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"Too hard" excuse on fees disclosure just doesn't cut it for Simplicity, or financial regulators worldwide


For too long, the funds management industry has had it too good, extracting a high price for products investors neither understood nor benefited from in any great way.

The times are indeed changing, and the funds management industry is running out of places to hide.

In the U.K.  the Financial Conduct Authority is calling on fund managers to front up with the actual cost of their investments. No more multi-layered fees buried in deep in the fine print that investors either can't find, can't read or can't understand.

As the BBC reported here, the FCA is asking asset managers in the U.K. to come clean disclosing an \"all-in-fee\" that reflects the sum total of what investors are charged. If the power, telecoms, retail, tourism, agricultural and manufacturing industries can charge in dollars and cents for services, along with central and local governments, why do fund managers get away with charging in basis points and burying it in fund performance (ironically, itself reported in dollar and cent returns). 

Since before our launch in August, Simplicity has been lobbying for these changes, so KiwiSavers can see just how much they are being charged in fees by their providers.

If they still haven't told you, we highly recommend you check out Sorted's fee calculator here.

Or visit the New Zealand Herald's website here so you can find out your fee load.

Banks that sell KiwiSaver are grumbling that it's too complex to calculate the costs. They said it wouldn't be realistic until 2018 to get their act together.

We called BS on that one. We've even offered to do it for them, for free. No takers yet, but we'll keep you posted. %) See Sunday Star Times articles here for more on our 'cheeky offer.'

The Association representing banks worries that a full disclosure on fees may result in a run into low fee products without a more sophisticated understanding of how funds are managed and behave over the long term. For more on that subject, see Susan Edmund's article from Good Returns here. 

We also call BS on that one. In assessing funds, most professional rating agencies give @70% weighing on fees, for good reason. They really matter and are, by far, the biggest determinant of long term returns. That's why Simplicity focusses on this. As a nonprofit, we are for maximising investor returns, not making higher profits for the banks and fund managers. Over the long term, low fees are the single biggest way to achieve this. 

If the banks were right, we would be delivering the same product, at the prices they charge. But they aren't right, and we aren't leading our members down the same garden path some of them do.

How is it that most New Zealanders still don't know what they are being charged in KiwiSaver fees? Because providers (almost 10 years since the inception of KiwiSaver) have been in no hurry to educate them. Why? Because it's not in their best interest. Why let transparency get in the way of great profits?

The sooner New Zealand adopts a standardised, clear reporting system such as the one they are calling for in the U.K., and as proposed by the Government here, investors here can graduate from the primary school financial literacy levels they've been imprisoned in.

Sunlight really is the best form of disinfectant.

Yours in transparency and honesty

Sam & The Team at Simplicity  


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