FMA targets investor knowledge
The FMA says it wants to see more investors seeking financial advice.
Monday, July 6th 2015, 6:00AM 
3 Comments
It has released its investor capability strategy for 2015 to 2018, in which it says investor capability is a key part of well-functioning financial markets but there are problems in this country.
New Zealanders do not have a good understanding of concepts such as risk versus return and diversification, and while KiwiSaver is exposing a lot more people to financial markets, relatively few of them are seeking professional advice on their investments.
The FMA says it will provide leadership in this area, along with the Commission for Financial Capability and the financial services industry.
Its strategy document says there is poor use of financial advice in New Zealand and low trust in advisers. Advisers might not have the skills needed to address investors’ cultural needs.
It has a range of desired outcomes in mind, including investors accessing information more easily, being better able to understand that information, interacting with the FMA about risks in the market and seeking advice so they can be confidence about investing.
It will aim to achieve its goals this through partnerships designed to share investor messages more widely, more targeted use of relevant resources, developing new tools to address the areas of greatest risk, and ensuring investor outcomes are considered in any regulatory intervention.
The strategy supports the principles behind the Government Statement on Building Financial Capability in New Zealand, which was also released by the Commerce Minister last week.
The FMA’s director of primary markets and investor resources, Simone Robbers, said: “While the FMA is focused at the investment end of the spectrum of financial capability, we will be part of a more co-ordinated approach from all the agencies involved in financial capability.”
The FMA strategy focuses on two key groups of people – identified through research as "limited" and "moderate" investors – who make up approximately 60-80% of New Zealand’s adult population.
Robbers said those people were likely to have KiwiSaver investments but probably had not sought professional financial advice.
“We aim to develop resources and create effective partnerships with the CFFC, industry and other stakeholders to help these people make more informed judgments and effective decisions about their investments,” she said.
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• Good Returns 15/11/2014: In recent speeches from the FMA it has become clear that the regulator is not yet ready to encourage the public, who it acknowledges needs financial help, to use financial advisers.
• Good Returns 3/11/2014: Everett is now on record as saying he told the FMA during the job interview process last year that he believes that the existence of a strong and respected advisory sector is critical for New Zealand’s financial markets. He also believes the FMA has an important role in encouraging the use of financial advisers. While he has acknowledged advisers have made a lot of progress in lifting standards, it seems the FMA is not, quite, yet ready to promote the sector to the public.
• Good Returns 12/8/2014: Financial Advisers not up to scratch yet: FMA
• Good Returns 17/12/2014: Advisers are being told they need to focus on honing their value proposition for consumers: Rob Everett
Really FMA? There aren’t any financial advisers out there that would assist clients with improving their financial situation and financial literacy? Not one? From my viewpoint, FMA have almost no one within the organisation who knows the first thing about what qualifies as good financial advice. It is clear from comments, quotes and misuse of terms by the lawyers who populate the senior positions at FMA that they have next to no understanding about the basics of financial advice. Does FMA really believe that a member of the public would be better off investing by themselves rather than employing a financial adviser?
Now, here’s what those who use a financial adviser have to say:
• Good Returns 3/7/2015: Consumers value the personal relationship they have with their adviser. This has more weight to them than the legislative requirements imposed on financial advisers. Consumers also feel that there is little reason to doubt the authenticity of their own financial adviser, certainly in the absence of any current concerns about them.
With a regulator so out of touch with what constitutes good financial advice and so adverse to financial advisers, it is clear that we won’t solve the financial literacy problem any time soon. Perhaps it’s not the financial advisers who are the problem.