FSC: Advisers more important than ever

New Zealanders who have a financial adviser are coping much better with the disruption of Covid-19 than the wider population, the Financial Services Council says.

Tuesday, May 26th 2020, 6:03AM

It has released the first in a new series of surveys it has commissioned.

The Financial Resilience Index tracks how New Zealanders feel on five key financial indicators.

“The first round of the index, looking at how our views have changed from March to April, shows that Covid-19 has impacted Kiwis’ financial resilience across the board, but with a particularly acute hit to job security, money worries and mental wellbeing,” said Richard Klipin, FSC chief executive.

“By late April, 50% of us felt that Covid-19 was impacting on our job security, a jump of over 15% since March.

“While for 45% of us it has reduced our confidence in making financial decisions, an increase of 15% in a month. We are also seeing Covid-19 change the way we invest, with the number of Kiwis looking for low-risk investments jumping by around 20% from March to April.

“With over 40% of us now worrying about money on an at least weekly basis, the index also shows that Covid-19 and associated financial concerns are taking a major toll on our mental health.”

More than half of respondents had felt their mental health had been affected by money worries.

“The index also provides a stark reminder of the challenging outlook for many Kiwis when it comes to preparation for retirement,” Klipin said.

“Even before Covid-19 hit New Zealand, over 50% of us did not feel on track for the retirement we’d be happy with and expected to have to carry on working past the retirement age.

“We can expect these numbers to get worse in the future.”

He said the financial services sector was committed to doing what it could to help New Zealanders' improve their financial resilience.

Klipin said it was clear from FSC research that advisers were adding significant value for clients.

He said adviser alpha was adding 3% to 5% a year in returns for investment clients.

People who did not have advice were more likely to have panicked and fled their investments when markets fell in March. If they withdrew from KiwiSaver or moved to a more conservative fund at the bottom of the dip they could not get that money back, he said.

The other place that advice was showing its value was around mental health, he said. Clients benefited from having a plan and support, and being able to talk to someone who had seen market disruption before.

Adviser clients were also more likely to have saved for a “rainy day”, he said.

Good financial advisers would have told clients to put an amount equal to two or three months' income away as an emergency fund, he said, to be insulated against a shock.

“The problem is that the number of people getting advice is not huge.”

Klipin said the message to advisers was to “get out”, get among clients and people who were not clients.

They could provide guidance, leadership and reassurance to New Zealanders, he said.

Klipin said the country was in for a “real tough time” but it would make the role of advice more important than ever. “Good advisers need to step up.”

Tags: coronavirus Covid-19 FSC