Australian superannuation funds and fund managers are not the only ones being challenged on fees, with the New Zealand Financial Markets Authority (FMA) questioning why fees rose by 14.7% last year.
While happy that total funds in KiwiSaver rose by 17% from last year, the FMA director of regulation, Liam Mason said the authority was concerned at the lack of any significant movement in fees paid to KiwiSaver providers.
“KiwiSaver providers collected almost $480 million in fees, up 14.7% on last year,” he said. “We have previously said we were surprised costs per member had not fallen faster, given the growth in funds under management.”
Echoing recent statements from the Australian Prudential Regulation Authority, Mason said the FMA would be asking KiwiSaver providers to demonstrate how they were providing value for money for members.
In doing so, he pointed to a research paper prepared for the FMA which suggested fees charged by KiwiSaver providers were high compared to broadly similar funds in the United Kingdom.
“We are concerned that the benefits of scale, at least for the larger providers, are not being passed on to investors,” Mason said.
“Over the coming year, we will be asking KiwiSaver providers to demonstrate how they are providing value for money for members. This includes explaining investment styles and how higher fees are justified for services such as active fund management or responsible investment strategies.”
Responding to the FMA report the NZ Financial Services Council chief executive, Richard Klipin, acknowledged what he described as a clear message about fees and the desire of the FMA to have them reduced.
“Fees are a work in progress but there is already considerable work going on across the industry to reduce fees and to deliver a greater range of fee structures and other product innovations to Kiwis,” he said.
“With the growth of the KiwiSaver market there is now real competition for consumers to choose from to ensure that they are getting value for money and that they are paying fees which reflect their needs.
“Our message to Kiwis is a simple one – save smart. Make sure you are in the right KiwiSaver scheme for your needs, don’t be afraid to ask hard questions about fees, and ultimately if you’re not happy with the value being delivered, change provider or scheme.”