KEY POINTS:
How do you sign up new KiwiSaver business when you're competing against global banks who already manage billions of dollars and spend vast sums on advertising?
One way is to set up shop as an industry fund - pick an industry or two and set up as the KiwiSaver provider of choice to them.
This tactic seems to be working well for "eo financial services" - a small operation that's specialising in helping workers in the recruitment and book-selling market come to grips with KiwiSaver.
Eo national manager Sasha Grujic says recruitment agencies have a lot of seasonal, part-time and temporary workers on their books. These people, because of their transient work, are often overlooked by other providers.
Other KiwiSaver providers are not taking care of these workers, who are often young and female, because they can be hard to keep tabs on, which increases administration costs.
"That enables us to dedicate ourselves to the superannuation savings scheme, unlike other providers such as banks and insurance companies which offer a wide range of other financial services."
By concentrating solely on KiwiSaver, the company can dedicate itself to better service than the other, bigger operators which also offer insurance, banking and other financial services. And it pays no commissions, so keeps its fees cheaper than KiwiSaver providers using multiple sales channels.
Many of the people signing up to eosaver have no particular loyalty to existing financial institutions.
"They don't want to be upsold into other investments or schemes," says Grujic. "They just want to know someone is looking after their retirement savings and that's what eosaver does."
Eo (nz) is affiliated to Australian company eo Group, which has been working in the Australian superannuation industry for the past 15 years. Money invested through it is managed by two of the big fund managers, Tower and AMP.
Grujic says many employers see KiwiSaver as an obligation when it should be viewed more as an employee benefit which their staff would value - provided they know enough about it.
"Employers are still trying to get their heads around KiwiSaver. Our view is that they should carry on doing their day-to-day activities and not be distracted by administering a superannuation scheme."
Grujic says that, under normal market conditions, there will always be a place for smaller, niche players in the KiwiSaver business.
"In normal market conditions, you generally have the industry leader, a couple of challengers, some followers and other niche players."
"And through that, there are mergers and acquisitions, and new entrants. Niche players like ourselves have to focus on using our advantage of much lower overheads and convert that advantage into benefits valued by members, such as superior service."
He thinks there will also be a good spot in the market for those providers that don't confuse KiwiSaver offerings with the other products they offer.
A lot of temps are already signing up to KiwiSaver, says Grujic.
"Members are coming through to us. We do have quite a lot of people who are automatically assigned, but there are more and more people coming through because I think the employers are understanding better with the new employees what they need to do."
The more "engaged" an employer is, the better the KiwiSaver take-up rate is. One company gave its workers Grujic's personal phone number, which led to an evening filled talking to sceptical employees.
"Most of the conversations go along these lines, 'do I have to do this? Is my employer trying to rip me off? How do I get out?"' says Grujic.
"After a brief discussion, all but one was very excited to be part of it - the main focus was not about retirement, but about buying a first home."
The hazy level of financial literacy in New Zealand is another big challenge faced by KiwiSaver operators.
Grujic says there is a real lack of understanding about the difference between investing directly in a company and putting money into a managed fund.
One of the first jobs eo saver does it to explain what a managed fund is and how it works. "With New Zealand and KiwiSaver it is going to take a little while for people to understand the financial part of the equation, but the more money people have got in KiwiSaver, the more they are going to be made aware of it."
Being small may have cost and fee advantages, but not having a well- known brand can be a challenge when it comes to convincing potential members to let you look after their retirement savings.
"In the past 20 years, with the introduction of the current legislation on super schemes, no super scheme has collapsed. Yet, there is a general fear of uncertainty as it pertains to the security of members' investment. This fear is naturally more prevalent in lesser-known schemes."
