Consilium has slated a spring launch for its new open architecture KiwiSaver scheme with a September 1 go-live date.
Dubbed KiwiWRAP KiwiSaver, the new scheme will be a “first of its kind” in NZ, according to Consilium managing director, Scott Alman.
To be accessible only through financial advisers, the Consilium KiwiSaver platform would allow advisers to build truly bespoke portfolios for clients with at least $50,000 in savings, Alman said.
He said as well as offering a wide approved product list (APL) – – with some cost and liquidity constraints limiting selection – advisers would be able to charge a fee-for-service (of a maximum 1 per cent) collected through the platform.
“There will be an extensive APL of shares, bonds, managed funds – including exchange-traded funds,” Alman said. “Although there is one constraint that it won’t offer direct Australian and NZ shares – at least in the first version.”
Advisers would be able to build mini-KiwiSaver portfolios for groups of clients or individually tailored investments for clients, according to their preferred style and beliefs, he said.
“This is a mind-shift,” Alman said. “People have a set view on what KiwiSaver is. But people should be able to invest in KiwiSaver how they do in non-KiwiSaver portfolios.”
Craigs Investment Partners has offered a similar, if more restricted in choice, ‘self select’ KiwiSaver scheme since 2007, garnering about $250 million and 5,000 plus clients, through its broker force.
Alman said the Consilium KiwiSaver scheme is more akin to Australian superannuation wrap products that allow wide investment choice administered in a single platform. (Australian self-managed super funds take the free choice concept a step or two further.)
“And this is the first open architecture KiwiSaver scheme in the independent advisory space,” he said.
While advisers negotiate fees directly with clients (although Consilium administers the collection), the KiwiWRAP platform cost should be “at the lower end of the market”, Alman said.
“We want this to be an industry utility,” he said.
But given the individualised nature of the underlying portfolios, the Consilium scheme is structured – like the Craigs product – as a non-unitised superannuation fund with a flat 28 per cent tax rate rather than under the standard KiwiSaver portfolio investment entity (PIE) wrapping.
With KiwiWRAP KiwiSaver requiring a $50,000 minimum portfolio size to start, most eligible investors would likely sit in the top 28 per cent tax bracket charged via PIEs.
Dayle McDonald, Consilium head of wrap solutions, said the structure was also transparent – reporting full holdings, transaction and fee details directly to members.
“Each quarter members will receive a personal plan report – like a [discretionary investment management service] DIMS report,” McDonald said.
She said the underlying FNZ wrap technology also enabled seamless client access “like a bank account”.
McDonald, promoted to head of wrap last year, has been heavily involved in the Consilium KiwiSaver project. She is also overseeing the birth of the new Wrap 2 system, which is now expected to release the latest global FNZ technology on the local market by mid July.
Despite the turbulent market conditions ahead of launch, Alman said the timing is right for an adviser-focused KiwiSaver scheme.
He said, if anything, the rush of KiwiSaver members out of growth funds into conservative during the March COVID-19 crash, has shown that advice in the sector is more needed than ever.
At the same time the $60 billion plus KiwiSaver market, about to turn teen this year, includes a large number of members with substantial account balances who may appreciate advice.
“Our target market is KiwiSaver members with a decent balance who recognise the need for advice and that advisers can add value,” Alman said.
Furthermore, he said Consilium has eschewed offering trail commissions as inducement.
“When we first looked at the KiwiSaver space there was nothing conducive to financial advice – there was only commission-based sales,” he said. “Our aim is to support professional financial advice.”
Early in April the Christchurch-headquartered Consilium, which has about $4 billion in funds under administration, was granted a managed investment scheme licence – a regulatory precursor for KiwiSaver providers. Formal KiwiWRAP KiwiSaver documents have yet to be tabled.