Asset managers will have to justify their management fees or die trying, according to the KiwiSaver scheme Simplicity.
Photo: 123rf
The non-profit today announced it would branch out into conventional asset management territory, but undercut fees by orders of magnitude to try and level the playing field.
Simplicity's new service - which is open only to investors, rather than its KiwiSaver users - allows people to invest in the NZX-50 and investment bonds.
They will be charged an annual administration fee of $30, and ongoing management fees of $1 for every $1000 invested, with a minimum investment of $10,000.
Simplicity's managing director, Sam Stubbs, said those were by far the lowest management fees on the market, with other asset managers charging three or four times that amount.
He said Simplicity was aiming to be a disruptor in the market, forcing other managers to justify their high fees, or die trying.
"We have fees that are very old-fashioned in New Zealand now ... [other asset managers] haven't had to build one bank branch, build one IT system - it's been an absolute gravy train of fees, and there has to be a market response, right? Simplicity is that market response."
Mr Stubbs said such schemes were commonplace overseas, but New Zealand was well behind the eight-ball.
"Products like ours have been in the market for years and years now, and they've actually been dragging down the fees of all market participants. It's just keeping everybody honest."
While he might get into some other companies' bad books, Mr Stubbs said the impetus was on them to provide value for money.
"I'm not expecting to get invited to any Christmas parties by the asset management community ... this is not a small change, it's a revolutionary change.
"But it will be very very good for New Zealand."