Booster's low KiwiSaver fund switch rate shows value of financial advice

17 June 2021

A report released by the Financial Markets Authority (FMA) today seeks to understand the driving behaviour behind the high level of KiwiSaver fund switching during COVID-19 market volatility in 2020.

Using data provided by seven KiwiSaver scheme providers, the report reveals that younger people were more likely to make a switch to a lower risk fund, without understand the long-term impact of their decision.

Booster reported a much lower switch rate during the period of market volatility than the industry average. This can be attributed to Booster’s commitment to providing its customers with financial advice at all stages of their financial journey.

“Our customers receive financial advice and as a result, we experienced far lower switching rates than what we saw occurring across the rest of the industry,” said Booster Managing Director Allan Yeo.

Assets V10 Front Quote Marks

Customers are more confident in their fund choice to begin with and are then supported through the nervousness that naturally occurs during market volatility.

Assets V10 Quote Marks

While the report focused on the behaviours of young people aged 26-35, Booster has defined strategies for different age groups which proved highly effective during the same period.

“For example, if someone over 65 requested a withdrawal of their funds, we had a conversation with that person to make sure they were aware of the possible consequences of that decision, and the longer-term impact for them,” Yeo comments.

“It’s important to remember that market movements, like the ones we saw in 2020, while unsettling and unpredictable in the short term, are not that unusual. What is more predictable though, is the performance of markets over the long term.

“The key thing is to not panic and jump into any rash decisions. Switching into a lower risk fund can lock in any losses once the market starts to recover – rather than just staying put during the unsettled activity.

“This is where the value of advice comes in. A financial adviser helps people of all ages assess their situation and stay the course during the tough times.”

FMA’s report also suggests that investors with a bank KiwiSaver provider took more action during this period, as they saw their KiwiSaver balance alongside their day-to-day accounts. It made it easier for investors to switch funds without understanding the impact of their decisions.

Booster’s online fund switch functionality has an inbuilt educational tutorial, asking the member to stop and check the reason for making their switch, and ensuring the switch is being made on sound decisions, rather than just reacting to negative media.

Di Papadopoulos, Marketing Strategist at Booster, said, “We have an inbuilt educational tutorial for our online switch functionality. Our app has snack-sized educational videos which cover investment fundamentals – including riding out the ups and downs when checking out their balance – so people can gain reassurance that it’s a normal part of investing.

Assets V10 Front Quote Marks

Booster’s ethos has always been to help our members make sense of their money. 

Assets V10 Quote Marks

“We’re pleased that this report supports our focus on helping members make sound financial decisions before switching KiwiSaver funds.”