When you think about building long-term wealth or property investing, you probably focus most of your energy on your mortgage, your home, or your direct investments. However, one of the largest financial assets you will ever own might be sitting quietly in the background right now: your NZ KiwiSaver.
In a recent discussion, Simon from MHQ sat down with Matt Hanchet, Investment Distributions Manager at Generate Investment Management, to unpack why getting professional advice around KiwiSaver NZ and managed funds can have a far greater impact on your financial future than you realise.
The Hidden Danger of the “Set and Forget” Mentality
Many New Zealanders treat their KiwiSaver account as a default baseline – something they set up through their bank or a default provider years ago and haven’t looked at since. This exact oversight can cost you thousands of dollars in lost returns over time.
Matthew shared his own personal story about his early days entering the financial sector. Before receiving proper investment guidance, he had no idea where his funds were allocated. He eventually discovered his balance was parked in a defensive fund that had earned a mere $50 in returns over the course of six years.
Once he received tailored advice and moved into the right fund type, the trajectory completely changed. In fact, optimising his KiwiSaver NZ strategy played a massive role in allowing him to buy his very first home.
Active vs. Passive: Busting the Index Fund Myth
A common narrative circulating in the investment community is that passive investing – simply putting your money into a low-fee index fund and leaving it – is always the best option. However, relying solely on this strategy can be a lazy approach that ignores the substantial benefits of professional portfolio management.
Consider these major factors when weighing active vs. passive management:
True Diversification
A popular passive route is investing heavily in the S&P 500. However, the top seven stocks in the S&P 500 currently make up close to half of the actual index, meaning you aren’t getting genuine, broad diversification.
Risk Mitigation
Passive index funds lack systematic risk metrics to actively manage sector weights when markets shift.
Consistent Outperformance
While some active managers fail to beat the market, experienced active investment teams with rigorous processes have consistently delivered strong, long-term returns for their clients.
Boosting Growth Through Advice and Extra Contributions
One of the most telling statistics from Generate Investment Management highlights the sheer power of financial advice. Nationwide, only about 40% of KiwiSaver members are currently enrolled in growth funds. At Generate, 81% of their members are in growth or aggressive funds.
Why is there such a massive gap?
Because 91% of Generate’s members received professional financial advice when setting up their accounts. While growth funds aren’t suitable for everyone (such as those needing short-term cash for a house deposit), they are often ideal for individuals utilising KiwiSaver as a long-term retirement vehicle.
The Compounding Power of Extra Contributions
Beyond selecting the correct fund, working with an adviser can help you understand the massive compounding effects of increasing your contribution rate. Because extra contributions come directly out of your paycheck as forced savings, your lifestyle adjusts naturally. Over a decade or two, coaching yourself to contribute just a small percentage more can drastically accelerate you toward your financial and property goals.
Managed Funds vs. KiwiSaver NZ: Which is Best?
A holistic financial strategy often utilises both KiwiSaver and external managed funds in tandem, depending entirely on your unique personal circumstances.
KiwiSaver NZ provides a locked-in structure that protects long-term wealth, boosted by mandatory employer contributions and government contribution incentives. It is ideal for long-term retirement planning and first-home deposit saving.
External managed funds, on the other hand, offer high liquidity, allowing you to withdraw capital at any time. This makes them an excellent vehicle to capture long-term capital appreciation in the stock market rather than relying solely on lower-yielding vehicles like term deposits. They are ideal for funding intermediate wealth goals or drawing down assets during retirement.
Take Control of Your Financial Future
Your KiwiSaver NZ account should not be a forgotten line item on your bank app. It is a powerful pillar of your wealth-building ecosystem. Making smart, active decisions regarding your fund type, contribution rates, and advisory relationships today will significantly alter your financial freedom decades down the track.
If you want to maximise your KiwiSaver strategy, optimise managed funds, or build a comprehensive property investment plan, reach out to the team at MHQ today.
Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact an adviser from MHQ.
