ASSET_SPRING_2024 Time for a roadmap to KiwiSaver 2.0

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Contents | ASSET Spring

KiwiSaver needs a good overhaul. ASSET assembles a group of experts to discuss how the popular savings scheme can be made even better.

FEATURES

In this bumper feature we explore KiwiSaver and discuss ideas to improve the scheme.

Josh Cuttance didn’t pick the best firm to work with when he became an adviser. Since then he has built up his own business and been recognised as an up-and-comer.

REGULARS

David van Schaardenburg asks is KiwiSaver a triumph of marketing or value for money?

Can advisers gamify financial advice?

Check out fund performance data.

Mint Asset Management CEO

Rebecca Thomas talks about her financial planning business and says Mint has plenty of headroom

Jacob Wolt has spent 30 years as an adviser and has recently retired. He talks about his career and passes on some valuable learnings.

Find out what advisers are reading at goodreturns.co.nz

Growing financial capability with the Booster Foundation

At Booster, we’ve long been about improving the financial resilience of New Zealanders.

On top of growing peoples’ savings, Booster has the free budget tool, mybudgetpal available for anyone to use.

And our award-winning Savvy debit card and App has in-built, clever ways for people to manage and save money, while they earn a competitive rate of return on their balance.

But we know communities in New Zealand sometimes need more targeted and innovative ways to build their financial capability. So, we formed and funded the Booster Foundation as a charitable trust to grow the financial resilience of all Kiwis. The Foundation partners with organisations to design and deliver financial capability tools and training.

Booster Foundation chief executive Anika Speedy says with strategic priorities to build skills and knowledge, innovate, learn and share, the first year got off to a flying start.

“We have focussed on funding new initiatives and pilot programmes that have the potential to be scaled for greater impact. The programmes also must be free, so there is no financial barrier to taking part,” says Speedy.

“We’re already seeing the impact of these initiatives and the best part is it’s only going to grow,” says Speedy.

Projects funded for the inaugural 20203/24 year included:

• Tamariki at a Te Waha o Rerekohu Area School in Tairāwhiti are learning the basics about money and saving, including KiwiSaver, to set

them on a lifelong path of being curious and confident with money.

• Pasifika youth in South Auckland are learning financial skills like budgeting, saving, understanding debt and spending habits, as well as what KiwiSaver is all about, with Life Smarts 90% of participants reported they felt either very confident or confident managing their money compared to 27% at the start of the programme.

• A free, online finance education platform “My Money Kete” is helping hundreds of people learn about personal finance through videos, social media posts, and step-by-step guides including budgeting tools, savings tips and ways to manage debt.

• Prospective homeowners in the Taitoko (Levin) area preparing to take the leap into home ownership, will learn financial education in a tikanga Māori framework that recognises the legacy of wealth and future

generations.

• In Rotorua small and medium Māori businesses are building their financial skills and getting ‘loan ready’ as they connect with ‘Koha Lenders’ for capital to grow their businesses.

Speedy says more partnerships are getting underway, including a collaboration with the JR McKenzie Trust to support O Le Nu’u Trust to train Pasifika financial capability trainers and facilitators.

“Starting with three pilot regions, this programme has fantastic scope to grow nationwide,” says Speedy.

Workforce development and training is also the focus of a partnership with Massey University Financial Education and Research Centre, to grow the skills of all financial capability providers and create career pathways.

“We’re in a great position now to see what works, how we can scale programmes and foster more collaboration, including with other funders.

“The Foundation is also looking to grow our donations from people who believe, like we do, that there are many more communities in Aotearoa that can benefit from the kind of financial education the Foundation is enabling,” says Speedy.

For more information on The Booster Foundation go to www.boosterfoundation.org A

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The perfect storm for positive change

OOne thing I love each year is our annual KiwiSaver Roundtable – and this year was no exception.

We all agree KiwiSaver is doing a great job, but it’s time it was given a few tweaks. There is a need for one person in Government to take ownership of such an important part of the New Zealand economy.

Any changes need to be forwardlooking - and done on what the ANZ Investments general manager describes as a ‘glidepath’ approach. Not lots of changes all at once, rather a series of changes made over time.

While there is a need for a key Minister to become involved, on the other side the industry needs to work with a united voice.

This arguably falls to the Financial Services Council (FSC).

Whether by design or not, it bodes well that Kirk Hope has taken up the reins of chief executive at FSC. Why? The two parties which also need to work together are the industry and employers. Hope’s former role was nearly nine years as the chief executive of Business NZ.

With his appointment, and an industry which seems reasonably united on change, it’s pretty much the perfect storm in which to achieve positive change.

As this is the final issue of ASSET for the year, it’s an opportunity for quick reflections. Eighteen months after regulation for financial advisers came into play, I’d say the fear of change has been replaced with enthusiasm.

The sector feels more invigorated and positive.

The other thing I have observed is that the make-up of the advice world has changed, with lots of older people retiring.

They have largely been replaced by a younger, more diverse group of people. That’s a good thing.

The life-insurance market has had a good shake up, with two new chief executives and a third coming soon.

There have been lots of affordability plays, especially on the new-business side, plus a focus on affordability, so around the three-month free premium offerings, and those sorts of things.

Like other areas of financial services - think mortgages - providers still need to significantly lift their game. Again, it is good to see some life companies specifically trying improve in this area.

Investment advisers can only be happy with a year of markets providing good returns.

A couple of observations: we are likely to see more consolidation amongst managers. But, on the other hand, there is a surprisingly solid pipeline of Australian managers operating in New Zealand, with many deciding, sensibly, to make PIE versions of their funds.

While there is no hard and fast data available, our research shows Australian managers have done well pulling funds out of New Zealand.

A prediction for next year is that fund managers will get more deeply involved, using financial advisers to distribute their KiwiSaver products.

On that note, it is appropriate to sign off our KiwiSaver issue of ASSET. Here at Tarawera Publishing, we wish you and your family a happy and joyful Christmas.

Philip Macalister Publisher

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Disclaimer All articles in ASSET are for information purposes only, the content is intended to be of a general nature, does not take into account any person’s specific circumstances, and is not financial, legal, or other advice. It is recommended you seek advice from a suitable expert before taking any action in relation to anything contained in this magazine.

ASSET is published by Tarawera Publishing Ltd (TPL). TPL also publishes online money management magazine Good Returns 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

BENTLEY BACK IN AN OLD GARAGE

Thom Bentley has rejoined NZX-owned Smart as its head of business development.

Over recent years Bentley has held roles at Pallas Capital, iPartners and BetaShares. Before that he was with Smartshares (as Smart was known then).

NZX says, in a statement, Bentley will be a valuable addition to the team and it signals Smart's continued commitment to delivering tailored investment solutions to its growing client base.

Bentley says he is “looking forward to reconnecting with former colleagues, meeting new ones, and to getting out on the road to bring the Smart and Quay Street story to our partners and investors.”

He says Smart is positioning itself as a modern investment partner focused on making wealth creation and investing more accessible and transparent for investors.

During his previous stint at Smartshares, between 2018 and 2021, he built up the institutional business and was involved in developing the core ETF suite.

DAUGHTER TAKES OVER FOUNDER'S ROLE

An eighteen-year PIC veteran has landed the chief executive role. Kristen Garner, who has worked at PIC Insurance Brokers for the past 18-years in a variety of roles, is to become its new chief executive.

Most recently she was the company's chief broking operations officer and before that head of product and process.

PIC Insurance Brokers was founded in 1989 by Garner’s father Mike, who passed away in March 2022. The company remains a family-owned business.

“I’m proud to accept this opportunity and honoured to continue dad’s legacy at PIC,” Garner says.

“As a business, PIC continues to invest with long-term initiatives, most notably with the upgrade of our core operating system.

"Our focus remains on building strong relationships with our partners and providing exceptional service to our clients; many of whom have been with us for over 20 years.”

FISHER FUNDS ADDS RI GM

Fisher Funds has appointed former AMP Capital NZ managing director Rebekah Swan to the role of general manager Responsible Investments.

For the past 12 months, Rebekah Swan has been on contract as a Responsible Investment Specialist for the fund manager and KiwiSaver provider and the new appointment elevates the speciality to leadership-level.

Swan held various positions at AMP Capital, including developing her expertise as ESG investment specialist, before becoming managing director in 2020, prior to the sale of AMP Capital’s global equities and fixed income business to Macquarie.

TWO LIFE COMPANIES GET NEW CHAIRS

Partners Life and Fidelity Life have appointed new chairs recently.

Mary-Jane Daly (MJ) has taken over from Jim Minto at Partners Life, while former Chubb director and ACC chief executive Scott Pickering will lead Fidelity Life.

Daly is a professional independent director with more than 10 years’ experience. She serves as chair of AIG Insurance New Zealand and is chair of the Fonterra Shareholders’ Fund. She is an independent director of Kiwi Property Group and Kiwibank.

She previously served as a board member of Auckland Transport, Natural

Hazards Commission Toka Tu Ake, Cigna Life Insurance, Airways Corporation of New Zealand, and the New Zealand Green Building Council. Her executive experience includes roles in banking and insurance in New Zealand and the United Kingdom.

Daly’s appointment comes during a period of significant change in the sector. Her experience will enhance Partners Life’s strategic priority to build a brighter and more secure future for New Zealanders.

Ms Daly will assume the role of Chair on 1 February 2025, with a two-month handover period to facilitate the transition.

In addition to his role on the Fidelity Life board, Pickering is also chairman of Evolution Healthcare, on the boards of Kiwibank, ASX-listed Insurance Australia Group, IAG New Zealand, Engage Consulting and Bowls New Zealand, is an adviser to HealthNow and Bain & Co, and was previously on the board of Chubb in New Zealand and Australia.

Pickering was chief executive of ACC New Zealand for more than eight years, where he led a major business transformation, and also held Regional chief executive roles with Willis Towers Watson in Central and Eastern Europe, Middle East and Africa.

“He’s the perfect person to lead our board,” interim chairman Lindsay Smartt says. “Since he joined us in July this year, he has clearly demonstrated the depth of his experience and leadership. This will be invaluable as we bring to life our threeyear strategic plan and grow for the good of New Zealand."

TAP ADDS COMPLIANCE SUPPORT

The Adviser Platform has grown its compliance and governance team with new appointments.

The Adviser Platform (TAP) has expanded its compliance and governance team with the addition of Lyka Burr and Vincent Zhang . Both joined TAP as compliance specialists and adviser support.

Managing director Ryan Edwards

THOM

says the appointments reinforce TAP’s commitment to simplifying compliance and enhancing support for financial advisers.

“TAP has consistently aimed to make running a FAP easier for advisers by simplifying compliance."

He says the appointments "reflect TAP's commitment to helping more advisers navigate the complexities of regulatory requirements and stay on top of their compliance obligations."

"This ensures our members are wellequipped to run compliant and wellgoverned advice practices.”

Burr has five and a half years of experience in financial services, most recently as a Team Leader Paraplanning at AMP-owned Advice First, where she managed a team drafting Statements of Advice and led adviser onboarding and training.

Meanwhile Zhang was most recently at AIA as a compliance analyst for five years and five months and before that was with Aioi Nissay Dowa Insurance Management. Previous roles include claims case manager and compliance analyst work.

Their focus includes conducting quality assurance checks, reviewing documents, providing feedback to advisers, addressing compliance queries, and assisting with TAP’s licensing programme.

TAP Head of Compliance and Advice, Scott Duncan, says: “Lyka and Vincent’s extensive experience and deep understanding of regulatory requirements will significantly strengthen our ability to support advisers. TAP’s mission has always been to offer clear, practical pathways for navigating licensing and the regulatory environment, and their expertise further enhances our capacity to achieve that.”

FORMER APEX BOSS JOINS TRUST MANAGEMENT

Trust Management, which provides financial services to charitable trusts and “for purpose” investors appoints new GM.

Renee Tourell

has been appointed new general manager of client services at Trust Management.

Tourell brings significant experience in operational excellence, client success, and leadership from her career in financial technology and professional services.

She has held senior leadership roles across a range of high-profile organisations, managing global strategy, transformational change, and client relationship management. Most recently, she served as CEO/Managing Director at Apex Investment Administration (NZ) Ltd (previously MMC), where she led strategic initiatives that delivered operational efficiency and successfully guided the company’s transition to Apex following its acquisition of MMC.

Prior to this, she was COO at Apex and held other key leadership roles at Meredith Connell, Wolters Kluwer and Dealogic.

MAKAO ADDS THIRD CONSULTANT

Luke Longdill j oins Makao Investments. Makao Investments has further strengthened its investment consulting capabilities with the hire of Luke Longdill as an Investment Consultant. Longdill,

a CFA charterholder, brings extensive experience in private wealth and insurance to the team, having previously worked for Craigs Investment Partners and Southern Cross.

Noah Schiltknecht, co-founder of Makao, believes that the new hire will set up the business well for continued growth: “We are excited to have someone of Luke’s calibre join our business. His prior experience will help us to continue to strengthen and broaden our offering for financial advisory firms and support further growth in our other key client segments.”

Longdill, originally from Auckland, lives with his wife and two kids in Rotorua. He will be based in Rotorua and will work closely with the team in Auckland across a number of clients and initiatives. Longdill will also contribute to research across manager selection and asset allocation.

John Horrell, co-founder of Makao, sees the hire as an important step in the evolution of the business; “2023 and 2024 have been very successful years for Makao. We have grown the business substantially across financial advisory firms, foundations and other institutional clients. We also launched our ESG reporting with Matter successfully."

"It is great to have Luke join the business. A third consultant in the business will allow us to continue on our path of widening our services and client base while maintaining our rigor in research and quality of delivery.” A

LUKE LONGDILL

Life companies lay out plans

Fidelity Life and Partners Life have laid out their growth plans for the future.

Fidelity Life laid out bold new growth plans to advisers last month a year after admitting it had dropped the ball in this channel.

Chief executive Campbell Mitchell told around 200 delegates at the company’s Engage conference that it plans to be a $1 billion company in eight year’s time.

A year ago, chief commercial officer Bronwyn Kirwan, stood up at the Engage conference and admitted Fidelity Life had ”lost the hearts and minds of advisers”.

The company was going backwards and was ranked sixth out of sixth for growth, “behind Pinnacle (Life).”

Fidelity had deteriorating lapse rates and poorly ranked products.

When she famously announced Fidelity Life was “getting back in the game” she acknowledged there were some “trolls” (aka comments on Good Returns), but these trolls “strengthened our resolve.”

“(The) trolls made us inspired.”

At this year’s Engage event Kirwan and Mitchell talked about how hard staff members had worked to get back in the game.

“We are the doers,” Kirwan said.

While Mitchell said: “Every day of every week this team has worked hard at getting back in the game.”

Mitchell said Fidelity Life was the fastest growing life insurer in New Zealand in the period ending September

30, with 150% year-on-year new business growth in last two quarters.

Even though New Zealand is going through tough economic times and there is a cost-of-living crisis, Fidelity had the best industry retention rates in the latest Financial Services Council statistics.

Mitchell said Fidelity had only just begun its journey to growth and its aim was to make the company first choice insurance partner for advisers.

Soon after this event Partners Life held its roadshow and laid out its plans for the future including a decision to kill off its Customer Outcome Matrix (COM) and change its commission structure.

Partners Life has decided to stop using its COM for advisers as it believes the system may breach the CoFI regulations which are due to come into effect next year.

The COM was introduced in July 2021 as a way of measuring advisers' performance by surveying policyholders.

It was designed to ensure clients understood the advice they were provided, to encourage positive adviser conduct and create good customer outcomes. It was also aimed at early detection of potential issues at claim time.

Partners also tied its commission structure to the matrix, paying high rates of bonus commission corresponding to the scores advisers received.

From January 1 Partners will "no longer calculate bonus commission based on COM measures."

Partners chief distribution officer Andries van Graan told advisers that they would now all be paid 100% of bonus commission.

That means "the vast majority (of advisers) will get a pay increase."

He acknowledged that the matrix was making disclosure difficult for advisers.

With the changes to commission payments will be "consistent reliable and you know what it is going to be."

The matrix was not overly popular with advisers and created complexity for them as well as the company.

The COM is not being completely killed off. The surveys will continue but not be tied to commission. Where a client gives a no answer to a question that information will be passed onto the adviser.

Partners big changes is around the evolution of its digital innovations called Quote for Alteration (QFA) which automates and speeds up the underwriting process.

The company says it is a “game changer” and no other life companies in New Zealnd have the ability to match this service.

Phase two of QFA will see the service move to new business A

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Big Booster Bash

Booster hosted one of its biggest conferences ever, with up to 200 people attending the annual event in Wellington last month.

It was a day of stimulating presentations and conversations on the future of financial advice, the use of AI, what it takes to deploy capital to support and grow New Zealand business, an update on the Booster Foundation’s great work to grow New Zealanders’ financial capability, and Awards for the highest performing advisers.

The conference was topped off by a gala dinner, with the awesome Jordan Luck Band bringing out everyone’s best dance moves.

Those taking home Booster Awards, wine and congratulations included: Excellence Awards

KiwiSaver - Property Academy

Super/UK Pension - deVere

Investments - Matt Golding

Mover & Shaker Awards

North - Matt Isbister

Central - Scott Crocker

South - John Gaudion A

Superannuation Excellence Award winners – the deVere New Zealand team

Melissa Burgess, Natasha Liong, Jonathan Liong, Donna Fisher, Mitch van der Weert & Jacinta Highley

Katrina & Alan Borthwick

Chris and Denise Cornford

Mark Lyall, Liam Bratton, Jack Paterson & Matt Newman

Chris and Kathryn MacKay

Chris and Kathryn MacKay

Advisers hold off selling; still lots of headroom for Mint

An insight into the growth and challenges of Amplify and Mint Asset Management with its chief executive Rebecca Thomas.

Rebecca Thomas, the chief executive of Mint Asset Management, caught up with Philip Macalister Good Returns TV to discuss the progress of Amplify and the broader challenges facing the wealth management industry in New Zealand. The conversation covered everything from acquisitions and funds under management (FUM) to market dynamics and the evolving regulatory landscape.

The growth of Amplify

Thomas began by providing an update on the performance of Amplify, which includes a blend of acquisitions and organic growth.

Amplify, which originally started from scratch, has now reached breakeven and is experiencing strong portfolio performance, thanks to the implementation of new investment models.

One of the significant moves Amplify made was the acquisition of Prosperity Partners' retiring adviser book in Auckland, which was merged into their SAGE business. Additionally, the acquisition of Totara Wealth from Nelson, a company with a primarily discretionary investment management services (DIMS) structure, marked another milestone.

The success of these acquisitions has been clear, with both businesses seeing strong growth, driven by existing clients

who are entrusting more assets for management.

As of the latest update, Mint Asset Management's FUM under advice stands at just under $300 million, a testament to the success of these acquisitions and the overall growth strategy.

Deal flow and acquisition strategies

When asked about the future of Amplify’s acquisition strategy, Thomas highlighted a shift in the market. While there had been considerable interest from advisers in selling their businesses in the past, the appetite for exits has diminished, partly due to the recovery in markets.

After a period of uncertainty, many advisers are now more inclined to wait until the market stabilises further before deciding to exit. However, the aging advisor demographic remains a factor, and with medical issues continuing to impact advisers, the next wave of

exits could be tied to market cycles, particularly after a recovery and before the next downturn.

Thomas emphasised that the model for acquisitions within Amplify is designed to be flexible, allowing advisers to retain their investment strategies while benefiting from Mint’s platform.

The firm is agnostic to platform choices and fund types, which appeals to a wide range of advisers. She also noted the impact of the recent tax changes, with the top tax rate being 39% to while portfolio investment entities (PIE funds) pay 28%, PIEs more attractive, even to share brokers.

Regulatory climate and adviser sentiment

One of the factors influencing adviser decisions has been the evolving regulatory environment. Thomas noted that while there was initial concern about the new regulatory framework,

particularly with the introduction of the Financial Advice Provider (FAP) structure, advisers are now much more comfortable with the rules.

The regulatory burden, including AntiMoney Laundering (AML) requirements, remains a challenge, but the recent announcement to consolidate supervisory bodies in New Zealand is seen as a step in the right direction.

Thomas pointed out that while regulatory concerns have eased, the real issue for advisers is the market cycle, with many holding off on exits due to a sense of stability in the market.

Business valuations and market realities

The discussion also touched on the valuations of advisory businesses, which have seen some variance depending on the income structure of the firm. Those businesses with a higher percentage of recurring income have generally seen more favorable valuations, while those relying more on transactional, or one-off income, face more complex assessments.

The challenge is in determining the ongoing sustainable revenue and the cost base required to continue operations once the previous owners exit.

Thomas reflected that negotiations

around valuations often centered on EBITDA (earnings before interest, tax, depreciation, and amortisation) versus revenue multiples, with a significant focus on the quality of earnings.

Some advisers with transactional income modesl, for instance, have had to adjust expectations regarding the sale price of their businesses.

Funds management landscape: Consolidation and capacity

The funds management sector has been marked by consolidation, with large players like BNZ and Harbour combining forces in significant deals, leading to a reduction in Mint’s funds under management as assets shifted in-house in these consolidated groups. This trend has not been isolated, as overall growth in the institutional market has remained flat, and competition for assets is becoming increasingly fierce.

However, the New Zealand market presents unique opportunities due to capacity constraints in local bonds and equities. In particular, smaller companies and stocks with lower liquidity present challenges for asset managers, who need to manage portfolios carefully to avoid over-concentration in these areas.

While there are some capacity

constraints Mint has about $1 billion in headroom remaining before hitting capacity limits in trans-Tasman equities.

The Fee Debate: Active vs. passive management

In terms of fee structures, Thomas highlighted the ongoing trend of passive investment strategies, particularly through ETFs, gaining market share. She noted that this trend mirrors global shifts, especially in KiwiSaver, where investors are increasingly attracted to lower-cost, passive options.

However, New Zealand’s unique market characteristics, including liquidity constraints and the ability of active managers to generate alpha, still provide opportunities for outperformance, particularly in the active management of New Zealand assets.

Thomas concluded that despite the growth of passive investment, there are still niches where active management can deliver significant value, particularly where different investors have varying risk appetites and return expectations.

Mint Asset Management’s strong performance after fees is a testament to the firm’s ability to deliver on these opportunities. A

REBECCA THOMAS

Time for a roadmap to KiwiSaver 2.0

ASSET Magazine asks industry leaders the hard questions about KiwiSaver: is it doing what it set out to do? How do we make it more equitable? And what about the idea of investing retirement funds in long-term, domestic infrastructure projects?

BY KIM SAVAGE

KiwiSaver is widely considered a triumph for creating more than half a nation’s worth of savers - and amassing a funds pool of $117 billion-plus and counting.

Not bad for a scheme less than 20 years of age.

But as KiwiSaver matures, industry leaders want to see it really start to fulfill its potential. For that, they say,

New Zealand needs a truly bipartisan, long-term roadmap, to ensure KiwiSaver delivers what it is supposed to deliver: a healthy pot of retirement savings for each and every New Zealander.

In our 2024 ASSET KiwiSaver Roundtable, kindly hosted by the team at Fisher Funds, industry leaders shared their ideas for tweaks to KiwiSaver to make it fairer and more equitable, engaging younger generations to lock

in more savings at an earlier age, and ensuring the right advice is delivered in the right way to savers at the time they need it most.

There is no suggestion of the need for a complete overhaul. Subtle changes made holistically, allowing for plenty of runway for the changes to take effect, is generally viewed as the best way to build on the foundations of what most see as a strong brand already.

Left to right: Sam Bryden, Tracey Berry, Stephen Upton, Fiona Mackenzie, Philip Macalister, David Boyle, Ana-Marie Lockyer and Kim Savage

Who will be the next KiwiSaver champion, our leaders ask?

Meanwhile, faced with the seemingly impossible task of reducing the deficit, political leaders have turned their heads in the direction of KiwiSaver schemes, to ask what is stopping them from putting the funds to work by investing in long-term infrastructure projects for the greater good of New Zealand.

ASSET Magazine tested KiwiSaver leaders’ appetites for investing KiwiSaver funds in private assets, asking the key question: are KiwiSaver funds the silver bullet to close the infrastructure deficit?

NZ Inc is important, but investors come first

Roads, ports, the electricity networkthe few core infrastructure assets which don’t already have holes in them - are still unlikely to be fit for purpose in years to come.

The Government has made it clear it expects private finance to come to the party to help pay for new projects, but should the expectation extend to KiwiSaver members and their investments?

Pie Funds Chief Executive Ana-Marie Lockyer has seen the possible benefits firsthand.

“I was in Sydney recently and got to use the new metro line, and that's funded by

the superannuation system effectively,” she says.

“They're creating self-sustaining environments and communities and facilities for people to age well and to enjoy their life through all their life stages.”

Pie Funds is already dipping its toes in the waters of private investment - not in infrastructure but in equity, investing $10 million from its KiwiSaver Growth Fund in Icehouse Ventures’ late-stage venture fund.

Lockyer says New Zealand is still far behind other parts of the world, and has some growing up to do.

“New Zealand's a small country, so if your primary purpose is to grow your pocket-money for when no one else is paying your salary, then you're not going to get all of the exposure from New Zealand assets.

“But as balances grow, it's absolutely a way for us to support buildings and infrastructure that will support us through our milestones in life.”

Not straightforward

New Zealand is not unique in seeing superannuation-scheme assets as a silver bullet to fix an infrastructure deficit, according to ANZ Investments Managing Director Fiona Mackenzie. But while there may be a place for private assets in

KiwiSaver, it’s not as straightforward as some may think.

“You need very strong investment governance, and you need to have a really robust operating model. New Zealand Super does this incredibly well, but they have a very deep team, and they've built that expertise up over many years,” says Mackenzie.

“It's a space where we're dependent on having great assets to invest in and that's not quite there yet in New Zealand, I would say. I hope it's getting there.

“These are 10, 15, 20-year assets. I think there's a place for them, but we've got to make sure, as an industry, that we do it very, very well, because the downside impact in terms of the KiwiSaver brand, if one of us does not, is pretty serious.”

Kernel Wealth’s Chief Operating Officer Stephen Upton says it is important to differentiate between the various types of private assets when considering solutions for funding. Long-term unlisted property, venture capital, private equity and infrastructure each had their unique challenges and there might be an easier solution than direct investment of KiwiSaver funds.

“There are other instruments that you use for this. Why don't we just issue infrastructure bonds? Every single Kiwi manager would buy infrastructure bonds

FIONA MACKENZIE

TRACEY BERRY

SAM BRYDEN

with a 6% or 7% coupon,” says Upton.

“So it’s just lumping together a whole lot of different, less-liquid things, and we need to be clear about which ones we're talking about.”

GoalsGetter’s Head of Distribution, Sam Brydon, says any new approach has to keep the investor front of mind.

“It's got to be client or investor first, not solving problems for the country.”

Other providers agree, including ANZ Investments’ Fiona Mackenzie:

“The challenge at the moment is KiwiSaver is continuing to grow beautifully.

“That's a good thing, but we could potentially end up, in a small market like New Zealand, bidding against each other, both on the entry and the exit of these assets.

“That is not a good outcome for members at all.”

According to Fisher Funds General Manager of KiwiSaver David Boyle, there is also a challenge in finding adequate ways to be transparent with investors - about where their money was being invested when it comes to private equity.

“How do you describe these investments in a PDS that very few people read and make it easy to understand?” asks Boyle.

“Environmental, Social and Governance are areas we have spent a lot of time on, improving the transparency and process across all our funds and company activities.

“I believe PE and local infrastructure opportunities will continue to evolve, and certainly, as we get more expertise, these sectors much like in Australia will grow. A slow and steady approach here is required in my view.”

“It’s about differentiation as well, by unlocking alpha that’s not currently in the market. If you can get the right balance and mix and it helps New Zealand Inc, then that's a bonus,” says Boyle.

The search for KiwiSaver’s next champion

There’s consensus on the strength of the KiwiSaver brand, 17 years after the scheme was first introduced, but leaders have grown weary of its use, at times, as a political football.

Kernel’s Stephen Upton says KiwiSaver “needs its next champion”.

“So, whether that's [MP Andrew] Bayly, who really sees the opportunity as an economic driver, because the benefits will flow to New Zealand if you get it set up better, or whoever that may be, it needs the next champion to move forward, because there is no burning bridge.”

Pie Funds’ Ana-Marie Lockyer says

‘Many people don't engage. Nor do you want them to engage every day. It's finding that Goldilocks moment, perhaps that annual KiwiSaver Day’

Stephen Upton

there are too many Government ministers involved with KiwiSaver.

“We have three ministers that touch KiwiSaver from different perspectives, and none of them own it together,” she says.

“And so until you get all three of them in a room and present them with where we are today, where we think we need to get to, what the outcome of that is on future New Zealanders, and, in fact, what the outcome is on future superannuation requirements, then it's really hard to do.”

Lockyer says KiwiSaver would benefit from shaking its association with its founder Sir Michael Cullen, which sometimes leads people to perceive it as a Labour initiative, preventing long-term bipartisan thinking on the scheme.

“I think one of the things that Australia has done very well is they've legislated the purpose of KiwiSaver,” she says.

“It means every government is working to the same legislative purpose of KiwiSaver.

“Really focusing on the long-term retirement outcomes, and people being able to live a dignified life in retirement, means that actually any decisions that any government makes is going to be in line with that.”

Fiona Mackenzie says the tough economic environment is not a reason for political leaders to put off having hard conversations.

“Now, actually, is the time to be saying, ‘How do we help New Zealanders take advantage of their competitive advantage as long-term investors?’ and really get the markets doing the heavy lifting.”

Lay it all out in a long-term plan

Along with the desire to see a bipartisan approach to KiwiSaver, there’s support for the creation of an official “glide path”, setting out what tweaks will be made to

the scheme and when they will take effect. Aside from lifting contribution rates themselves, KiwiSaver leaders remain keen on seeing the separation of employer and employee contribution rates.

Mosaic partner Tracey Berry, who, before joining the financial services consultancy, established three KiwiSaver schemes, says the lack of separation creates unintended perverse outcomes.

On the other hand, she says, uncoupling seems relatively straight-forward.

“It immediately disadvantages no one, and immediately advantages some or puts them into an equitable position; irrespective of their ability to afford contributions or not, at least they're getting contributions. And so I feel like it's most impactful for those that possibly need it the most.

“If we lift the bottom, we lift all of society,” she says.

The lack of long-term thinking is holding New Zealand back, says Fiona Mackenzie, citing, as an example, the lack of information around potential increases to contribution rates.

“I think Australia was really smart and said, ‘Right, we’ve just got to put 10 or 15 years on it. It's going to go up by 50 basis points at a time’, which really does give certainty. Having certainty is

massively important for employers, and for KiwiSaver members.”

GoalsGetter’s Head of Distribution Sam Bryden says introducing changes at the point of entry for KiwiSaver members was an effective way of achieving the improvements they all wanted to see, without adding the burden on current members.

“Increasing the KiwiSaver contribution rate for young people as they start working for the first time would be effective, especially since they typically have fewer financial responsibilities at this stage of their life.

“The additional contributions are unlikely to be missed and that will help establish good financial habits at the beginning of their career.

“Over time, this approach can be gradually applied to new employees as they enter the workforce, creating longterm financial security,” says Bryden.

Equity would continue to be difficult to achieve with the current KiwiSaver set-up, as Fiona Mackenzie points out:

“If you've got an ethnic pay gap, which we know Māori and Pasifika people do, then even though our data shows that Māori members are actually contributing

more in percentage terms, because of the pay gap, they're retiring with lesser outcomes.

“Same thing for people who take ‘carer’ gaps, whether it's looking after aging parents or looking after children, unless

needing a change.

Mosaic’s Tracey Berry says it is probably not well understood at a consumer level.

“I would look at my daughter, who's just started work in Australia: he's working for a government department,

‘One of the things that Australia has done very well is they've legislated the purpose of KiwiSaver’

Ana-Marie Lockyer

your employer is generous and covering those gaps,” says Mackenzie.

“So there is inequity that's actually hard-coded, because it's all tied to your employment.”

Employers including KiwiSaver contributions as part of a total remuneration model was something some of the KiwiSaver leaders see as perhaps

and the superannuation is obviously very generous on top.

“She's concerned with her salary, what she's getting in the pocket, and super is cream on top, so it's not even in here from her perspective.”

Kernel’s Stephen Upton says total remuneration is just a perception.

“The employers who want to game

‘There's no point having great returns, low fees, if people aren't contributing into their scheme; that's fundamentally got to change’

David Boyle.

the system and feel it's in their interest, because they're very focused on labour cost for whatever reason: they will find ways that it can be done.

“Do you want to shut down those lower, total-employment cost ‘loopholes’ of encouraging 70-year-olds to be in the workforce, and encouraging immigrants to be in the workforce, or encouraging people overall to take a total remuneration package?”

Meanwhile Catherine Pollock, Smart’s General Manager of Business Development, says total remuneration “creates incentives, so you would hire someone who's not paying KiwiSaver.”

Working as an industry, together with employers, to come up with recommendations to take to Government, is a focus for the group going forward.

KiwiSaver in the age of the Great Wealth Transfer

One question continues to surface: is KiwiSaver doing what it was designed to do?

Industry players think there’s still a way to go before they can answer yes, not just with the scheme’s settings but also with younger people’s level of engagement, with many youth taking the view there’s no need to contribute, given they will inherit wealth from the generation before them.

David Boyle says young people need to remember they're living longer and their parents are living longer.

“The intergenerational wealth transfer may not happen to the same extent as it has been in the past. This is because we’re living longer and we need our

investments to live as long as we do.

“Many of us may not be in the position to give our children what they want and it can create unhealthy tensions. I am concerned about those Kiwis who have worked incredibly hard for a modest nest egg, and then they're getting pressure from their children to help them get into their first home, or other financial support.

“This will lead them to have less to live off, which in turn could impact their own quality of life in their latter retirement years.

“And there's no point having great returns, low fees, if people aren't contributing into their scheme; that's fundamentally got to change,” says Boyle.

Stephen Upton agrees the promise of an inheritance is different to what it was in decades past.

“Will they get it when they're 40? Or will they get it when they’re 70?

“I have friends who have a parent who is a centenarian and they’re having to maintain and supplement the lifestyle of the 100-year-old, even though they’re retired themselves.”

Timely advice critical

Good quality advice at key milestones for KiwiSaver members could make a world of difference, especially as the funds pot grew in the decades to come.

Ana-Marie Lockyer says a critical point for this advice is around the age of 55-65.

“You’re 10 years to retirement, and [at] 65, goodness, you've got this pool.

“You don't actually have to take it out, but you can. But if you take it all out, it's pretty irresponsible to give it to you

How would you score KiwiSaver based on where it is today?

Stephen Upton 6/10 KERNEL

“In terms of its initial 2007 camel approach, great. It incentivises people in early, because the first home is the milestone they think about. All of the problems that we're aware of stem from the fact people aren't really engaged with it in the right way. And I think we create a problem for ourselves, the dabbling at the edges. We've actually got to have generational thinking, even though New Zealand's terrible at longer-term planning. KiwiSaver is only a third of the way to maturity. People forget that it won't be mature until 2046 when you have a complete cohort in there, and we are all going to expect contributions to be significantly larger than withdrawals until that point in time, regardless of any transferring around.

“So we can get into the specifics of the approach towards it, but ultimately, there's still an underlying, ‘what are we trying to achieve here?’”

“KiwiSaver having more than 3 million members, with no mandatory driver, is quite an extraordinary outcome. And what that’s led us to is that KiwiSaver has a very strong brand. It is perceived as almost a national taonga now, and people get very unhappy if people start making changes, like we saw 18 months ago with the GST tweak. I actually consider it's in better shape than we sometimes think it is when we're talking about change.

“There are some areas we could continue to refine and improve, but I genuinely think doing wholesale changes to it is a risky proposition, to be honest.”

“We began with an awesome foundation: centralised contributions through Inland Revenue is a masterpiece, so we're not having that cost of lost super; truck and trailer is a really great approach, and I keep using those themes.

“I guess my concern is that I can't call it a success at the moment, when you've got 3.4 million investors and 1.2 million not contributing for a variety of different reasons. That's something that we need to investigate a little further. We need to change, probably, the narrative around how we talk about building contribution rates, rather than the finger-wagging that we've been doing at the moment as an industry.”

Tracey Berry

“The simplicity is what's beautiful about KiwiSaver. It’s frictionless, largely, to get in. It's relatively frictionless to change. I know there's a perception it might be harder, but the reality is it's very easy. I think that while it’s arguably not compulsion, it operates in a virtual compulsion manner. And so consequently, from a behavioralscience perspective, it’s the best way to get maximum penetration [in a noncompulsion state].

“We began with an awesome foundation: centralised contributions through Inland Revenue is a masterpiece, so we're not having that cost of lost super; truck and trailer is a really great approach, and I keep using those themes.

“I guess my concern is that I can't call it a success at the moment, when you've got 3.4 million investors and 1.2 million not contributing for a variety of different reasons. That's something that we need to investigate a little further. We need to change, probably, the narrative around how we talk about building contribution rates, rather than the finger-wagging that we've been doing at the moment as an industry.”

“A good example of how healthy it is is how many providers there are. It’s reasonably easy to get started, the amount of choice that’s out there for the consumer is great, and the ease of transfer is also nice and easy.

“Looking back at when it started, there was a bit of a failure early on in terms of having young people in the right funds, and that's been addressed now. I think there are huge amounts of improvements to be made in terms of somehow getting more advice, especially into those younger people. Because if you come into KiwiSaver at the age of 18 and you don't know what you're doing, even if you choose a fund, you could end up [doing so] just because you think that that's the right thing to do.”

“It just seems that we're doing something, so that’s great, and the bones are there, but there's just so many things we could be doing better that would make a huge difference for Kiwis. We had a young professionals’ event the other night; you expect a fairly engaged audience. But do you know how many of them had actually actively chosen their provider? Their path? I think there's a lot of people who just don’t care that much.”

Fiona Mackenzie

Lockyer

Emily O’Hara, Pathfinder KiwiSaver Plan member

KiwiSaver Plan

First for 5-year KiwiSaver returns

in the Multisector Growth, Balanced & Conservative categories*

Pathfinder has been awarded Best Ethical KiwiSaver Fund Provider by Mindful Money four years running and all three funds in the Pathfinder KiwiSaver Plan ranked 1st for 5-year returns in their category in the latest Morningstar KiwiSaver Survey (as at 30 September 2024).* Offer your clients a KiwiSaver they

*Disclaimer: Pathfinder KiwiSaver Growth Fund returns ranked 1st out of 19 Multisector Growth Category Funds, Pathfinder KiwiSaver Conservative Fund ranked 1st out of 16 Multisector Conservative Category Funds, Pathfinder KiwiSaver Balanced Fund ranked 1st out of 22 Multisector Balanced Category Funds for a period of 5 years as of 30/09/2024. Results are from the Morningstar KiwiSaver Survey September Quarter End 2024. © 2024 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the

without help.”

However, Mosaic’s Tracey Berry suggests it isn’t entirely providers’ responsibility to ensure good advice filters through to consumers.

“I think the inputs to making an informed decision may include advice. It may be proprietary from the provider. It may be on the phone. Sometimes, advice is reactionary. I'm providing advice because somebody's engaged with the scheme and they've got a question or a concern.

it would be more suitable for members with smaller balances, early in their savings journey, while David Boyle sees AI as more of a tool in the process, alongside human interaction.

Upton does agree there are times when human advice will be necessary.

“When you're approaching retirement, and you've got a million-dollar balance, there’s a risk if you don't have any financial literacy of knowing what to do with it. Human advice becomes critical.”

Boyle is interested to see how

‘Why don't we just issue infrastructure bonds? Every single Kiwi manager would buy infrastructure bonds with a 6% or 7% coupon’

Stephen Upton

“And actually, we might not necessarily be hitting the people who need the advice or the information to make informed decisions the most,” says Berry.

“And so that's incumbent on the industry, and the Government and others, to all participate in helping consumers make informed decisions.”

What about the ‘AI adviser’?

The idea of the “AI adviser” causes some contention: Stephen Upton suggests

technology will change people’s behaviour and savings habits.

“I think it opens a new digital toolbox for providers to integrate AI and help clients improve their personal financial capability, which is a great thing.

“But fundamentally, you still require a good investment proposition, along with access to quality advice when they need it, especially when they reach retirement,” says Boyle.

Open banking would change the game, according to Mosaic’s Tracey Berry, with

‘There is inequity that's actually hard-coded, because it's all tied to your employment’

Fiona Mackenzie

the sharing of data across the financial services sector.

“As an investor, if I permit you, the adviser, to consume that [banking] data, I know that you're going to provide me a whole bunch of insights that benefit me that I didn't otherwise know.

“Suddenly, [as an investor], you're aware that based on your spending habits over the last six months, you could conceivably save an extra $20, and that actually, what that means over the next 30 years is that suddenly you go, ‘Oh, it's not $20 a week, it’s $70,000’.

“The ability for consumers and members and investors to make informed decisions is really useful, if we use it for good,” says Berry.

While changing technology will create opportunities for providers, it can’t solve the dilemma of how to get, and keep, people’s attention.

Ana-Marie Lockyer predicts AI will create great information and ‘nudges’: “It will capture another small part of the population of KiwiSavers, but not all.”

Keep targeting apathy

Stephen Upton says apathy is still a major obstacle.

“Many people don't engage. Nor do you want them to engage every day. It's finding that Goldilocks moment, perhaps that annual KiwiSaver Day - a reason to have a look and check that you're comfortable with your contribution settings, your overall risk profile, and therefore fund choice.”

“Just getting people to focus for a moment every now and then would be the biggest thing.” A

Early brush with fraudster

didn’t

deter award-winner

Josh Cuttance had an unusual start to his career. Now his business is going from strength to strength.

It might be hard to imagine a more shocking introduction to a career in financial services than that experienced by Dunedin adviser Josh Cuttance.

In 2018, the then-26-year-old was introduced to insurance when he and his wife bought their first house. “The person we went through had a financial planning business, his daughter was a mortgage broker. We got a mortgage through her and in those dealings, got some insurance and kind of realised what the industry was. Previously I had no idea.”

He was offered a job and started his level 5 studies. So far, so normal.

“But then I was just about to finish my study and I was going to work one day, and I was told ‘don’t come in, there are 16 serious fraud officers in the building.”

The man he was working for was Barry Kloogh, who went on to be sentenced to

eight years and 10 months in prison for a Ponzi scheme.

Having only been working there four months, there was no suggestion Cuttance was involved, but it meant that he was out of work, effective immediately.

“It was like, wow, this was an interesting introduction,” Cuttance remembers. “But in those four months I did realise it was the career I wanted to do.”

He started to contact everyone in Dunedin who was in financial service and asked for meetings. “I talked to a few people, had a few offers and options but one that stood out to me was being in SHARE and running my own business. Paying a monthly fee to be under their licence but to have full ownership of clients and my business.

“There was risk involved but we felt it was pretty low-risk at the time. Our

mortgage was pretty low, my wife’s income covered the mortgage and we didn’t have kids … We thought ‘why not do that?’

“That was June 2018 when we started the business and so here we are, fiveand-a-half years on, and it works really well for us.”

He said the SHARE model meant he had access to people who were more experienced and could offer support and advice, but he still had the freedom to build his own firm.

Cuttance says there is no shortage of people who talk about Kloogh now and say that he seemed shady at the time. “He was different for sure. It’s easy to say that after the fact.

“You can’t regret the past but you can just learn from it. I may not be where I am sitting today if it hadn’t been for me getting the lending there, and things like that.”

Despite the alarming initial experience of bad behaviour, Cuttance says the people he has met in the industry since have been good and doing their best for clients.

He said he was happy to have found a career that was a great fit, and he had been working on building his client book over the half-decade with a range of different approaches.

“I wouldn’t say it’s been hard building the business over those years. There has been a lot of work. My big thing was that it's really about creating a sustainable way to get your business.

“I did a marketing degree that helped, I’ve always worked on social media and that’s been one element of getting me business.

“Then I’m working on referral relationships, business networking groups like BNI. I do get young advisers calling me for advice and I tell them you have your tree and there’s fruit on different branches. You don’t know which branch is going to work at one time but as long as

“That doesn’t sit overly well with me.”

He said it was good that regulation had introduced a need for advisers to have sufficient support staff to cater for their clients.

“I’ve been building that up. My wife is my EA, and we have another administrator in the business who has been with us a year now. I’ve got a young adviser starting in the new year as well. I plan to build sustainably but I also like the idea of growing a business and having staff and growing advisers too. It’s what the industry needs and I see that as something that would be enjoyable if we can both benefit from that – my business would benefit but so can the advisers, that sounds like a good thing to me.”

Cuttance said, as he continued in the industry, he realised the real value was in claims.

“That’s the genuine value we provide. Whether a client has a claim that’s simple, or the client had a claim declined and we worked hard to turn that decision around, or we just make sure the client

‘I do get young advisers calling me for advice and I tell them you have your tree and there’s fruit on different branches. You don’t know which branch is going to work at one time but as long as you’re working on all of them, that creates a sustainable model.’

Josh Cuttance

you’re working on all of them, that creates a sustainable model. It has for me.

“Don’t get me wrong, I haven’t been a bull out of the gate writing bucketloads and bucketloads of cover but I’ve done alright. I haven’t relied on one particular source of business, either. Some people build up a dependence and once the tap is turned off it can become quite hard.”

Cuttance has also bought businesses, with two smaller acquisitions and one significant one in recent months.

The process of onboarding clients had required a different approach from those that came in fresh, he said.

“It’s a whole different way of learnings in doing that, making sure clients feel they are looked after not just being palmed off. We did a video of him and I to the clients saying we know each other and we want this to be a smooth transition. Little things like that have been really important and have helped.”

Cuttance said he would not subscribe to the model of “have as many clients as you can and hope no one calls”.

really understands, that’s the value we provide, to be fair.”

Many people thought of insurance as a grudge purchase, or something they did not necessarily need when they were not familiar with it, he said.

“You don’t look at it as something you might not really need if you understand what the products do and how they might be applicable for your situation. There’s always a strong education approach to what I do. Ideally empowering my clients to understand and make a decision. I’ve advised on what I believe is best for them and hopefully they can fully understand that – that’s always been my goal. I find that process enjoyable. It moves away from me trying to sell you anything to me trying to show the value and how that applies to your situation. That’s the stuff I like.”

He said there was also significant commercial opportunities because many advisers were getting older, and the population was underinsured. “If we can tap into younger people, there is a lot of

opportunity.”

The increased awareness many people had of others’ health problems, often through exposure on social media, also helped to highlight how insurance could help, he said.

Cuttance had a career in hospitality before shifting to insurance and said people who had been in that sector, particularly in management, often made good advisers.

“The reason for that is that you have to be able to relate to anyone. That’s something I’ve always felt I was reasonably good at. I’ve also always been interested in investing and economics.”

Financial advice combined his ability to relate to people and his interest in finance and business “incredibly nicely”, he said.

The industry was working at moving away from an image of a “slimy salesman”, he said, to one of a genuine profession and something that was part of a wider financial advice picture.

Cuttance also offers KiwiSaver advice and said he felt people had a real desire to engage with that. “In the KiwiSaver conversation people will sit up straighter and can feel a bit more interested.”

A significant proportion of his work is done online. He says it can make up to 70% of his client consultations. “When I see clients, I’ve found particularly younger families love that. It also means I work later. I have a young family, a sevenmonth-old and a three-year-old and if I’m in 8pm or 9pm appointments that’s cool, I can spend an hour with them before bed… I do work at least 50 hours a week but I do those on my own time and I feel like I can spread that.”

Cuttance said he was optimistic about the future of the sector. “Technology will play a part in our industry for sure. How you help business owners navigate that will be interesting. For me it’s making sure I’m up with that and utilising the tools that make us more efficient.”

He recently won a Fidelity Life “Professional of the Future” award. Fidelity said the award recognised "an adviser with a strong business strategy, an unwavering commitment to amazing customer experiences, and someone who demonstrates ongoing professional development and involvement in enhancing the industry”.

Cuttance is also on Fidelity's Adviser Council and Financial Advice NZ’s risk committee.

He says he owes a significant portion of his success to the SHARE model.

“It’s allowed me to not only have other people around me in the office to call on with an open door policy as separate business, but part of the same group. It’s been so instrumental in the fact that I’m only five-and-a-half years in, but I feel like my experiences have been so far accelerated because of those people being in the office next door.” A

Radical for its time

Jacob Wolt, now retired, reflects on 30 years of advising – including the business decisions considered revolutionary. This is his story in his own words.

BY JACOB WOLT

Bradley Nuttall was established in 1994 as a partnership with a singular focus: to provide advice in the best interests of our clients.

This foundational principle has remained the cornerstone of our business for three decades, guiding us through significant transitions and growth.

When Dave Bradley, Andrew Nuttall and I founded the company, we set out to create a firm that would provide tailored personalised advice, free from the influence of prevailing trends or productdriven offerings.

Our approach was somewhat revolutionary, as many advisers and brokers at the time were still operating on commission-based models that prioritised product sales over client needs.

Radical move

The year 1998 marked a pivotal moment in our journey, when we decided to transition to a fee-only model.

This was radical for its time, as it meant complete transparency in our pricing structure and clear alignment with our clients’ best interests.

It was a bold move that set us apart, at a time when the financial services industry was still heavily reliant on commissions, brokerages, and frequently opaque fee structures.

Embracing technology

The late 1990s then marked a significant shift in our operational efficiency. In 1998, we became a foundational user of the AEGIS investment platform.

This custodial system enabled our

clients to access lower-cost wholesale investments and eliminated the need to complete individual paperwork for each investment.

A technological leap forward, this allowed us to focus on delivering improved investment outcomes, spending more time on providing strategic advice tailored to each client’s individual needs and less on administrative tasks.

The move to the FNZ/Consilium platform, and other platforms in recent years, has significantly further enhanced our delivery and capabilities.

I recall the early days of handwriting financial plans, completing manual cashflow modelling, writing up file notes, and the time spent preparing for client reviews.

The stark contrast with today’s virtually instantaneous modelling and reporting capabilities illustrates the rapid technological evolution we have witnessed and embraced over the years.

Pioneers of holistic approach

Our vision extended beyond just offering investment advice. We recognised early on that true financial stewardship required a comprehensive approach.

In the late 1990s and early 2000s, we were pioneers of holistic wealth management in New Zealand.

This approach considered not only delivering investment solutions for clients, but also took into account many other financial and personal matters. Depending on client needs, these could include lifestyle goals, cashflow modelling, tax considerations, estate planning, inter-generational wealth transfer and philanthropy.

This methodology has now become more of an industry standard, but it was innovative at the time.

The approach resonated with many accounting and legal firms. We developed close relationships with many financial professionals to ensure all our clients’ needs were considered.

These relationships are greatly valued, as are the many client introductions provided by accounting and legal professionals seeking unbiased, fee-only, holistic wealth-management advice.

Similarly, we have appreciated the many introductions from our clients over the years.

Evidence-based investment

Another watershed moment occurred in 2002, when we adopted an evidencebased investment philosophy.

Grounded in academic research and empirical evidence, including Nobel Prize winning work, this approach provided a robust framework for our investment decisions.

It offered our clients a transparent, low-cost investment strategy where risk could be measured and managed effectively.

This shift had profound implications for our business model. It freed us from the constant barrage of fund managers pushing their latest products, fads, and, at times, illusory returns, and allowed us to maintain a consistent, scientificallygrounded approach to investing.

This philosophy has stood the test of time, serving our clients well for over two decades.

Growth and specialisation

As we grew, we recognised the need for specialised expertise to better serve

JACOB WOLT

our clients. This culminated in our 2017 union with Richard Austin, Steve Mander, and their business, IQ2, to form a new brand; Cambridge Partners.

The merger allowed us to expand our service offerings, providing a greater range of comprehensive wealthmanagement solutions for the varying needs of a broader range of clients.

It also provided enhanced opportunities for our staff in terms of career development and progression.

Cambridge Partners continued to uphold Bradley Nuttall and IQ2’s core beliefs, including a commitment to innovation, high professional standards and a strong focus on client outcomes.

Over the years, we have also provided shareholding opportunities for several of our advisers – Todd Sutton, Scott Rainey, Pip Kean and James Howard – as part of our succession planning. This will ensure the continuity of our client-first approach beyond the tenure of the founders of the business.

Global connections

Our commitment to excellence led us to forge global connections.

We participated in many overseas conferences, study tours and training programmes. Our commitment to lifelong learning led to us co-founding the Australasian Asset Class Investment Association in 2003 and the Global Association of Independent Advisors (GAIA) in 2014.

These two associations exposed us to world-class ideas and practices. The connections we formed in these groups have been instrumental in our ongoing innovation, business development and ability to deliver quality advice to our clients.

Institutional services

In 2005, we expanded our services to include institutional clientsparticularly not-for-profit and tax-exempt organisations.

This move not only diversified our client base but also provided valuable insights into the strategies employed by fund managers and consultants in the institutional space, further enhancing our knowledge and capabilities.

The initiative was further enhanced in 2013, when Bradley Nuttall became the first New Zealand-owned financialadvisory business to be accredited by the Centre for Fiduciary Excellence (CEFEX).

This global accreditation provides comfort for our clients, ensuring that we adhere to the highest global standard for fiduciary excellence.

The development of Consilium

Originally launched as Bradley Nuttall Middle Office Services in 2006, the intent of this new development was to provide investment and technology solutions to similarly aligned financial advisory firms

throughout New Zealand.

In 2013, recognising the growing demand for these services, we decided to separate this division of Bradley Nuttall into what is now known as Consilium.

Today, Consilium is a leading provider of advanced financial solutions in New Zealand, offering services to over 150 advisory firms.

Learning from mistakes

Our journey has not been without its challenges. For instance, in 1998 we ventured into mortgage broking.

This was subsequently divested in 2001 due to inherent conflicts of interest, a chapter which taught us valuable lessons about staying true to our core competencies and ethical standards.

Long-term vision is critical

Throughout our history, we have maintained a strong focus on long-term planning. Our business plans consistently look beyond immediate goals to three, five, and even 10-year horizons.

This forward-thinking approach has been crucial in meeting client needs, achieving sustained growth and adapting to changing market conditions.

The concept of overestimating what is achievable in the next year but underestimating what can be achieved in the next decade has been particularly relevant to our business.

Building a legacy

As I reflect on the past 30 years, I am filled with gratitude for the relationships we have built with clients, team members, other professional advisers, selected fund managers and many other stakeholders.

The transition from the founding generation to the new leadership team, led by James Howard as CEO, instils me with confidence that the values and vision we established will continue to thrive.

Looking to the future

As Cambridge Partners continues to evolve, the foundational principles established 30 years ago remain at its core.

The firm’s commitment to innovation, professionalism, and client-centric service continues to drive its success.

With the new generation of leaders at the helm, supported by the wisdom and experience of its founders, Cambridge Partners is well-positioned to continue its legacy of excellence in wealth management.

The journey from Bradley Nuttall to Cambridge Partners over the past 30 years has been one of continuous growth, learning and adaptation, with our clients at the core of everything.

We have built a firm that survives and thrives in an ever-changing financial landscape. A

Key lessons from three decades in business

1. Choose business partners wisely

My initial decision to partner with Dave Bradley and Andrew Nuttall was pivotal. Our shared values and vision were more important than any formal contract. Later, the decision to merge our business with Richard Austin and Steve Mander’s business was based on the same principles - and continues to this day as new shareholders are introduced to Cambridge Partners.

2. Invest in team development

Build a strong team in which all members are afforded the opportunity not only to use their unique abilities in their roles, but also for career development. For us, this is reflected in the longevity of many of our team members within the business.

3. Embrace innovation

From adopting new technologies to pioneering fee-only advice, our willingness to innovate has kept us at the forefront of financial services.

4. Focus on client outcomes

Our unwavering commitment to putting clients first and making a difference in their lives, consistently focusing on helping them to achieve the best outcomes possible, has been the foundation of our success and longevity. Many of our clients have been with us for over 20 years.

5. Maintain a global perspective

Our international connections have been crucial in bringing world-class practices to our local market.

6. Adhere to an evidence-based approach

Adopting and sticking to an evidencebased investment philosophy has provided consistency and reliability for our clients.

7. Be willing to take calculated risks

While every initiative has succeeded, our willingness to take risks has been essential for growth and learning.

8. Prioritise transparency

Moving to a fee-only model in our early stages helped set us apart and to build trust with our clients.

9. Evolve with technology

Continuously adapting to advances in technology enables leverage and improved client outcomes.

10. Balance business and personal life

While the business has demanded significant time and energy, maintaining a focus on family and personal values has been crucial.

KiwiSaver: a triumph of marketing or value for money?

David van Schaardenburg takes his annual look at the state of KiwiSaver: the returns, the fees, and the million Kiwis who belong to a scheme but don’t contribute.

Every year, I like to look at the Financial Markets Authority’s annual KiwiSaver report, combined with researchcompany reports on the KiwiSaver sector: they provide a unique insight into the advances (or not) in New Zealand’s funds-management industry, household wealth and in our society’s financial literacy.

This year, I do so at a time the right-ofcentre Government, which has been in power for one year, has had a complete handoff approach to retirement savings and the funding of retirement.

This is despite recently published long-term forecasts by the Government’s own economic department about the unaffordability of New Zealand Superannuation.

It comes also at a time that the funds management industry continues to globalise, as the financial and technological barriers to access New Zealand resident investors - and for them to invest globally - continue to decline.

This has led to an increasing number of quality offshore-investment firms establish or further grow their New Zealand resident offerings. Which in turn means the KiwiSaver revenues the funds-management firms gather become increasingly important, as other parts of their businesses face greater competition.

Nominal returns look good

Over the one-year period ending September 30, the balanced-fund option of the largest seven KiwiSaver providers returned on average 16.6% after fees and before tax.

Over the five years to the same date, the same group returned 5.4% per annum.

This is a great recovery from the markets’ setback in 2022, and early in the Covid pandemic. It also covers the period when bond yields went from record lows to much higher, as inflation surged across the world.

Less encouraging is the minimal dispersion in returns between the largest providers over the five-year period. Bar Milford, who outperformed, the other six had returns for their balanced funds in the narrow range of 4.3-5.5% per annum.

Are the larger providers more interested in mimicking each other, or genuinely growing their KiwiSaver members’ wealth?

Value

for money (or not)

Looking back at my reviews of the prior two years of KiwiSaver industry trends, one common factor, sadly, has been the reluctance by KiwiSaver providers to reduce their fees.

The 2021-22 year saw fees rise at a similar rate to KiwiSaver total assets, while much of the substantial decline in 2022-23 was due to reductions in performance fees thanks to weak investment returns.

The latest year to June 2024 saw aggregate KiwiSaver assets grow by 19.3%, while investment fees rose by 18.9% : great investment returns on the back of recovering financial markets, however, very little of the benefits of scale appear to be being passed through to KiwiSaver investors.

The FMA’s comparison of weighted average fees across the KiwiSaver

industry over the last decade does show a substantial reduction in the aggregate average fee rate (as a percentage of assets) by 31%.

As large as that number is, the growth in the industry over the same period has been 173%.

Missing from the FMA’s 10-year reflection are insights into why average fees have declined - and should KiwiSaver investors, notwithstanding the last two years’ lack of progress, have some optimism they’ll get a better deal in future?

Supporting KiwiSaver fee reduction has been the growth in low-cost passive investing.

Passive providers now make up around 32% of KiwiSaver assets, versus sub20% 10 years ago.

However, not all KiwiSaver passive funds are ‘cheap’.

For example, AMP now has a passiveinvesting approach, yet its KiwiSaver Balanced fund charges over 230% more than the fee that the Simplicity Balanced Fund charges. BNZ also charges a substantially higher rate for its passive KiwiSaver funds versus Simplicity.

To the casual observer, it does seem the marketed benefits of most providers’ KiwiSaver funds cover just about anything else but the fairness of costs borne by the investor (excluding Simplicity and Kernel).

Is KiwiSaver a triumph of marketing over value for money?

While their other funds-management services suffer declining revenues, are KiwiSaver schemes the gravy train that will keep New Zealand fund businesses alive?

‘One common factor, sadly, has been the reluctance by KiwiSaver providers to reduce their fees’

Two-tier savings scheme

The latest member statistics show that KiwiSaver is working reasonably well for around 65% of the members, while being of less value for the other 35%.

Non-contributing members were up 3.4% to more than 1.3 million members. Sure, 28% of these were under 17 or 65-plus, but near one million New Zealanders were not investing.

If KiwiSaver is about reducing the reliance on government support in retirement, then it’s not happening for an awful lot of people.

Contributions were up 6.5%, but withdrawals were up 19% - more members in retirement, more suffering financial hardship.

In the absence of legislation lifting contribution rates and forcing compulsion, KiwiSaver risks becoming a declining factor in retirement savings far too soon.

Financial literacy up

The participation of around 60% of New Zealanders in KiwiSaver has driven a huge surge in financial literacy, albeit off a modest base.

Signs of continuing sophistication of thinking are still occurring, but in my view there is a long way to go.

Fewer members appear to be tinkering with their KiwiSaver wealth.

We know that the banks, who hoovered up a large market share of KiwiSaver members in the early days, have continually declining market shares.

We see more KiwiSaver members opting to take on more investment riskmore likely to be balanced or growth risk profile.

We see declining switching between risk profiles – that is, trying to ‘time

the market’. And switching between providers has fallen 31% versus five years ago.

Growth funds now have near 50% of KiwiSaver assets, but, given the long timespan most KiwiSaver members have between now and when they are likely to spend their savings, this statistic should be more akin to 80% plus.

The role of the adviser

When I talk about financial advisers, I’m not referring to employees of KiwiSaver providers who will only sell their employers’ solution.

I didn’t see any statistics on this important aspect of KiwiSaver in the FMA’s annual report.

As the economics of KiwiSaver

independent financial advisers will become more important.

The Ignite network has thousands of KiwiSaver clients - many with other wealth accumulated, on which they have also received advice.

KiwiSaver is seen by providers as a ‘product’. To an adviser, it is a component of a client’s wider wealth building or deaccumulating strategy.

Hence the need for KiwiSaver providers to evolve their offering as fast as the rest of the wider investment-fund industry is changing. Otherwise they risk advisers disintermediating them. A

David van Schaardenburg is independent of any investment provider and is chief executive of the Ignite Adviser Network, which provides advice to over 15,000

‘Are the larger providers more interested in mimicking each other, or genuinely growing their KiwiSaver members’ wealth?’

Are you the one to bring games and finance together?

Gamification could be the strategy that makes financial advice come alive – and it could well be an adviser who cracks open this unrealised opportunity.

BY RUSSELL HUTCHINSON

Amajor tool the Financial Markets Authority (FMA) uses to ensure compliance by financial advice providers (FAPs) is the monitoring visit.

Most people want to manage their money better, and most of them have smartphones and play games.

Most games have an economic component, and many require high levels of planning and skill.

The game industry is vast1 – at above $400 billion in revenue for 2023, it beats music and films combined. With billions of customers, and varied experiments in user interfaces, it suggests levels of experience that could add a lot to financial services.

We are not alone in thinking so, with international consultancies and many project commitments showing that for the better part of a decade or more, financial services companies have been exploring this opportunity.

I think financial advisers - you folkmight be better placed to actually make progress in this arena, as some of the best stand-alone innovations in the field tend to be made by advisers, not insurers, banks, or fund managers.

Surely gamification could be the strategy that brings financial advice and maybe life insurance advice, alive?

It’s been done in other fields after all.

The internet is a great place for data-intense challenges – and, as such, online share trading was one of the few commercial successes of the early years.

Online share trading would be second only to online banking in online financial

services. Its reputation would be bigger if it were not for Crypto which has hogged the limelight recently.

The evidence is solid: the internet is a great place for financial services and games, so why not both?

And some stodgy old fields have been revolutionised by gamification.

‘Gamification has long been talked about as a way to solve the long, detailed, and oftentedious financialadvice process.’

Games appeal

Some educational games are incredibly attractive. Hundreds of millions of accounts have been set up on Duolingo, and more than 70 million are regularly active – and that’s just one language app. Duolingo, and a host of its competitors, manage this task with a smaller group of people who want to learn a language, which is about half those that want to learn how to do better with their money. What’s more, it makes money – about US$128 million a year.

So, the demand for financial skills improvement is high, and current performance is low.

From a strategic perspective, this surely suggests a beautiful blue ocean in which to play, if only you can find a viable way to enter it.

Our image for this piece is Snakes and Ladders.

Long seen as a metaphor for life, it is doubly appropriate in this article –because as a ‘game’, it requires no skill: it is based purely on chance.

Therefore, for all but the youngest players, it is no fun.

No fun, as you will see, is a recurring challenge in the realm of gamification.

Thanks to Auckland Museum for the use of the image through the creative commons license.

Must be fun

Gamification has long been talked about as a way to solve the long, detailed, and often-tedious financial advice process. Insurers have frequently been interested in ways to achieve this, but few have progressed the concept in commercially viable ways.

The main trap is this: talking about gamification while simply adding some cartoons and progress bars to the same old financial advice needs analysis forms.

Games are meant to be fun. We were struck throughout our research for this piece by the absence of fun.

Let me share some examples:

Internationally: Moneyville, offered by a German bank, leans heavily on game aspects, especially visually, reflecting an early 90’s gaming aesthetic.

The goal is education, rather than gamifying any specific step in a formal

‘The internet is a great place for financial services and games, so why not both?’

financial advice or financial product process.

Planwise is an exemplar of the other end of the spectrum. It aims to make the process of budgeting, saving, and investing, more intuitive.

But you haven’t heard of any of these, because they haven’t achieved breakthrough success.

Hasbro’s Game of Life is often cited as an example, but it is not a gamified process; it is a game first and last. It was intended to have a ‘moral message’ and was later adapted to include more financial components, but actual use in financial services is non-existent.

Here in New Zealand some people have experimented with gamification. A large insurer pondered a board game.

The Financial Services Council has also experimented with the game-like a deck of cards option for the education

campaign, “It starts with action” - also a valuable conversation starter.

I also own a copy of a rather grim game aimed at starting conversation about endof-life care.

These are worthy attempts, but not Duolingo

Games in life

What about actually in the life sector?

Few good games exist in this area, and we fall back on nicely presented calculators of various kinds. Here are some examples:

Internationally: Anorak does a nice implementation of a life-insurance calculator, with good graphics and a UI that easily manages both large and small screen formats.

Rather than encouraging repeated playthroughs, it actively discourages them, recognising returning visitors and trying to

move them into the purchase process.

Dead Happy, a life insurer, offered a calculator in the form of making 'death wishes'; while also not strictly a game, whenever we demonstrated it, it was greeted with much amusement and affection. However, not so much affection as was needed –they have been absorbed into another insurer since July.

Locally: OneChoice has a slick and speedy calculator – but it only does life insurance.

A couple of banks and insurers have, or had, nice calculators, but these have also not achieved anything like the level of adoption required to deem them a commercial success.

So, gamification has been a dismal failure in financial services.

Our investigation found very few examples that have survived more than a couple of years. Usage data is sparse, and participant numbers are rarely shared. Those all suggest little success.

There are many, many more papers about how gamification could help than examples of it actually helping. Does that mean that gamification has nothing to offer us?

No, I think that someone - possibly you - may have the key to advancing gamification.

Making the planning process engaging, amusing, and even something that customers might want to repeat - annual review, anyone? – could come from one of you.

Don’t pin your life savings on it, but do experiment. And remember, it’s meant to be fun. I wish you luck. A

1 https://www.statista.com/ statistics/1344668/revenue-video-gameworldwide/

Returns are calculated to 31/10/24. Returns are calculated before tax, 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/

TOP 10

As usual it has been a busy month on Good Returns Here is a list of the top 10 most read stories over recent weeks.

01 IRD likely to catch up with those not declaring FIF income

A tax consultant warns those not declaring their foreign investment fund (FIF) income: Inland Revenue may soon catch up with them.

02 KiwiSaver winners

Andrea Malcolm looks at the latest KiwiSaver data from Melville Jessup Weaver: who are the big winners over recent years?

03 KiwiSaver shortcomings identified in global report

Bumping up KiwiSaver contributions and introducing a carer’s savings credit for those with young children are among the improvement measures identified in a new report.

04 NZX’s Smart links up with iShares to launch new funds

Smart, formerly SmartShares, is launching four new ETFs in a new strategic alliance with BlackRock's iShares.

05 FNZ founder steps back

FNZ founder Adrian Durham steps down as group chief executive, as the firm raises another US$1 billion of capital.

06 Partners kills its matrix

Partners Life has decided to stop using its Customer Outcome Matrix (COM) and change its commission structure.

07 Advisers frustrated with NZCFS L5 marking South Island FAPs say NZ Certificate of Financial Service L5 marking is taking too long and is inconsistent.

08 Fidelity lays out bold new growth plans

Fidelity Life has laid out bold new growth plans, a year after admitting it had dropped the ball with advisers.

09 DRS member or not - client care remains advisers’ responsibility

Both the regulator and Government officials say the onus falls on advisers to work with disgruntled clients - even if they have left the sector or joined a new provider.

10 Savings not just debt in focus as interest rates tumble

Savers are expected to need additional support to find a new home for their rainy-day funds, as term deposit rates continue to slide.

They recognise KiwiSaver clients with higher balances deserve more.

They want their clients to have a clear retirement strategy.

They want to charge a fee-for-service commensurate with the advice given. They want their clients’ KiwiSaver integrated with their overall financial plan.

They value receiving referrals from KiwiWRAP marketing. They want to build comprehensive portfolios using best-of-breed managers.

They understand KiwiSaver is the future of advice and recognise they need to take control of their value proposition, service and revenue.

“KiwiWRAP is a game changer for my business because it puts me, not the scheme, in control.”

Adam Stewart - Compound Wealth #1

“KiwiWRAP advertising and promotion have led to me securing new clients. It’s a unique offering that gives advisers a real point of difference in attracting new clients looking for something different.”

Joel Robinson - Radical Investment

Highest average member balance $176,000 as at March 2024*

Contact us today

Consilium NZ Limited is the issuer and manager of the KiwiWRAP KiwiSaver Scheme. The Product Disclosure Statement and a full list of investment options for the KiwiWRAP KiwiSaver Scheme is available at www.kiwiwrap.co.nz. *KiwiSaver Market Review 2024 (Melville Jessup Weaver).