Home » Money IQ: How I set up a KiwiSaver scheme (spoiler: it wasn't easy)

Money IQ: How I set up a KiwiSaver scheme (spoiler: it wasn't easy)

by 100IQ Win The Knowledge

Rupert Carlyon​ launched Kōura Wealth after previously working in investment banking in London and Auckland. He talks to Stuff about the challenges of setting up a KiwiSaver scheme.

KiwiSaver has been a little bit of an obsession of mine forever, I was at UBS when KiwiSaver first got brought out in 2006, and it was kind of awesome right? All of a sudden we thought we were going to turn New Zealand into this country of savers.

While I was in the United Kingdom I got a pension through my work, and it was awesome. I had a whole series of options, [was] properly engaged, chose my fund managers, and did quite a lot of work on it.

Then roll forward, I came back to New Zealand in 2014, I thought oh, I’ve got this KiwiSaver account, I’ll try and figure out what to do with it.

I rang up my provider, and they said, when I tried to figure out their investment strategy and wanted to understand a little bit about the people involved, hey, Rupert, this is KiwiSaver, you’re young, chuck it in a growth fund and don’t think about it ever again.

I think the catalyst that really drove me to think, OK, I can really now see a model that works and do something different, was when the FMA [Financial Markets Authority] introduced personalised digital advice.

“All of a sudden we thought we were going to turn New Zealand into this country of savers,” says Kōura Wealth founder Rupert Carlyon.


“All of a sudden we thought we were going to turn New Zealand into this country of savers,” says Kōura Wealth founder Rupert Carlyon.

I was like, this is awesome. We know that people are not really getting the right outcomes, and we know one of the big reasons is because people aren’t getting the help they need, and fundamentally with KiwiSaver the margins aren’t really there to do advice for the masses.

Between the digital advice tools, plus the growth of passive ETFs [exchange traded funds] in the United States, I was like, actually, I can now see a model and I can see something that works. And that gave me the confidence to quit my job and figure out how to do it properly.

So it was simply a business that was started off because we thought we can help clients by giving them advice.

What were some of the difficulties you had setting up a KiwiSaver scheme?

The first challenge was finding partners because fundamentally KiwiSaver is a very expensive game. You need a lot of capital to set it up, plus because we’re so highly regulated we also needed to have the right people providing that capital to allow us to have the credibility and governance structures in place.

So the first challenge was finding the people to partner with, and I was really lucky. I met quite a few people, but then I was introduced to Warren Couillault​ from Hobson Wealth, and he agreed with my hypothesis around the market and the ability for digital advice to really transition.

The next big issue was regulatory. KiwiSaver is a very, very, very regulated business, so we needed to work with the FMA to get a managed investment scheme licence, plus also get a digital advice exemption, so that was about 500 pages worth of paperwork that we had to file with the FMA.

That took about three or four months working pretty hard with consultants to get that all together. Then even once we’d formally lodged our paperwork it was another nine months of working through that with the FMA.

At the end of the day people are trusting their retirements to us, so it’s only fair that we do have that regulatory burden sitting over the top of us.

We wanted to be consumer-focused and really put the client first and at the centre of everything and bring some learnings from overseas, whereas the FMA were pretty keen to make sure that it mimicked exactly what the offline traditional advice process looked like, plus addressing a whole lot of other concerns.

So that was quite a lengthy process just educating on both sides, really, to get ourselves into a nice middle ground that we were both comfortable with.

People tend to have very low engagement with KiwiSaver, says Carlyon.


People tend to have very low engagement with KiwiSaver, says Carlyon.

In the background we had an IT build going, and IT for a finance person is not an easy topic. So I think we were lucky we had a pretty good partner there, and it went fine, but it was just another thing.

What you’ve got to remember is at this point in time it was me by myself with support from the team at Hobson.

And then we went live. Then the focus really turned to how do we operationalise this business? The finance and the funds management stuff we were really good at, but we had to learn extremely quickly how to do all the other stuff.

It’s not like other industries where you might just go and hire expensive people to take these problems off your back. With KiwiSaver the money is just not there to do that, or at least not until you’ve got significant scale.

What about getting people through the door?

That’s been hard. We were the first people in the market with a digital advice solution, we thought we were solving a lot of people’s problems, so we thought that was going to be a really attractive USP [unique selling proposition] for us.

But unfortunately what we found was that actually people just didn’t care, and that was very frustrating. Fundamentally people have very, very low engagement with KiwiSaver, and for those people that are engaged, they don’t really have the issues that we are trying to address here.

At the same time, those customers that weren’t really thinking were also getting told by banks and other people, ‘don’t worry about it, just chuck it in a growth fund and never think about it again, and by the way, if you really want to think about it come with us, your banks’.

Now we’ve realised we need distribution help which is why we’ve gone and partnered with NZ Financial Services Group.

Did that help?

We are in the process of rolling it out at the moment, but we do expect that to be quite a big uplift for us.

The mortgage and life insurance channels are valuable because these are points in time when people are thinking about their finances, but they’re not necessarily thinking about their KiwiSaver. But when prompted they’re really keen to have a conversation.

It’s been a hard journey. I think for us, it’s been about pivoting. The stuff that has to go right has gone right for us – our funds have done pretty well, the finance side we’re really happy with, the core operational side we’re really happy with – and it’s just testing out how we can now bring what we see is a unique set of benefits to a wider group of people.

Would you have done anything differently?

I think the one thing we probably should have done is tested our proposition a lot harder at the start. We were so adamant in the belief that what we were doing was needed, and necessary, that that’s why we did what we did.

What’s also happened is there’s been 10 KiwiSaver schemes launch in the period since we launched as well, so it’s become a lot more competitive.

We probably could have brought more senior people on earlier. Because we’ve noticed as we’ve transitioned people on and transitioned through as a team, we have noticed that we do get better results with more experienced people.

It’s been hard. I spent 15 years in various advisory roles or capital market roles, always wondering why more people didn’t go and start businesses, and I don’t think KiwiSaver is that different to anything else.

KiwiSaver is a complex beast given the competition, the regulatory environment, and the technology required, but now I understand why people don’t start businesses. It’s a lot harder and a lot more stressful than I think I’d ever appreciated, or most people who haven’t done it do appreciate either.

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