KEY POINTS:
Recommendations by the Retirement Commissioner that all KiwiSaver providers wrap up their fees into a single comparable figure have been welcomed by the industry, although some are concerned it will make fees the only deciding factor for some investors.
In a report released this week, Retirement Commissioner Diana
Crossan said the Ministry of Economic Development should consider whether the number of fee types for savings products should be restricted and whether disclosure of fees in one comparable figure should be made mandatory.
The call follows work by the commission to gather data on fees in order to do a comparison. But it found not all fees were readily explained in investment statements and there were up to 10 different types of fees regularly used by providers.
"The overall cost impact of fees charged cannot therefore simply be compared across companies. Calculations are needed to work out one figure that describes the overall cost impact on a consistent basis," the report said.
The commission said the figure could be expressed as a percentage of funds under management but it would prefer a dollar amount to be named as this would be easier for consumers.
It admits that costs are not the only issue to be considered when selecting a fund but said that the overall cost impact of fees "should be one important factor in a consumers decision to invest".
AMP head of product management Roger Perry said it was feasible to have one fee but it would not necessarily be fair to everyone.
"Different customers behave in different ways and it is appropriate that customers pay their share - an example of this is a customer who switches in between funds frequently, they should pay for the cost of that."
Perry said a better alternative would be to use a management expense ratio which looked at what the manager charged to run the fund and was usually a percentage of what was invested.
Fisher Funds managing director Carmel Fisher also welcomed a single fee proposal but said there should always be room for further explanation.
"I am all for simplifying and making things more transparent. But if a fund charges a performance fee and it is included in a [management expense ratio] it can look really expensive but it can also mean the investment has performed a lot better than its peers."
Fisher said it would be fairly simple to take the percentage and turn it into a dollar amount based on how much was invested but she warned it could make investors chose solely on their fee cost.
She said the fee needed to be looked at in context of the return on the investment.
ING general manager marketing Steven Giannoulis said one fee would be easier but would not necessarily bring greater transparency for investors. "One fee would imply that it would be the only thing that people should look at."
