumen on the working group and we are going to do something about that."

Dale-Jones said the legislation required his group to consult, including specifically with any person it reasonably considered to be representative of the financial advice industry.

Once it started work on August 1, it would move quickly to start that process, he said, and getting adviser input would be critical.

“The legislation requires us to take into account the availability and quality of

KiwiSaver could better service low-income earners

Financial advisers play an important role in helping people on lower incomes navigate retirement savings, AMP’s general manager in New Zealand says.

Blair Vernon said KiwiSaver could be improved to better cater for those who were not high earners.

He said he regularly spoke to people earning about $50,000 or less a year, who were facing enough of a financial challenge that it was not feasible to save for retirement.

“We need to be realistic about that.”

He said thought should also be given to whether the member tax credit should be reduced for higher-income earners, to allow more of that incentive

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money to be given to low-income KiwiSaver members. Each KiwiSaver member can receive up to $521 a year from the Government if they contribute $1,042. The Government used to match it dollar-for-dollar.

"The changes made to water down the member tax credit have a much bigger impact on people with that level of earning," Vernon said.

He said sharing out the incentives in favour of low-income earners would make KiwiSaver more compelling for those earning less and would have an impact on their longterm outcomes.

He said there was also a challenge among middle-income earners who could afford to save but chose not to because they prioritised other spending. "They're making a conscious choice to consumer today versus looking after tomorrow.

Sometimes they're not thinking all that through."

That was where advisers could help, he said.

“Advice is code for a bit of coaching. Sometime you need that to get perspective."

financial advice. So we have a balancing act to do. Ultimately the code has a part to play in creating an environment where customers choose to access useful advice, whether from an adviser, a business, a digital process or part digital process. We need advisers' ideas and suggestions to help get that right, so please participate in consultation.”

He said the code that the working group drafted would be different from that AFAs currently work under.

“The new code has a wider context than the current code. It applies to many more advisers. Also, it extends beyond being a code for AFAs to now cover professional conduct in respect of all financial advice services - moving from an occupational code to a service one. So the consultation process is an opportunity for businesses (large and small) to demonstrate how they ensure good conduct in their advice service as a whole: how they combine their organisational capabilities with the advisers' conduct and competence to attain appropriate customer outcomes."

Younger investors rate responsible investment Talking about responsible investment is one way for financial advisers to engage younger clients, one fund manager says.

Fisher Funds operates a responsible investment policy across its equities and fixed interest investments, and recently added a ban on thermal coal producers.

Director Frank Jasper said there was a groundswell of public interest in responsible investment.

“KiwiSaver has brought a different demographic into the investment market over the last decade,” he said.

"Younger people are very engaged in this sort of thing, they want to do the right thing, invest their money and get good returns but they also want to do it in a way they feel comfortable with. It’s consistent with how they are making other decisions in life."

He said it was noticeable that clients that were traditionally sometimes hard to engage with in on investment were more interested in ESG discussions.

“When you talk about investing for retirement their eyes glaze over but with this they are interested and engaged.

It’s an entree into the world of investing.”

He said that was a point that Fisher Funds highlighted to investment advisers.

UP FRONT

{ NEWS from AUSTRALIA }

Advisers reject accountants’ advice model Australia’s Financial Planning Association is opposed to a move that would mean accountants would offer financial advice with a fee-for-service model.

The Accounting Professional and Ethical Standards Board took submissions on its consultation paper.

The FPA said accountants’ services were more transactional and limited to tax matters, whereas financial planners could manage millions of dollars for their clients, meaning more time was needed to serve the client.

“Financial planners need to have the ability to charge an appropriate fee commensurate to the risk, size and complexity of the client,” the submission said.

It went on to state that an accounting fee-for-service model was not transferrable to financial planning, and recommended a separate consultation should pinpoint the repercussions for the industry and consumers by detailing how a fee-for-service only policy would work in practice.

NAB apologises again NAB, parent of BNZ in New Zealand, has apologised for a wealth management mistake in which at least 150,000 customers were not told advisers were cross-selling the bank’s own products.

ASIC said NAB’s financial advisers were telling customers to buy products that were ultimately owned by the parent bank, such as products branded by wealth giant MLC. Customers were issued statements of advice and financial services guides that ASIC said failed to fully disclose

the connection between the financial adviser, the financial advice licensee and the products that the adviser was recommending to the customer.

NAB has agreed to send customers who invested in MLC-branded products a corrective disclosure when they log into their accounts “for a three-month period”. NAB has also agreed to write to the remainder of affected customers currently invested in related products, explicitly acknowledging the issue and providing corrective disclosure.

New rules not enough The government’s financial advice overhaul is still yet to go far enough to protect consumers from poor guidance in the life ¬insurance industry, Industry Super Australia and the Australian Institute of Superannuation Trustees says, ISA and AIST, which represent the not-for-profit superannuation industry, are calling for the government to extend the ban on commissions from the

life insurance industry to the general insurance industry.

They also want advisers to have to contact clients once every two years to an annual obligation.

While there were concerns the Future of Financial Advice reforms could push advisers to exit the market, the number of advisers in Australia has risen to more than 25,000 by the end of last year, from 18,000 in mid-2009.

Retirees scrimp on drawdown

Retirees are drawing down small annual amounts on their superannuation, despite a myth that they are frivolous with their savings, new research shows.

How Australia Saves, a joint paper

by Vanguard and Sunsuper, found that most retirees were drawing down their assets at a rate of 6% per year.

Vanguard senior manager of superannuation policy Paul Murphy said the results dispelled the idea that retirees had a preference for using their super as a lump sum or withdrawing large amounts annually.

Advisers warned of hackers Australian financial advisers are being told to be wary of the risk posed by hackers.

Midwinter managing director Julian Plummer said a major cybersecurity event could have a catastrophic effect on their businesses.

“I’ve been quizzing large advice practices about the make-up of their directors and typically they consist of finance professionals to direct on corporate management processes – cybersecurity professionals are sitting at the kids table, but the global security situation demands it is time for these guys to actually have a say in how the company is run,” he said.

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FATHER OF KIWISAVER PLEASED WITH CREATION Sir Michael Cullen dreamed up the scheme on a summer break.

Ten years on, he says there is still room for improvement.

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ormer finance minister Sir Michael Cullen says KiwiSaver is still one the major things he is proud of from his time in parliament.

The retirement savings scheme, which now has more than 2.7 million members and more than $40 billion under management, was his idea, dreamt up over a summer holiday break more than a decade ago.

“I came back in January to get Treasury to do the costings around some of the options for incentives for the scheme,” he remembers. “Projections and likely numbers.

The basic principle is one I worked on over that period.”

The plan was hatched because New Zealand was going through an economic period not dissimilar to the present environment. Growth was led by consumption and migration and house prices were soaring. There was concern that New Zealanders were investing too heavily in property at the expense of other asset classes, there was a need to encourage more saving, and capital markets were crying out for more liquidity.

Cullen said the scheme was seen as a way to create more security for retiring New Zealanders, and some additional income, without requiring further tax

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It benefits those who were better off, not the lower to middle-income earners who were the target of KiwiSaver. It would have been better if we had kept the starting point at 18 or first entry into the full-time labour market.

increases. “It was just before Baby Boomers started retiring and the cost of superannuation was going to increase significantly.”

Ten years on, most politicians publicly support the scheme.

But former prime minister John Key referred to it at the time as “communism by stealth” and other opposition politicians openly lobbied against it.

“That was somewhat over the top,” Cullen says. “Considering the scheme invests in private sector investment funds.”

When it was launched on July 1, 2007, no one expected the scheme to be as popular as it has been, he says. “The number of members is very much larger than we ever expected at the time we set it up.”

Critics argue the scheme has merely moved existing savings and Cullen says, to some extent, that is true. “It led to some decline in private sector employer savings schemes but they were already contracting signficantly.”

It has led to more liquid capital markets, he says, and now that the bigger schemes are achieving signficant scale, they can contemplate direct equity investment in the New Zealand market. “That’s exactly the path the New Zealand Super Fund has followed

ASSET REGULATION PROFILE DATA ADVISER

over the last 15 years.”

But that does not mean the scheme is without problems.

Cullen says some issues remain.

“The current government has fiddled around the edges,” he says. “They’ve reduced its value by taxing employer contributions.”

That change was introduced in 2012.

Cullen says many members did not realise how much of a potential impact it could have on their final savings total.

“It has a significant impact on net returns.

I would like to see tax withdrawn on employer contributions. People don’t see it as much, they don’t see how much that has cost them.”

With the benefit of hindsight, he would have done some things differently, too.

Many wealthy parents took the opportunity to sign up their kids to KiwiSaver purely to get the now-axed $1000 kickstart, he says.

“It benefits those who were better off, not the lower to middle-income earners who were the target of KiwiSaver. It would have been better if we had kept the starting point at 18 or first entry into the full-time labour market.”

He also floated the idea, never picked up, of using KiwiSaver contributions in place of the official cash rate, to moderate consumption. Cullen was interested in the possibility of following Singapore’s lead with a variable employee contribution rate, linked to an inflation target.

In Singapore, it can move to anything up to 30% of a person’s gross wage when the heat needs to be taken out of the economy.

Cullen says while Singapore is a low-tax country, giving more room to move, in New Zealand it might have been possible to use an increase in KiwiSaver contribution rates from 4% to 5%, or from 4% to 3%, to affect consumption and take the heat off interest rates.

Cullen said, whereas interest rates redistribution money across sections of the population – to predominantly elderly savers when they are high, for example – a variable contribution rate allowed people to retain the benefits of their own money. “When the contribution rate goes up, it’s still you rmoney and it’s still going into your scheme.”

He said the time was probably right to make KiwiSaver compulsory and to increase contribution rates. “It’s not a decision that’s a no-brainer,” he said. “There are arguments on both sides.”

But he said there was a risk, with so many people part of KiwiSaver, that those who were not involved were those who could least afford to be left out.

It would also be important to conduct research into why a significant number of KiwiSaver members were contributing less than they should, he said. “Not just people taking contribution holidays.

There is another significant number who aren’t contributing at full rates. We need to know a good deal more about the reasons for that before we think about the solutions.”

More competition in the market should deliver better outcomes for members, Cullen says.

“New entrants into the market, like Simplicity, tend to drive down fees and increase net returns over time. We are still seeing a maturing scheme and there is room for the majority of these fees to go down.

There’s nothing like more competition from low-cost providers like Simplicity to put pressure on the big players.”

While Cullen says he rates the scheme highly and among his most important achievements in his time in politics, he is not a member of the scheme himself.

“By the time it was set up I was already 60 and on a high income, with a substantial defined benefit superannuation scheme.

I had no need of futher assistance from government by the way of incentives. A lot of people on my income at the time have joined but that wasn’t the market. It was for people on below average to two times the average income.”

Cullen recently joined the board of Retirement Income Group, which has developed the country’s first variable annuity product. A variable annuity is a financial product that converts an investor’s retirement savings into a regular income that is insured to last their lifetime.

Cullen said it was important to offer KiwiSaver members a way to make their income last through retirement.

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KiwiSaver Turns Providers say the scheme has been a success but there is still much to work on.

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LEAD

HOW WELL DO YOU THINK KIWISAVER HAS PERFORMED OVER ITS FIRST 10 YEARS?

Ana-Marie Lockyer: I try to think about what score I’d give on a school report and I kind of go B+. What are the highlights?

I think participation. We’ve got 2.8 million members, we’ve got $41 billion in funds.

Over the last five years, those members in general have put 40% of the money in and someone else has put in the other 60%, be that the government, employers or through returns. That’s a pretty good investment for people over the last 10 years. The other thing I see as a highlight is the centralised processing. From a New Zealand perspective, it’s something that is new. Where are the challenges? For me, too many people are in it but not making the right decisions to make sure that KiwiSaver gives them the right outcome in their retirement.

Henry Tongue: The big question is that we’re not saving enough. We need to save more. So, how do we do that? It’s through education, basically. We need to educate our members and give them options and the tools to save for their retirement.

Joe Bishop: I think it’s fantastic when you talk to members and they see a nest egg, oftentimes amounts that they’ve never saved before, never had before. That’s really starting to get people’s attention and I think that’s fantastic. Helping people into their first home as well as the most important part, of course, which is putting a context of retirement income on to the table. The “workons”, to echo Henry’s point, is engagement levels. The full sense of security that some members have, who think that just because they’re in KiwiSaver, that means they are going to be set up for retirement - so, not actually making an active decision.

What we can do as providers is help build that engagement, give them the right tools and help them make better-informed decisions.

Sam Stubbs: I think there are a couple of A+s and a couple of D-s. The A+s are for the government really, in keeping KiwiSaver front and centre as a savings vehicle and actually broadly encouraging it; I mean, it writes out $1 billion a year in subsidies. It deserves an A+, too, for not tinkering with it too much and for not making it a heavily politicised vehicle, which can happen when you get $40 billion of people’s money involved.

There are a couple of D-s. One is not creating a forward-looking enough message for people about their need to save, not increasing contribution rates or giving any idea that they would want to do that. I think that’s an issue. The other issue is not being as front and centre about encouraging competition as they might.

A reasonable amount of things about KiwiSaver are still relatively obscure and obfuscated and the regulator could probably move a little bit more aggressively on that.

Overall, though, it’s amazing.

This is so far ahead of anyone’s projections of what it would be 10 years on. It’s been an unmitigated success. When you do something that successful, that quickly, it’s never going to be perfect, is it?

Therese Singleton: I think administratively, it’s been set up really well and very smartly.

I think the concept of the default fund being so conservative has really played out well in the short-term, in terms of the market volatility over the last 10 years. Whether or not that’s going to stand people in good stead in the long-term is a different issue altogether. I would give it a B+ as well, in terms of the set-up of it. Consumers are very aware of KiwiSaver, even relatively young consumers. Again, the negatives are that there’s a false sense of security, because the level of understanding and education out there is just way too low, in terms of people understanding where they are. The difference between being in a conservative fund versus a pretty aggressive fund will have a huge impact on some of those younger lives at the moment, so there’s a real need to solve that.

And then we’ve got a 42% non-contribution rate. So again, you’ve got that false sense of security. If you’ve got 42% of people who are putting nothing in, they’re not really getting much benefit from KiwiSaver at all.

David Beattie: If you go back relative to expectations 10 years ago, it’s far exceeded what we were expecting in terms of participation and breadth of engagement.

We have hundreds of stories where we look at the advice part of retirement planning and thinking about that. Someone now having a small KiwiSaver balance has been able to have an adviser to engage with them about the whole broad spectrum of financial advice. It’s not just the fact that they are poorly prepared for retirement, but that their risk position is poor, they’re not covered for income protection insurance, so when they sit down with them, it becomes a great dooropener for conversations that advisers would not have had. People would not have had access to just a couple minutes’ conversation with an adviser about their whole financial package, so I think that’s been a great success as well.

David Boyle: The huge jewel in the crown around KiwiSaver is that it’s in the New Zealand psyche now. I remember the first three years – nobody knew what KiwiSaver was. People were only just starting to talk about it. Ten years on, everyone knows about KiwiSaver, which is great. Don’t underestimate the jewel in the crown being Inland Revenue central sourcer of those. If you cast your mind back – if Kiwisaver wasn’t here, I don’t think we’d have a managed fund business. It would have been nowhere near, if at all. It was dying; advice was dying, retail funds were dying, market and liquidity.

KiwiSaver saved the bacon of the industry in my personal view.

But the numbers of those going on contribution holidays is increasing, as is hardships, which really does my head in. We’re supposedly in an economic

Ana-Marie Lockyer (ANZ)

Henry Tongue (Generate)

Joe Bishop (Kiwi Wealth)

Sam Stubbs (Simplicity)

Therese Singleton (AMP)

David Beattie (Booster)

David Boyle (Commission for Financial Capability)

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environment that is amazingly good, yet hardships as a number is growing, which suggests that perhaps the information is an issue, and those joining are not necessarily being informed well enough to determine whether this is a product that’s suitable for them, depending on the circumstances.

When you’ve got 580,000-odd people not getting member tax credits, and then another 609,000 that haven’t got [the full amount] it means that 1.1 million people are putting in less than $20 a week. That would suggest to me there are some serious issues and it needs to be looked at.

Singleton: Part of the value of KiwiSaver is really the apathy. You’re defaulted in and so therefore you have to do something to default out. To try and get people to change their mindsets, to now increase their contributions or start contributing again is far harder than keeping them in in the first place. It’s not easy to reconnect with people. We’ve had heaps of campaigns that have had some success, but we’re getting a very low rate – maybe 2% uptake from people who are being promoted to, to try and contribute at least enough to get the tax credit.

Lockyer: No matter how you attempt to engage those members, it’s a challenge the world over, which is why those countries where it is not voluntary - and they have set contribution rates, where they have good plans to increase those over time - see more success.

Stubs: I think there’s a fiduciary responsibility issue there though, isn’t there?

There are clients that have been given a default, in particular, so there’s a fiduciary responsibility. The industry will charge $480 million in fees this year. I wonder how much of that is spent on actually proactively contacting members by easier and harder

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"It is not easy engaging with a default member when they come on board."

David Beattie methods, in order to get them to make sensible decisions. It’s easy to say that it’s difficult to contact members and it’s hard to engage, but I believe that we should also be asking ourselves, how hard are we really trying? How much money are we spending on it?

Boyle: People don’t wake up in the morning and go, “I can’t wait to swap my balances in KiwiSaver, I have x amount of dollars saved, let’s put some more money away.” You just don’t do it. There needs to be a number of different levers that everyone constantly has to align with, so that you’re getting this message out. Not just with providers – what we try and do at the Commission is in the media. We’ve got to get the conversation outside the business pages. We need to bring it to life in other areas. I think social media is a really good way.

Bishop: I think that’s going to become absolutely crucial. Where we’re seeing people who are not contributing enough to get their MTC, that’s something we need to address. But people will actually address that themselves if they start to think about how their contributions are going to lead them, if they’re seeing a projection of how that’s going to lead to retirement income. Is that going to meet their expectations in the future? When we frame that debate, when we get people looking at KiwiSaver in terms of retirement income, I think the rest will flow through from there.

Beattie: Having been a default member/

provider now for a couple of years. We’ve learnt a lot of things. It is not easy engaging with a default member once they come on board and one of the frustrating things you might want to just note is that although the IR system is a great central source, the reality is, as a default provider (and I assume the others are in the same boat) 40% of the information we get on default members is rubbish. You can’t contact them and that’s really frustrating.

Beattie: We’re only able to contact six out of every 10 we get. And you have to have up to five conversations with these people, they’re not easy even if you’ve got the right contact details. You can’t just make a quick phone call and assume that’s done “Ah, we can’t contact them.” You’ve actually got to put a real effort into doing it.

DO YOU GO BACK TO EVERY DEFAULT CUSTOMER THAT COMES ON BOARD?

Beattie: We do.

Singleton: As do we. We have a free advice service for all the KiwiSaver members.

Lockyer: It is a fiduciary responsibility for all of us. We’ve taken on these members that have been defaulted to us. I think the industry took a long time to get to the point where they were contacting members. I think most providers now try to contact every member as they come in to talk to them. The benefits are fantastic for the member and feedback from when we do speak to members is actually that they make decisions. It may not be that they’re moving fund because they’ve got reasons, but actually they are confirming that they want to stay in that parking lot. I think the biggest challenge is data, and a lot of this is actually employer data. We will obviously start calling members as they come in, but also working through those that you haven’t contacted a number of times, and their employers may have their employer data on, for example, and they may have moved employment. So, it is challenging, but again, the Inland Revenue provides a good service for providers to go back and cleanse the data on an annual basis.

Singleton: I think there’s potentially a part to play for employers with this. We have a whole heap of preferred provider agreements with employers, and when the employer is actively engaged in the conversation with their members, it’s a whole different conversation than if you’re ringing them up and trying to get them to make a decision around their fund.

Boyle: Advice is a big part of your business, Henry, isn’t it, with the contact?

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Tongue: Absolutely. If you can get an employer who sees the value of advice for their employees, you get in there and talk to them. You send an adviser out, you’re speaking to the whole firm at once and you’re sorting all those issues out, so it works.

Boyle: The market is maturing, so the next stage is actually identifying and thinking about how you get your market share and keep it. That means you have to think a lot around what the services are and the added benefits as well. It’s not just the return or how the fund is managed.

Singleton: Young people want to be able to switch on their app.

Stubbs: These are provider issues and we’ve all got a responsibility. If you think about KiwiSaver’s role in society now, we’re in moral hazard territory by this being a voluntary scheme. KiwiSaver is now on the verge of discriminating against the poor, because it’s the poor that don’t understand it, it’s the poor who don’t contribute, who take holidays, and they will suffer as a consequence. If you’re not going to have a compulsory scheme, if you’re not going to have a way to make people save for their retirement, it doesn’t matter how much or how little they know, you do run the risk of KiwiSaver actually making the rich richer and keeping the poor poorer.

Stubbs: The moral hazard there is not conservative versus growth, it’s not contributing or contributing too little. In that way, KiwiSaver is a victim of its own success.

There are a lot of people out there who think, “I’m in KiwiSaver, so I’m okay”, when they have no idea what they’re saving, no idea what they’re doing. It’s become a catch-all phrase for a more comfortable retirement, when actually it’s not.

Boyle: Let’s be really honest, it’s not anywhere near as successful as it should be. Irrespective of fees, returns, investment management, approaches and services; if people aren’t contributing (and there’s a

truckload that aren’t) then we’re doing New Zealanders a disservice.

SHOULD WE AUTO -ENROL EVERYONE?

Bishop: Yes. Tongue: Yes. Lockyer: Yes. Beattie: Yes. Boyle: I’m on the fence with it. I don’t think the numbers stack up. That window has kind of closed.

Singleton: I just don’t see that there’s a huge opportunity left, and I’m not sure it’s worth the debate.

Stubbs: Anything which gets more people into the product. I’m a yes.

Beattie: I don’t disagree with Sam’s comment about the risk of discriminating against the lower socioeconomic groups, but here’s one of the interesting anecdotes that we’ve found. As an experiment, very early on, we had someone in Rotorua who went out and actually sold KiwiSaver to lower socioeconomic groups. For them, it’s been a fantastic outcome, because those people very quickly understood what a Member Tax Credit is all about, as a beneficiary.

The most interesting phone calls I’ve had are from people who are in that group, who have rung us, and me, and asked to make sure that they are maximizing their contribution, their 20 bucks a week. They will crawl over broken glass to make sure they’re putting the 20 bucks in. It’s the higher socioeconomic groups who don’t understand that! They’re not even maximizing that part, so in a sense, the tax break – the way they’ve done that – was an incentive that benefited the lower groups. We’re not seeing them as the problem. If they can just keep putting in $20 a week, however they find it – and they can find it – they’re going to be a whole lot better off than a whole bunch of people who just don’t seem to understand the whole concept.

Lockyer: To a degree. We’ve certainly looked at those who aren’t contributing enough to get their MTC, and the biggest reason for not contributing is affordability.

There are some people who can sacrifice that $20 a week today, but we shouldn’t underestimate the fact that there are some that can’t.

Beattie: You’re talking about people who can’t afford it, but somehow, they are making sure they afford it, because they understand that it’s actually a good sacrifice to make, 20 bucks a week. They’re finding it.

Boyle: I genuinely had this guy ring up and he was grumpy, because he said, “KiwiSaver is only for those that are employed. It’s for rich people.” I said, “Well, how much do you think you can afford?” He said, “I could do $10 a week, but I can’t do that.” I said, “Yeah, you can, and the government will give you $5.” His whole demeanour changed. It’s one of the myths that we found.

SHOULD THE GOVERNMENT PLAY THEIR ROLE IN THAT?

Boyle: It’s probably a fair question. If you think about it - because I’ve been around for a while! - right from the beginning, there was mass awareness. The Inland Revenue promoted KiwiSaver, there was a lot of information to get people cracking, there were TV ads. We’re coming up to 10 years and it’s a question worth considering, but I think now, providers are in a really great position with funds under management.

They’ve gone through a lot of legislative changes that now probably gives a really good platform to do a lot more on improving the comms and com activity with members.

Singleton: The portability is so good between the schemes, in terms of how easy it is for people. It’s a market competition issue. You need to do this stuff to connect with your people.

Stubbs: KiwiSaver has got such a great

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brand name out there now. It defies logic to us not to think that most Kiwis wouldn’t agree with this statement: If you’re working, you should save a little bit for your retirement. You should have to. Not if you want to, you should have to, because that’s a sensible thing to do. It’s just a commonsense statement. KiwiSaver is the vehicle now which has the trust that you can save it in. With residential real estate, one of the reasons for its prominence is that it’s one of the few things they’ve trusted, because our industry has managed to do some nasties to investors. We’re getting to that point now.

Politically, that’s not a difficult thing to say.

It basically makes sense, doesn’t it? If you did that, you would eliminate a lot of this problem, because it is fair.

Singleton: In our annual reports, where you have to disclose what you do in terms of educating members etc, it’s never been followed up or anything like that. There is a requirement and they’re asking what we’re doing, but I think there’s quite a diversity of what different providers are doing and very little challenge as to whether or not it’s enough.

I ASSUME EVERYONE IN HERE WOULD SUPPORT THE PROPOSITION FOR HIGHER CONTRIBUTION RATES?

Boyle: The intention of KiwiSaver is also always to be on top of salary or wages.

We’re seeing a lot of changes in the employment environment. That is supposedly in good faith - you’re agreeing to get contributions as part of your total package and you choose how you want to do it. Psychologically (we’ve seen this very strongly) it’s coming out of your pay and you’re making both employer and employee…. it doesn’t feel right, whether it’s right or wrong. The other thing is that a lot of our workers are moving to more contract environments that don’t fit into the criteria of KiwiSaver at all. In fact, many aren’t even aware that they are signing up and not being eligible to receive KiwiSaver matching contributions. There is some work to be done there, because I believe that is one of the reasons why the numbers of empty contribution rates or people contributing at all is kind of increasing, because of employment changes.

Beattie: The reality is it’s the perfect storm of current settings:Llack of compulsion; a free labour market that is working on a total remuneration package; and lack of education/understanding about the whole long-term saving benefit. It’s not conducive to higher contribution rates for people, when they’ve got a choice of: “Do you want +3% for that?” “Will I get a higher salary as a result? Yes? Then I’m in for that, thanks very much.”

Bishop: Especially when the conversation is very focused on today. “What’s in my hand today?” As opposed to, “What will this actually lead to, in the future?” And understanding what you’re sacrificing.

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"It's become the catch-all phrase for a more comfortable retirement when actually it's not."

Sam Stubbs Or what’s being sacrificed on your behalf by your employer, for instance.

Beattie: Does anyone have any stats on what percentage of employers explicitly acknowledge that? And give a higher salary?

Boyle: I think the EMA came out with something like 25/26%?

Lockyer: I think they said a quarter of employers, but again, I don’t know where that was generated from.

Beattie: So, 75% of them are potentially taking advantage.

Boyle: Possibly.

Tongue: It’s all a contract negotiation.

It’s just how you pitch your contract.

It doesn’t matter whether it’s in or out.

Singleton: The market will regulate it.

I think, going back to the political question, the thing that I find most frustrating with the industry is that there just isn’t enough informed debate. We’re coming up to an election and there’s no debate around retirement savings, hardly. We don’t even know what the other party’s policies are around this. Winston may be the kingmaker, and what’s his policy on it?

Tongue: He has got on his website that he wants compulsion, but it’s one sentence, nothing more.

DISCLOSURE OF FEES IN DOLLAR TERMS, WHICH IS GOING TO HAPPEN. DOES EVERYONE SUPPORT THAT? OR DOES ANYONE NOT SUPPORT IT? Boyle: I’m going to say yes.

Lockyer: Absolutely support it.

Singleton: Yeah.

Stubbs: Terminal value is way the wrong

number to show people. It’s dollars-per-week income you’ll get, because if you show them a terminal number, they think, “Woah, that’s a lot of money!” They won’t think about what that means in terms of dollars per week.

That’s how people think, that’s how national superannuations pay.

Singleton: That’s the whole way the market’s moving. There’s an absolute need - and everybody recognises that – to be able to articulate what people will have at retirement, because that’s part of the challenge with the contribution rates. People can’t make that mix.

Beattie: And represent it in today’s dollar terms.

Bishop: My concern with doing it as a one-off on a statement is how many people look at those statements as a starting point.

Also, there’s no nuance in a statement, so you can’t allow people to adapt for their own circumstances. For somebody who is 20 or 21, they’re actually much more interested in, “What’s the value going to be when I want to buy my first home?” That’s of far more value to them than retirement income. After they’ve bought their first home, then you can change the timeline to retirement income.

Stubbs: There’s nothing too wrong with getting it wrong. If you’re making these predictions, as long as they’re in an acceptable range, it’s better that they know that than not know it, and live in this dream world in which KiwiSaver is going to look after them in retirement.

Bishop: We used the phrase earlier – false sense of security. That’s flowing through quite a lot. People think, “I’m in KiwiSaver, therefore I don’t need to do anything else.”

It’s only when you get into projections, it’s only when you get into showing people the impact tomorrow of the decisions they make today, that people actually start to engage and make those informed decisions.

Stubbs: Can I ask one question about fees disclosure? Around this table there are six providers. Two of us this year will disclose fees, in dollars and cents. Four won’t. Next year, they’ll have to. Ten years on now, we’ve got people consciously deciding not to tell people what they pay in dollars and cents.

Is this really a confidence-inducing move for the industry?

Singleton: The reality is, everyone is moving towards that, but some providers have been around longer than others. You’ve built systems, you’ve built a whole capability off the back of what’s been required.

Stubbs: Yeah, but you have a revenue line, which adds up every dollar you charge every client. Why can’t you tell a client what it is in dollars and cents?

Tongue: How long has it been on Fund Finder for? Pretty much since inception? So, the data has been there.

Lockyer: And it’s available on disclosure statements on a regular basis.

Stubbs: There are three internal registry systems, external registry providers in New Zealand. Everyone else who is big has got their own internal one. If we talk about the government - and consumers wanting to

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have confidence in KiwiSaver - to get to compulsion, I think we’ve got to up our act big time on this.

Singleton: But we’re all completely supportive of the changes.

Stubbs: Yeah, but you’re taking way longer to do it than you could - 16 out of 26 won’t do it this year, when they could have. They’ve actually chosen not to.

Lockyer: I agree with fee disclosure. Fees, by itself, is just one variable within KiwiSaver. I think returns after fees is very important, too.

Singleton: Yeah, absolutely.

Bishop: After fees and tax.

Tongue: It’s the only true measure of comparison.

Stubbs: We’ve just launched a tool on our website today, which will show every provider’s fees in dollars and cents. It’s sad.

Singleton: To be honest with you, we measure our complaints - as do all the providers - very regularly. The vast majority of the complaints we will be getting are around the “after everything” return the consumer is getting. What fund they’re in is critically important in that regard. That’s what people are interested in.

Lockyer: We were talking about long-term outcomes. There’s a number of contributors that fees is one lever, so let’s be really clear; putting one number on a statement ain’t gonna solve the whole problem, whereas we should be giving them more. In terms of the terminal value idea, or whatever we call that, absolutely I agree that is should be something that people can relate to. It’s not a big balance, because what am I going to do?

Hand it over to you to lose?

Singleton: Yeah, it’s too scary.

Lockyer: It’s actually, “What is this income going to give me? And how will that help me make the right decisions?” To work that out, none of us should get hung up on assumptions, because if we go back to what are the important things for New Zealand:

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Are you in KiwiSaver? Have you made the right fund choice? Are you contributing the right amount? Whether I use 4% or 6% for my growth fund, versus Joe, who might use 5% or 7%, is not going to make a big difference to people answering those three questions.

Boyle: But we have a hope for the competition; as a consumer, which I am, I really want to see my provider reward me for the balance I’ve got. Also, as part of: why would I and should I be paying more fees, just because I might have more money than the other industry who’s getting the same return?

Singleton: How is my fund performing?

Boyle: I think providers have got a great way: 1) to show the value of the fees that they’re getting; that’s not just the return, it’s about admin and all your support stuff. But also, I think there has to be – and hopefully it will happen – more innovative ways that providers will reward their KiwiSaver members around returns. It could be by fees or it could be by getting a better investment product, which would be awesome as well.

Let’s look at the bigger picture. But getting fees down is ideally quite a good thing as well, in time. It has to happen.

Tongue: The net returns, after fees and taxes, count. It’s the only true measure. If you look at just fees: say you had a very badly performing fund, with the lowest fee.

Where’s the protection for that consumer?

Bishop: Or something as unsexy as tax.

Depending on the vehicle that someone has invested in, and if they’re in, say, an AUT or something like that, they might be giving back 30 basis points of performance, because of the tax implications. That can have a material impact as well. Those are other considerations.

Tongue: It’s a competitive thing. Net returns, after fees and tax, will create a value proposition for members and they will vote

with their membership. They can move.

Stubbs: That’s true, but if I look at my power bill, my phone bill, my rates bill – which charges me a percentage of the value of my house – every single one of those bills tells me what I pay in dollars and cents. Most of the market isn’t getting that information out. It’s all very well talking about after tax returns, but actually providing a granularity of information, which appeals to a person’s intelligence, is really, really important.

Lockyer: I look at it slightly differently.

When I go to buy a house, or build a house that I’m going to live in for the next 40 years, I shop around for construction companies and I go, “This is what it’s going to cost.” I then go and get references and look at the quality of their build: is it going to last me 40 years? What’s it going to give me over that time? I don’t put it in the same bracket.

Stubbs: But every one of those companies told you what you were paying in dollars and cents. They didn’t say, “We’ll charge you .03% of the value of your house.”

Lockyer: Some did, some didn’t, actually!

To tell the honest truth!

Singleton: It is a factor, but you run a massive risk of doing a disservice to the public by just focusing on fees. It’s just too dangerous.

Lockyer: As balances grow, as providers, we all need to look to pass the scale back to members over time. We’ve given them the ability to make right decisions for themselves.

I know providers are passing back fees – big fees – back to members over time, since KiwiSaver started.

Stubbs: The first point made here was that we have a centralised processing hub on KiwiSaver. It’s one of the lowest cost schemes, and yet we have some of the highest fees in the world. How has that happened? People should ask very legitimate questions. The reason they are not asking the questions about fees is because they don’t

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know what they are paying. More than 50% of the market doesn’t tell their members what they paid in dollars and cents in fees last year.

Lockyer: But everyone knows what they are paying, because everyone has a product disclosure statement and that states it very clearly.

Beattie: You’re assuming the KiwiSaver market should be commoditized.

Stubbs: No, absolutely not.

Beattie: The comparisons with the power and utility bills – that’s a commodity. I hope that the KiwiSaver industry doesn’t reach a point where the whole thing is too commoditised.

Stubbs: It won’t, but most providers are charging pretty rich fees now for what looks like a commodity product to most of the consumers. They don’t know. These are some of the highest fees in the world. $480 million of revenue to KiwiSaver.

Tongue: Super Ratings came out last year and said Australia is higher than us.

Stubbs: It is! It’s almost the highest in the world. I said amongst the highest in the world. Australia is a very poor example to use for justifying fees. $480 million of fees this year.

Singleton: As funds get bigger, the market will dictate that prices will have to be reduced.

Boyle: The irony is that when we started our schemes as competitors, we looked at where Australia was and man, that was 2.25% up to 3%. And there is a 1% trail for advisers and they were hugely expensive.

And they were up there for 20 odd years.

That’s when my super came in at 90 basis points and that’s what we started at.

Stubbs: That’s true David, but the Aussie industry revenue last year – this was just reported last week – was $31 billion in fees and $280 billion since inception. In New Zealand, it’s $480 million, and the actual cost of manufacture – all round the table, we all know what our cost of doing business is – is nothing like that. It is super profitable and

"In the last five years, our fees have gone down about 20%."

Ana-Marie Lockyer there’s not a dollar of capital associated with it. There’s transfer pricing that goes on in recouping bank branch costs and so on, but it is a massively lucrative industry. Ten years on now, $40 billion into it, how many fee cuts have we had?

Lockyer: In the last five years, our fees have gone down about 20%.

Singleton: And ours are about the same as well, because on the last pitch we all reduced our fees.

WHAT’S ONE THING YOU’D LIKE TO SEE ACHIEVED IN THE NEXT 12 MONTHS?

Beattie: We’ve got to make a lot of progress with linking the accumulation phase with the decumulation phase much better.

We’re certainly very active in that space, and I think it’s important the moment there’s far too much of what you call a terminal number.

I don’t use that terminology. I think it’s just a journey of continuum that goes right through

a process of accumulating and decumulating, and it’s managed all the way through. Trying to get that answer, as opposed to, “Oh, that’s 65, cash it up.”

Singleton: I would like to see an awful lot more public debate, political debate through the election period and also just better media coverage of retirement saving in New Zealand. I think that would be a significant improvement.

Stubbs: In a year’s time, I’d like to find out that the new government - whoever they are – have made KiwiSaver compulsory and that if you earn, you need to save. And a 10-year visibility on where contributions will go to, so that everybody can plan.

Bishop: I think the key for the next 12 months is the exemption for the FAA to facilitate roboadvice, and opening up personalised advice for members through digital channels. I think that is going to be a huge driver of engagement for members.

Tongue: It’s all about education and engagement. Digital is one way, there’s lots of other ways. I think everybody is working on it in the background, and you’re going to see some changes in the next 12 months.

Lockyer: For me, it’s engagement for members in terms of three things: being in KiwiSaver, making your fund choice actively and checking your contribution rates. We can measure that easily in 12 months, because we can look at those changes. The other one for me is let’s be really clear about hardships and how hardships work within KiwiSaver.

Should KiwiSaver be one of the first ports of call for that, given it’s a retirement savings product? The unfortunate people who are taking money up today need those balances in the future.

Boyle: The last 10 years - and also the changes that the FMCA have made around advice – should now give advisers a platform to focus on the customer genuinely, and invest in that area. If we see that, the measurement is exactly what Ana said; contribution rates increase, MTCs that the government’s free money, getting more of it.

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The business of

KiwiSaver Is the retirement savings scheme the saviour of investment advice, or a lot of work for little reward?

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ASSET REGULATION KiwiSaver DATA ADVISER

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lack of financial advice may be standing in the way of many KiwiSaver members getting the best possible result from the scheme – but it is not clear how best to get it to them.

Advice for KiwiSaver members is something the Financial Markets Authority has voiced concern over - its research showed just three in 1000 sales and transfers were made with advice, and the Government sought to improve with its rewrite of the Financial Advisers Act. But on the ground, advisers say, even with 2.7 million members and more than $40 billion under management, it is hard to make a living offering KiwiSaver advice.

Providers that pay commission – and the number is limited – usually offer between 0.2% and 0.25%. The average KiwiSaver member’s balance is now about $15,000, so an adviser could expect to pull in about $38 a year.

“You can build it up if you do a lot of it,” said finanical adviser Liz Koh. “But one of the issues is you have to do a lot of work to bring the business in.”

There was also an ongoing education requirement to help the client make sure they were in the right fund, and record the advice processes around that, she said.

But David Boyle, who was head of KiwiSaver for ING when the scheme launched and is now at the Commission for Financial Capability, said there was a group of advisers who were making it work.

They had started up relationships with employers and taken on their employees as clients. They were able to build a good core business from that work, he said.

“A good number of advisers looked at is as a long-term opportunity and a good way to get started.”

He said as balances grew and more people reached the stage where they wanted to get an income from their KiwiSaver money, there would be more need for advice. It was a good “door-opener” to introduce people to the concept of contributing small amounts over time to a growing savings pot, he said.

“The ironic thing is that I spoke to a group of financial advisers a few months ago, and one of them said that KiwiSaver is killing the advice industry. Seriously? I asked the question, ‘Why?’ ‘Because we can’t make anything out of it’. That’s the issue. Working with employers is where advisers can share a lot of value. If they do the right thing, then they’ll grow a business, based on a range of services, not just KiwiSaver.”

Fred Dodds, chief executive of the IFA, agreed. “I do think KiwiSaver has been good for those advisers who have been prepared to do the work.”

He said his first encounter with KiwiSaver was while working with Tower, which was an early default provider. He said whether

I do think KiwiSaver has been good for advisers who have been prepared to do the work.

Fred Dodds

advisers were working in insurance or investment, it made sense to have KiwiSaver as part of the conversation.

“Why on earth would you not have them as a KiwiSaver client? It’s a locked-in financial services product that will live with people for decades. Forget the trail on the money, that might vanish as years go down the track, but it’s one of the main contact points [to check in regularly with clients] how good is that?”

WHAT ARE THE OPTIONS?

Not all KiwiSaver providers deal with independent advisers, and of those that do, not all pay a commission.

Default provider Booster has a clear advice focus in its proposition. Each member is given access to personalised financial advice from an adviser, and chief executive David Beattie said that model was paying off for clients and advisers.

“We’ve got hundreds and hundreds of cases of the successful financial advisers who don’t see it is a stand-alone, when they start taking

the holistic approach.

“We get default members in and we have a conversation with them and a number of them say, ‘Yes, I wouldn’t mind talking to an adviser’. We give them the lead, they’ve got nothing in their account, but the advisers who get it go, ‘Oh, don’t worry about that. Gift them to me. And if they’re nearby, next block over or whatever, I’ll go and visit them because I’m confident I’ll unearth all sorts of things’.

They’ve got $100,000 on deposit or the bank, that they’ve been sitting on for 10 years which shouldn’t be sitting there.”

He said his advice model was the only way that many clients would ever speak to an adviser.

“Someone with $20,000 in KiwiSaver is paying $50-$100 – the adviser is receiving $50-$100 per annum. That is, in our view, for a good adviser, some of the best value for money you’re ever going to get, because they weren’t receiving that.

“If you go through KiwiSaver, the adviser can say, ‘I’m happy to take the holistic approach.

I’m receiving a little bit. It’s a reasonable fee for some advice. I’m happy to engage with you. The reality is, you’re getting a bargain here, because I’m available 24/7. You may not need me for a couple of years, but when you do, we’ll sit down for an hour and we’re not going to charge you any extra. You’re just accumulating all that stuff over the years.’ It’s a model that works. Without that, they wouldn’t engage with these people.”

ANZ is the only one of the big four banks that distributes its KiwiSaver product through advisers. To work with ANZ, advisers must hold a distributor agreement, complete product accreditations on the products they will promote and recommend, and regularly meet business development managers for training.

The bank pays between 0.2% and 0.25% commission. “Approximately 65% of our KiwiSaver members in the OneAnswer KiwiSaver Fund, marketed in the adviser channel, are adviser-managed. We have two other KiwiSaver schemes,” said Ana-Marie Lockyer, general manager of wealth products.

NZFunds pays 0.2% commission to advisers who must complete a training and induction programme before they start offering its scheme to clients. “In certain circumstances we pay advisers to complete planning work on behalf of clients,” said chief executive Richard James.

He estimated that more than 90% of NZFunds’ FUM was adviser-managed.

AMP is also distributed via advisers, and pays 0.2% to salaried and self-employed advisers, except when clients are in the default fund, when no commission is paid. “All of our AMP KiwiSaver Scheme members have access to advice through an adviser, either directly through an employed adviser, or through a self-employed adviser. In terms of FUM, we manage $2.6 billion directly through

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KiwiSaver

One of the issues is you have to do a lot of work to bring the business in.

Liz Koh our employed advisers and $2 billion is managed through self-employed advisers,” a spokesman said.

New provider Simplicity deals through AFAs but does not pay commission.

Less than 5% of its FUM is advisermanaged. “We support advisers who charge for their services and are not commissionbased. We are focussed on lowering the cost of products so that advisers have room to charge a fee for service. We have just launched a reporting service for advisers that allows them to view their client investments and download the data for reporting and analysis purposes,” said founder Sam Stubbs.

Milford Asset Management also distributes KiwiSaver via advisers but does not pay for transfers or offer a trail commission. “We do understand the pay back for an adviser with low balance but growing KiwiSaver accounts is a challenge as it is hard to charge advice fees, but this will change as balances grow,”

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said head of wealth management and advice Murray Harris.

“I know some advisers are doing KiwiSaver as a sort of ‘loss leader’, in the hope that when those accounts become large nearer to retirement those members will become very good advice clients, or if the adviser does a good job with their KiwiSaver choice, the client will give them other investment business as well where advice fees can be charged.”

SuperLife said advisers often helped their clients set up an account and the advisers were then, with permission, given access to the online platform. It, too, does not pay commission or trail.

HOW VIABLE IS KIWISAVER FOR ADVISERS?

AMP’s general manager of advice and sales Therese Singleton said the advice proposition was improving.

“We’ve put a lot of effort into making it

KiwiSaver

easier for them to cross-sell into their existing client base for KiwiSaver, to be frank, because there’s very little in it for them,” she said.

“You can’t make a living out of selling KiwiSaver. It’s that holistic approach to advice, to your customers. It’s what this is driving them towards. When you think of the demographics of the financial advisers in the country at the moment - the size of their businesses and the future trajectory for growth in their businesses – KiwiSaver has a lot to play in that.

“So, a lot of them are getting more engaged in that conversation, around the fact that their demographics of their traditional book - which is probably a risk book, let’s be honest – is aging and falling off. The growth and the new younger people are likely to come in through KiwiSaver option. As those balances get larger, they’re getting more remuneration off the back of it. So, we’re seeing a change over the last two years in that regard.”

Harris said advisers had shown little interest in working with Milford on KiwiSaver.

“I think most advisers selling KiwiSaver are somehow aligned to a bank, life company or other default provider. Maybe also the fact that we don’t pay for transfers and we do not pay trail on our funds has been a factor. However as that old commission model is changing, as balances increase and members begin to focus more on after fee returns they will begin to seek more advice around being in the right fund. That may open up more opportunity to provide advice and perhaps to charge a time in attendance fee or similar rather than trails and commissions.”

He said KiwiSaver should create more opportunities as time went by. “With $40b invested today which is forecast by Treasury to be $70b by 2020, today’s KiwiSaver members, especially the young ones, no matter how modest, will be a rich vein of new advice clients and business for advisers in the future. Whilst the focus now is on

We’ve put a lot of effort into making it easier for them to cross-sell into their existing client base for KiwiSaver, to be frank, because there’s very little in it for them.

Therese Singleton

accumulation of savings, it will soon turn to decumulation. We need to ensure KiwiSaver members don’t blow their next eggs on holidays, boats and cars. They will need plenty of advice on how to responsibly consume their savings over the rest of their lifetime in retirement. That is when the adviser will get their pay-back.”

But Koh said advisers who were hoping to put in hard work now for a payoff in future might be disappointed. Many people opted to leave their money in KiwiSaver when they retired, she said.

"There are some advisers who say ‘take your money out and give it to me to invest’, so they can make fees out of them but I have an ethical problem with that. Some people, especially if their balances are small, are better to leave it in KiwiSaver.”

OR LEAVE IT TO PROVIDERS?

For some people, speaking to an adviser is not something that comes naturally. Lockyer said ANZ recently offered 3000 of its default KiwiSaver members an appointment with an independent financial adviser and received fewer than 10 responses from people who were interested.

“It’s not a huge number. And this is free advice, remember. There is no cost to speak with a financial adviser to do this.”

Joe Bishop, of Kiwi Wealth, said some of his members had no desire to do so, either.

“It’s something that’s intimidating to them, they’ve got no model for that. So, their parents never really spoke to an adviser, their siblings have never spoken to an adviser; they’ve got no model for that, it doesn’t come naturally to them. They’re not necessarily looking to speak to somebody. So, we say, ‘Right, how do you reach these people?’ We’ve found that digital is possibly the way forward. It’s providing people with the tools and letting people start the journey themselves.”

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ASSET REGULATION DATA ADVISER

Understanding

AML It's audit time again for many reporting entities, writes Barry Read.

T

his year we are busy completing AML/CFT independent audits, as it is four years since the legislation came in requiring all AML/CFT reporting entities to complete two-yearly audits.

Financial advisers who provide services that include category one products are caught by the act as reporting entities for AML/CFT. This means they must have completed a risk assessment and developed a AML/CFT programme with policies, procedures and controls to manage the identified risks.

In our experience, most financial advisers are not handling client monies when offering advice services. The majority are using product or service providers who handle the actual transactions. These product and service providers are also reporting entities

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who have completed risk assessments and put in place programmes which usually have client due diligence requirements which the advisers must complete so clients can transact.

This raises the question are we doubling up? I think we are and there are two possible solutions to this issue.

Product and service providers could make all advisers who represent their products agents for AML/CFT. This is allowed for in the AML/CFT regulations, but very few providers have taken up this option. If all product and service providers did this, then most advisers wouldn’t need to be reporting entities.

The other option would be for the FMA to recommend changes to the AML/CFT regulations which state that only advice entities who handle client monies directly be reporting entities but add that all financial advisers have obligations to follow all AML/

CFT requirements for providers who are reporting entitles and they must report any suspicious transactions.

In our opinion adopting either of these solutions would save financial advisers a whole lot of time effort and money without any increase in ML/FT risk.

Having completed hundreds of independent audits for advice businesses we have seen some common issues that crop up during the audits. ➤ Entities not reviewing the risk assessment or programme, at least annually. ➤ Vetting for new staff not always completed. ➤ Staff training on AML/CFT not being undertaken. ➤ Entities not really understanding their obligations for suspicious transaction reporting.

REGULATION

Product and service providers could make all advisers who represent their products agents for AML/CFT.

The first two are pretty simple fixes, for example we recommend that entities complete an annual review of their risk assessment and program in August when completing the FMA annual AML/CFT report. Vetting new staff isn’t difficult these days and can be completed by recruiters.

Staff training requires a bit more planning.

Because there aren’t many changes to the products and services for most advice businesses from year to year, what training would be suitable?

We recommend that the compliance officer undertakes formal training each year. This might be online courses provided

by AML/CFT Solutions or other training providers or ask the FMA or Financial Intelligence Unit (FIU) to provide a training update for the team. Also, most providers do updates and training on their services

and AML/CFT requirements. The compliance officer should then undertake at least one annual up date for the team.

Suspicious transaction reporting is probably the least-understood requirement.

Adviser businesses usually state that they meet the client, and therefore know them, and that they ask about the source of funds and they get transaction reports from product and service providers and have seen nothing suspicious.

So, what would a suspicious transaction look like for an advice business and what would happen if you did report it?

The FIU provides suspicious transaction guidelines which explain what they are looking for from suspicious transaction reporting and what happens to it.

Most people think that it relates to terrorism financing and laundering drug money, but the fact is it covers a range of criminal activities which are going on in NZ. Entities are required to report suspicious transactions when they have formed a suspicion based on reasonable grounds that a transaction could be linked to: ➤ Money laundering ➤ Terrorist financing ➤ The misuse of drugs ➤ Criminal proceeds ➤ A serious offence punishable by five years of more (Crimes Act) Some common indicators of suspicious activities that could relate to financial advice transactions are:

➤ Attempting to conceal or hide funds (cash jobs, tax evasion) ➤ Significant or frequent transactions that are unexpected ➤ Ambiguous or inconsistent explanation of source of funds or income streams ➤ Reluctance to provide proof or complete due diligence requirements ➤ Unusual changes in contact details. ➤ Transaction from certain high-risk jurisdictions For example, if a client wants to invest monies but stops when the process gets to the customer’s due diligence requirements, that could be considered suspicious and likely should be reported.

Also, if a client wants to deposit cash into an account and state that it is from cash jobs, well that’s tax evasion and you can use the STR process to report it.

So, what happens if you do report and suspicious transaction to the FIU? Firstly, they don’t then send a policeman around to the person’s house and state that “your adviser has reported you”. In fact, even if action is taken against a suspected criminal it is likely they will never know that the report came from you.

What actually happens to the report is that the report is assessed by the Intelligence audit team and they will use other intelligence to determine if any action is required. They also cross-reference with other government departments databases to see if there are any other risk factors.

In most cases there may be no action taken, but the information might help in the future when cross referenced with other reports and information.

The real key is to know your clients well and have your eyes open for any suspicious activities or behaviour, and if you aren’t sure, report it. If you are wrong about your suspicions at least let the professionals decide that you were wrong.

If you have any questions about AML/ CFT requirements for your advice business feel free to give us a call and talk to one of our experts.

Barry Read runs Independent Development Solutions (IDS), specialising in helping advisers meet their compliance requirements.

027

Investment

{

}

Raising Inflation Targets?

By Christian Hawkesby, Head of Fixed Interest & Economics

I

n a surprise to financial markets, Janet Yellen recently acknowledged that the debate over whether to raise inflation targets is “one of the most important questions facing monetary policy”, and encouraged further research.

While we still believe there is a low chance of the US Fed’s inflation target actually being lifted, the implications of this tail-risk are complex and far-retching, for both economies, financial markets and investors.

THE RATIONALE FOR RAISING INFLATION TARGETS

There are valid arguments for central banks to raise their inflation targets, in light of experience over the past 25 years of central banking.

The main idea is that raising inflation targets would also lift the level of neutral interest rates, as investors would seek to

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be compensated for higher inflation. This in turn, would mean that central banks would have more bandwidth to cut official interest rates to stimulate the economy when the next recession comes around. One of the key lessons of the Global Financial Crisis (GFC) was that, with 2% inflation targets, the zero-bound for nominal interest rates ended up restricting central banks in the US, UK and Europe much more quickly than expected. With no room left to cut interest rates, they were forced to revert to unfamiliar and untested tools like quantitative easing. While New Zealand and Australia avoided this predicament, at 1.75% and 1.50% respectively, official interest rates are much lower than ever imagined pre-GFC. This idea to raise inflation targets by a modest amount is not new. It was first floated in 2010 in the immediate aftermath of the GFC by Oliver Blanchard, the former IMF Chief Economist. However, until recently it has been largely ignored as a theoretical distraction, for a couple of reasons.

First, central bankers in the US, UK and Europe have been much more focused on the immediate practical challenge of navigating their economies out of the post-GFC Great Recession. Revisiting the arguments for where to set the inflation target did not seem like the top priority.

Second, central banks were having enough problems even achieving their 2% inflation targets. So lifting inflation targets to an even more challenging 3 to 4% may have risked undermining their credibility.

THE CURRENT STATE OF DEBATE

For a number of years since the GFC, policy

makers at the US Fed have been downplaying the debate about raising inflation targets, so it was a surprise when in response to questioning Janet Yellen appeared more open to considering the issue.

There are a couple of things that may explain the change of tone. First, the passage of time means that the immediate challenge of dealing with the GFC is further behind the US Fed. Indeed, the US is further along the economic cycle than other parts of the Western world, such as the UK and Europe. Second, the drum beat from academics and former policymakers has become louder, with 22 prominent economists signing a letter that urged the Fed to raise the inflation target (including Nobel Prize winners, former US Fed regional Presidents, former White House advisers, and former Bank of England MPC members).

INVESTMENT IMPLICATIONS

If the US Fed changed the inflation target, the most obvious immediate effect would be that the yield curve would steepen. That is, short-term interest rates (influenced most by the Fed Fund Rate) would fall, as the market priced in looser monetary policy to generate inflation pressures and lift inflation to the new target. While bond investors may seek higher yields to compensate for higher expected inflation, the immediate effect of lower short-term interest rates may ripple down the curve and leave longterm interest rates lower as well. In our opinion lower interest rates in the US would likely push down the US dollar, while the additional monetary stimulus should give an immediate boost to equity markets.

Over a longer horizon, once higher inflation has become embedded in the economy, the

Investment

The potential impact of a higher US inflation targets on financial markets Immediate horizon

Long-term horizon

Lower

Higher

Ambiguous

Higher

Yield curve

Steeper

Steeper

Inflation breakevens

Higher

Higher

US dollar

Lower

Lower

Equities

Higher

Ambiguous

Short-term interest rates Long-term bond yields

new higher inflation target should create different types of impacts on markets.

The first is that the whole level of the yield curve should be higher, to compensate for higher inflation expectations. In a sense, this is the primary objective of the exercise, to provide more bandwidth to cut interest rates in a recession. But the yield curve may also be steeper, as investors seek more compensation for inflation risk and uncertainty over longer horizons. Over the long-run, a higher inflation target should continue to weaken the US dollar, as its purchasing power erodes more quickly through time with a higher inflation rate than its trading partners. Finally, the impact on equities is ambiguous. On the one hand, higher inflation should lift nominal GDP and earnings growth, and investors are likely to favour real assets like equities in a higher

Lower interest rates in the US would likely push down the US dollar, while the additional monetary stimulus should give an immediate boost to equity markets.

inflation environment. However, if inflation rises to a level to where it becomes too uncertain and unstable, then equity markets may get hurt by more aggressive actions taken by the US Fed to get inflation back under control at the new target.

Inflation targeting has become a key feature of the investment landscape over the past 25 years. While the debate over whether to raise inflation targets is heating up, we would still place a low probability of 10-15% on inflation targets being lifted in the next 5 years. That said, the implications of any change would be wide ranging, so investors need to think ahead and be prepared if these probabilities change.

This column does not constitute advice to any person. www.harbourasset.co.nz/disclaimer/

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PRACTICE ASSET REGULATION DATA MANAGEMENT ADVISER

Insurance in KiwiSaver not a no-brainer It’s often suggested as a solution to under-insurance but would it really help?

W

{ RUSSELL HUTCHINSON } 030

www.goodreturns.co.nz

hen our editor asked me to write about insurance and KiwiSaver I thought – well, that’ll be brief, because, of course, by law insurance was kept out of KiwSaver.

Some people think that was a shame, and at some points in the past I agreed. But recent experience has made me think twice, or more, and change my mind. I am now convinced that keeping insurance out of KiwiSaver has been good for savers, insurers, and advisers.

That doesn’t mean that we shouldn’t be having conversations about insurance with savers – we should. But the option of insurance in super has been tried thoroughly in Australia, and ASIC’s draft risk statement of advice is an exemplary demonstration of the

problems it has caused.

In Australia insurance is routinely part of super. Typically, it is just life and total and permanent disablement insurance (TPD), and they are fairly basic versions of each. The great advantage of insurance is super is autoacceptance, the tax treatment of your super contributions, and that it is all so easy. These are strengths and hazards. Australian super has high contribution rates and if you were a member early on and had a decent income it creates a biggish cash pot. That can look like it is enough to retire on, especially if you’ve also paid off the house and have anything else.

That sense of “super has it covered” can dangerously extend the insurance in the plan too. Unfortunately, while the savings, the insurance in the plan is almost guaranteed

PRACTICE ASSET REGULATION DATA MANAGEMENT ADVISER

"Cover you buy outside super is better and less likely to malfunction or create confusion about either cover or cost."

not to be enough. It will vary, but three or four times salary life and TPD couldn’t come close to meeting most client objectives – like repaying a home loan in, say, Sydney or Melbourne, let alone replacing years of income as well.

Then there is the consumer confusion – or lack of reading, which might lead them to assume that TPD would look after them in

the same way income protection would.

No trauma cover is in sight either. Finally, we should consider definitions. These will be limited. The TPD is usually an “any occupation” definition rather than “own occupation”. Tight wordings are a natural consequence of the advantage of autoacceptance: that it is usually acquired without any underwriting. But it doesn’t matter. It isn’t enough scope of cover, nor a big enough amount of cover, or good enough quality of cover.

ASIC’s draft SOA for risk advisers shows a typical recommendation to replace the poor cover in Super with more, better, cover outside of super. A regulator showing how replacement should be done, seems to underline just how widely accepted it must be that millions of these cases of insurance in super aren’t great … but the insurance isn’t just bad if you needed to claim. It may be bad even if you don’t need to claim.

You will note my proviso earlier about being a member of the super for a long time, on a decent salary. Of course, some people aren’t.

Perhaps they’ve been members a long time, but on a lower income. Contributions may have been interrupted too – for whatever reason – and now they have a small cash pot and they’re about to turn fifty. Now the premium is rising fast and the client may not notice the effect on their super. Now the premium is eating their retirement. Separate from super the cost is truly transparent – combined one may mask the other. That was a large part of the reason for the move away from with – profits contracts with their even-more-opaque conjunction of investment and insurance. Keeping the two-separate left investment management charges and insurance costs clearer to the benefit of consumers.

But now let us return to KiwiSaver. Savers are naturally the same market as borrowers and buyers of insurance. Pre-retirement people nearly always have someone depending on them, and even single folks have a bank keen to at least have the loan covered. They also, usually, have an income to protect and all the usual hopes and fears about surviving cancer and living to see their grandchildren grow up. They usually need cover. You can’t sell it in KiwiSaver, but selling it alongside KiwiSaver makes a lot of sense.

You may find a nearby investment adviser to have an argument with about how much they should spend on insurance versus repaying debt or increasing savings – but I will propose a minimum goal – keep the house. Whatever happens most clients would like to keep the house.

It surprises me how many insurance plans fail in this objective. Most of the ones which

only have life and trauma cover – but no income protection, for example.

Even many of the plans with some Life, TPD, and mortgage protection would fail to let the client keep the house if they have a partner who is at home looking after kids and couldn’t find work quickly. So, argue all you like about how much, but at least argue for the client to keep the house. The client will probably agree.

There is another job insurance can do which is intimately connected with KiwiSaver. That is to complete the saving for you, if you can’t. Life cover, in this case, often has less work to do than TPD and income protection.

Death before retirement is both rare and less financially crippling for a surviving spouse/ partner than it used to be.

Most people work a bit anyway. If your partner dies you don’t have to pay for their retirement. Whereas, if you are unlucky enough to become totally and permanently disabled that is the day your retirement starts.

On that day, you will need sufficient capital and/or income replacement to survive.

Even if the disability is merely temporary – and even short periods of incapacity can be frightening – then you will be grateful for Income Protection. Not just for the income it provides, but for continuing the fund KiwiSaver contributions when you cannot. But here the picture is a bit murkier, and insurers seem to have different ideas about how this should be done.

Most good income protection plans include KiwiSaver contributions as part of the insurable income even while they may offer separate KiwiSaver insurance optional extras.

The need for good advice both when seeking cover, and at claim time, is clean.

Should you hope that this changes? What improvements could be made? For my money, and it seems the Australian experience backs that up, cover you buy outside super is better and less likely to malfunction or create confusion about either cover or cost. Extra KiwiSaver benefits don’t look as effective as simply treating KiwiSaver as part of the total package and insuring it. But helping people to calculate how much cover they require alongside the growing KiwSaver pot could be valuable.

There is a connection between doing this job well and working out how much you need at retirement – the sums use much of the same data from the same people for the same purpose. Perhaps the most helpful change would be more financial advisers acquiring the skills to give both insurance and KiwiSaver advice.

Russell Hutchinson is director of Chatswood Consulting and Quality Product Research, which operates Quotemonster.

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ASSET ADVISER

For more information call 0800 888 361 Latest 1 Yr 3 Yr 5 Yr Transaction Return Return Return Exit Price % New Zealand Insurance Fund Miscellaneous Booster KiwiSaver Capital Guaranteed 1.0794 2.58 --Booster KiwiSaver Options 1.2202 0.57 --Fidelity Life Super-Sup Options -0.07 4.81 6.01 Kiwi Wealth KiwiSaver Scheme ----CashPlus Fd NZ Funds KiwiSaver Growth Strategy 1.6212 12.86 7.69 11.27 NZ Funds KiwiSaver Income Strategy 1.3061 3.64 3.86 4.01 NZ Funds KiwiSaver Inflation Strategy 1.3385 4.59 3.67 5.85 Westpac KiwiSaver-Capital Protect Plan 1 2.2963 12.34 11.83 13.64 Westpac KiwiSaver-Capital Protect Plan 2 2.0612 12.32 11.83 13.64 Westpac KiwiSaver-Capital Protect Plan 3 1.9761 12.31 11.83 13.64 Westpac KiwiSaver-Capital Protect Plan 4 2.0411 12.33 11.82 13.63 Westpac KiwiSaver-Capital Protect Plan 5 1.7746 12.33 11.83 -NZ Insurance Cash AMP KiwiSaver Cash Fund 1.4692 1.71 2.52 2.60 AMP NZRT Cash Fund 1.46228 0.65 1.50 1.58 AMP Prem PSS OnePath NZ Cash 1.56429 1.99 2.70 2.75 AMP PSS Select Cash 1.47508 1.80 2.50 2.52 ANZ Default KiwiSaver Scheme-Cash 1.3987 2.31 2.95 2.94 ANZ KiwiSaver-Cash 1.3037 2.32 3.02 2.96 Aon KiwiSaver ANZ Cash 15.0542 1.88 2.50 2.50 Aon KiwiSaver Nikko AM Cash 14.0692 2.32 2.93 3.06 ASB KiwiSaver Scheme's NZ Cash 1.4231 2.18 2.97 2.90 BNZ KiwiSaver Cash Fund 1.1283 2.59 2.84 -Booster KiwiSaver Enhanced Income 1.4816 1.89 2.76 2.91 Fidelity Life Super-Super Cash Portfolio 2.8344 0.93 1.45 1.55 Fisher TWO KiwiSaver Scheme-Presv 2818.44311 2.33 2.94 3.08 Kiwi Wealth KiwiSaver Scheme Cash Fund ----Mercer KiwiSaver Cash -2.18 2.94 2.96 NZ Defence Force KiwiSaver Cash -1.97 --OneAnswer KiwiSaver-Cash Fund 1.3535 2.18 2.88 2.83 SIL 60s + Sup Cash Fund 2.16 2.01 2.52 2.43 Westpac KiwiSaver-Cash Fund 1.3645 2.31 2.96 2.93 NZ Insurance Equity Region Australasia AMP Prem PSS OnePath NZ Shares 2.14968 6.40 7.60 13.35 Aon KiwiSaver Milford 3.0344 8.83 10.56 14.86 Booster KiwiSaver Socially Rsp Inv Gr 1.6562 12.19 9.52 9.66 Booster KiwiSaver Trans-Tasman Share 1.4165 15.07 9.28 5.63 Milford Active Growth KiwiSaver 3.05481 8.93 10.69 15.02 OneAnswer KiwiSaver-Australasian Share 1.7047 7.24 10.79 15.90 NZ Insurance Equity Region Australia AMP KiwiSaver Australasian Shares 1.0652 ---New Zealand Insurance Fund Equity Region NZ AMP Prem PSS ACI NZ Shares 2.43284 6.49 13.00 15.97 AMP Prem PSS ACI NZ Shares Index 2.15092 8.68 12.82 16.34 Fidelity Life NZ Shares Portfolio 6.1252 8.23 10.64 11.00 Fidelity Life Super-Super NZ Share -13.88 12.24 11.97 SIL 60s + Sup NZ Share Fund 5.3402 7.37 10.26 15.51 New Zealand Insurance Fund Equity Region World AMP KiwiSaver International Shares 1.1469 ---AMP KiwiSaver Passive International 1.1426 ---AMP Prem PSS ACI Global Shares Index 2.07127 15.36 13.48 13.27 AMP Prem PSS ACI Global Shares 2.16487 18.55 8.69 12.46 Index Hdg AMP Prem PSS FD Intl Share Fund 1 Value 1.2889 15.22 10.97 11.96 AMP Prem PSS FD Intl Share Fund 1.43294 17.98 14.23 13.10 3 Growth Booster KiwiSaver International Share 1.8209 16.73 11.22 12.07 FANZ Lifestages KiwiSaver High Growth 1.14314 13.49 --Fidelity Life Aggressive 3.4678 8.29 10.01 10.04 Fidelity Life International 2.4175 12.08 7.97 9.21 Fidelity Life Super-Sup Intl -16.57 9.41 10.08 Fidelity Life Super-Super Aggressive -11.65 11.10 10.69 Fisher FuturePlan - Intl Coms 2.9825 14.75 6.95 9.38 Fisher TWO KiwiSaver Scheme-Eq 4133.54026 12.68 9.28 11.52 Mercer KiwiSaver Shares -15.84 --NZ Defence Force KiwiSaver Shares -15.62 --OneAnswer KiwiSaver-Intl Share 1.7502 17.11 15.12 14.71 OneAnswer KiwiSaver-Sustainable Int Shr 1.6533 13.79 11.41 10.56 SIL 60s + Sup International Share Fund 3.328 16.87 14.65 14.16 New Zealand Insurance Fund Equity Sector Global - Real Estate AMP KiwiSaver Property 0.9577 ---OneAnswer KiwiSaver-Intl Property 1.3204 1.56 8.51 10.20 New Zealand Insurance Fund Equity Sector NZ - Real Estate MFL Property Fund 3.849 2.83 11.05 13.43 OneAnswer KiwiSaver-Australasian Prpty 1.7051 0.53 12.83 13.35 New Zealand Insurance Fund Global Bond AMP KiwiSaver International Fxd Intr 0.9945 ---AMP Prem PSS Blackrock Global Fixed Int 1.96652 2.46 5.22 5.32 AMP Prem PSS PIMCO Global Fixed 2.29942 4.63 5.90 6.16 Interest Name

Size Morningstar Rating $M Overall 45.13 89.92 13.06 78.21 85.31 18.20 61.15 12.34 10.23 16.01 22.81 18.90

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83.95 114.54 4.06 1.10 4.30 320.80 4.01 1.33 405.06 115.53 18.73 4.03 27.67 117.46 15.40 0.36 33.62 1.72 303.65

--------------------

4.41 115.79 26.37 5.96 662.78 25.48

2 3 2 1 3 4

0.52

--

4.77 8.70 1.40 6.66 23.55

4 3 1 1 3

0.52 0.54 9.93 11.19 6.04 6.00 9.00 43.60 0.62 0.45 22.44 9.54 25.06 81.86 12.25 2.72 39.67 5.72 13.58

--4 3 2 3 3 -3 2 3 4 2 3 --5 2 5

1.08 8.44

-4

508.87 16.72

3 4

0.27 2.22 2.40

-3 5

Name

Latest 1 Yr 3 Yr 5 Yr Size Morningstar Transaction Return Return Rating Return $M Overall Exit Price %

AMP Prem PSS SSgA Global Fixed 1.95186 1.09 5.30 Int Index OneAnswer KiwiSaver-Intl Fxd Int 1.6627 1.39 5.15 New Zealand Insurance Fund Multisector - Aggressive AMP KiwiSaver LS Aggressive Fund 1.4683 13.67 8.11 AMP NZRT AMP Aggressive 3.00801 12.57 7.30 AMP PSS DynamicMkts Growth 1.82607 13.04 7.63 AMP PSS Select Growth 1.7207 12.93 7.61 Aon KiwiSaver Russell Lifepoints 2045 8.3168 12.32 11.17 Booster KiwiSaver Asset Class Growth 8.1949 13.20 -Booster KiwiSaver Geared Growth 1.9644 17.47 12.35 Booster KiwiSaver High Growth 1.456 12.63 9.80 Fisher Funds Growth KiwiSaver Fund 1.8931 11.28 9.38 Fisher FuturePlan - Growth 2.84758 9.17 7.83 Generate KiwiSaver Focused Growth Fund 1.439 10.09 11.51 Kiwi Wealth KiwiSaver Growth ---Mercer KiwiSaver High Growth -13.89 11.04 NZ Defence Force KiwiSaver High Growth -13.63 -New Zealand Insurance Fund Multisector - Balanced AMP KiwiSaver AMP Global Multi-Asset 1.0582 --AMP KiwiSaver AMP Responsible 1.0532 --Invmt Bal AMP KiwiSaver ASB Balanced 1.0546 --AMP KiwiSaver Fisher Balanced 1.7249 6.95 7.80 AMP KiwiSaver LS Balanced Fund 1.6017 9.40 6.66 AMP KiwiSaver LS Moderate Balanced 1.5852 7.80 6.14 Fund AMP NZRT AMP Balanced Fund 2.8338 8.41 5.84 AMP NZRT AMP Global Multi-Asset 1.05526 --AMP NZRT AMP Moderate Balanced 2.0806 6.74 5.26 AMP NZRT ASB Balanced Fund 1.96582 8.09 8.02 AMP NZRT Fisher Balanced 2.32362 5.92 6.82 AMP NZRT Nikko AM Balanced 2.49054 5.28 8.53 AMP NZRT Responsible Investment Bal 1.05739 --AMP PSS DynamicMkts Balanced 1.83998 8.75 6.10 AMP PSS Lifesteps Consolidation 1.7615 7.03 5.66 AMP PSS Lifesteps Progression 1.85369 8.61 6.00 AMP PSS Select Balanced 1.78252 8.72 6.10 ANZ Default KiwiSaver Scheme-Balanced 1.6555 7.01 8.37 ANZ KiwiSaver-Balanced 1.7284 7.10 8.40 Aon KiwiSaver ANZ Balanced 23.8482 7.52 8.24 Aon KiwiSaver Russell Lifepoints 2025 8.6686 8.06 8.73 Aon KiwiSaver Russell Lifepoints Bal 8.8107 10.48 10.12 ASB KiwiSaver Scheme's Balanced 1.7198 10.02 9.47 BNZ KiwiSaver Balanced Fund 1.3849 10.34 8.57 Booster KiwiSaver Balanced 1.6649 8.60 7.90 Booster KiwiSaver Socially Rsp Inv Bal 1.2689 8.23 -Fidelity Life Balanced 4.3155 5.42 6.34 Fidelity Life Super-Super Balanced -7.86 -Fisher FuturePlan - Balanced 3.911 7.08 6.93 Fisher TWO KiwiSaver Scheme-Bal 4681.65956 7.98 7.69 Kiwi Wealth KiwiSaver Balanced ---Mercer KiwiSaver Balanced -9.10 8.54 Milford KiwiSaver Balanced 2.00865 10.51 11.13 NZ Defence Force KiwiSaver Balanced -8.89 -OneAnswer KiwiSaver-Balanced 1.7516 7.13 8.49 Westpac KiwiSaver-Balanced Fund 1.673 7.78 8.52 Westpac Retirement Plan - Balanced Port 3.4927 6.71 7.38 New Zealand Insurance Fund Multisector - Conservative AMP KiwiSaver ANZ Conservative 1.015 --AMP KiwiSaver Default (Default) 1.5845 5.39 5.54 AMP PSS Select Income 1.74193 1.11 3.82 ANZ Default KiwiSaver Scheme Cnsrv(Dflt) 1.6519 4.04 6.30 ANZ KiwiSaver-Conservative 1.6175 3.62 6.00 Aon KiwiSaver Russell Lifepoints Cnsrv 9.288 5.69 7.24 ASB KiwiSaver Scheme's Cnsrv (Default) 1.6733 5.10 6.17 BNZ KiwiSaver Conservative (Default) 1.2479 5.95 6.13 BNZ KiwiSaver First Home Buyer Fund 1.0755 4.94 -Booster KiwiSaver Default Saver 1.1744 4.42 -FANZ Lifestages KiwiSaver Income 1.05812 3.26 -Fisher Funds Conservative KiwiSaver Fund 1.5196 4.81 5.97 Fisher FuturePlan - Capital Prot 1.20944 1.50 1.50 Fisher TWO KiwiSaver Cash 1.65524 4.70 6.04 Enhanced(Dflt) Kiwi Wealth KiwiSaver Conservative ---Kiwi Wealth KiwiSaver Scheme Default Fd ---Mercer KiwiSaver Conservative (Default) -5.27 6.36 Milford KiwiSaver Conservative Fund 1.58419 7.49 9.26 NZ Defence Force KiwiSaver Conservative -4.62 -OneAnswer KiwiSaver-Conservative 1.634 3.70 6.02 Westpac KiwiSaver Default 1.1609 4.04 -New Zealand Insurance Fund Multisector - Growth AMP KiwiSaver ANZ Balanced Plus 1.9267 8.18 9.21 AMP KiwiSaver ANZ Growth 1.0713 ---

5.16 4.62

8.76 2.70

4 2

10.36 9.29 9.57 9.63 13.19 -11.86 10.40 11.05 9.67 --12.41 --

254.87 256.06 4.20 34.42 14.23 42.16 7.49 167.85 1294.46 72.14 183.54 1008.76 120.62 7.42

3 2 4 4 5 -4 4 4 3 5 -5 --

---8.81 8.11 7.27 7.08 -6.22 8.52 7.83 8.97 -7.31 6.59 7.32 7.39 9.12 9.55 9.65 10.07 11.45 9.83 -7.59 -6.88 -8.03 8.81 -9.53 12.91 -9.66 9.47 8.28

2.55 2.98 2.09 34.60 794.54 541.08 791.04 0.59 278.78 72.83 157.31 155.26 1.91 3.16 7.40 2.83 48.11 90.21 1664.31 27.44 17.62 101.92 990.83 206.77 359.28 26.72 5.54 238.13 122.29 590.45 1227.14 294.34 147.07 26.89 461.37 1132.26 101.24

---3 3 2 2 -2 3 4 3 -3 2 3 3 3 4 4 4 5 4 4 2 -2 -4 3 -4 5 -4 4 2

-5.64 3.13 6.31 6.18 7.86 5.94 ----6.59 1.55 6.08 --6.79 --6.23 --

2.42 1321.91 1.95 1029.90 640.54 75.48 3468.37 392.45 44.21 34.93 52.10 525.40 21.82 702.11 510.20 107.29 1054.74 35.30 1.36 402.29 103.59

-3 2 4 4 5 3 4 ---4 1 3 --5 --4 --

10.66 209.85 -- 2.31

3 --

Latest 1 Yr 3 Yr Transaction Return Return Exit Price % AMP KiwiSaver ASB Growth 1.0814 --AMP KiwiSaver LS Growth Fund 1.5107 12.21 7.55 AMP KiwiSaver Nikko AM Balanced 1.7027 6.29 9.56 AMP KiwiSaver Nikko AM Growth 1.0547 --AMP NZRT AMP Growth 2.12721 11.10 6.76 AMP NZRT ANZ Balanced Plus 2.42692 7.11 8.29 AMP NZRT ANZ Growth 1.06927 --AMP NZRT ASB Growth 1.07108 --AMP NZRT Nikko AM Growth 1.04266 --AMP PSS Lifesteps Growth 1.81359 11.57 7.10 ANZ Default KiwiSaver Scheme1.6615 8.96 9.58 Balanced Gr ANZ Default KiwiSaver Scheme-Growth 1.6569 10.66 10.61 ANZ KiwiSaver-Balanced Growth 1.764 9.01 9.62 ANZ KiwiSaver-Growth 1.7791 10.76 10.66 Aon KiwiSaver Nikko AM Balanced 17.2715 6.91 9.62 Aon KiwiSaver Russell Lifepoints 2035 8.5655 10.46 10.13 Aon KiwiSaver Russell Lifepoints Growth 8.7433 12.32 11.12 ASB KiwiSaver Scheme's Growth 1.6982 12.81 11.02 BNZ KiwiSaver Growth Fund 1.4621 13.18 9.67 Booster KiwiSaver Balanced Growth 1.6275 10.61 8.98 Fidelity Life Growth 4.1578 8.03 7.71 Fidelity Life Super-Super Growth -9.71 8.18 Fisher TWO KiwiSaver Scheme-Gr 1.65273 10.12 8.59 Generate KiwiSaver Growth Fund 1.3956 7.29 10.58 Mercer KiwiSaver Growth -12.06 -NZ Defence Force KiwiSaver Growth -11.77 -OneAnswer KiwiSaver-Balanced Growth 1.7885 9.03 9.65 OneAnswer KiwiSaver-Growth Fund 1.8014 10.79 10.73 SIL 60s + Sup Balanced Fund 4.0636 8.84 9.09 Westpac KiwiSaver-Growth Fund 1.7116 9.17 9.86 Westpac Retirement Plan - Dynamic Port 3.9344 8.13 8.78 New Zealand Insurance Fund Multisector - Moderate AMP KiwiSaver AMP Income Generator 1.031 --AMP KiwiSaver ASB Moderate 1.032 --AMP KiwiSaver LS Conservative Fund 1.6826 4.63 4.83 AMP KiwiSaver LS Moderate Fund 1.6195 6.48 5.53 AMP KiwiSaver Nikko AM Conservative 1.0171 --AMP NZRT AMP Capital Assured Fund 2.42125 4.10 4.27 AMP NZRT AMP Conservative 2.68341 3.57 3.89 AMP NZRT AMP Income Generator 1.02938 --AMP NZRT AMP Moderate 2.06403 5.41 4.61 AMP NZRT ASB Moderate 1.03833 --AMP NZRT Nikko AM Conservative 1.01318 --AMP PSS DynamicMkts Conservative 1.76797 3.79 4.11 AMP PSS Lifesteps Maturity 1.68412 3.55 4.05 AMP PSS Lifesteps Stability 1.77475 5.57 4.81 AMP PSS Select Conservative 1.75824 3.80 4.11 ANZ Default KiwiSaver Scheme-Cnsrv Bal 1.6515 5.20 7.15 ANZ KiwiSaver-Conservative Balanced 1.6803 5.28 7.20 Aon KiwiSaver Russell Lifepoints 2015 8.8745 5.69 7.32 Aon KiwiSaver Russell Lifepoints Mod 9.1727 7.98 8.66 ASB KiwiSaver Scheme's Moderate 1.7145 7.07 7.75 BNZ KiwiSaver Moderate Fund 1.3194 8.42 7.58 Booster KiwiSaver Asset Class Cnsrv 3.518 6.11 -Booster KiwiSaver Moderate 1.6277 5.26 6.15 Fisher TWO KiwiSaver Scheme-Cnsrv 1.7185 5.06 6.15 Generate KiwiSaver Conservative Fund 1.2341 2.13 6.93 Mercer KiwiSaver Moderate -6.49 -NZ Defence Force KiwiSaver Moderate -6.26 -OneAnswer KiwiSaver-Conservative Bal 1.6958 5.28 7.17 Westpac KiwiSaver - Moderate 1.1947 5.53 -Westpac KiwiSaver-Conservative Fund 1.6019 4.19 5.93 New Zealand Insurance Fund NZ Bonds AMP KiwiSaver NZ Fixed Interest 0.9976 --AMP Prem PSS ACI NZ Fixed Interest 2.03075 1.76 5.44 AMP Prem PSS OnePath NZ Fixed Interest 1.84954 1.05 4.94 Fidelity Life NZ Fixed Interest 3.9603 1.66 3.55 Fidelity Life Super-Super Fixed Int -1.57 3.51 OneAnswer KiwiSaver-NZ Fixed Interest 1.6363 1.52 5.41 SIL 60s + Sup NZ Fixed Interest 2.8794 1.08 4.80 Westpac Retirement Plan - Accum Port 3.2438 1.10 2.69 New Zealand OE Cash AMP AIT NZ Cash - UT35 1.10174 1.93 2.79 AMP ARS-Cash 1.94096 2.18 2.95 AMP Capital Cash Advantage Fund 1.41617 1.55 2.57 AMP Capital NZ Cash Fund 1.63238 2.30 3.07 AMP Capital Term Advantage ---AMP Prem PUT OnePath NZ Cash 1.38409 1.84 2.60 AMP PUT Select Cash 1.32559 1.64 2.39 ASB Cash Fund ---Name

5 Yr Size Morningstar Rating Return $M Overall -- 1.94 -9.47 607.37 2 9.99 40.93 3 -- 1.53 -8.41 196.92 2 9.65 271.18 3 -- 3.45 --- 1.15 --- 3.28 -8.79 0.40 2 10.66 98.61 3 12.12 82.19 4 11.21 1390.94 4 12.77 2188.49 5 10.08 7.52 3 11.78 16.09 4 12.83 31.86 5 11.72 1095.43 4 -- 177.02 3 9.03 198.63 2 8.43 3.12 2 8.72 97.05 2 10.56 245.03 3 -- 154.16 4 -- 43.46 --- 7.63 -11.30 405.18 4 12.85 306.33 5 10.46 97.05 4 11.13 823.87 3 10.01 107.03 3 --5.31 6.38 -3.25 4.28 -5.32 --4.45 4.44 5.53 4.49 7.60 7.90 8.24 9.65 7.77 --5.56 6.48 ---7.92 -6.29

1.26 0.41 309.46 381.96 0.99 101.21 299.12 0.27 116.22 0.94 1.46 0.94 3.34 5.66 9.80 31.00 781.09 4.92 18.65 1243.36 272.89 13.70 128.82 123.78 86.01 55.30 1.74 152.31 195.84 2126.39

--3 3 -1 2 -2 --3 3 3 3 4 4 5 5 4 5 -3 3 4 --5 -3

-- 0.28 4.33 11.79 3.77 2.26 3.25 0.21 3.28 1.26 4.16 7.10 3.58 7.57 2.54 18.30

-4 3 1 2 3 2 1

1.95 3.02 2.91 3.12 -2.67 2.44 --

---------

10.72 12.16 107.43 4508.61 -3.01 3.15 289.02

ASSET ADVISER

Latest 1 Yr Transaction Return Exit Price % BT Enhanced Cash Fund 2.0738 2.33 Fisher Cashplus Fund 1.2983 2.17 Nikko AM NZ Cash 1.0233 2.85 NZ Funds Core Cash 1.32755 1.93 New Zealand OE Equity Region Australasia AMP AIT Australasian Shrs-Multi 2.8272 11.28 Mgr-UT07 AMP ARS-NZ & Australian (multi3.34643 12.11 manager) AMP ARS-NZ & Australian (Value) 3.67551 3.50 AMP NZRT Australasian Shares 1.28777 12.90 AMP Prem PUT OnePath NZ Shares 2.17937 6.24 BT PS Australasian Diversified Share 2.0419 7.03 Castle Point Ranger Fund 1.335 18.11 Devon Alpha Fund 1.5828 -Devon Dividend Yield 1.8973 -Devon Trans-Tasman Fund 3.6614 -Forte Equity Trust 1.32897 25.72 Harbour Australasian Equity 2.2523 12.77 Harbour Australasian Equity Focus Fund 1.4103 13.59 Harbour Australasian Equity Income 1.7123 7.09 Milford Active Growth 3.02799 8.56 Milford Trans-Tasman 2.25874 15.35 Mint Australia NZ Active Equity 2.4427 8.20 Nikko AM Concentrated Equity 1.9344 10.72 OneAnswer SAC Equity Selection 2.1894 6.52 Pie Australasian Dividend 2.2114 10.45 Pie Australasian Emerging Companies 2.8285 4.96 Pie Australasian Growth Fund 4.252 -5.83 Pie Growth 2 Fund 1.2733 7.42 New Zealand OE Equity Region Australia AMP Capital Australian Share Fund 2.44476 12.20 Devon Australian 1.3786 -Fisher Funds Australian Growth Fund 3.2832 5.68 Fisher Funds Premium Australian Fund 1.4423 6.06 Milford Dynamic 1.49957 9.03 OneAnswer SAC Australian Share 3.8235 7.95 New Zealand OE Equity Region Emerging Markets AMP AIT Emerging Markets - UT65 1.36447 17.57 New Zealand OE Equity Region NZ AMP Capital NZ Shares Fund 2.65786 6.99 AMP Capital RIL NZ Shares 1.81147 7.99 AMP Prem PUT ACI NZ Shares 2.4937 6.42 AMP Prem PUT ACI NZ Shares Index 1.88993 7.97 BT Dividend Share Fund 2.167 4.93 Fisher Funds NZ Growth Fund 7.2137 10.42 Fisher Funds Premium New Zealand Fund 1.6929 10.55 Fisher Trans Tasman Equity Trust 4.7318 7.64 Forsyth Barr New Zealand Equities 2.4341 10.36 Harbour NZ Equity Advanced Beta Fund 1.3325 7.52 Nikko AM Core Equity 1.9034 10.54 NZ Funds Dividend and Growth 1.7588 13.48 OneAnswer SAC NZ Share 4.1743 7.54 Russell Investments NZ Shares 1.545 9.11 Smartshares NZ Core Equity Trust 1.2847 11.02 New Zealand OE Equity Region World AMP AIT Global Equities-Multi Mgr-UT28 1.15398 17.19 AMP AIT Global Infrastructure - UT04 2.53399 11.92 AMP ARS-International Shares (Growth) 1.41545 18.47 AMP ARS-International Shares (Passive) 1.57958 17.47 AMP ARS-International Shares (Value) 1.33457 22.65 AMP Capital Core Global Shares Fund 1.40074 16.48 AMP Capital Core Hedged Global 1.4443 19.69 Shares Fd AMP Capital Emerging Markets Share 1.05926 19.26 AMP Capital Global Listed Infrastructure 1.75845 13.61 AMP Capital Global Shares Fund 2.66277 18.05 AMP Capital Resp Invest Leaders Gl Sh 1.54057 15.60 AMP NZRT International Shares 1.37925 18.14 AMP NZRT Passive International Shares 1.37484 17.35 AMP Prem PUT FD Intl Share Fund 1 Value 1.34535 14.98 AMP Prem PUT FD Intl Share Fund 1.47276 17.88 3 Growth AMP Prem PUT SSgA Global Shares Index 1.80733 15.09 AMP Prem PUT SSgA Global Shares 2.25731 17.38 IndexHdg ASB World Shares 1.5203 18.37 BT PS International Diversified Share 1.6966 17.37 Elevation Capital Value Fund 1.6497 14.34 Fisher Funds International Growth Fund 1.7651 16.34 Fisher Funds Premium International Fund 1.8325 16.05 Fisher Global Fund 5.0413 14.67 Milford Global Fund 1.37464 12.50 Nikko AM Global Equity Hedged 1.6629 14.08 Name

3 Yr 5 Yr Size Morningstar Rating Return Return $M Overall 2.98 2.99 131.36 -2.64 2.54 35.04 ---- 118.91 -2.77 2.68 60.88 -8.38 10.50 20.01

2

9.03 11.00 9.39 7.51 12.40 9.03 ----12.24 11.92 11.48 10.41 10.96 13.73 15.83 7.41 11.69 18.71 9.76 --

11.12 15.34 -13.37 16.55 -----16.62 -14.49 14.81 14.75 17.59 16.71 12.85 18.10 -14.85 --

7.59 5.44 8.93 1.96 187.84 18.33 99.61 76.98 126.47 14.43 163.24 10.35 49.26 733.98 278.21 56.31 32.81 16.54 83.19 84.10 71.51 124.21

2 3 3 3 4 2 3 5 3 -4 3 3 3 3 5 4 2 5 5 3 --

5.32 -8.87 9.02 10.13 3.29

6.24 -7.96 8.30 -5.91

173.78 31.92 59.84 63.60 168.28 29.65

2 5 3 4 5 1

5.53

1.45

3.29

--

13.32 14.04 12.82 12.05 15.28 11.92 12.10 10.42 15.02 -14.55 14.04 10.59 12.99 --

16.31 -15.84 15.85 17.52 16.29 16.41 13.76 17.23 -17.33 13.01 15.79 ---

468.67 12.27 1.82 4.16 19.12 141.91 79.22 47.24 15.36 100.08 7.51 81.83 116.48 207.62 36.80

4 4 4 3 5 2 3 2 5 -4 2 3 3 --

9.43 9.40 15.78 9.32 12.69 14.66 9.93 8.45 8.25 11.52 8.40 10.92 11.12 10.85 14.09 12.67 9.96 12.71 11.68 10.30 8.64 9.09 7.12 8.72 10.06

10.90 13.08 17.04 12.87 15.13 14.56 14.26 5.34 -13.56 11.33 --11.96 13.04 13.09 14.29 13.13 12.54 10.66 8.73 9.05 10.53 ---

22.64 17.76 7.19 3.62 5.49 868.24 521.20 74.04 308.38 140.27 59.23 8.10 4.34 2.53 2.24 4.61 7.25 148.74 293.57 25.98 33.14 72.91 91.69 298.53 95.11

3 3 5 3 5 4 3 1 2 4 3 3 3 2 3 4 4 4 3 2 1 1 2 2 3

Latest 1 Yr Transaction Return Exit Price % Nikko AM Global Equity Unhedged 1.7503 13.75 NZ Funds Equity Inflation 0.8502 -1.48 OneAnswer SAC International Share 1.9965 16.93 Pathfinder Global Water 1.8156 11.42 Pathfinder World Equity Fund 1.6474 14.19 Pie Global Small Companies Fund 1.3749 15.55 Russell Investments Global Shares 1.7806 17.20 Russell Investments Hedged Global 1.9262 19.25 Shares T.Rowe Price Global Equity Growth 1.3256 17.53 New Zealand OE Equity Sector Global - Real Estate AMP AIT Global Property - UT54 3.04778 -0.43 AMP ARS-Listed International Property 3.73851 0.69 AMP Capital Global Propty Securities Fd 1.49999 -1.13 NZ Funds Property Inflation 1.5395 3.04 OneAnswer SAC International Property 1.336 1.28 New Zealand OE Equity Sector NZ - Real Estate AMP ARS-Listed NZ & Australian Property 3.2007 -0.27 AMP Capital Listed Property Secs Fd 2.24044 -0.29 AMP Capital NZ Property Fund 2.18497 2.10 BT Property Fund 3.9216 1.66 Mint Australia NZ Real Estate Investment 1.7087 0.04 OneAnswer SAC Property Securities 2.9972 0.49 New Zealand OE Global Bond AMP AIT Fixed Interest Income - UT36 1.19635 2.08 AMP AIT Global Bonds-Multi Mgr-UT13 1.96686 0.62 AMP ARS-International Fixed Interest 2.44618 1.35 AMP Capital Global Short Duration 1.08242 2.43 AMP Capital Hdgd Gbl Fixed Intrst Fund 2.3176 2.30 AMP NZRT International Fixed Interest 1.14667 1.69 AMP Prem PUT Blackrock Global Fixed Int 1.82294 2.28 AMP Prem PUT PIMCO Global Fixed 2.2974 4.42 Interest AMP Prem PUT SSgA Global Fixed 1.80784 1.19 Int Index ASB World Fixed Interest 1.1087 1.41 BT PS International Diversified Bond 2.1748 2.81 Fisher BondPlus Fund 2.1483 3.29 Fisher Funds High Income 1.0261 4.02 Nikko AM Global Bond 1.1461 2.68 NZ Funds Global Income 1.4222 3.33 OneAnswer SAC International Fixed Intrst 1.1921 1.32 Russell Investments Global Fixed Int 1.1707 3.82 New Zealand OE Miscellaneous AMP ARS-UK Cash 0.72596 -10.83 BT PS Alternative Investments 1.0873 4.18 Fisher Funds Property and Infrastructure 2.1887 13.32 KTAM NZ Australian Long Short Equity 1.3161 -Nikko AM Income 1.2276 2.19 Nikko AM Multi-Strategy 1.1086 4.64 NZ Funds Core Inflation 1.3231 5.65 NZAM Alpha Fund 1.1316 -NZAM Global Growth 1.4192 -Pathfinder Commodity Plus Fund 0.8379 -8.87 Salt Long Short Fund 1.4734 7.07 New Zealand OE Multisector - Aggressive AMP AIT Aggressive Portfolio - UT31 1.87825 12.36 AMP AIT eInvest - Aggressive - MDF7 1.31061 13.48 AMP AIT Growth Portfolio - UT03 1.80308 11.19 AMP Capital Growth Fund 2.50925 11.67 AMP PUT DynamicMkts Growth 1.85402 12.62 AMP PUT Select Growth 1.64294 12.62 New Zealand OE Multisector - Balanced AMP AIT eInvest - Balanced - MDF5 1.2374 9.21 AMP AIT Moderate Portfolio - UT01 1.81459 5.61 AMP ARS-Balanced 1.99777 9.83 AMP Capital Global Multi Asset Fund 1.2113 8.13 AMP Capital Responsible Inv Leaders Bal 1.80951 7.63 AMP PUT DynamicMkts Balanced 1.814 8.37 AMP PUT Select Balanced 1.71272 8.42 ANZ Invmt Fds Balanced 1.688 6.71 ASB Balanced 1.5494 9.42 Milford Balanced 1.97346 10.34 NZ Funds Core Growth 1.3753 6.25 OneAnswer MAC Balanced 1.688 6.71 Westpac Active Balanced Trust 2.0981 7.09 New Zealand OE Multisector - Conservative AMP PUT Select Income 1.62346 1.00 ANZ Invmt Fds Conservative 1.4715 3.43 ASB Conservative 1.551 4.49 Milford Conservative 1.07898 7.58 OneAnswer MAC Conservative 1.4715 3.43 Name

3 Yr 5 Yr Size Morningstar Rating Return Return $M Overall 13.70 -- 129.35 4 3.90 5.41 81.32 1 16.00 16.10 177.89 5 10.19 12.57 12.00 3 11.70 -- 32.83 4 8.97 -- 72.07 2 13.89 -- 59.31 4 10.63 -- 57.48 3 --- 16.50 -9.12 10.16 2.72 7.71 10.04 5.57 6.92 10.31 190.49 6.76 7.34 85.07 8.13 -- 5.18

5 3 2 2 3

11.64 13.17 10.35 14.28 12.16 12.73

11.38 12.90 9.46 13.16 12.09 13.16

4.56 20.98 119.68 75.06 48.00 123.77

1 3 -4 2 3

3.38 3.91 4.65 3.48 4.95 4.33 4.95 5.72

3.24 3.80 4.50 -4.92 -5.12 6.15

101.41 11.97 1.80 196.59 82.80 1.98 1.42 2.39

1 2 2 1 3 2 3 5

5.19 3.52 3.96 5.33 5.01 5.22 3.47 5.00 6.11

5.10 3.21 4.68 5.54 5.11 -3.53 -6.40

4.80 304.21 355.90 154.96 66.47 21.66 116.52 3.35 528.93

3 1 2 4 3 4 1 3 5

-2.07 1.09 12.46 -6.18 3.51 3.02 ---3.13 --

-1.47 1.77 13.25 -6.26 -4.78 ---3.54 --

10.73 9.38 71.57 22.33 10.60 119.14 123.62 47.07 57.47 63.49 236.71

------------

6.54 7.72 6.44 7.17 7.48 7.45

7.77 -7.57 9.38 9.47 9.49

112.58 66.97 36.98 5.76 4.02 14.19

1 3 1 4 3 3

6.42 4.69 7.07 6.21 6.36 5.93 5.95 8.03 8.88 10.70 3.73 8.03 7.80

-5.20 8.02 -8.53 7.22 7.24 9.25 9.23 12.51 8.30 9.25 8.98

93.24 103.02 156.06 166.56 45.39 5.15 39.23 208.01 152.32 390.81 93.43 35.78 222.83

3 1 3 2 3 3 3 4 4 5 2 4 4

3.78 5.74 5.55 -5.74

3.10 2.83 5.94 50.91 5.32 135.70 -- 122.94 5.94 9.52

1 3 2 -3

Latest Transaction Exit Price Westpac Active Conservative Trust 1.8113 New Zealand OE Multisector - Growth AMP AIT Balanced Portfolio - UT 02 1.88404 AMP AIT eInvest - Growth - MDF6 1.29021 AMP ARS-High Growth 1.79085 ANZ Invmt Fds Balanced Growth 1.8183 ANZ Invmt Fds Growth 1.9182 ASB Growth 1.5083 Fisher Multi Sector Fund 3.0645 NZ Funds Global Equity Growth 1.508 OneAnswer MAC Balanced Growth 1.8183 OneAnswer MAC Growth 1.9182 OneAnswer SAC Balanced 2.8909 Westpac Active Growth Trust 2.0364 New Zealand OE Multisector - Moderate AMP AIT eInvest - Conservative - MDF2 1.16795 AMP AIT eInvest - Moderate - MDf3 1.20571 AMP ARS-Conservative 2.18522 AMP Capital Conservative Fund NZ 2.33332 AMP Capital Income Generator Fund 1.10486 AMP PUT DynamicMkts Conservative 1.71299 AMP PUT Select Conservative 1.72396 ANZ Invmt Fds Conservative Balanced 1.5775 ASB Conservative Plus 1.5344 ASB Moderate 1.5549 Harbour Income 0.9946 Milford Diversified Income 1.63475 Mint Diversified Income Fund (Retail) 1.0403 NZ Funds Global Multi-Asset Growth 0.5892 OneAnswer MAC Conservative Balanced 1.5775 Westpac Active Moderate Trust 1.4219 New Zealand OE NZ Bonds AMP AIT NZ Bond - UT36 1.18441 AMP AIT NZ Fixed Interest - UT60 1.7196 AMP ARS-NZ Fixed Interest 2.45645 AMP Capital NZ Fixed Interest Fund 1.65633 AMP Capital NZ Short Duration 1.25676 AMP NZRT NZ Fixed Interest 1.20359 AMP Prem PUT ACI NZ Fixed Interest 2.01694 AMP Prem PUT OnePath NZ Fixed Interest 1.72382 BT Corporate Bond Fund 1.6256 BT PS NZ Diversified Bond 1.3138 Fisher New Zealand Fixed Inc Trust 1.25 Forsyth Barr NZ Fixed Interest 1.6434 Forsyth Barr Premium Yield 1.6775 Harbour NZ Core Fixed Interest 1.0957 Harbour NZ Corporate Bond 1.0585 Nikko AM NZ Bond 1.0178 Nikko AM NZ Corporate Bond 1.1486 NZ Funds Core Income 1.53039 OneAnswer SAC NZ Fixed Interest 1.6393 Russell Investments NZ Fixed Interest 1.1639 Westpac Active Income Strategies Trust 1.1785 Name

1 Yr 3 Yr 5 Yr Size Morningstar Return Return Rating Return $M Overall % 3.54 5.02 5.47 217.79 2 8.55 11.93 12.52 8.59 10.35 12.17 6.67 16.83 8.59 10.35 8.22 8.40

5.72 7.22 7.83 9.27 10.28 10.38 6.68 9.80 9.27 10.28 8.99 9.08

6.53 -9.33 10.96 12.40 11.05 8.24 11.66 10.96 12.40 10.43 10.55

111.36 32.82 54.58 151.47 72.42 30.38 11.74 61.79 33.22 18.63 51.38 70.33

1 2 2 3 5 3 3 2 3 5 4 3

4.48 6.30 5.04 3.56 6.41 3.59 3.57 4.92 -6.50 3.96 10.53 --1.23 4.92 5.02

4.52 5.25 5.22 4.49 -3.97 3.91 6.86 -7.17 -12.24 --10.85 6.86 6.38

--5.55 4.91 -4.34 4.36 7.53 -7.19 -13.40 --6.48 7.53 7.08

26.75 95.45 54.29 8.00 110.19 2.17 15.89 167.89 651.74 272.08 2.66 1612.16 39.54 30.60 10.85 400.35

2 3 3 4 -2 2 4 3 4 -5 -1 4 3

2.17 1.38 1.98 2.01 2.90 2.05 1.74 0.87 2.74 1.84 0.89 2.24 2.55 2.34 2.79 1.92 2.97 3.09 1.42 1.97 2.36

5.10 5.01 5.59 5.65 4.55 5.73 5.35 4.80 4.72 5.15 4.72 5.32 5.56 5.28 5.05 5.40 5.82 4.18 5.27 5.33 3.08

2.95 3.93 4.47 4.52 4.20 -4.29 3.67 4.57 4.44 3.68 4.10 4.75 4.56 4.73 4.82 5.42 4.73 3.85 -3.04

29.33 7.04 6.88 1884.62 370.64 8.02 8.65 1.86 71.07 226.37 60.06 13.97 57.03 148.98 309.60 62.42 340.44 126.27 12.73 166.22 14.45

2 3 3 5 3 5 4 3 3 3 2 3 5 4 4 5 5 3 2 3 1

Returns are calculated to 31/05/17 Returns are calculated before tax and after fees, except for the non-PIE categories, which are after tax and after fees. For more information about this table and the methodology behind the data, contact helpdesk.nz@morningstar.com or go to www.morningstar.com.au © 2016 Morningstar, Inc. All rights reserved. Neither Morningstar, nor its affiliates nor their content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution.

To the extent that any of this information constitutes advice, it is general advice and has been prepared by Morningstar Australasia Pty Ltd ABN: 95 090 665 544, AFSL: 240892 and/or Morningstar Research Limited (subsidiaries of Morningstar, Inc.) without reference to your objectives, financial situation or needs. You should consider the advice in light of these matters and, if applicable, the relevant Product Disclosure Statement (in respect of Australian products) or Investment Statement (in respect of New Zealand products) before making any decision to invest. Neither Morningstar, nor Morningstar’s subsidiaries, nor Morningstar’s employees can provide you with personalised financial advice. To obtain advice tailored to your particular circumstances, please contact a professional financial adviser.

Please refer to our Financial Services Guide (FSG) for more information www.morningstar.com.au/fsg.asp

DATA

TEN YEARS OF KIWISAVER – WHO HAS CONTRIBUTED WHAT? ANZ KIWISAVER GROWTH PERFORMANCE SINCE INCEPTION WHAT MAKES UP A $55K FUND FOR SOMEONE EARNING $50K 37% of value was delivered through good investment, management. Use good advice. (Based on ANZ KiwiSaver growth fund actual performance since inception).

034

www.goodreturns.co.nz

Top 10 This month we look back at what were the most read KiwiSaver news stories since its launch 10 years ago.

Top stories included KiwiSaver funds’ exposure to ammunition investments, banks’ KiwiSaver selling antics and the flawed KiwiSaver default provider system.

1

6

2

7

KiwiSaver furore gave advice boost (October 2016) Media headlines about KiwiSaver funds’ exposure to ammunition investments have provided a boost to financial advisers.

Fidelity sells KiwiSaver and takes stake with buyer (July 2013) Fidelity Life has confirmed that it has done a deal to sell its KiwiSaver business to Grosvenor Financial Services, which will also see it take an ownership stake in the company.

3

Budget 2011: Key KiwiSaver changes (May 2011) The key changes the government is making to KiwiSaver.

4

Urgent action required over banks’ KiwiSaver selling tactics (May 2013) Banks that have been put on notice by FMA chief executive Sean Hughes that their sales tactics are under review.

5

How not to sell KiwiSaver (June 2011) Offering people $10 to sign up to a KiwiSaver scheme has landed Patrick Diack in trouble with the authorities.

Kiwibank set to dump Mercer as its KiwiSaver manager (August 2009) Kiwibank is on the verge of dumping Mercer in favour of AMP as its KiwiSaver provider.

Self-managed KiwiSaver likely (June 2013) Self-managed super funds may be a feature of KiwiSaver in the medium to longer-term, says ASB’s executive general manager of wealth, Blair Turnbull.

8

KiwiSaver rot runs deeper than defaults (April 2012) The flawed KiwiSaver default provider system is symptomatic of wider problems with the scheme that need to be addressed if it is to achieve its objectives.

9

Aon selling KiwiSaver through RFAs (March 2012) Aon has developed a unique way of promoting its KiwiSaver scheme, giving Registered Financial Advisers a disclaimer that allows them to inform clients about the scheme without advising on it.

10

Plan to help people switch KiwiSaver schemes (August 2013) A “what’s my number” campaign for KiwiSaver providers has been proposed by the Productivity Commission.

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