Kiwisaver providers are being asked to put the interests of their customers first as the amount of money transferred by customers changing their schemes doubled in a year.
The Financial Markets Authority said in its KiwiSaver report for the year ended June, total funds invested in KiwiSaver had grown 29% to $21.4 billion in the year.
More than $10 billion, or 47%, of total KiwiSaver funds was in low risk, conservative or cash funds, compared to 50% in 2013.
However, in the year, $3.57 billion was transferred into schemes from other schemes - up significantly from the $825 million in the 2013 year. The year-on-year growth in transfers of members' money from 2012 to 2013 was 11%.
FMA director of compliance Elaine Campbell said a large proportion of the growth could be explained by the merger activities of two of the largest providers - making up about $2.2 billion of funds.
Apart from those two mergers, about $1.4 billion was transferred between schemes as members changed provider.
Dunedin investment adviser Peter Smith disagreed and said the answer to why a large number of KiwiSavers were changing providers was the main banks' attitude towards their staff.
''In order for bank staff to get promotion they must `sell'. All sales count for `brownie points' in staff performance and hence promotion. The more the better is the bank attitude.''
KiwiSavers from non-bank and rival banks were fodder, Mr Smith, a principal in the Kepler Group, said.
KiwiSavers were often told by front-line bank staff they could see the progress of the account on bank statements if they transferred.
One of Mr Smith's clients transferred from one bank scheme to another within the same bank when the document was included with a mortgage application.
As an authorised financial adviser (AFA), the code of practice was defined by the client must come first, he said.
There was a standard procedure to complete if AFAs were asked to transfer from one fund to another. In particular, AFAs had to provide a comparison of funds.
''The investor has to be made aware of the risks involved in changing from one fund to another as all KiwiSaver funds are not the same.''
Money week ran from October 13 to 19 with many AFAs available for a free one-hour no obligation consultation on money matters, Mr Smith said.
Ms Campbell said the growth in transfers was huge and demonstrated the rise in competition between providers for market share and funds under management.
The FMA's concern was the competition should not be at the expense of KiwiSavers' experience.
Figures showed 460,000 members transferred their KiwiSaver scheme this year compared to 127,000 in 2013 with about 290,000 members involved in transfers as part of corporate mergers. There were still 33% more member scheme transfers in the reporting period.
''It is critical members receive appropriate advice and support when they are encouraged to transfer their KiwiSaver schemes. We are concerned some of the sales practices we have discovered through our monitoring activity do not put the customer's interests first and this reflects poorly on some providers' attitudes towards their customers.''
