Simplicity KiwiSaver scheme has been told to remove an advertising campaign after the Financial Markets Authority found it was "likely to mislead" consumers.
The FMA said Simplicity's 'All Greys' advertising campaign, which included the statement, "get out of the game when you want to, retire with up to 20 percent more than the average KiwiSaver plan", was unsubstantiated and likely to mislead or deceive under the Financial Markets Conduct Act 2013.
The advertising campaign appeared on a variety of media channels from August to October 2021, including TV channels, Facebook, YouTube, billboards, internet display banners, and Simplicity's website.
On Wednesday, the FMA found the campaign would likely mislead consumers to incorrectly believe joining Simplicity would give them a retirement balance 20 percent greater than the average.
The FMA found two main issues. Firstly the claim consumers would be 'up to 20 percent better off' was based on the current value of 45 years of the benefit of paying Simplicity's fees relative to a higher average KiwiSaver fee.
The FMA concluded the assumptions that were relied on when making the claim were not reasonable, in particular, the assumption fees wouldn't change over a 45-year period was unrealistic, as was the assumption of all other factors being equal, such as investment returns.
The second main issue was the assumptions underpinning the advertising claim. The FMA said it wasn't clear the main benefit was from paying lower fees meaning consumers couldn't examine or query it.
FMA director of investment management Paul Gregory said Simplicity had withdrawn the campaign promptly, accepted responsibility and engaged with them constructively.
"Advertising can strongly influence investors' decision-making, this is why the law states that any claims made in advertising must be substantiated. It is vital that providers ensure their marketing materials are factually accurate and don't mislead.
"The direction holds Simplicity accountable to investors and means we have additional responses available if Simplicity does not make the necessary improvements or fails to comply with the direction order.
Gregory said the decision sends a clear message to the financial services sector.
"We will continue to use our powers to sanction providers who make misleading claims in their advertising, as set out in our guidance."
The direction requires Simplicity to:
- Cease and desist from publishing the advertising materials in question
- Ensure all current and future promotional material comparing the benefits of a Simplicity fund with other similar financial products is not likely to mislead or deceive investors, particularly:
- Clearly distinguishing any representation about fees saved from any representation about a KiwiSaver balance projection
- Ensure all material assumptions supporting representations relating to Simplicity fees or projected retirement balances are disclosed in a sufficiently prominent way
- Ensure any comparisons between a Simplicity financial product and a similar product are based on reasonable grounds, which are documented and approved by a senior executive.
- Either remove the online 'Simplicity Difference Calculator' or ensure it is compliant and confirm in a report to the FMA
- Ensure that for the next two years Simplicity's advertising policy is fully implemented, it regularly ensures current and proposed advertisements are compliant, and its Board receives a report on FMC Act compliance practices at least every six months
- Advise all investors who joined Simplicity between 20 August and 30 November 2021 of the FMA's action and that Simplicity cannot predict or guarantee with any confidence that an investor will retire with 20 percent more than the average KiwiSaver plan if they switch to Simplicity.
- Collate a summary of any complaints about the campaign over the next three months and provide it to the FMA.