Why I Changed KiwiSaver Providers
09 Feb, 2025
Over the last six months, I’ve had the dawning awareness that it was time to take a deep dive into my KiwiSaver fund. From everything I’ve read and watched, and from the people around me who know about KiwiSaver and investing in general, it was becoming clear that my Simplicity High Growth KiwiSaver fund might have got me to this stage in life, but it's not appropriate for the next chapter.
Bradie, from podcast episodes #01, #14, #54, #63, and #90 was one such person whose opinion I sought, as she also gets a kick out of researching KiwiSaver funds. The Donegans from Rebel Finance School were another influence. The image of Alan and Katie, Jonny and myself, each sitting at my kitchen table with a laptop researching KiwiSaver providers, will stay etched in my mind. This was our version of a very good time indeed!
I also attended two big financial independence meet-ups last year, and via my blog, I’ve talked with countless people from all walks of life with sound levels of understanding about how pūtea (money) works. Whenever I heard a KiwiSaver provider and fund mentioned, I researched it.
The crowd's wisdom told me that it was time to look to change the type of KiwiSaver fund I was in, which would also mean having to change provider.
I don’t change my KiwiSaver often, and I don’t take the decision lightly. There are many choices in the KiwiSaver market these days, each offering a wealth of often conflicting information, making direct comparison almost impossible. Although Sorted tries, their information is not always accurate. According to the Morningstar KiwiSaver Report for September 2024, there are 21 KiwiSaver providers who offer a combined total of 302 products (individual KiwiSaver funds) from which to choose!
If you are researching your own KiwiSaver, don’t feel disheartened by this, and don’t immediately think you need to outsource your decision-making. Providers will provide information; you just have to sift through it.
Do your own financial research!
I have. Did I want to? Not really!
I’m just like you: busy. We are all busy.
We all put off big financial decisions because we know they will require effort.
I did not need to engage a financial advisor to make this KiwiSaver choice for me, as I know that many move people into high-fee, actively managed funds that give the advisor a kickback. Be careful who you seek advice from.
I researched with the following key points in mind:
I want a passively managed KiwiSaver fund. I want as few humans involved as possible. Humans are poor at predicting the future of an investment.
Low fees. The more humans involved, the higher the fees and the higher the meddling in the fund's composition.
No stock picking. I want to own as much of “the whole share market” as possible because, over time, it goes up.
I do not want any niche, ESG or satellite investments in my fund.
I will cut to the chase and share that I’ve moved my KiwiSaver from Simplicity High Growth to InvestNow Foundation Series Total World Fund.
Today, I am sharing the thinking behind my decision to change, and I would like you to continue to research while adding my thoughts to the mix.
Simplicity KiwiSaver
When KiwiSaver started in 2007, I signed up with ANZ. Steadily, more providers entered the market, and I realised I no longer wanted what they were selling. As my knowledge of investing grew, in 2017, I moved away from their high fee, actively managed fund (KiwiSaver Switch) to the lower cost and more passively managed Simplicity Growth Fund. In 2023, Simplicity added a High Growth Fund, and I moved to that.
My KiwiSaver fund ticked along and I updated the growing balance monthly in my net worth spreadsheet.
I liked the information coming from Simplicity. If CEO Sam Stubbs hadn’t kept challenging the high fee status quo, we wouldn’t have the low fee and transparent fee options we do today.
I knew how destructive high fees are to an investment over time (Impact of fees tool), and the Simplicity fees were low, and they continued to drop during my time with them, which is excellent. They are currently just 0.25%.
I liked how a portion of my fee went to charity. However, I was always less interested in the ESG aspect of their fund management as I always felt this veered into stock picking.
My thoughts on ESG and ethical investment
KiwiSaver, ETF, index fund and managed fund providers offer a staggering array of choices. They offer a smorgasbord of diverse products, such as a Total World Fund, and very niche products focusing on particular sectors, such as a New Zealand property fund or product, such as crypto.
Each provider is just trying to package up a product that you and I might want to buy. I don’t want to buy a specific product or sector because neither I nor anyone else knows that it will perform well over the long term or do better than the average of the share market combined. By buying a Total World Fund, I don’t have to guess the next big thing. Instead, with one purchase, I own every sector and every massive company within it.
As a consumer I have more say than as an investor. If I don’t like cigarettes or the dairying industry, I don’t buy what they sell. If enough people stop buying what they sell, they will go out of business. I can’t guess which company will fall next, but I know that as an index investor, without me having to do anything, the next top performer will replace them in my investment.
Although I’m a little disappointed that via Simplicity, I will no longer be investing in good long-term rental investments that benefit tenants, I sleep well at night knowing that via The Happy Saver, I have helped thousands of people get their money in order so that they can afford to pay rent, afford to buy their own home or pay off the one they have.
Back to the story…
I was also looking for a more ‘aggressive’ KiwiSaver fund that tracked an index, meaning it had 100% exposure to global share investments. These can be jumpy in the short term (one to five years), but over time, they go up. Given this was KiwiSaver, I knew I had plenty of time to ride out any down periods. When I joined Simplicity, few (if any) options were available that just tracked a major index, such as a Total World Fund or US 500, but this felt like a good attempt.
As my knowledge of investing outside of KiwiSaver grew, I learned that I didn’t want my provider to pick and choose companies; I wanted them to just ‘buy them all’ as this was in line with the book The Simple Path To Wealth by JL Collins that I had read.
I invested a portion of every paycheque into my KiwiSaver. As is appropriate with a 30-year investment, apart from updating my balance in my net worth spreadsheet each month, I didn’t pay too much attention to the investment itself.
I’d get email updates from Simplicity about tweaks and changes, each of which I read, before getting on with my day.
Simplicity was growing, and my KiwiSaver balance was increasing. When they introduced Simplicity Living and explained that a portion of my investment would fund permanent rental housing, it made me pause. Still, the explanation of their long-term objectives with this allayed my doubts. I was aware that my fund was becoming increasingly actively managed, but with the balance still rising and me living a busy life, I got on with my day. If I ever had reason to doubt the overall direction of the fund, a glance at their website backed up my thoughts when I read the fund I’m in aims for 98% in growth assets, which, at face value, fits my brief.
I’m busy, so I didn’t dive deep into these changes. I really should have.
Ruth, what are you doing?
However, when those whose opinions I value started to question - and I mean really question - my fund choice, it was time to dig a little deeper into what these ‘growth assets’ are.
Simplicity breaks their High Growth fund down in the following way:
Simplicity KiwiSaver High Growth Fund Update. The numbers from different sources differ by a percent or two, depending on when they were taken, but they're enough to give an idea.
According to their website, they aim to invest 98% in ‘growth assets’. But what exactly do they mean by that? Does this mean exposure to international equities or shares via a massive index fund? No.
I knew their purpose was to deliver “market index-like returns”, but what index are they explicitly referring to? Their terminology fitted my thinking of tracking a big market index, such as the S&P 500 or Total World Fund, but the index they referred to had me scratching my head a little. They have selected a “blended” benchmark index to include 35% Bloomberg DM ex NZ ESG Screened Index (Unhedged) and 65% Bloomberg DM ex NZ ESG Screened Index (NZD Hedged). So when they say our performance has been X compared to the index, this is the obscure index they are referring to.
Simplicity's stated focus is to “take a mostly passive investment approach and maintain low costs.” They have a buy-and-hold strategy and don’t actively trade securities—all good things.
But with only 70% of my KiwiSaver fund now invested internationally, it’s no longer the diversified global investment I hoped for.
As the years passed, the composition of my KiwiSaver fund evolved as they sought higher growth in different ways than I anticipated, moving further away from what I was investing in outside of KiwiSaver (a simple S&P 500 ETF) by adding an element of risk through exposure to Unlisted Property, evolving companies and New Zealand shares.
I knew that my KiwiSaver fund was straying further away from that basic investment philosophy.
I continued to learn about my fund.
As someone who has been progressively rejigging our investments to align with the concept of just ‘buying the whole share market’ by buying either a US 500 ETF or a Total World Fund, my Simplicity High Growth Fund, although performing well for now, was veering way off course from what I would prefer to invest in.
I started researching precisely how my KiwiSaver investment is broken up and what my Simplicity High Growth Fund was invested in:
Simplicity has a ‘target’ allocation for each type of investment in their fund, and then they have the reality, or what they ‘actually’ have.
Three things interested me:
Their exposure to Australasian Equities was far higher than their target, with more Kiwi companies in the mix than I realised.
Their exposure to International Equities was lower than their target
Their exposure to Unlisted Properties was far lower than their target, and I’m assuming, given their target, they want it to be far higher.
Here is a breakdown of their Top 10 investments:
It’s not in keeping with my investment strategy to have 4.34% invested in Simplicity Living Ltd. Contrary to what I’m about to say, I like the aspect of Simplicity Living. I like that a company has actively tried to change the rental market instead of just complaining about it. But, as an investor, I don’t want to take on the risk that being invested in an illiquid asset brings.
I kept drilling down into the actual composition of my fund.
I read the Simplicity website cover to cover, plus the Fund Update, Product Disclosure Statement, and Statement of Investment Policy and Objectives. I remembered they had switched to DWS as their external manager of international assets, so I looked into that, too.
It took a bit of searching, but via Mindful Money, to the best of my Googling ability, I tracked down the list of hand-selected companies in my fund, the Portfolio Holdings.
Finding information about your fund ain’t no walk in the park, though, folks, and I ended up cobbling together a picture of the makeup of my fund from multiple sources.
My High Growth fund consists of international shares. Their Statement of Investment Policy and Objectives explains they “have established our own sector funds that hold a portfolio of securities, designed to provide a market index-like return”.
These are the Simplicity hedged and unhedged global share fund, NZ shares from the Simplicity NZ Share fund, and some allocation to unlisted securities with “high growth potential” (read: high risk and illiquid). The unlisted property invests in Simplicity Living Limited, which develops its own residential rental property (read: illiquid).
Researching KiwiSaver was worth the effort.
I found it ALL QUITE FASCINATING but had to delete half of it as you would find it BORING, working out how a KiwiSaver provider creates an investment fund. It’s similar to your favourite cafe, perfecting and tweaking its recipes by what it thinks will perform/sell best. It turns out that once I dug about, their definition of growth assets, passive management and diversification is different to mine, and their (impressively bilingual) PDS openly states that the “returns you receive are dependent on the investment decisions of Simplicity”.
No disrespect to the team at Simplicity, but this doesn’t fit my “buy the whole share market” investment approach, as there is too much human intervention.
Ultimately, my decision to change funds came down to the fact that 30% of my investment is invested in Australasian equities (a big chunk of which are New Zealand equities), unlisted property investments in the form of their Simplicity Living rental housing, and money invested into Icehouse which invests in early-stage private up and coming future companies.
It’s not that I don’t LIKE what they are trying to do here; I’ve heard the CEO of Simplicity, Sam Stubbs, speak about their rental housing and providing money for future companies in New Zealand. I just don’t want my KiwiSaver money invested in it because it introduces a level of risk I am no longer comfortable with.
We invest in a simple US 500 ETF fund outside of KiwiSaver, and I want my KiwiSaver to be in a similar fund.
What tipped me over the edge to finally sit up and take notice was when it became clear that this investment has veered well away from following an extensive, all-inclusive index fund and has progressively begun to actively take a stance on what should and should not be included.
Their fund is performing well (22.08% before tax and after fund management fees in the last year). Still, it's barely two years old, not long enough to develop a track record and even if it did, “past performance does not predict future performance,” and the fact that over time, an actively managed investment in the majority of instances can’t outperform the share market average.
This was illustrated in Warren Buffet’s Million Dollar Bet.
Now that I knew what I didn’t want in a KiwiSaver fund, it was time to find a new provider and fund.
The hunt for a new KiwiSaver fund was on.
I upped my enquiries with friends and acquaintances, asking, “Who do you invest with, and why?” I also scrolled through investing Facebook Groups, websites, and Reddit.
Time and again, the InvestNow Foundation Series Total World Fund came up in conversation.
Changing KiwiSaver providers is very straightforward. You go to the website of the provider you want to move to, complete their sign-up process, and they do all the back-end work required to bring your investment to them. It took me seven days to change, and during that process, I received emails from my old provider, my new provider, and the IRD.
InvestNow Foundation Series Total World Fund
This fund was created in February 2023, almost two years ago.
It was created because investors kept asking for a low fee passively managed KiwiSaver PIE fund that tracked the Vanguard Total World Fund ETF.
What is in it? It is pretty simple.
It is 100% in growth assets (international equities). It invests into an ETF, the Vanguard Total World Stock Index Fund, which invests in shares of large, mid-sized and small companies listed on international stock markets. The objective of this KiwiSaver fund is to try to mimic the Morningstar Global All Cap Target Market Exposure NR (NXD) Index benchmark. (Sorted). The investment fund manager is Fundrock, which handles the fund's day-to-day operations.
I used their Product Disclosure Statement to help me research this fund.
There are about 9,781 companies in this fund, and how an index fund works is that if a company goes bust, its place in the fund is taken by the next top performer. On the other hand, there is no upside to growth; some companies are massive and take up a larger part of the fund. Visit Vanguard to see the fund composition.
The KiwiSaver fund invests directly into the Vanguard Total World Stock Exchange Traded Fund (VT). FundRock NZ Limited is the fund issuer and manager.
It is also a New Zealand-domiciled PIE fund (Portfolio Investment Entity), meaning taxes are capped at 28%. This is not much of a win for me, as I’m on a lower income.
Fees
They market themselves as a low-fee provider, but that only tells half the story. Their management fee is a tiny .07%—that is low. But the kicker is the .50% transaction fee you pay every time you buy or sell.
When I moved my $133,000 KiwiSaver balance to InvestNow, I paid $665 in fees. The more money you move, the higher the cost, simply because of the .50% transaction (buy) fee. Bradie told me that when she moved her much larger KiwiSaver balance over, she wondered if she had made a terrible mistake due to the fees she paid taking a bite. But share markets do what share markets do, and for both of us, the gains in our funds have already surpassed the fees/losses we paid.
When I spoke to people about this fund, the higher fee was the biggest impediment to them switching.
Late in 2024, I asked you to write to me with suggestions for blog posts for 2025. Craig asked me this question:
“Has an analysis been done to compare fund performances, taking into account fee charges? I’m considering a move to InvestNow but don’t have the numbers to back the move.“
I'm sorry, Craig, but that analysis has not been done to my knowledge (tell me in the comments below if you have it). It’s tough to do, as the fund has only been available for two years. You need more data to draw any decent conclusions. Comparing KiwiSaver funds is extraordinarily vague and complicated. www.smartinvestor.sorted.org.nz is usually quite good at this, but not this time.
I did use the Rebel Donegans Impact of Fees Calculator, though, which showed that over 30 years, based on fees alone, InvestNow is the better choice by $70,697:
However, while fees are important, they only tell part of the story.
Performance
The TYPE of investment your KiwiSaver is in makes a difference in returns over time.
Added to the complexity is that the fund I’m leaving and the one I’m joining has only been around for about two years, so there is not much historical data available. Every KiwiSaver fund calculates its returns differently and compares itself to different benchmarks.
But whereas Simplicity has created its own fund, the makeup of which is hard to work out, which makes it difficult to compare, InvestNow are trying to stick as closely as possible to a very long-standing ETF investment. And there is plenty of historical data on that:
My new KiwiSaver provider is trying to stick as closely to this graph as possible.
PERFORMANCE: I accept a higher fee because I believe InvestNow will outperform Simplicity over time.
Given the exposure this investment has to the Total World Fund (so all the largest and most lucrative companies globally), I’ll come out with a larger balance over the long term, and pay fewer fees over time.
Summary
My decision to change KiwiSaver providers from Simplicity to InvestNow was carefully made. I liked, and I still do, a lot of things about Simplicity.
In financial terms, although it's hard to pinpoint the exact returns because the fund is so new, I have tracked my KiwiSaver balance in my net worth spreadsheet, and it has increased in value year on year.
But this fund, much like when I owned Meridian shares, kept me awake at night. It was performing OK but felt risky due to its lack of diversification.
As you will know from following my blog over the years, I’ve really narrowed in on the investment philosophy of JL Collins, Mr Money Mustache, The Donegans, and many others who say “buy the whole share market”. Whether that be a US 500 ETF, a Total World Fund, or something similar.
The benefit of having a well-read blog is that not only do I get to share my thoughts with you, but you get to share yours with me. In some ways, I feel foolish for not making a change sooner, as I have known of the InvestNow Foundation Series for a while now, but on the other hand, I feel entirely at ease.
My KiwiSaver choice was not catastrophic to my wealth. I’ve had a good run, but given the research I’ve now done - which, believe it or not, I’ve edited down here 😬 - I feel the time is right for a change. And in case you were wondering, both Jonny and our daughter have changed providers, too.
I have not thought, “What if I had changed sooner?”. The important thing to me is that I acted immediately when I possessed all the knowledge I needed.
