Financial advice's 'golden opportunity'

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A period of uncertainty is the perfect opportunity for financial advisers to show their value, the Financial Markets Authority’s chief executive says – particularly as many New Zealanders seem to be taking much more of an interest in their finances and investing.

Wednesday, June 24th 2020, 10:37PM 1 Comment

Rob Everett

The FMA has released its latest investor confidence survey, which shows that, despite market disruption in March, confidence has held up.

While the proportion of respondents who said they were “not very confident” increased significantly in 2020 (up 6 percentage points on the result for 2019 to reach 22%), the proportions “fairly” or “very” confident saw little change.

The increase in those “not very confident” was a result of more people having an opinion and fewer selecting “don’t know”.

The survey was done in early to mid-May. FMA chief executive Rob Everett said it was possible that the recovery in markets by that time had given respondents a boost, and that could have dwindled if the survey was done again now.

“It also reflects what a lot of people are talking about – the market level generally, and particularly equities, don’t really reflect the underlying economic picture. Partly because interest rates are low and people are not putting their money into term deposits … there’s a bit of a disconnect with where prices are in the economy.

“Some people are playing that … once that gap narrows [the confidence] may look less well placed.”

Everett said uncertain times such as this were a good opportunity for financial advice and financial service providers in general to have a big impact on clients, helping them through a difficult period.

There were people paying much more attention to insurance policies, investments and KiwiSaver than they might have done six or 12 months earlier, he said. “It’s a golden opportunity for the financial advice sector to show its worth.”

A lot of people were dealing in shares who had not done so before, he said, which could be a concern. Everett said if they were putting $1,000 into Sharesies to try it out, they would not need advice – but if they were pulling money out of term deposits in frustration and seeking another home, they would need guidance.

Looming regulatory change would also help the sector, he said, which had been hamstrung by the various requirements of different types of financial advisers. A “levelling of the playing field” would help to improve the sector’s reputation, he said.

Everett said confidence in regulation was going in the right direction.

There was a strong increase in the proportion of investors who were confident that markets were effectively regulated, rising from 60% last year, to 68% in 2020. The rise in confidence in effective regulation has been driven by a steep increase in confidence levels among KiwiSaver investors over the last two years, up from 56% in 2018 to 67% in 2020.

By far the most common reason for a lack of confidence in New Zealand’s financial markets was the impact of Covid-19.

This was mentioned as a reason by more than four in 10.

The second most common reason for low confidence was a general uncertainty about the market, a feeling that it is entering a negative growth phase, mentioned by 17%.

There was a small increase in percentage of people with shares they had bought themselves.

There had been significant increases in the proportion with government or corporate bonds purchased independently (doubling from 3% in 2019 to 6% in 2020) and the proportion investing in peer-to-peer lending (also doubling in 2020 to reach 4%).

Almost 20% had made a new investment or increased investments in the past 12 months.

Most common activities within this group were buying shares (46%) and buying managed funds, unit trusts, managed investment schemes or ETFs (39%).

Men, higher earners and those employed full-time had higher confidence than other groups. Those with managed funds and personally-bought shares were typically the most active within the investor space and had the highest confidence in the markets.

Tags: FMA investor confidence Rob Everett

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