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Adviser questions KiwiSaver tool

By Tamsyn Parker

A financial adviser has hit out at the Government’s money education site Sorted over its KiwiSaver tool claiming the way it pr esents the information to the public is “potentially” misleading and may lead to poor decisions.

But Sorted’s managing editor Tom Hartmann says it has made certain choices in how it presents information on KiwiSaver based on the fact it is trying to commu nicate with the general public in a language they will understand. T auranga-based adviser Brent Sheather said it was industry standard to use KiwiSaver fund performance data that was after fees but before tax but the Sorted site compared after tax data.

“This means that one has to make some rather complex assumptions on tax to adjust standard benchmark data to an after tax basis.”

Sheather said the website also did not provide benchmarks to compare the fund performance to – a standard that professional investors like the New Zealand Superannuation Fund used.

“Most retail investors, even if they knew what they needed, would give up.”

Sheather was also critical of Sorted’s focus on performance data rather than fees.

“By prominently displaying five-year performance and ena bling users to rank funds by performance the Sorted website encourages performance-chasing b y investors.

“The Sorted website only provides short-term performance data despite a number of K iwiSaver funds having 10 years of per formance history. However, historic performance, even for 10 years, offers little information as to which funds will outperform and the shorter the period the more misleading the information.” H artmann said the goal of its comparison tools was to provide KiwiSaver investors and those investing more widely with the best and most r elevant data available to the public.

“. . . the Sorted site is not built for expert investors at the NZ Super Fund. It’s for a wide audience of actual and potential K iwiSaver members, including secondary students who utilise these tools in our Sorted in Schools programmes. This means they require plain English and to have us r efrain from using industry jargon as much as possible.”

Hartmann said it used after tax and fees data to give everyday people the closest idea to what they will receive in the hand, af ter fees and tax. “ Simply repeating institutional practices can be unhelpful and incomplete to wider audiences.” He said the concept of comparing to a benchmark would need to be taught befor e it could even be used by the general public.

“We offer averages of a fund’s peers, such as an average of

balanced fund performance to compare with a specific bal anced fund. This serves the same purpose as the industr y’s use of benchmarks: to help compare the performance and volatility of the fund within its particular market.”

Hartmann said while it agreed with Sheather that a focus on performance returns could lead investors to assume it will pre dict future outcomes that was why it had chosen to make the information less prominent to other data.

“Knowing that users will be looking for performance, we have opted to downplay it.”

Hatmann said it had opted to compare five-year performance figures in order to be as inclusive as possible.

“We think five years is long enough to keep a long-term per spective while including as many funds as possible in the comparison tables.” H e said many newcomers’ providers would be excluded for a long per iod of time if it only used those with more than a 10-year track record.

Hartmann said Sheather appeared to be targeting Sorted as a pr oxy for his criticism of the KiwiSaver industry but it could only wor k with the data it had which was provided through statutory disclosures by the providers.

“As to holding us ‘partly responsible’ for ‘painfully high’ KiwiSaver fees, we think our tools hav e done their part to contain them. When the KiwiSaver fund finder was first published ... there was a provider whose fees resulted north of 3 per cent, able to be seen for the first time. By only months after our release, it had exited the industry. Sunlight is a great disinfectant.”

■ THE WEEK AHEAD

Virus effect on sharemarkets lessens

Global sharemarkets rallied strongly last week, bouncing back from the previous w eek's losses.

The S&P 500 hit a new record high on Thursday, shaking off the coronavirus worries against the backdrop of a strong earnings season.

However, US shares finished the week on a more cautious note as investors began to consider the impact of the disruption in China on the global economy.

US shares were up 3.2 per cent for the week, with Europe and the UK also posting impressive gains.

The Australian and New Zealand markets finished in positive territo ry, although only marginally. The top NZX 50 mo vers last week were Kathmandu, rallying 15.1 per cent, Gentrack which gained 9.5 per cent and Vital Healthcare, rising 3.6 per cent, while Vista Group dropped 8.9 per cent, Synlait Milk fell 7.4 per cent and Fonterra lost 4.9 per cent.

The NZ dollar was mixed, falling against the Australia and US dollar, but rebounding against the British pound and holding its own against the euro.

Interest rates moved higher, both here and offshore, while oil prices fell for the fifth consecutive week. Another busy week looms for global investors, with the reporting season set to continue over the coming days.

The global reporting season has now passed its peak, with around two-thirds of companies having reported.

Aggregate S&P 500 earnings have pushed their way into positive territory and are now sitting at 0.7 per cent (compared with the same

Jeremy Flood ON THE MARKETS

quarter a year ago). This would be the first improvement in year-onyear earnings since December 2018. The earnings season continues this week, with more than 90 S&P 500 companies due to announce quarterly results.

Some of the higher profile global companies set to release earnings include Air Liquide, Martin Mariet ta Materials, CVS Health, Alibaba, Coca Cola, Nestle, Republic Services and Zoetis. W ith the earnings season around two-thirds complete, it has been a solid one so far. Of the 320 S&P 500 companies that have reported to date, 74 per cent have exceeded earnings expectations.

Key US economic releases will include inflation and retail sales, while Fed Chair Powell testifies to Congress today and tomorrow.

Coronavirus developments will take centre stage, and investors will watch with interest as a number of factories reopen after the extended Lunar New Year holiday.

The pace of new cases being reported has slowed and the death rate remains low at around 2.0 per cent, although the impact of the disruption on economic growth could be significant.

US politics will also be in focus, especially after the reporting sham bles at last week’s Iowa caucuses. I nvestors might instead look to the New Hampshire primary today for clearer guidance of how the Democratic nomination race is shaping up.

Domestically, the Reserve Bank will be the highlight tomorrow afternoon.

While no change to interest rates is expected, it will be particularly interesting to hear what the Bank thinks about the likely flow-on effect of the situation in China.

The local reporting season also starts this week, with Contact En ergy, Sky TV, Sky City and NZX set to kick things off o ver the coming days.

Across the Tasman, Transurban, Amcor, CSL and Goodman Group will be some of the highlights.

Outlook statements will be ea gerly awaited, with investors keen to hear just ho w much disruption local companies have seen across Chinese customer bases or business units.

J eremy Flood works for Craigs Investment Partners. This article should not be deemed as advice. Disclosure statement available free of charge and on request.

Guardian Shares & Investments Compiled by

Disclaimer: NZX and MetService have endeavoured to ensure the correctness of the information; neither NZX, MetService related companies, nor this newspaper, nor any of their respective employees or agents make any representation as to its accuracy or reliability nor will they, to the extent permitted by law, be liable for any loss arising in any way from, or in connection with, errors or omissions in any information provided (including responsibility to any person by reason of negligence). Please note: All products and services are subject to change without notice. S&P/NZX 50 Gross S&P/NZX 20 index S&P/NZX All Gross Gold Silver Copper NEW ZEALAND SHARE MARKET Source: NZX and Standard & Poors

Country TT buy TT sell NZ DOLLAR Source: BNZ London – $US/ounce London – $US/ounce London – $US/tonne S&P/NZX 50 Index GrossS&P/NZX 50 Index Gross constituents Company CODE Buy Sell Last Daily Volume price price sale move ’000s

METAL PRICES Source: interest.co.nz Company daily % rise Top 5 NZX gainers Company daily % fall Top 5 NZX decliners a2 Milk Company ATM 1539 1550 1548 +12 643.9 Air NZ AIR 278 280.5 280 – 896.7 ANZ Banking Gr ANZ 2720 2730 2720 +19 7.19 Argosy Prop ARG 140.5 141 141 –2.5 546.5 Arvida Gr ARV 186 188 188 +1 901.9 Auckland Intl Airpt AIA 862.5 867.5 865 –10 949.2 Chorus CNU 630.5 639 638 +5 289.1 Contact Energy CEN 713 724 722 –1 890.4 Ebos Gr EBO 2335 2345 2345 –1 109.1 F&P Healthcare FPH 2389 2395 2395 –18 366.6 Fletcher Building FBU 527 529 528 –13 991.0 Fonterra Share Fund FSF 385 386 385 – 76.48 Freightways FRE 854 857 856 +13 41.52 Genesis Energy GNE 313 318.5 316 –7.5 247.8 Gentrak Gr GTK 225 245 230 +11 287.5 Goodman Prop Tr GMT 227 232 230 –2.5 691.0 Heartland Gr Hldgs HGH 184 186 185 – 230.0 Infratil IFT 545 555 550 +5 620.1 Investore Property IPL 182 184 184 +1 80.44 Kathmandu Hldgs KMD 345 354 354 +10 478.0 Kiwi Property Gr KPG 155 156 156 – 833.4 Mainfreight MFT 4025 4081 4025 –65 361.6 Mercury NZ MCY 516 529 525 –4.5 520.4 Meridian Energy MEL 543 547.5 545 –7 1.6m Metlifecare MET 688 690 688 –1 1.3m NZ Refining NZR 158 160 160 +2 506.8 NZX NZX 136 137 137 – 154.7 Oceania Healthcare OCA 118 120 119 –1 1.7m Port of Tauranga POT 730 732 731 –19 122.7 Precinct Properties PCT 186 187 187 –0.5 1.0m Prop for Industry PFI 251.5 252.5 252.5 – 138.4 Pushpay Holdings PPH 450 458 455 +1 120.7 Restaurant Brands RBD 1310 1330 1302 +3 13.56 Ryman Healthcare RYM 1575 1580 1575 –18 511.3 Sanford SAN 762 766 762 –11 8.54 Scales Corp SCL 450 460 455 –14 73.51 Skellerup SKL 235 236 235 –5 121.0 Sky Network TV SKT 62 66 64 –2 907.6 Skycity Ent Gr SKC 356 357 357 –5 464.3 Spark SPK 471 475 475 +3 1.9m Stride Prop & Inv SPG 236 237 236 –2 129.3 Summerset Gr Hldgs SUM 887 895 893 –7 539.7 Synlait Milk SML 790 796 791 –22 142.3 Tourism Holdings THL 289 290 290 –10 371.1 TrustPower TPW 745 760 755 +10 67.61 Vector VCT 346 351 350 –3 126.2 Vista Gr Intl VGL 315 319 319 –7 223.0 Vital Hlth Prop Tr VHP 288 295 290 +2 222.0 Westpac Banking WBC 2595 2618 2597 +2 33.98 Z Energy ZEL 436 437 437 –2 406.7 1,572.65 +9.35 +0.60% 17.77 +0.01 +0.06% 5,653.0 –73.0 –1.27% Australia 0.977 0.9433 Canada 0.8702 0.8375 China 4.7771 4.1903 Euro 0.6001 0.5737 Fiji 1.4655 1.3281 Great Britain 0.5066 0.4885 Japan 71.95 68.88 Samoa 1.7953 1.5625 South Africa 9.8294 9.4679 Thailand 20.41 19.41 United States 0.6548 0.6309 q 11,702.59 –58.29 –0.5% q 7,719.96 –39.93 –0.51% q 12,651.58 –66.35 –0.52% p p q

As at 4pm Feb 10, 2020 p Rises 41 q Falls 88 11470 11746 11654 11562 11838 11930 10/1 17/1 24/1 31/1 7/2 10/2 At close of trading on Monday, February 10, 2020 Moa Gr +11.54% Plexure Gr +8.86% Gentrak Gr +5.02% PaySauce +4.11% Kathmandu Hldgs +2.91% TIL Logistics Gr –5.71% Just Life Gr –5.00% Napier Port –4.14% Smartpay Holdings –4.11% Tourism Holdings –3.33%