“I think we're at this real inflection point where KiwiSaver is mature and investors are starting to say, ‘my balance is at a point where this is serious and my actions need to become more serious’.”

Alman says there’s a rule of thumb that when your balance equates roughly to a salary, then you should get interested.

“With KiwiWrap we've made the minimum $50,000 because we think that's when people start thinking they might require advice.”

But there needs to be a mindshift among investors and advisers, he says.

“In New Zealand we’re coming from a mindset of KiwiSaver as a product that can be sold like a mortgage and that's fundamentally wrong. It should be seen as a personalised retirement investment account and treated like non-KiwiSaver investments.

“To date KiwiSaver has been almost excluded from the financial planning conversation; that money needs to be integrated. It’s about getting your financial house in order and a good financial adviser is a financial planner.”

Now two years old, Consillium’s multi-fund, advice driven KiwiSaver platform KiwiWrap now has around 30 accredited FAPs, about $60 million under advice, 400 clients and an average balance of $150 million - the highest of all the providers.

“I think for advisers the penny’s dropping that they can remove the single manager risk and there's over 400 different securities including direct equities.”

While some advisers favour a model portfolio, others have clients with strong preferences who want to invest in individual stocks with a model portfolio beside it.

“I think that'll become more and more popular. And why shouldn't it? It's their money, as long as they're investing prudently?”

KiwiWrap accreditation covers the basics such as having a real statement of advice and producing a rationale of advice, which covers the reason for making recommendations and how the investment process works.

“So, in some ways, we're doing what a FAP licence requires anyway, just checking that they've got the T's crossed and the I's dotted. Because we want to stand behind the advice given.”

KiwiWrap advisers can charge up to 95 basis points in year one, and up to 75 basis points in consequent years, says Alman.

“They agree on the level of service with the client; complete transparency is so important and members should know exactly where their money is invested, who the managers are, their risk tolerance, their asset allocation, and what fees they pay for admin, funds management and the advice. In comparison, the product model is very opaque.”

Adviser feedback

Advisers are saying that at last they can integrate clients with larger KiwiSaver balances into their overall wealth management solution, says Alman.

“Like most jurisdictions, we have a problem in NZ where people with lower amounts of money to invest find it more difficult to get quality advice. So by being able to bring all their assets to the table, they can perhaps now receive independent advice rather than just a product sale. So that's been some feedback.

“We also get interesting questions. Advisers might want a really obscure security added to the approved product list where investors want to be very specific with their portfolio. We’ve got a very broad product list but not anything and everything can get on it.” 

He says there are safety rails in so far as the investors are getting professional advice.

Lessons from across the ditch

In Australia, two thirds of the money financial advisers manage is superannuation money.  In New Zealand, it would be 5-10%, says Alman.

The lesson to take from across the ditch is how powerful the outcome is for the country, he says.

“I don't think it's had a recession in the last 35 years. They've got amazing infrastructure. Think of all those big stadiums and roads. That's because they've got $3 trillion in assets sitting in this in a personalised retirement savings scheme, called superannuation.

“Australia receives more dividends from foreign companies, then leaves Australia from their own companies. I travelled to Europe this year and ran into many Aussies travelling around on the back of their $1.5 m superannuation accounts.

“Sure there’s things wrong with it. It’s very complex but it's the fact they've had it for going so long, and they've had incentives for people. And that has led to a lift in financial literacy in Australia. If you've got a half a million dollars to a million dollars in your superannuation and everybody at the bowls club is talking about where their money is invested, you start to get interested.”

Changes that would help KiwiSaver growth include decoupling employer and employee contributions so that if an employee has to stop contributions, the employer has to continue; an end to the age restrictions where under 18s and over 65s don’t get the employer contribution, and a tax incentive to reward people for putting away their money until the age of 65, he says.