Competition in the KiwiSaver space is fierce with providers out to win as big a market share as they can of the growing fund which now stands at close to $6 billion.
If you want to evaluate your provider or join up to a new scheme, the number of available choices can be daunting - there are 34 KiwiSaver providers offering 54 schemes of which 36 are open to the public for investment. Add in the fact there are more than a hundred funds and it can all be a confusing picture.
So how do you choose between providers?
Should you choose the provider first and then the type of fund or assets you'd want to invest in or the other way around? Or do you just leave the choice up to others and be placed into one of the six default schemes?
Here's what some of the providers say are the eight key things you should consider.
Mercer NZ head Martin Lewington says the key thing to a lasting investment relationship is trust. "But trust can be nebulous if you are a new customer. If you were an existing customer, you'd get a sense of whether you trust the provider or not."
Part of that is to knowing the independent directors and trustees, Westpac's head of wealth Andy Morris says. "They should provide a governance structure that will protect your investments".
"You need to be sure that they have the credentials to manage your investment and that you are able to trust them with the investment decisions that they are making on your behalf."
Michael Chamberlain, principal at Aventine which provides SuperLife KiwiSaver, says he would avoid providers where the promoter and the investment manager were the same. "I would want a provider where there was independence between the trustees, the promoter/administrator and the investment manager."
2. CORE BUSINESS
Being in a scheme with the wrong structure and non-core business means that you could be taking on risk.
"It is an issue of what happens if something goes wrong," Chamberlain says. "The right structure protects you should something go wrong."
Forsyth Barr savings specialist Gordon Tucker says "the style of service and style of product offering" differs from one type of institution to another.
"Professional investment firms tend to have a history of providing personalised service for their clients and therefore more likely to have this style with their KiwiSaver product," Tucker says.
Tucker says who owns the provider matters. If the parent company is from overseas, "the profits made by these providers will ultimately move offshore".
"The other aspect of non-New Zealand ownership is that if the offshore parent has financial constraints or change in policy, this can affect operations in New Zealand. This was visible with the closer of Eosaver last year and Asteron KiwiSaver earlier this year."
Chamberlain says he would avoid a provider where it is a listed company which has to worry about quarterly profits.
"I would want a provider that made decisions because they were best long term and not for the next quarterly announcement to the stock exchange."
Milford Assets investment committee chairman Brian Gaynor says companies where investment managers are shareholders, in contrast with them being employees, are better motivated to perform well.
"Ownership is a very strong incentive to achieve above average investment returns and provide better, and more personal, service levels."
4. INVESTMENT OPTIONS
Members are likely to change their investment portfolio over time, say from growth assets to cash assets. Having a range of options, including pure sector exposures such as regional equities portfolios, cash, socially responsible investment and alternative assets, can facilitate this.
ING head of KiwiSaver distribution David Boyle says everyone's circumstances change and it pays to review it from time to time. "Five years ago is different from today. You don't need to sit and forget KiwiSaver but you don't have to look at it everyday."
As your requirements change, your scheme needs to reflect that, Morris says. It may be the ability to add money when you like, for example.
Chamberlain says the provider should have a long-term investment view. One who "is more likely to assist with a direct exposure option like they have in Australia, where investors can choose their own companies to invest into, instead of going via a fund".
The investment style used by providers should also be considered, "such as small cap stock picking, large to mid cap stock picking, active vs passive investment management," Tucker says.
5. COMMUNICATION CAPABILITIES
Ease of communication and access to information are cornerstones of good client service. "That is in terms of access to informed people that the member can talk to about their investment and also how the provider communicates with the member,'' Morris says.
A provider is investing your money for you, and you deserve to get prompt, easy to understand information when you want it, adds Gareth Morgan marketing manager Steve Wiggins. He says good communication can also be measured by the detail of any information you get sent. "Can they account for every cent they have received? If not, how can you be sure that all your own contributions, all your employer contributions and all the Government contributions have made it into your account?
"You have to know what investments the provider bought with your money. A unit price is not enough information. Only then can you independently verify the value of your investment - and know if it suits your long term goals. If you don't know these things, you're investing blind. " Wiggins says.
6. HISTORY OF PERFORMANCE
Tucker says a provider that has only made a "name for themselves" as a result of KiwiSaver is unlikely to provide a long-term history of performance.
"Compare that to a provider who has been managing client funds long before KiwiSaver was established. While historic performance does not guarantee future performance, it can provide insight to a provider's capabilities long-term, instead of the short-term focus.''
But Lewington says the focus should not be on the "last quarter or last six months best performance".
"You are really looking to future, and does the scheme fit your need. KiwiSaver is a long term multi-decade investment. You can be upset frustrated and end up making poor investment decisions if you are reacting now rather than the long term.''
7. LEVEL OF FEES
The level of fees have a major influence on long term returns".
"If one provider has high fees and one provider has low fees and they both have the same gross returns in a given year, the performance for the provider with high fees will generally be worse,'' Tucker says. ''However if you are paying higher fees, but performance is consistently strong each year, then it may be worth paying the higher fees to achieve this performance."
Chamberlain says the importance of low fees should not be underestimated. But there are assumptions that have to be met before he'd consider fees as a "decision point".
"Having got the provider that has the flexibility and the relevant investment options and assuming that it is structured right and that it is core business, I would go with the one with the lowest fees."
8. REPERCUSSIONS OF A WRONG CHOICE
The good thing about KiwiSaver is you can move from one provider to another if you don't like your first choice. But you could be made to pay for fees for exiting a high-yield fund and you could incur losses if the fund is moving negatively at the time you exit.
"There is always a cost of changing providers," says Chamberlain. "Even if the provider doesn't charge a transfer fee there are buy/sell spreads and out of the market costs/risks."
In case your provider closes, two things may happen, says Boyle. You either make an active choice as to who your next provider will be, or if you don't decide after three months, your savings will be reallocated to an existing default provider.