Article written by InvestNow – 30th July 2021

Insufficient design

Over the last 14 years, KiwiSaver has evolved from a gleam in the eyes of Sir Michael Cullen to a starring role in the financial lives of more than 3.1 million New Zealanders, topping $82 billion in funds under management. 

However, as popular as it is, of late many have been pointing to its obvious design flaw – the limited ability for one portfolio/investor to invest in multiple KiwiSaver offerings.

Stuff’s Janine Starks said in a recent article “KiwiSaver forces you to invest with one manager for decades of your life. Even if you switch managers, the whole lot goes to a single firm. There’s no polite way of putting this – it’s incredibly bad practice.” 

This KiwiSaver design flaw limits investor choice; and in a time where the popularity and financial importance of KiwiSaver have skyrocketed, Kiwis should have the ability to control and maximise the dollars they’re putting away for some of life’s key moments – buying a first home and retirement. 

To add petrol to the flame, according to the Financial Markets Authority (FMA), the majority of KiwiSaver investors are invested in growth funds i.e., a more aggressive investment strategy; and those looking for more aggressive ways to maximise their returns are the ones most hindered by this fundamental lack of flexibility.

How? Say a growth investor really wants to push their portfolio to the next level by layering a few growth products together – there are few-to-no KiwiSaver Schemes’ that offer multiple competitive growth options from multiple fund managers, and as already mentioned, the KiwiSaver design itself confines you to a single Scheme.

Considering a sum of $32 billion is invested in KiwiSaver growth-style products, according to the March 2021 Morningstar quarterly survey, including $6 billion in “aggressive” funds/strategies, this design flaw is impacting approximately 40% of the KiwiSaver market.

Why such an inflexible model?

Presumably, the risk. The architects of KiwiSaver perhaps thought that the more flexibility and control the everyday Kiwi had over investment decisions regarding their KiwiSaver, the higher the risk of losses due to a lack of appropriate knowledge to make sound investment decisions. 

But we don’t see it that way.

We strongly believe in the opposite. Providing choice and flexibility, and empowering Kiwis to make their own decisions. Restricting choice is another, not-so-polite, way of telling someone they can’t be trusted to make sensible decisions.

So we have gone 180 degrees in the other direction – providing Kiwis with a real ability to personalise their KiwiSaver portfolios.

They can build a portfolio based upon their risk appetite (conservative, balanced or growth), their investment style preference (passive or actively managed funds) or meet their belief in responsible investing – all within one single KiwiSaver Scheme. Not only that, but they can easily change any characteristic of their KiwiSaver portfolio, without having to switch schemes, over their lifetime as their personal needs change.

We’ve taken it one step (actually a big leap, if you ask us) further 

Not only do we believe in choice, but we also know it doesn’t make sense to have all your eggs in one basket, and when it comes to investing, not every fund manager is equal and no single fund manager gets it right all the time – so why not enable Kiwis to spread their KiwiSaver portfolio across a range of fund managers!?

There’s no question about it – Kiwis have a clear preference for growth-style funds – if only Kiwis could invest in more than one growth-style fund from more than one manager?

Well, now they can. The 20,000 InvestNow customers have shown us, over the past four years, the fund managers they most trust and respect, so we’ve focused our efforts there, recently adding highly competitive Growth Funds from Milford, Fisher Funds and Smartshares –  three of NZ’s most popular fund managers, to the InvestNow KiwiSaver Scheme. 

“And we won’t stop there. We’ll keep listening to our customers and continue to add the funds and fund managers that they are asking for,” says Mike Heath, General Manager of InvestNow. 

You can have your eggs in more than one basket

We know you actively seek and value choice. We welcome you to join us, as together, we continue to reap the benefits of the investor choice and flexibility we’re advocating for.

Take control of your KiwiSaver.

33 Growth (7), Balanced (4), Conservative (2) and Single-sector (20) funds from 12 leading fund managers, in one KiwiSaver Scheme. Consider KiwiSaver hacked.