Fees charged by KiwiSaver providers may not reflect how actively they manage their investment funds, a new study has found.
KiwiSaver members pay fees to KiwiSaver providers in return for investing their money, enabling them to save for retirement, or help them buy a first home.
The Financial Markets Authority (FMA) commissioned MyFiduciary to look at what providers who were officially 'active' or 'passive' fund managers did in practice, and whether this resulted in higher - or lower - fees.
Released on Monday, the findings showed there was "not a significant relationship" between the level of active management and fees charged. FMA director of regulation Liam Mason, said most providers were transparent and some were actively managing funds without charging high fees.
But in a small number of cases, members who paid higher fees for an 'active' fund weren't getting their money's worth.
"The report shows there are a small number of funds where the high price doesn’t necessarily match the level of active management being claimed,” Mason said.
Across 26 public KiwiSaver providers, two-thirds said they were "mainly active". But the results showed varying degrees of how active they were.
"Based solely on activeness and fees charged, there are a small number of providers that appear to be poor value for money relative to other providers," Mason added.
The FMA said it would follow up on KiwiSaver providers who were charging higher fees for a lower level of management.
It would introduce new industry guidelines around fees, which providers were obliged to review to ensure they were reasonable and provided value for money. It would also look at whether information provided in documents such as the Product Disclosure Statement and Statement of Investment Policy (SIPO), was sufficient for members to make investment decisions.
Clive Fernandes, director of KiwiSaver advice provider National Capital, said the focus should be on advice, not fees. As the impact of COVID-19 was unpredictable, even the most active fund managers couldn't have picked the extent of the market drop.
"Clients with access to advice ended up making better decisions and should have better retirement outcomes than those who did not," he said.
Similarly, Sorted managing editor Tom Hartmann, said what's most important is to pick a KiwiSaver fund with the right level of risk. However, the FMA report highlighted that some KiwiSaver members were charged more and not getting extra value.
"The main concern is providers managing funds passively, but still charging us," he said.
KiwiSaver members concerned about fees can check fee charges on their KiwiSaver Annual Statement. Sorted's KiwiSaver fees calculator provides a ballpark cost to retirement age, and how the fee compares to other providers. Members can also compare fees after returns (based on the last 5 years), using Sorted's Smart Investor Tool.
