Douglas said the feedback it had received from KiwiSaver providers was that it was incredibly difficult to engage many of those in the funds.
"Put simply, most people don't spend a lot of time thinking about their KiwiSaver scheme and whether they are in the most appropriate fund.
"This is not specific to New Zealand, but something we see all around the world."
Douglas said it was right for the FMA to be asking questions of the providers but it may also be time to take another look at the default process which automatically allocates people to a conservative default fund if they do not choose one.
"In Australia, default investors are automatically allocated to a growth fund, that is something with a bias to growth assets like equities.
"This could be too much to swallow for our market, but there are other options."
Douglas said with KiwiSaver now 10 years old, it was time to try something new that
would help investors.
"People need to be nudged in the right direction. They need to get in the right habit."
The research also revealed the best performing KiwiSaver funds over 10 years for the first time.
KiwiSaver was launched in July 2007 but fund managers didn't begin investing the money until September 2007 meaning the full 10 year investment history has only just become available.
According to Morningstar the top performing fund in the conservative category over 10 years was the Aon Russell Lifepoints Conservative fund which has had an average return of 7 per cent per annum.
In the balanced category it was the Aon ANZ balanced fund with an average return of 7.1 per cent per annum while the Milford Active Growth fund was the top performer in the growth category with an average of 13 per cent per annum.
But despite being the top performing funds over the long-term they have not attracted the most investment from savers.
The Aon Russell Lifepoints Conservative fund is the smallest of the nine conservative funds which have been running for 10 years at just $74.9 million.
That compares to the largest conservative fund - ASB's default fund - which has $3.58 billion invested in it and had an average return of 5.4 per cent per annum over 10 years.
In the balanced category the Aon ANZ balanced fund only has $29 million invested in it compared to the biggest balanced fund running over 10 years, the ANZ balanced fund which has $1.8 billion in it and had an average annual return of 6.4 per cent.
Milford's Active growth fund has $760.4 million invested in it but is still dwarfed by the ANZ growth fund which has $2.4 billion in it and has had an average return of 6.8 per cent annually over 10 years.
Douglas said the Aon Russell funds had been consistent performers in recent years but they operated very much under the radar when it came to attracting investment.
"The clear reason they haven't done better is that they don't have a bank-aligned network they can rely on."
Douglas said when it looked at where the KiwiSaver money was going it was all about having a strong distribution network either through financial advisers or banks.
While investors are always urged to consider long-term performance when they look at investment funds Douglas said it was not about chasing the best performer.
"Who is going to be the best performer over the next 10 years is anyone's guess."
Instead Douglas said it was more important that people focused on being in their right fund for their risk profile.
