Previously I wrote about Why I’m Switching to Simplicity. Since then I’ve become a member, and I’m enjoying being a customer so far. Last week I had a great chat with Sam Stubbs, their managing director. Here are the best bits of our conversation!
Ryan: Hey Sam, thanks so much for agreeing to chat with me!
Sam: No problem Ryan, thanks for helping promote us on your website.
R: Happy to do it! So what made you decide to start Simplicity?
As I got older I became more and more cynical about the financial services industry, I saw it looking after its profits first and foremost and not customers.
When I hit 48 I had a midlife crisis of sorts – I decided that I’d led a very fortunate life and I was going to focus on giving back.
One big problem in NZ is that we have too many poor old people. We shouldn’t tolerate this; I want to help provide NZer’s with dignity in their retirement.
Helping Kiwis have a bigger KiwiSaver balance when they retire will be huge for this, and the best way to help Kiwis grow their KiwiSaver is by cutting fees. Most KiwiSaver providers charge far too much in fees which has an enormous impact on what people end up with when they retire.
I know our model of drastically lowering costs to lower fees has worked overseas so I knew it could work here. It took a lot of work but eventually we got to the point where we could offer funds to the public at a very low price.
R: Is it fair to say that you’re succeeding far beyond your expectations?
S: Yes! We’re on track to far exceed our targets for clients signed up and $ under management for the first year. Kiwis have really embraced Simplicity. We originally were aiming to have 4% of the KiwiSaver market eventually, now we think we can get as high as 10%.
NZ has been a bit slow to latch onto passive investing, but I think that is beginning to change.
R: That’s awesome! Have you gotten any backlash from within the industry?
S: No, not really. Competitors have been mostly silent or else they’ve gone back to “It’s bottom line returns that matters” and they’re right of course. But what they miss is that by charging far lower than average fees we can achieve greater than average returns.
R: That’s surprising! I thought you would have been getting a lot of heat from executives whose bonuses you might be putting in danger! Yes, your low fees will almost guarantee you perform far greater than the average KiwiSaver fund.
R: Do you think we’ll see other providers start to lower their fees soon?
S: No, I doubt it. Only if they are forced to. Remember, they have much higher fixed costs than we do and have to keep fees high to maintain their profits up. And if they do lower fees I would expect it to be a token gesture.
R: Haha, like “look at us! We’ve decreased fees from 1.6% to 1.5%”
Do you think the general population are becoming aware of how important fees are?
S: Yes, we’re getting there, but we still have a long way to go. More and more KiwiSaver members are making fees a big part of their decision, which didn’t use to be the case!
We’re really frustrated by the lack of transparency many providers have with what fees they charge. It’s not hard to provide customers with a good estimate of how much they are actually paying.
R: That’s one thing I love about Simplicity’s interface. It’s really clear – “here’s what your balance is, here’s what you’ve earned and here’s what you’ve paid in fees.”
S: Yes, we believe that other providers not disclosing what customers are paying in fees is completely unacceptable.
R: What would you say to people who are unwilling to switch to Simplicity because it doesn’t have the name brand recognition of a major bank or fund provider?
S: What people have to know is that their KiwiSaver money is controlled by government-owned entity Public Trust, so it’s never at risk should anything happen to Simplicity. And as far as returns go, we’ve back tested our portfolios and found we are constantly near the top. It becomes almost impossible to beat a low fee model over a long period as it’s advantage gets bigger and bigger each year.
R: Yeah, you might not be the best every year, but there’s no way anyone could pick the best KiwiSaver provider year in year out, so they’d be better off with you guys and guaranteeing that they are above average.
I’ve seen on your blog recently about some KiwiSaver providers trying to look better by showing off dubious ‘awards’. What’s going on here?
One Australian research centre was giving out ‘awards’ to KiwiSaver providers, which the provider has to pay to display. 75% of their ratings were Platinum, Silver or Gold. I bet you can see the problem here already.
And to make things worse their awards weren’t even a good reflection of strong performance. Fees only made up 22% of their rating, which is far too low, most professional rating agencies give around 70% weighting to fees, with good reason. Providers would be better off spending money on providing better service rather than trying to trick their customers with BS rewards.
R: Frustrating that companies are trying to trick people with meaningless awards. Anyway, so what’s next for Simplicity? I remember reading that might you want to branch off into insurance in the future?
I think the next product we’d like to add is a unit trust. It would be similar to our KiwiSaver funds but you’d be able to buy and sell as you wish.
R: I think that would be great! It’d be awesome for Kiwi’s to have more choice when it comes to buying low-fee passive funds. I think there’s a lot of financial products that would benefit from Simplicity’s model. Term deposits, credit cards…
Anyway, I’d better let you go! You’ve got probably got plenty of new customers to call! Do you think you’d have to stop doing that if you started getting 1000’s of new clients a day?
Never, I think it’s vital to add the personal touch and to not take your customers for granted.
If you or any of your readers have any feedback, please pass it on to me, and we’ll take it on board.
Well, hope you enjoyed that! Chatting with Sam reinforced my opinion that Simplicity is the real deal and that they’re having a massive positive impact on New Zealanders. From their low fees to their charitable donations and ethical investing, it’s really hard for me to find something I don’t like about them. This is why I’ve been trying to get people to switch – the more people that switch the Simplicity, the more they can lower fees and give to charity.
As Sam mentioned, if you’ve got any feedback on Simplicity please let me know either in the comments or you can email me at firstname.lastname@example.org.
Are you a Simplicity member? How are you finding it so far?
Haven’t made the switch yet? What’s stopping you?