A Massey University research has found that leaving the KiwiSaver schemes run by their banks.
For the year ended March 31, the five major banks collectively had 28,139 members transfer out of their KiwiSaver funds, which represented 58.7% of the number that transferred into the accounts.
The negative association between the Fund and member flows and the KiwiSaver provider being a bank was a real surprise.
In a previous survey conducted for FINSIA, KiwiSaver members indicated a preference for having their KiwiSaver account with their bank so they could see their balance via online banking.
However, this might mean that members are constantly monitoring their account and their funds’ performance and choosing to move when performance is poor.
The key approach was to focus on fund and member flows for the research project.
We wanted to understand what KiwiSaver members actually do in terms of their investment behaviour, not what they say they do.
The findings highlight the immaturity of investors in KiwiSaver and the need for education and advice to ensure they are making appropriate investment decisions.
While investors do appear to be chasing returns and avoiding fees, that is not always the best approach to a long-term investment.
Both returns and fees are important but it is a sign of an immature market when investors chase historic returns with an expectation that they provide some indication of future returns, which of course do not.
*Dr Claire Matthews is a Director of Finance Senior Lecturer at Massey University.
(Picture courtesy: Massey News)
