Feb 27, 2009
KiwiSaver throws lifeline to traditional providers
Getting Kiwis to save could save the industry
Graeme Kennedy [NBR]KiwiSaver could lead New Zealand’s superannuation industry out of its slump despite costs and difficulties for traditional fund managers using the government super scheme, says Grosvenor Financial Services Group chief executive Allan Yeo.
“It could be a saviour,” Mr Yeo said. “Traditional superannuation companies have been in decline for the last eight years as New Zealand has no tax incentives to save and without them people will not save voluntarily.
“High interest rates in the past 10 years have made it difficult to promote long-term investments in diversified’ portfolios and the industry hasn’t helped itself with a performance perceived to be poor."
“Everyone is banking on KiwiSaver funds growing quickly in the next 10 to 15 years and that it will be profitable long-term — most super funds have gone into it because they can’t afford not to.”
But KiwiSaver’s extra compliance requirements with different legislation, administration and Inland Revenue-interfaced electronic systems meant extra cost for traditional super funds — of which only a few were malking profits, he said.
Grosvenor, however, is in profit and has no difficulty managing its traditional products and KiwiSaver on the same platform.
The Wellington company topped the superannuation sector in The National Business Review’s monthly Exciting Companies series with a 63.8 rating in surveys conducted by strategic business consultancy New River.
It was followed by Milford Asset Management, AMP, author and columnist Mary Holm, Fidelity Life, Fisher Funds and ING.
Grosvenor began in 1998 as a joint venture between a group of financial advisers and Mr Yeo who had worked with a small Wellington merchant bank.
The company initially provided mid and back- office services including finance market research, administration and reporting for 10 Wellington adviser- clients and now has around 150 nationwide.
Grosvenor expanded into Australia six years ago, taking a 57% stake in superannuation services provider Tranzat which has 40,000 clients and $A500 million in funds under management. It also offers life insurance in a joint venture with Fidelity Life.
“We began our own super scheme when KiwiSaver started two years ago,” MrYeo said. “Our advisers foresaw a need to have access to the fund for their clients so after operating in Australia where super is compulsory we understood the requirements of a pseudo-compulsory environment.
“We were more aware of the issues involved in KiwiSaver. And we had developed our own platform in-house to handle both types of scheme together so were easily able to move the required changes in KiwiSaver.”
The government scheme has attracted 900,000 savers and the number is expected to pass one million this year following the cut in the wage threshold contribution from 4% to 2%.
“KiwiSaver takes on added importance in the global crisis with sharemarkets down and most portfolios in double- digit decline,” Mr Yeo said.
“People saving with the fund will benefit if they stay in while those saving in a non-super environment will suffer.”
He said the New Zealand superannuation industry needed to be regulated to raise professionalism and lift adviser standards.
Industry statistics indicate the sector has up to 8000 unqualified advisers and less than 400 with qualifications.
“A lot have very little credibility with clients,” Mr Yeo said. “But Grosvenor is well-positioned for growth — we have got where we are through innovation.”
LITTLE GOOD NEWS
Good times and bad are reflected almost equally in business consultant New River’s survey of conditions in the superannuation sector.No respondents reported extremes and 45% remained neutral, with 30% finding business difficult and 25% buoyant.
New River said those in the buoyant group were taking advantage of KiwiSaver and the boost it was giving the industry.
But the traditional superannuation market was described as terminally ill and most companies were being forced to move into the government fund.
“And returns for most super schemes are negative due to the global financial crisis,” the consultancy said. “Obtaining the returns people expect has become extremely difficult.”
Business conditions
Respondents’ rating of current business conditions in the SUPERANNUATION SectorVery buoyant =0%
Buoyant =25%
Neutral =45%
Difficult =30%
Very difficult =0%
Top seven SUPERANNUATION firms
Rank / Company/ Excitement rating1 Grosvenor Financial Services 63.8
2 Milford Asset Management 58.3
3 AMP 56.0
4 Mary HoIm 53.0
5 Fidelity Life 52.0
6= Fisher Funds 47.0
6= ING 47.0
