Index-based fund provider, Simplicity, is listing its range of passive products on investment platforms in a bid to woo philosophically-aligned financial advisers.
Sam Stubbs, Simplicity founder, said the group, which is verging on $300 million under management across 10,000 members, had struck deals with the ASB-owned Aegis and FNZ investment platforms to list its KiwiSaver and unit trust products.
Platforming was essential in garnering adviser support for the Simplicity funds – a strategy previously eschewed by the group.
However, Stubbs said Simplicity was targeting fee-based advisers with no commissions on offer.
“We’re also compiling a list of fee-based advisers who we will recommend to our clients – and we welcome any genuine fee-based advisers to get in touch with us,” he said. “Many of our members may want to speak to a financial adviser, we’re supportive of the goal to deliver good financial advice to as many people as possible.”
Stubbs said any member referrals routed via the Simplicity-vetted adviser list would be no-strings arrangements without any “economics” involved.
“There won’t be any referral fees or requirements to sell our products,” he said, estimating the final approved adviser list would number between “20 to 40”.
As part of the platform effort, Simplicity would also offer a “portal” for advisers to access their client KiwiSaver accounts.
Simplicity has grown since launch just over a year ago solely on the back of “word of mouth” recommendations with funds under management soon to break through $300 million, Stubbs said. The KiwiSaver scheme has attracted almost 10,000 members – mostly from rival providers – while the Simplicity unit trust range, released earlier this year, has hit $70 million sourced from about 1,000 investors.
Stubbs said the growth rate has been about double “the most optimistic forecasts”, putting Simplicity on a path to “cash-flow break-even” next year, well ahead of forecast.
According to the Simplicity accounts for the 12 months to March this year, the company recorded a $247,000 deficit in its first year of operation: expenses of about $505,000 outweighed income of $138,000, comprising fund management fees of $99,000 and annual member fees of $39,000.
Both the Simplicity KiwiSaver and unit trust products invest principally into Australian-domiciled Vanguard passive funds with NZ shares and fixed income managed in-house.
Stubbs said Simplicity was talking to Vanguard about the prospect of launching NZ-registered funds that would eliminate any ‘tax leakage’ from the Australian vehicles.
“We estimate that our growth fund has tax leakage of a maximum 20 basis points while for the conservative fund it’s down to as low as three or four basis points,” he said.
However, Stubbs said it would make sense for Vanguard to structure any prospective NZ funds – open to all local investors – rather than for Simplicity to create its own.
“The costs of building them would cancel out the gains from removing any tax leakage,” he said.