BS KiwiSaver Marketing: Are You Paying the Price?
Fund type - a decision that could make or cost you thousands.
And yet, they aren’t standardised. Instead, KiwiSaver Providers market their funds how they’d like and consumers are left to fend for themselves.
I’m not cool with that, and here’s why you shouldn’t be either.
In the KiwiSaver space, there’s five main fund types. The difference between these fund types is the kind of investments they contain and how much there is of each kind. In finance speak, we call this asset allocation.
Well, what’s the problem then?
The asset allocation for each fund type isn’t standardised, so unless individual Kiwis dig into the data they have to rely on marketing claims. And these claims range from questionable to downright misleading.
Let’s use KiwiSaver growth funds as an example. Here at BetterSaver, we define growth funds as having 65-89.9% growth assets (eg shares and property). The rest of each growth fund is invested in income assets (eg bonds).
The table below shows three funds marketed as growth funds, but that have wildly different asset allocations. Trigger warning: this means that an unknowing Kiwi could end up in a fund that’s way more or less risky than they want. This could cost them hundreds of thousands dollars by the time they retire.
So how do we fix it?
It would be easy to say regulation, but that should be a last resort. Regulation is hard to get right and often costly to implement. Instead, providers should be taking a transparent approach to marketing their funds so it’s easy for anyone to understand what they’re signing up for. It’s just the right thing to do.
Apparently this isn’t enough motivation, so collectively we need to put on the pressure. It’s important for finance nerds like me to speak out, but it’s even more important for you to vote with your dollars. Switch to a KiwiSaver provider that strives for transparency and accountability and avoid the shady ones.
The good news is you don’t have to do it alone. I founded BetterSaver to provide independent, expert KiwiSaver advice that bypasses the marketing BS. But more than that, we’re here to advocate for everyday Kiwis who are being misled in the name of KiwiSaver provider profits.