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KiwiSaver exodus to conservative GRTV speaks with Mint Asset Management’s David Boyle, following the ASSET Annual KiwiSaver Round Table, on the Covid switching trend, robo-advice and membership compulsion. Because you were part of the round table I was interested to talk about what came out of that because I thought there was some quite surprising things. Last year when we did the round table, we talked about how would managers handle a downturn? And I think last year you said that it was going to be a bit of a dog fight. It was going to go to hell in a handcart, I think you said. Hell in a handbag, I think. That’s right. So did you get it right? Look, I was genuinely surprised. No one would have picked what Covid-19 was going to do to NZ investors and particularly our wellbeing, if you like. And there were a number of switches. We had, what? $1.4 billion or thereabouts moved from growth to income assets. But given there's $60 billion or thereabouts and the number of investors that did make that change, I thought it might've been higher. I guess my fear is if we have a double dip, which today feels even more likely than not, what's the resilience really going to be like then, for investors? Overall, do you think people handled it pretty well? I think they did. I mean, there was a lot of mixed messages in the media about it. There were some really good articles as well, but I think the providers did a pretty good job, relative to the numbers they had to deal with. And some of the switching that took place, it would have been great if they were able to help mitigate that a wee bit, but let's hope that they have a better plan for the next time.
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But that was one of the really interesting things for me, because there were 40,000 people that switched $1.4 billion, and if they switched and they haven't moved back, they've actually crystallised quite a few hundred million dollars loss. So we asked the question, should providers be offering some sort of advice or intervention when this switching goes on? And surprisingly, they said no. Did that surprise you? Yeah, it does to a point. I mean, the ability to give reasonably qualified advice is not cheap and we've got new regulation that's not going to make it any easier, right? So robo-advice may be an option in the future, but it didn't appear to be something that was genuinely well accepted by the providers that were talking at the time. But surely the providers, you're talking about 40,000 people, so I don't know how many providers we've got? About 31, I think – of schemes – 26 providers. Thirty-one. And so, they could do stuff by telephone, on the internet, making sure they ask some questions, and they hadn't done it. But what surprised me is, for years we've been talking about shifting people up the risk curve, because they're in the wrong funds, and now they want to go the other way and they say, “oh no, we're not going to get involved”. It doesn't make sense to me.
No, and I think there was a bit of a mixed bag of conversations around that. But I think there has to be more done in that area and how they can deliver that in an effective way that will help mitigate that risk again. Because if it happens again and we see another 25% market correction perhaps, which I'm not saying, goodness, is going to happen, but I think people are feeling a little fragile and their financial wellbeing is probably more under the pump now, given the changes in employment [security]. It’s interesting because if these people realise that they have crystallised some quite big losses, questions will be asked. And they should be. And they should be asked. The thing is that they don't know what they've lost. Imagine if you got a statement saying: "Now, if you'd stayed where you were, you would have ..." Well, maybe that's what they should do. I don't know, that's a big call. Not for us to say today. Maybe the FMA should get onto this one. Maybe they should. So interesting, we talked about roboadvice and no one thought it was the magic or silver bullet. No. And in fact, some of them were quite dismissive of robo. What was your take on that?
