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Gareth Morgan: KiwiSavers could be next victims

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  • Gareth Morgan: KiwiSavers could be next victims

    Gareth Morgan: KiwiSavers could be next victims

    4:00 AM Tuesday Feb 16, 2010
    Gareth Morgan. Photo / Bay of Plenty Times.

    One of the major conclusions of the Capital Markets Taskforce (CMD) was that New Zealand must clean up its act when it comes to financial market practices to have any hope of improving the allocation of capital across this economy.
    We have a shocking bias towards property, driven to a large degree by the fear people have of being ripped-off by fast and loose operators in financial markets more interested in self-enrichment than managing people's savings.
    The latest case of this sleaze occurred in the finance sector where operators used media personalities to promote their wholesomeness to the public, while making loans to related parties on non-commercial terms.
    Folk fell for the advertisements and the promised headline returns and lost their lifesavings. The tragedy is they assumed market regulators would protect them.
    The truth is quite different. The regulators are anything but pre-emptive, they work on a complaints-first basis so when you get mass destruction, they do too little and too late. The CMD highlighted this ineffectiveness and advised changes to both the Securities Act and its enforcement.
    New Zealand has fallen so far behind in terms of the respectability of its financial market governance that there is a strong case for the regulators to adopt the American approach, where the enforcement agency can enter the premises of finance businesses and audit their processes.
    In other words the state of trust in our finance sector is so bad we no longer can afford the luxury of waiting for disaster before regulators get off their chuffs and take action.
    If we are to restore trust in banks that have ripped-off the taxpayer, in finance companies that mislead the public, and now also in KiwiSaver providers, then the public - or at least its agent, the regulators - needs to get tough. Real tough.
    Take these lapses with Huljich Wealth Management (New Zealand) Limited, a relatively new entrant to the financial service industry that has its heritage in a sausage and salami company. It got the former National Party leader Don Brash to chair it, and has Auckland Mayor John Banks as its other independent director.
    There seems to be an awful sense of deja vu here - like former All Black Colin Meads with Provincial Finance or former TV presenter Richard Long with Hanover. Neither of those celebrity endorsements helped the public, in fact they were instruments of abuse of the public's trust. With Brash and Banks we're at a totally different level, yet the company they're part of is gaining a questionable track record.
    Where on earth are the myriad of government regulators who are supposed to be over this KiwiSaver thing? First we had Huljich paying salespeople to sell its KiwiSaver at street corners and door to door in South Auckland - totally against the rules.
    Then Huljich's salespeople were found selling it to the mentally impaired in institutions.
    Now there are suggestions they have been manipulating their returns through related party transactions. Concerns around this haven't been helped by Huljich's refusal to respond to these suggestions under the weaker-than-weak grounds of "commercial sensitivity" to disclose to anyone how their returns - which were miles beyond anyone else's - were achieved.
    Don't the trustee and the regulators require auditing of KiwiSaver providers? I find it extraordinary that KiwiSaver is open to having apparent performance figures distorted by related party transactions. Certainly it would make a mockery of any performance surveys.
    Financial markets are vital to this economy but for your own self-preservation make sure you get regular and full disclosure, so you can see how every dollar you save is invested and how it has earned its return.
    Don't rely on the regulators to protect you, they are there simply to ooh and aah as the corpses stack up.
    To the Government - get off your backside and start seriously implementing what the CMD told you to do. The longer you take, the deeper the hole this economy has to climb out of.
    * Gareth Morgan is director of Gareth Morgan Investments, and Gareth Morgan KiwiSaver Ltd, and he was a member of the Capital Markets Taskforce.
    The state of trust in our finance sector is so bad we no longer can afford the luxury of waiting for disaster before regulators take action.
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    David Chaplin: Morgan v Huljich in battle to be king of KiwiSaver

    2:00 PM Tuesday Feb 16, 2010
    Peter Huljich, managing director and chief investment officer of Huljich Wealth Management New Zealand. Photo / Richard Robinson.

    Gareth Morgan's marketing spiel in the New Zealand Herald this week made for a very entertaining read.
    Morgan excels at scaremongering and he did not disappoint with his 'KiwiSavers could be next victims' rant.
    But while he raised some valid points - he always does - I think his text should be viewed in the commercial context in which the Gareth Morgan KiwiSaver (GMK) scheme operates.
    In his article Morgan singled out the Huljich KiwiSaver scheme for criticism. Admittedly, Huljich has been caught out indulging in some unsafe marketing practices but it's a huge stretch of the imagination to compare the savings scheme to some recently-defunct finance companies on the back of that.
    More to the point Huljich is probably GMK's most fierce rival in the particular KiwiSaver niche they operate in - both trade on their 'Kiwiness' and self-proclaimed high-performance abilities.
    And the two schemes have been very successful in attracting members with GMK, in particular, getting off to a flying start when KiwiSaver launched in 2007. Of late, however, Huljich - in member numbers at least - has overhauled GMK.
    According to the Workplace Savings NZ (formerly known as ASFONZ) website , Huljich boasted just over 54,000 members as at September last year compared to the 44,581 members reported by GMK in November 2009.
    This represents spectacular growth for Huljich, which claimed only 14,123 members in March 2009 versus the 35,095 members on the GMK books.
    It's difficult not to conclude that Huljich might be cutting a bit of Morgan's grass.
    In a short-term performance sense both Huljich and Morgan have also lost some of their shine, which shouldn't really matter to KiwiSaver members facing 10 to 40 years of investing. It's also why fund managers who have just experienced a bumper year should report it with a dose of humility- a quality neither Huljich nor Morgan suffer from.
    However, Morgan, in particular, has toned down his performance rhetoric recently after a disappointing year.
    According to the GMK website, in the 12 months to January 31, 2010: its growth fund lost 6.61 per cent; the balanced fund dropped 2.51 per cent, and; the conservative fund returned 1.75 per cent.
    While it's not an exact overlap in time, the recent Mercer KiwiSaver survey 2009 annual performance data serves as a proxy benchmark to measure GMK against. In the Mercer survey the average conservative KiwiSaver fund returned 8.1 per cent in 2009; the average balanced fund returned 12.1 per cent, and the average growth fund grew by 16.5 per cent.
    Steve of Wellington takes up the story here in one of the responses to Morgan's article: "I've got my Kiwisaver with you Gareth and all I seem to do is lose money - thousands at the moment. How about less spin and more time trying to recover some of my money you have lost?"
    Latest breaking news articles, photos, video, blogs, reviews, analysis, opinion and reader comment from New Zealand and around the World - NZ Herald
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx


    • #3
      Me reckons Morgan should focus on his scheme. I am a member and the thing is bleeding money like crazy. I realise it's long term and short term trends are not critical but the rate at which his growth fund is under performing there might be nothing left in 40 years.
      I don't have to get it right, I just have to get it going!


      • #4
        Originally posted by XYZ-Man View Post
        Me reckons Morgan should focus on his scheme. I am a member and the thing is bleeding money like crazy.
        He would argue that at least you know why you are losing money.


        • #5
          Just FYI.....from another blog site..

          "...spent a couple of hours wandering around a few websites to see what really has been going on with Kiwisaver. Who is ripping off clients and who is providing decent results?

          Well, here's the go for a selected number of balanced funds. Morgan's fund is listed as GMK."


          • #6
            that's food for thought


            • #7
              Yeah sure is - maybe Gareth's fund is a clear case of the:

              Swipple's Rule of Order
              He who shouts loudest has the floor.

              I read his book "Pension Panic" and recall him saying (in the book) Kiwis are not poor savers - (which we hear all the time from other experts and Government) in fact we are just poor investors i.e. we do not invest our savings wisely.

              Fundamentally we are naive when it comes to money management preferring to trust others to 'do the right thing' with our dosh rather than maintain a watchful eye on our investment returns. If this is true than Gareth knows most of his clients are not keeping a watchful eye on him.

              Just my summation of course.


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              • #8
                Originally posted by CJ View Post
                He would argue that at least you know why you are losing money.
                At least then I would know that he knows that he is screwing us.

                At the moment he thinks he is an angel and every other man/woman in a stripped suit is fleecing the poor mum and dad investor. A while ago he was making a lot of noises about insurance companies.
                I don't have to get it right, I just have to get it going!