InvestNow’s Flexible KiwiSaver Scheme Review

InvestNow has been hinting about their move into offering a Kiwisaver scheme for some time now. And I was waiting to see what they were going to offer. The anticipation was that it would be similar to Superlifes scheme- where you can individually choose the allocation amount to different funds. But, InvestNow has the advantage of having funds from many different fund providers- whereas Superlife really only has its own funds (SmartShares).

Now that InvestNow’s Kiwisaver is live (since October)- I’m interested in learning what they have actually come up with and do a review on the InvestNow KiwiSaver Scheme.

InvestNow KiwiSaver Overview

InvestNow is a Wellington-based investment platform that has recently moved into the KiwiSaver Space, offering a range of low-cost passive (index) and actively managed funds for investors to choose from.

I think their investment platform is great if you are looking for a diverse range of fund (more than 100) ranging from 0.27% to 2.7%. Both active and passive funds. It’s a great place to start as it has a low entry point with no fees to use their platform. They offer funds from some of the largest fund managers in New Zealand such as AMP, Smartshares, Pie funds, and Vanguard and iShares funds. A great platform for DIY index fund investing.

They also offer term deposits from major banks such as ANZ, BNZ, CCB, Heartland, and SBS- so you can shop around for better term deposit rates without having to open accounts with each separate bank.

What we are here to look into today is their Kiwisaver offering– and whether or not it’s worth considering as your KiwiSaver Manager.

InvestNow’s KiwiSaver scheme is unique in that they offer you 28 PIE funds from 9 fund managers including Milford Asset Management, Mint Asset Management, Harbour Asset Management and more.

Type:	Kiwisaver Manager
Minimum Investment:	$0
Membership Fees:	$0
Fund Fees	Average of 0.63% ($6.30 for every $1000 invested)- and as low as 0.27%
What’s on Offer:	28 PIE managed funds from 9 fund managers
Suitable for:	All Kiwis who are participating in Kiwisaver

Funds on offer

The 28 funds on offer including 6 passive index funds and seven funds with fees of less than 0.5%. A large majority of the funds have fees lower than the average of 1.08% when writing this. Having many funds to choose from gives you the freedom to build a Kiwisaver portfolio that matches your values and investing style- similar to Superlife, and the reason I joined with them a few years ago.

Most are sector-specific ( International Fixed Interest, Australasian Equities, Listed Property etc) but they also have several diversified funds. A full table is included at the end of this post with fees, buy-sell spread and links to the PDS for each. All the funds are in the following image if you don’t want to scroll all the way down there.

Passive Index Funds

I’m a big fan of index funds- so I will focus on those for now- otherwise, we’ll be here all day. So what are the 6 index funds on offer? The six pass funds are;

• AMP’s All Country Global Shares Index Fund @ 0.40%
• AMP’s Australasian Property Index Fund @ 0.45%
• AMP’s NZ Share Index Fund @ 0.33%
• AMP’s Hedged Global Fixed Interest Index Fund @ 0.41%
• Hunter’s Balanced @ 0.37%
• Hunter’s Growth @ 0.37%

All of which are considered low fee in my opinion. They are better than the majority of larger KiwiSaver Schemes. The Hunter funds are already diversified across different asset sectors.

The Hunter Growth fund invests in: 2% cash, 3% NZ Fixed Interest, 15% International Fixed Interest, 26% Australasian Equities, and 54% International Equities.

The Hunter Balanced Fund invests in: 2% Cash, 12% NZ Fixed Interest, 26% International Fixed Interest, 20% Australasian Equities, and 40% International Equities.

Fees Charged by InvestNow KiwiSaver Scheme

Some people say that you shouldn’t just focus on fees- however- I think that if you are looking at index funds- then fees are an important consideration. After all- fees are one of the only certainty when it comes to investing. And fees can have a major impact on your overall balance by the time you retire. That is one of the reasons why I left my ANZ growth fund- with a fee of 1.48% at the time.

So let’s talk about the different types of fees involved.

No Admin Fee

Just like their regular investment platform- InvestNow is not charging any admin or membership fees. A large number of other Kiwisaver managers charge between $12 to $30 per year in membership fees. Ok, now it’s not a huge amount per year. Over a lifetime it can be up to $1400 in membership- it’s more if you consider lost interest and compounding. At the end of the day, you have spent your time to earn the money going into your Kiwisaver so Saving on a membership fee is great.

Performance Based Fees

There are a few funds with performance-based fees. This includes the Castle Point 5 Oceans fund, Harbour Australasian Equity focused fund, Milford balanced growth fund and the Salt Enhanced Property Fund. You pay the performance fee if the fund has met its target. This pushes the estimated fees for these funds up a little bit to; Castle Point- 1.36%, Harbour -1.14%, Milford balanced growth- 1.08%, and Salt Enhanced Property Fund- 1.15%.

Buy-Sell Spread

Since many of the funds on offer charges a Buy-Sell spread on their fund I thought I’d say a few words about what exactly a buy-sell spread is?

A buy-sell spread is a fee that you pay whenever you deposit or withdraw money from an investment. The buy fee is charged when you invest in fund units- and the sell fee is charged when you sell fund units. Sometimes buy/sell fees are called Establishment fees or Contribution fees, and Withdrawal fees or Exit fees.

Some fund managers charge buy-sell spread to make sure that any transaction costs incurred as a result of you as an investor entering or exiting a fund are paid by you and not the other investors in the fund, or the fund manager. This theoretically can keep the management fee lower for everyone else.

I do prefer a simpler fee structure which does not include buy/sell fees, such as offered by other Kiwisaver schemes, as I think it is easier to understand what you will be paying before you join. Different fee structures, like buy/sell fees, are easier for fund managers to hide in the small print, such as performance fees etc. We generally only focus on the membership fee and the annual fee- so it’s easy to miss the other fees.

But, buy/sell fees are not that bad if you are a long term investor- if the fund manager keeps the management fee lower than it otherwise would be if no buy/sell fee is involved, because;

1. Each investor bears the cost of any buying or selling of their shares in the fund- which in turn allows the fund manager to charge a lower fund management fee- but remember it doesn’t guarantee that the fee will be lower- in the case of AMP funds above they have a low fund management fee. (This could also be because they are indexed though).
2. If you are investing for the long term the buy and sell fee-only affect you when you deposit your money- and then again in a decade or two later when you cash out- so overall the management fee and annual fee has a more significant effect on fees paid.

How Does InvestNow KiwiSaver Scheme Work?

Ok, so you have 28 funds to choose from. So how does the scheme work?

Step 1: Choose which of the 28 funds you want to invest in.

Step 2: Choose the weighting of each of the funds that you selected in step 1.

Step 3: Confirm the weighting and selection of funds.

It sounds simple, doesn’t it? But with KiwiSaver being a large chunk of your retirement savings you really need to think carefully about your selection.

You change the mix at any time in the future, that new mix would be applied to your current holdings and all future contributions. The one thing to remember is that switching your weighting like this is treated as a withdrawal. This means that you might be charged a buy/sell spread every time you switch between funds.

You can also choose to switch only your future contribution allocation only- which would not trigger a withdrawal and hence a buy/sell fee. To do this the PDS states that you need to complete a change investment strategy form and send it to InvestNow.

Re-balancing

Other diversified Kiwisaver funds will generally re-balance their asset allocation periodically so that the fund will have the same risk level- growth, balanced etc. InvestNow’s scheme does not have an automatic re-balance feature just yet- but that is a future functionality that InvestNow intends to build. Buy/sell spreads will most likely be involved in this as well.

My InvestNow KiwiSaver Scheme

Let’s say I decided to switch to InvestNow for my KiwiSaver. How would I go about selecting which funds to invest in? I would first go to an online tool such as the Sorted Investor Kickstarter or other online asset allocation calculator tool to get an idea of what my asset allocation should be- InvestNow does not offer this service- you could use a competitors Robo advisor service.

The results of my suggested asset allocation using the Sorted Investor Kickstarter is below;

Then I would set the allocation of the different passive funds to get a scheme that looks similar to the above- although I would probably ignore the cash component since I have decades before I turn 65. This is where the InvestNow KiwiSaver scheme comes into its own. I can choose to not include the cash component. This was one of the reasons why I didn’t go with Simplicity- they had too much weighing in cash (7%) and fixed interest (7%) for a growth fund given my time horizon and risk appetite- But hey, that’s me.

So a possible weighting could for my KiwiSaver Scheme could be;

• 30% Hunter’s Growth Fund
• 10% AMP’s NZ Share Index Fund
• 50% AMP’s All Country Global Share Index Fund
• 10% AMP’s Australasian Property Index

The allocations above would give me an exposure of 66.2% to International Equities, 17.8% to Australasian Equities, 5.4% to Fixed Interest, 0.6% to Cash, and 10% to property- with an overall fee of 0.39%, which is better than the current 0.67% I’m paying with Superlife to get a custom KiwiSaver Scheme.

Remember- this is just an example- if you were to choose InvestNow you will have to consider how you would allocate your fund selection depending on your time horizon and investment style. Don’t listen to me!

Just a side note- the above allocation is basically the funds I invest in InvestNow directly if you switch the Hunter Growth fund for the Vanguard fund.

InvestNow KiwiSaver Scheme’s User Interface

There’s a common feeling that InvestNow’s User Interface is a little dated. That might be true for their investment platform- were, to be honest; it doesn’t really matter for me since my investments are all automated. I visit once a month to create a report and that’s about it. I am after all investing for the long run- so who really cares what the UI looks like for the once a month visit. But InvestNow’s KiwiSaver interface has been updated and looks very modern, simple, and clean!

Their new UI looks nearly identical to the one offered by Kernel– and that’s not a bad thing. I really like the Kernel UI. I suspect they are both use the adminis platform to display your portfolio. Why re-invent the wheel, right!

InvestNow Kiwisaver Scheme Review

So- is there enough there for me to make the switch from Superlife? Honestly- I have to do a bit more thinking, but it’s certainly an option. Switching does crystalise any returns and taxes on my current KiwiSaver- but now might be a better time to change than in March.

I might be biased towards InvestNow, as I have most of my investments with InvestNow already, but I really do like their Kiwisaver offering. I’d prefer not to pay a buy/sell spread, but the lower annual fees, when compared to the likes of Superlife, could have a greater effect on my final balance than the onetime buy/sell fee- more calculations to do…

One other thing holding me back is that most of my current InvestNow Portfolio are already invested in the three of the AMP index funds already- does it make sense to double down with my KiwiSaver too? Although, I have stopped contributing to the AMP NZ share index fund after the buy/sell spread increased from 0.1% to 0.44% and switched to Kernel’s Top 20 fund with a fee of 0.29%.

What do you think? Do you like what InvestNow’s KiwiSaver Scheme is offering? Let me know in the comments!

For More- Check out a Q&A with Mike from InvestNow over on Your Money Blue Print

Table of all Funds in the InvestNow KiwiSaver Scheme

Fund	Sector	Annual Fee	Buy Sell Spread
AMP All Country Global Shares Index Fund	International Equities	0.40%	0.07%/0.07%
AMP Australasian Property Index Fund	Listed Property	0.45%	0.27%/0.27%
AMP Capital Ethical Leaders Balanced Fund	Diversified	1.32%	0.19%/0.19%
AMP Capital Global Property Securities Fund	Listed Property	1.38%	0.25%/0.25%
AMP Capital NZ Cash Fund	Cash and Cash Equivalents	0.27%	N/A
AMP Capital NZ Fixed Interest Fund	New Zealand Fixed Interest	0.58%	0.05%/0.05%
AMP Hedged Global Fixed Interest Index Fund	International Fixed Interest	0.41%	0.25%/0.15%
AMP NZ Shares Index Fund	Australasian Equities	0.33%	0.27%/0.27%
Castle Point 5 Oceans Fund	Diversified	1.36%	0.30%/0.30%
Castle Point Trans-Tasman Fund	Australasian Equities	1.07%	0.30%/0.30%
Clarity Global Shares Fund	International Equities	1.06%	N/A
Harbour Australasian Equity Focus Fund	Australasian Equities	1.14%	N/A
Harbour NZ Core Fixed Interest Fund	New Zealand Fixed Interest	0.65%	N/A
Hunter Balanced Fund	Diversified	0.37%	0.12%/0.19%
Hunter Global Fixed Interest Fund	International Fixed Interest	0.54%	0.00%/0.25%
Hunter Growth Fund	Diversified	0.37%	0.15%/0.19%
Milford Balanced Fund	Diversified	1.08%	0.13% *
Milford Conservative Fund	Diversified	0.95%	0.11% *
Mint Australasian Equity Fund	Australasian Equities	1.36%	N/A
Mint Diversified Growth Fund	Diversified	1.36%	N/A
Mint Diversified Income Fund	Diversified	1.08%	N/A
Russell Investments Global Fixed Interest Fund	International Fixed Interest	0.78%	0.15%/0.15%
Russell Investments Global Shares Fund	International Equities	1.50%	0.18%/0.13%
Russell Investments Hedged Global Shares Fund	International Equities	1.53%	0.20%/0.15%
Russell Investments NZ Fixed Interest Fund	New Zealand Fixed Interest	0.76%	0.10%/0.15%
Salt Enhanced Property Fund	Listed Property	1.15%	0.20%/0.20%
Salt NZ Dividend Appreciation Fund	Australasian Equities	1.16%	0.20%/0.20%
T. Rowe Price Global Equity Growth Fund	International Equities	1.20%	N/A

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