Despite excruciating headlines about the freezing of its two credit-crunched investment funds, ING, offspring of the Dutch financial behemoth, remains the most popular KiwiSaver provider in the land.
As angry investors braved the first real chill of the Auckland winter to protest outside ANZ Bank branches around the city this
week, the Weekend Herald gathered figures which show just over 21 per cent of all KiwiSaver members are signed up with the bank's half-owned fund manager ING New Zealand.
Of the total $2.725 billion contributed to the superannuation scheme by March 31, $523.9 million or 19 per cent of it is in ING's care. Quite a responsibility.
The protesters were galvanised by the Frozen Funds group, a highly organised lobby of around 1000 investors who want a total product recall of ING's Diversified Yield and Regular Income funds.
The funds were frozen in March 2008 after being nobbled by the credit crisis, leaving 8000 investors unable to access $521 million.
Many were put into the funds by staff of the ANZ's financial advisory network, who, courtesy of the ING link-up, enthusiastically marketed the funds.
The point they're wanting to make, spokesperson Andrew Davidson says, is "would you trust this pair with your retirement savings?"
"A lot of people have put a lot of money in [to ING KiwiSaver funds] for the same reason that people invested in DYF and RIF - that they trusted these brands."
The Frozen Funds group says it has heard of many people pulling their investments out of ING and switching to other KiwiSaver providers, and through its regular gung-ho newsletters it hasn't held back from broadcasting this to the world.
With this kind of bad press it seems amazing that the fund manager has held on to its number one spot in the KiwiSaver market.
On closer examination it's not so surprising.
For a start it is one of the six "default" providers - the financial organisations which have been appointed by the Government to automatically receive an equal share of new kiwisavers who don't actively choose their own provider.
In its latest six-monthly evaluation of KiwiSaver, the Inland Revenue Department says 35 per cent of the scheme's one million members are allocated to a default fund. The figure is much higher for those who are auto-enrolled into KiwiSaver - which happens by law when you start a new job - with 66 per cent being default-allocated.
Second, ING has a highly efficient distribution network, says Chris Douglas, manager of fund analysis for research house Morningstar Australasia. It is the investment manager for ANZ and so has the medium of the bank's nationwide branch network, plus well established relationships with the financial advisory industry.
Douglas doubts many potential kiwisavers walking in to an ANZ branch would be aware of the link-up with ING and the frozen funds publicity anyway.
And overall ING hasn't done that badly.
"They've been one of the biggest fund managers in New Zealand for a number of years, they've got a big strong client base, and despite all the doom and gloom they've had one product that's blown up but when you look across their full suite of products they've actually continued to perform reasonably well," he says.
Morningstar's latest KiwiSaver Performance Survey shows ING's funds aren't top of the bill in the various categories over the past year, but they aren't last either - its two conservative funds come in at fifth and sixth out of the 12 surveyed, while its balanced and growth funds also finished up about middle of the range.
ING has generally avoided tackling the frozen funds criticism head on. When asked about it this week, head of KiwiSaver distribution David Doyle said the two are different issues.
The frozen products are individual funds, whereas KiwiSaver is about long-term superannuation planning, he says.
He adds that as a default provider ING has had to meet legislative requirements and the scheme is subject to heavy scrutiny.
Having a bank branch network gives you a big leg up in the KiwiSaver business, as evidenced by Westpac's success, Morningstar's Douglas says.
The bank comes in at number four in the popularity stakes despite not being a default provider.
Sharon Mackay, senior product manager for the bank's fund manager BT, says Westpac hasn't actively pushed KiwiSaver in the wider marketplace but has done a lot of work internally on training staff.
The messages are complex, she says, and while websites and written material have their place, face-to-face contact is important in getting people signed up.
"And strength and credibility of the brand as well, particularly given the last 18 months in the market, that's definitely what people are looking for."
Compare that to default provider Mercer, which comes in at number seven. It has 69,500 members but 63,000 of them are in the default scheme.
Mercer provides KiwiSaver schemes for Kiwibank so you would think that association would make up for its own lack of household name status.
Strangely, however, the government-owned bank has a policy of not going out of its way to promote KiwiSaver. It makes the scheme available because it wants to be a one-stop shop, spokesman Bruce Thompson says, but Kiwibank is growing rapidly and "it's a question of timing and what we have available".
In stark contrast is Gareth Morgan KiwiSaver - also not a default provider - which with no bank network to distribute through still makes it to number eight on the popularity table. It has "unashamedly" relied on its founder's name, executive director Andrew Gawith says. "Undoubtedly Gareth has a pretty high profile and it's a given we have exploited that to the hilt."
But it also prides itself on transparency and the reporting of its performance. Gawith says it has approached Kiwibank to form a relationship but nothing has happened yet.
He says the fact that both Kiwibank and BNZ, which uses default provider AXA as its investment manager, have chosen not to push KiwiSaver to date could be a fallout from the ANZ/ING frozen funds debacle. "If you are stepping outside your core business and taking on people's money and managing it for their retirement your liabilities and risks start to go up."
It's clearly not a fear ASB has held. It has used its brand strength to energetically sell KiwiSaver. There have been "Goldstein" television commercials and an in-branch DVD featuring comedian Pio Terei.
That together with its default status puts the bank in the current number two position with 190,000 members - it has been in a tacking duel with ING for the top slot each quarter since KiwiSaver's launch almost two years ago.
Greg McAllister, head of wholesale distribution for ASB Group Investment, says the Pio DVD caused a 20 per cent growth in KiwiSaver membership in one month: "Which spoke enormously to us about the importance of trying to make the scheme simply understood for customers."
And he says that simple message so far has been "join".
To that end most of ASB's members are in its default scheme - 178,000 members out of the total 190,000.
In comparison only a quarter of ING's members are in its default fund. It puts this down to its good relationships with the financial advisory industry, which focuses on tailoring a superannuation solution to the client's individual needs rather than just getting them through the door.
This is the next big challenge, ASB's McAllister says, to move people out of the conservative default funds which provide little long-term growth and into funds that are more appropriate for their stage in life.
"Being in is one thing, but now making it work is another.
"We consider an important objective for the ensuing year or more sits around financial literacy, and assisting customers to understand and maximise the product that they've got."
It's a focus most of the providers are now gearing up for. They describe the timing as the "secondhand car phenomenon".
ING's David Doyle says for the first few years of Australia's compulsory superannuation regime nobody took much notice of their schemes because they weren't worth anything. "When it got to the value of a secondhand car people said 'crikey'."
At this point suddenly investors get interested in the type of of fund they're in and the performance of their fund manager, he says.
However the level of understanding about KiwiSaver and investing generally is still so low that further educating people will have to be done "slowly and methodically".
KiwiSaver commentator and Weekend Herald columnist Mary Holm backs him up.
"I keep getting letters from people who ask the same basic questions and the misunderstandings are still just really common," she says. "People still think the Government could swoop in and take all their money out."
Retirement Commissioner Diana Crossan concedes that up until now providers have struggled just to keep up with the vast numbers of people joining KiwiSaver and the seemingly endless changes that have been made to the scheme.
But while better off people can pay financial planners for advice there is little available for the average worker entering a default scheme. "My strong recommendation to government before they even implemented KiwiSaver was that you need a lot more education. And we're running to keep up."
Sharon Mackay says educating its KiwiSaver members is a huge issue for Westpac, and it has begun some conversations with the Retirement Commission and industry bodies about forming a provider group to drive financial literacy programmes.
AXA chief executive Ralph Stewart says his organisation is gearing up in conjunction with BNZ to focus on retirement savings education and promotion, and he is "there with bells on".
Managing director Martin Lewington says Mercer New Zealand is also planning a communications push, using initiatives such as email newsletters and more or clearer information on investors' statements.
"Employers probably bend over backwards to make sure anything they say can't be interpreted as giving the employee advice."
Jack Regan, managing director of default provider AMP Financial Services, says there is another good reason why providers want to encourage kiwisavers to more actively participate in their investment future.
With the banks' push to sign up everyone, including non-contributing members like children, accounts can become dormant and whittle down over the years as the fees take over.
"I would suggest that there's some risks which not only lie with the banks but also with the investors themselves."
JOINING UP
* 1,000,283 members (as of March 31)
* 31 KiwiSaver providers
* 54 KiwiSaver schemes
* $2.725 billion gone to providers (as of March 31)
As of December 31, 2008
* 90 per cent contributing at 4 per cent
* 35 per cent allocated to default schemes
* 75 per cent of money with six providers
* 15 per cent of members are younger than 18
Source: Inland Revenue
How your KiwiSaver billions are divided
John Lloyd and Camille Hope make their point. Photo / Greg Bowker
Despite excruciating headlines about the freezing of its two credit-crunched investment funds, ING, offspring of the Dutch financial behemoth, remains the most popular KiwiSaver provider in the land.
As angry investors braved the first real chill of the Auckland winter to protest outside ANZ Bank branches around the city this
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