The KiwiSaver industry sometimes struggles to treat investors like the intelligent people they are. And, at their worst, they treat them like the idiots they aren’t.

Too often brochures and newsletters have pictures of smiling, happy couples, and tortured platitudes drawn from fairytales, road trips and school reports.

Another way the industry veneers the truth is via awards and accolades cooked up within the sector.

Here's a prime example. Recently an Australian based research house, SuperRatings, sent out a raft of ‘awards’ for KiwiSaver. For clarity, Simplicity wasn’t considered because we hadn’t launched yet.

Of the providers rated, 25% received “Platinum\", 25% \"Gold\", 25% \"Silver\" and 25% \"Other.\" That means that 75% of those who were considered got Silver or above, and 50% got Gold or Platinum. I’m sure everyone would love to compete in an Olympics where they had 75% chance of winning a medal, until they realised no one would respect the award.

And unlike the Olympics the winners just don't get the glory of the award, they have to pay for it too. SuperRatings charges the winner of its own awards a fee to use the ‘award’ logo afterwards in their marketing. If they don’t win anything, or the award is a lowly one, the manager is way less likely to pay up. Hence so many glittering awards, which means more potential money for the research house giving the awards. Is it any wonder that intelligent investors eyes glaze over when they see these?

Putting aside all cynicism, perhaps the awards do really reflect what matters, i.e. long-term returns for members. Let's see...

We took the managers awarded Platinum and Gold, and looked at the performance of their balanced funds, over five years, vs the industry average. Note, all data came from the government owned Sorted website.

Of 12 managers awarded Platinum and Gold, seven underperformed the industry average. One underperformed by 2.3% a year --- for five years. All that glitters is not gold after all.

In this context of perpetual underperformance, fees actually matter. They matter a lot to investors because they would have been a big contributor to the poor performance of their funds. Five years is just a window that captures a short cycle in an economy. Spin it out over 10 years and you begin to establish a performance pattern that isn't based on luck or a cycle in the economy.

SuperRatings scaled its awards across a spectrum of categories, giving only 22.5% of the weighting to fees, a laughably low number. This serves one purpose though: Allowing high fee, poorly performing managers to be well enough rated on other factors to get their gong, and pay the ratings agency to boast about it.

To give you some context. In other more respected surveys, for example CanStar, the average weighting for fees is closer to 70%, which is is backed up by a raft of academic research and actual returns.

The SuperRatings commentary on fund management styles was also highly questionable. In a survey attempting to show how high fee managers really added value, they declined to disclose who they surveyed, so investors couldn't easily verify their claims. We can only guess why they withheld the names...Simplicity hereby awards them a Platinum medal, with diamante clusters, for lack of transparency.

Perhaps SuperRatings judges should read the latest paper from the UK regulator, which lambasts high fee active managers for providing very poor value, and not disclosing fees in a way investors can understand.  

The Financial Conduct Authority is calling for asset managers to tally up their fees in one real number that investors can understand.

Sure, awards have their place in a world where they are well judged, fairly awarded and assessed in the interests of investors, not managers. And so do ratings systems. They have a legitimate place in the industry. Morningstar is an excellent example of this.

KiwiSaver managers would be better off spending their clients' money on education, not buying farcical gongs to fluff up their websites. They, like us, should refuse to participate in surveys designed to make as many as possible look good. Instead, let's give smart investors the transparency and education they deserve.