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New Zealand’s Ilumony wants to help users make the most of their KiwiSaver account with robo-advice

Robo-advice is all the rage in the Australian fintech space, but legislative barriers have largely both held back the development of similar platforms in New Zealand, and prevented Australian offerings from launching across the ditch.

As New Zealand’s financial regulatory body, the Financial Markets Authority (FMA) explained it in June, current laws around financial advisers, passed in 2008, state that personalised advice can only be given by a “natural person”, as they had not considered digital advice.

At the moment, only “class” robo-advice, or generic recommendations based on characteristics such as age and risk profile, is allowed. With proposed changes not set to come into effect until 2019, the FMA proposed in June to use its exemption powers to facilitate robo-advice prior to 2019.

Working within this allowed scope for the moment is Ilumony. Cofounded by Rachel Strevens and Abhy Singla, Ilumony is a robo-advice platform looking to enable New Zealanders to make more informed financial decisions.

Targeted at “lower net worth individuals”, Strevens said – those with under NZ$500,000 to invest across all their assets – the platform is primarily focused around providing advice on KiwiSaver accounts.

“We match users with an appropriate risk profile, recommend the best funds available within the market, and continue to provide ongoing advice and updates ensuring users are always making the best superannuation decisions,” Strevens said.

“There is a significant lack of advice available when it comes to KiwiSaver, and a large portion of people are making poor decisions when it comes to their superannuation savings.”

Established by the New Zealand Government in 2007, KiwiSaver is a voluntary, work-based savings scheme that aims to help Kiwis with their saving for retirement, allowing workers to have contributions deducted from their pay.

It is similar in parts to a superannuation scheme, but is not actually super; rather, according to Inland Revenue, KiwiSaver savings will complement NZ Super to provide someone with a better standard of living for their retirement if they so wish. A saver may also be able to make an early withdrawal of part, or all, of their savings for various reasons, including if they are buying their first home or moving overseas permanently.

While the concept was established by the Government, KiwiSaver accounts are offered and managed by 30 or so different providers, who in turn offer a combined 200 different specific schemes. Ilumony wants to help customers find the right one.

Through her time as an investment advisor, Strevens said she worked with a range of companies and saw a couple of recurring themes: poor use of technology, high fees, high minimum investments, and an increasing regulatory burden, all of which Strevens believed were squeezing the smaller investor out of the financial advice space.

“I was frustrated by this, and particularly frustrated by the lack of advice available on KiwiSaver, when people so clearly needed help and advice with this. I was at a crossroads in my career, and was at the stage where I could continue doing what I’d always done, or I could branch out and try something a bit different,” she said.

In considering doing something different, Strevens looked at the various trends overseas, and saw that while huge internationally, robo-advice hadn’t yet cracked New Zealand.

“The more I looked at it, the more I realised that this was an opportunity I could not ignore. Online financial advice would reach the shores of New Zealand at some stage, why not be the one to help make that happen?” she said.

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The platform works by having users signing up for a KiwiSaver account go through a series of introductory questions, which help determine their investor risk profile and in turn provide them with a recommendation of the top two suitable KiwiSaver funds.

Once a user selects their preferred fund, Ilumony will either help them open a new KiwiSaver account, or transfer their existing account.

They can then track the performance of their KiwiSaver account through the platform, looking at their balance, how the performance of the fund compares to the average in the same category, and projections of what their future balance will look like, and what that translates to in terms of a retirement income compared to their current income, Strevens explained.

Strevens said the platform analyses significant amounts of both quantitative and qualitative data to compare and rank KiwiSaver funds across each category, including short, medium, or long term performance, consistency of performance, fees, the strength and experience of their management team, and independent ratings.

“The performance data is updated on a monthly basis, so we are able to develop a really clear picture of what’s happening with the various KiwiSaver funds,” she explained.

“We are basically filtering through all of the noise to provide users with informed advice that is simple to understand and clear to the user. At an individual user level we are also checking other smaller details such as contribution levels and tax rates to optimise all aspects of their retirement savings.”

Users can also go beyond KiwiSaver, with Ilumony allowing them to invest in global portfolios by simply deciding how much they want to invest at that point in time, or on a regular basis, and defining certain preferences, such as time frame and investment style.

Also available to users are financial advisers they can speak to should they so wish.

As the startup is targeting those with under NZ$500,000 to invest, Strevens said there are two key groups Ilumony can cater to: millennials, who often prefer the online-only approach, and those aged between 40 and 65 who like the benefits of an online platform, such as low fees and ease of access, but may also prefer some interaction with an adviser at some point in their customer journey.

In getting its beta going, Ilumony first approached employers to provide the platform through to their staff.

Strevens said, “Employers have been really keen to work with us, as they can understand and see that there is a real lack of information and knowledge from their staff in general when it comes to KiwiSaver, and that it’s incredibly valuable for their staff to get some help in this area.

“When we work with an employer group a lot of our focus is educational, and showing the staff how their decisions today will affect their eventual retirement, and some simple things they can do now to make sure they are on the right track.”

Given the regulatory landscape, Strevens said there are not yet too many direct competitors in the robo-advice space.

One is SavvyKiwi, which also looks to help match users to the right KiwiSaver fund. It then keeps monitoring the fund to keep savers abreast of any issues or changes that they should be aware of and, if they choose to switch, helps them easily transfer to another fund.

However, Strevens said the fee charged by SavvyKiwi for a premium account – starting at NZ$89 for a one year subscription through to NZ$209 for three years – may put some people off. Ilumony is not yet charging users fees.

The startup is currently in the process of raising funding as it looks to further develop its offering; in the pipeline are new features powered by more sophisticated data analysis and AI, Strevens said.

Image: Rachel Strevens and Abhy Singla. Source: Supplied.