Flexibility not a big part of the retirement riddle
There are some things that I consider vital for my retirement savings plan.
I need my money to be invested by people who know what they're doing. It needs to be in the right assets so it will grow sufficiently to pay for my (hopefully) extravagant retirement lifestyle. And I want enough flexibility so that my retirement savings can evolve with my changing needs and the changing environment.
I wouldn't consider the ability to treat my KiwiSaver plan like a bank account to be an important attribute. But clearly the folks at BNZ do.
The BNZ KiwiSaver scheme was registered this week and is due to launch shortly. One of its key differentiators, according to acting chief executive Anthony Healy, is that BNZ will allow customers to deal with their KiwiSaver as simply as "doing everyday banking or paying a bill".
He talks about the ability for members to go online and "move your money around just like you can in any bank account".
I don't get it . . . why would anyone want to go to an ATM and move their retirement savings around like in a bank account?
I'm not going to be able to get my KiwiSaver funds for 15 years and I have invested my funds in a way that is likely to achieve my investment objectives in 15 years' time.
Why would I want to fiddle with it regularly in the meantime and will my fiddles really make a significant difference to my outcome?
I sometimes think the value of convenience is overstated when it comes to KiwiSaver. I'm all for convenience. I love that my supermarket is open until midnight in case I get the munchies after dinner. I love that some service stations have a forecourt attendant so I don't have to pump my own gas (I am a girl).
But being able to move my money around in a savings plan that has years to run? Like I said, I just don't get it.
Some people do pay more attention to their investments than others, and certainly some people are very active with their investment strategies whereas others take more of a set and forget approach.
There is no right answer, but like most things, a moderate approach seems to make sense.
US studies on the value added by regular rebalancing of assets in 401k schemes (which are the equivalent of our KiwiSaver) are inconclusive.
In an article entitled The Subtle Art of Rebalancing, Morgan Stanley analysts found that while some rebalancing strategies worked well in some time periods, none delivered consistently superior results.
A reasonably common approach to managing long-term savings plans involves periodic rebalancing. This is where portfolios are reset to target allocations (so much in shares, so much in fixed interest etc.) on a fixed schedule, such as annually, six-monthly or quarterly.
Such periodic rebalancing minimises frequent and minor portfolio changes but ensures that portfolios are not left completely untended. It also helps avoid excessive trading in response to market movements that can take portfolios completely off course.
That's probably as much convenience as we need.
Carmel Fisher is managing director of Fisher Funds, an investment manager and KiwiSaver provider.
Sunday Star Times