Research: Who is going to provide investments for the great unwashed p
Research reveals New Zealanders have some conflicting investment behaviours.
Tuesday, January 12th 1999, 12:00AM
For at least the past 18 months, New Zealanders have been bombarded with messages about the importance of saving, in particular saving for retirement. Despite these messages, there is little evidence to suggest that more people are saving than before (though those already saving, may actually be saving greater amounts).
More than a quarter of the adult population is neither retired, nor are they saving for retirement, and this figure is growing rather than declining. The superannuation debate and referendum of late 1997 had a significant effect on non-savers, with the proportion not saving falling from 32 per cent to 25 per cent in the last quarter of that year.
However, since then, there has been a 4 per cent rise across the year in the number of non-savers, despite the ongoing efforts to persuade people of the importance of saving for retirement.
The fact is that almost everyone accepts that it is important for them to save for their own retirement (89 per cent agree), and only 9 per cent of those not yet retired believe that the Government will provide adequately for them in retirement.
Nevertheless, people are finding it increasingly difficult to save for their retirement, at least in part due to increasing pressures elsewhere in their lives.
The difficulty in saving is exacerbated by the general confusion about how and where to save, with the quest for security being the over-riding concern for most investors.
Just 13 per cent of savers and investors are committed to the product types that they are currently using - meaning that they are both satisfied with what they have, and believe that there are no better options available to them. This low level of emotional security leads to anxiety, driving people to seek investment products which they know and understand, and believe are safe from capital loss. This leads to a very strong appeal for property and term deposits, which consistently top the rankings of product appeal.
Since the heightened awareness resulting from the referendum debate, managed funds have consistently tracked in third place in terms of appeal.
However, there are major barriers for the average investor in using managed funds. People see strong appeal in employer-linked superannuation funds, but their understanding of unit trusts, for example, is very low. A high 43 per cent of people believe that managed funds are so complicated that they are only suitable for the expert investor.
While we would expect people to be taking advice in greater numbers, given the heightened awareness of the need to save, quite the contrary is true. The proportion now seeking advice is down to 21 per cent from previous figures around the 25 per cent mark.
In the third quarter of this year, 79 per cent of all people report that they do not use an adviser, and when we ask these people how likely they are to do so in the future, just 4 per cent feel very likely to do so. And that figure is not increasing either.
Advice and investment in managed products is inextricably linked.
Part of the reason for this is that the people who use advice are already what we might hypothesise to be the more educated or informed investors.
Unusually, they are more likely to be men - in contrast to some other areas which we research, where we find that women are in fact more ready to ask for advice about almost anything. They are more educated, richer and more likely to live in Wellington.
Without advice, it is very difficult for investors to get over the barriers into managed funds. We know that advice leads people to invest in managed funds.
But we also know that those currently investing in managed products are not out there singing their praises. Managed investors are not secure in their decisions (which begs the question about how much support and reassurance they're getting from and about their advisers).
And that managed investors, and advice takers, are more likely to fit the profile of the more sophisticated investor anyway.
What about the rest? What about the investor out there in middle New Zealand, who has been effectively convinced that:
- the Government will not provide for their retirement
- and that they have to start saving for themselves.
Which company or organisation is going to be brave enough to move away from the tempting "high net worth" individuals (where the money is) and provide an appropriate service to the much larger but poorer set of people who simply don't know enough to invest in this way....... yet?
Debra Hall is research director of Research Solutions Ltd, a full service market research company, with special interest and expertise in the financial services area.
The information in this article is based on more than 700 interviews per quarter, on an ongoing basis, which are reported in SaverPulseä, a syndicated survey available quarterly to subscribers. Please direct subscription enquiries directly to Debra Hall.
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