What consumers think of financial advisers
How consumers interact with the financial services sector: the FMA reveals all in a mammoth report
Thursday, August 4th 2022, 9:05AM 
5 Comments
by Jenni McManus
The FMA has today released the results of a comprehensive national survey on the mindset and motivations of consumers when managing their money and dealing with the financial services sector.
The 130-page document covers areas such as emerging risks, products and services, trust and confidence, behavour and attitudes towards the financial sector, the impact of financial advice, consumer knowledge and regulation and protection.
Among its key findings: while 65% of consumers say they are confident in their ability to make financial decisions, only 21% feel they are in a secure financial position; just over 50% feel they have a good level of financial understanding; and 31% of consumers say they feel nervous about speaking to a financial adviser and find it difficult to find suitable products and services.
In fact, only 18% of those surveyed had used a financial adviser, mortgage broker or insurance broker in the previous year.
Samantha Barrass, the FMA’s chief executive, says the survey will provide valuable insights as the regulator builds its understanding of the consumer mindset.
“We want to use data and evidence to shape the way we regulate and ensure fair consumer outcomes,” she says. “This is especially important following the passing of the Conduct of Financial Institutions Bill (COFI), which represents a significant expansion to our remit to cover the needs of all consumers of financial products and services.”
Consumer trust varies across the financial services sector. Banks are the most trusted (67%) and mortgage lenders (bank and non-bank) the least (37%), with financial advisers (52%) and insurers (48%) in the middle.
Eight percent of respondents said they strongly trusted financial advisers, 44% trusted them “somewhat”, 33% were neutral or “somewhat distrusted” them and 10% said they had a strong dislike.
Most don’t appear to be getting personalised financial advice. Just over 30% use internet searches, 27% rely on family and friends, 25% go to bank or provider websites and 20% use online tools such as Sorted. Only 11% use a financial adviser – about the same number as rely on YouTube.
Those using advisers are more likely to be male and have a household income of more than $150,000. Mostly likely to use mortgage brokers are men aged 25-44 with a household income of more than $100,000 and those using insurance brokers are likely to be male, aged 25-34, with a household income of more than $100,000.
The most common reason for using financial advisers is getting a good deal (32%), making a major investment or financial decision (29%) and getting help with an overall financial portfolio (27%).
When it comes to fairness in the way they’re treated by financial services providers, consumers say they’re looking for open and transparent dealings where providers explain clearly the risks and benefits of their products, simplification of the fine print and to feel as if they’re being treated like valued customers.
Most customers (66%) did not report problems with their providers. Of those who did, the top three concerns were investments not performing as they were led to believe, unexpected fees and charges, and poor service.
Only a third know how to make a complaint if they feel they’ve been unfairly treated. Of the 5% who did complain about a financial services provider, only half said the complaint was resolved to their satisfaction. Another 7% said they would like to have complained but didn’t, meaning one in 10 customers had considered a complaint of some kind.
Barrass says she wants to pay closer attention to the complaints findings “as it appears that many customers simply don’t know how the complaints process should work for them”. It’s an important part of consumer protection to have complaints resolved quickly, she says.
Barrass is also keen to dig more deeply into the issue of fairness and why some customers are finding their financial products don’t perform as well as expected and why they are finding unexpected fees and other charges.
“What we’re beginning to get from this research is the beginnings of what might be important to have in a fair conduct program,” she says.
“It could be good for individual firms to think about how they might be framing up the fair conduct programs….. [But] the primary purpose of the research is for us to understand the consumer experience and where we want to be digging in a bit more.”
Another area of concern is vulnerability. The survey identifies 14 key vulnerability characteristics, driven by health, life events, resilience and capability. Only one in 10 consumers fits none of the criteria, 46% meet two and 43% meet three.
Vulnerability is not a narrow concept, Barrass says. Often the characteristic occurs when people need to make important financial decisions – for example, the death of a partner. “We are less good at making decisions when we’re in those circumstances and need more help from our provider.”
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Comments from our readers
On a serious note; surely Samantha Barrass, the FMA have a little insight into consumers prior to this survey and your appointment. The Authority started in 2011 after all. I can only assume the Authority had put in some work prior to your appointment?
I have no doubt however, that a fair amount of business is being conducted without personalised advice. I have an SoA in front of me that does not resemble personalised advice regarding the client at all. I suspect a decision was made by the adviser concerned, on what decisions would be made, prior to meeting the client.
I totally understand Samantha Barrass‘ comments regarding not knowing what the process of complaints are. I made a complaint to the FMA, about the FMA, several weeks ago. Upon receipt of my complaint I was not advised of their complaints process but was advised the complaint would be sent on to their governance department. And that’s where it has remained. Could be Monkey see, monkey do I think.
It is not possible to be financially literate if you fully trust a bank as being the provider of quality advice. We have a very long way to go before Kiwis are more skilled with financial management
Just what makes a trustworthy bank not also in the considerably less trusted "mortgage lender (bank or non-bank) category.
Just how robust are the data for this survey?
Why are the question stylings never disclosed in the results?
Who answers these survey questions?
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I wonder whether there could be any positive correlation between the red tape required by both the client and the adviser when the advice comes from a regulated channel and the surveyeds' apparent reluctance to use a regulated advice channel?