This article was originally published on May 05, 2017.
One of the coolest things about being a personal finance blogger is getting to meet other people who are just as into the subject as I am.
I went mainly to learn more about Simplicity but I was interested in what the guys from Squirrel and Lifetime had to say, too. I knew a bit about Squirrel Money (they’re a P2P lending company) but Lifetime was new to me.
I’d been excited to head to this for weeks – here’s some of the best stuff I learned at the Roadshow!
Standing on the shoulders of giants
A common theme coming from each of the three guys was that none of their ideas were particularly groundbreaking or original. They were just taking ideas that they new had been successful overseas and adapting them to the NZ market. Makes sense, right? No need to reinvent the wheel when the same thing is already awesome elsewhere!
Lower fees = more money for you
First to speak on the night was Sam from Simplicity. If you’ve been reading my stuff for a while, you know all about Simplicity and why their low fee KiwiSaver is a great option. Just in case you’ve missed my previous articles about them you can check them out below.
Sam talked about how he doesn’t think your lifetime KiwiSaver fees should be more than your power or mobile phone bills, which I agree with! He spoke about the massive amounts of profit currently being made in the KiwiSaver industry and how this translates to less in the pockets of Kiwis when they decide to retire or buy a house. It’s actually something like 90 cents profit to every KiwiSaver dollar, which is outrageously high.
One of the things that’s very cool about Simplicity is that because they’re a not-for-profit, they genuinely can’t ever make a dollar of profit out of your money.
What’s in the future for Simplicity and their fees?
One question I asked Sam was how low will their fees get in the future. He said their eventual aim was to get their fees down to just $50 a year per person, with no management fee. This for me was the most exciting thing I heard all night (at this point my girlfriend was actually starting to fall asleep, but she agreed it was very exciting when she woke up)
Currently, a 30-year-old who earns $50k a year and has a KiwiSaver balance of $30k could save around $79k by the time they retire if they join Simplicity. If Simplicity then got their fees down to $50 a year it could easily mean $100k+ in savings by the time you’re giving up the 9 to 5 for good.
It would likely take a few years or more for Simplicity to have enough customers to get their fees down this low point, but I see their fees decreasing steadily over time as more and more people get wise to the ridiculous fees charged by most KiwiSaver providers.
As far as their investment funds go, Sam said their eventual goal was to get the fees on those to be close to those of the underlying Vanguard funds. Vanguard has over $4 trillion (yeah that’s a four with twelve zeros after it) under management and is owned by their customers, so their fees go down over time. Most Vanguard funds charge between 0.05% and 0.10% fees.
We also heard from John Bolton, CEO of Squirrel Money, a P2P lending company. One of their key differences to other P2P lending sites was the fact that they offer a reserve fund to pay out to investors in the case borrowers miss payments. This is definitely a concern with P2P lending as you can’t necessarily be guaranteed security.
While they do have a lower rate of return than other P2P companies (like Harmoney), they make up for it by being a lot more secure – they’re a lot more staunch in their vetting process, so you can be a lot more certain you’re lending to someone trustworthy.
Just like with regular investing, people do worry about what might happen to their capital in case of a financial crisis.
I’d been meaning to ask John about how Squirrel would fare in that scenario but he answered it himself in his presentation. He showed how it’d take a financial meltdown of truly epic proportions for investors to start losing their money. Squirrel is definitely the one I would look at if I wanted to get more into P2P.
Lifetime Retirement Income
This a tough question and it’s one a lot of people will be facing in the coming years. How do you
a) ensure you’ve got enough income to live on, and
b) your money will last you until you die?
with 500k Kiwis reaching retirement age over the next 15 years, with savings of at least $36 billion, this is a really big concern.
Ralph Steward from Lifetime gave us a chat about how they aim to provide a solution. He continued the theme of the night, taking successful overseas ideas and adapting them to the Kiwi market.
The idea behind Lifetime is to give retirees a fixed fortnightly income until they die, even if their money runs out!
Lifetime offer what’s called a variable annuity which means they provide a fixed income, but also offer the chance to take out money if you need to.
I know it’s a long way off for me, but seems like a pretty good idea and it’ll be something I definitely look a bit deeper at when my parents get closer to retirement age.
I had a great time at the Wealth Innovation Roadshow, was awesome to meet some like minded people (even met people who read my website!) and hear from Sam, John and Ralph.
If you’re a personal finance nerd like me, I’d definitely recommend attending these kinds of events in the future!