The Future of KiwiSaver

Mary Holm's weekly Q&A column appears in the Business section of the Weekend Herald.


I’ve recently switched to an aggressive managed KiwiSaver fund (Booster’s Geared Growth Fund). However, I have just learned that a 0.5 per cent adviser trail fee is built into the annual management fee.

This is ostensibly to provide external financial advice to all Booster KiwiSaver members, but is paid by the members whether the adviser service is taken up, and there is no opportunity to opt out.

I was expecting a high fee for this fund (1.76 per cent a year), however I am disappointed that 0.5 per cent, a significant portion of total fees, is for financial advice I don’t want to use.

I understand the FMA is not enthusiastic about trail fees, and it was not initially clear that this was part of the total fee. Is this common practice? In the meantime I think I’ll have to find another fund!



The official word from Booster is that payments it makes to financial advisers are not included in the management fee you pay.

“We do believe it is important that clients are able to access quality advice. To enable that we partner with financial advisers and Booster funds the provision of advice. If advisers are receiving payment from us they disclose this to clients,” says a Booster spokesperson.

This is despite your sending me correspondence from two Booster employees who say the adviser payments are included in the fee you pay, and that you can’t opt out and therefore pay a lower fee.

Asked about this correspondence, the spokesperson said, “It looks like we’ve got a bit of a job to do bringing up the level of understanding of how this works amongst our frontline staff and to make sure it’s communicated correctly to customers. For this I do apologise.”

Okay, I said to her, “But I’m still a bit confused. If the money that Booster pays to advisers doesn’t come out of fees paid by investors, where does the money come from? Does Booster accept lower profits than other KiwiSaver providers that don’t work with advisers?”

Her reply: “You’ve picked up on a good point and something which seems unique to Booster. I don’t know about the profits of others of course. But I do know our fees are comparable to industry while we are also providing advice (and a package of other extra benefits).

“We can do that because we are willing to pick up the tab for these benefits. This has always been our approach so we can make sure we deliver great value to our members.”

What does the FMA think about this?

“We cannot comment on individual scenarios, but we have made our expectations clear about fees for advice,” says a spokesperson.

“The FMA is fully supportive of New Zealand investors getting the help they need to make good investment decisions and good advice is valuable.

“Our preference is the fee charged for advice is separate.

“We understand, however, that until KiwiSaver matures further, a lot of balances are modest and even a moderate, ongoing charge for advice could push people away from getting the help they need.

“So while we expect providers to move toward a separate fee, we accept the practice of embedding the cost of advice in fees paid by investors.

“But regardless of how fees are structured (separate or embedded), advice should be received, not just offered; advice should be ongoing — at least annual — not just at on-boarding; the fee for advice should be reasonable; and the fee for advice — the sum, and who receives it — should be disclosed to and discussed with members.”

Hmmm. I dare say there are some interesting conversations between the FMA and Booster.

By the way, despite what was said above, fees on Booster’s Geared Growth Fund are considerably higher than on most KiwiSaver aggressive funds, which charge average fees of 1.07 per cent, according to the Smart Investor tool on

Investors in your fund also pay an interest cost, because the fund uses gearing, as explained in this column last September 3. So yes, you might want to shop around.




Originally published in The New Zealand Herald, written by Mary Holm.