KiwiSaver is one of the very best ways a New Zealander can prepare for the future. But finding the time to sit down and do the research into which KiwiSaver provider is right for you can be difficult. So, to assist, we have summed up what we think are important factors to consider when comparing the market.
This is where the rubber hits the road. Your KiwiSaver provider’s ability to produce good investment returns is key.
Every KiwiSaver provider manages funds differently and that means their investment performance can vary significantly. With the power of compounding returns, even a 1 percent p.a. better return over a long period of time can make a significant difference to your balance at retirement. It can increase your savings by tens of thousands of dollars or more, depending on how much time you have and the type of fund you’re in.
A way of comparing managers is looking at their investment performance over a long period of time, for example 5 or 10+ years. Although past performance is not a guarantee of future performance, it is an indication of how skilled a provider has been at managing your money over time.
There are a range of online tools to help someone see the track record of each provider and the returns they have delivered. Providers publish their returns on their own websites, but for more independent research, Morningstar produces a KiwiSaver Survey every quarter that allows you to easily compare providers.
Active Fund Management vs Passive Fund Management
Active Fund Management, as its name implies, takes a hands-on approach. The aim of active fund management is to produce better returns than a specific share market or benchmark over time, by actively managing risk and return. It involves deep analysis of which companies to invest in and which to avoid. This can also mean higher fees as you are paying for professional analysis, however with the ultimate goal of strong after-fee returns.
Passive Fund Management is based on the belief that on average it’s too difficult to identify the right and wrong companies to invest in. Therefore you’re better off passively investing with the goal of mirroring the return of a particular share market or index, minus a small fee.
People saw their KiwiSaver balances fall because of COVID-19. Escaping the wrath of the COVID Crash was difficult, but some managers fared better than others. The downturn in the market also opened up opportunities for buying shares in generally well-performing companies at lower prices. Having cash holdings set aside enabled an active manager like Milford to purchase these types of shares.
Skin in the game
Trust is of the utmost importance when someone is dealing with your money. So how can you be fully confident in your KiwiSaver manager’s ability to make the right investment decisions on your behalf?
Milford has a policy that its staff invest in the same funds as their clients. Not every investment company does this. We believe it is important to stand by our clients. So when markets go down, we see our own balances drop and know how unsettling that can be. You can believe our team is highly motivated to have your funds do the best that they can because we’re on the journey with you.
Think of a pilot flying the plane you’re travelling on. They’re highly motivated to get that plane safely on the ground, it’s the same with us.
Transparency and Communication
Transparency is important because it’s your money – the funds belong to you, so you should fully understand where your money is invested, why it’s invested there and most importantly, how it’s performing.
Milford communicates with our members every month, with commentary, and even more frequently during times of uncertainty like during COVID-19. Milford’s Mobile App and online portal has been developed to allow full visibility over your balance, your contributions, as well as how your KiwiSaver account is performing and the returns you have been receiving over different time periods. It also shows how your funds are made up and which companies your money is invested in.
And if you really aren’t sure, there is an option to speak to a real person with the investment knowledge to help.
Value for Money
Like anything you pay for, you can pay more or less but it comes back to value for money.
You shouldn’t judge a KiwiSaver provider solely on returns or fees. What they offer in terms of online planning tools and access to expert guidance, should weigh on your decision.
The best KiwiSaver providers give their customers access to financial experts who can offer advice and coaching for how to get the most out of your savings and ensure they are well prepared for the future.
Milford’s retirement planning tool takes information about your personal situation and maps out what your KiwiSaver balance could look like over time.
Is your KiwiSaver money working as hard as it should?
With all these things considered, it all boils down to customer satisfaction. At Milford, our clients are at the heart of our decision making, and it shows. We have been rated Consumer People’s Choice for our KiwiSaver Plan three years in a row. We won KiwiSaver Provider of the Year and KiwiSaver Outstanding Value Award in the recently announced 2020 Canstar KiwiSaver Awards. And our KiwiSaver Active Growth Fund has been the top performing Growth Fund over the last 10 years in Morningstar’s latest KiwiSaver survey.
If that sounds like the kind of company you’d like looking after your KiwiSaver money, why not join our KiwiSaver Plan right now?
Disclaimer: The material contained herein is based on information believed to be accurate and reliable although no guarantee can be given that this is the case. This is intended to provide general information only. It does not take into account your investment needs or personal circumstances. It is not intended to be viewed as investment or financial advice. Before making any financial decisions, you may wish to seek independent financial advice. Please note past performance is not a guarantee of future performance. Please read the Milford KiwiSaver Plan Product Disclosure Statement (found here) before investing.