What advisers can take from the FMA’s first big consumer survey

Nearly 40% of New Zealanders say they cannot afford financial advice. Only 18% use a financial adviser and 42% say they are not considering taking up any new financial products or services in the next 12 months.

Friday, August 5th 2022, 8:32AM

by Jenni McManus

Those are among a raft of findings released yesterday in the most comprehensive research ever done by the FMA into consumer attitudes to the financial services sector and how consumers manage their money.

The research Consumer experience with the financial sector will now be used by the regulator to delve deeper into issues such as the fair treatment of customers and why only a third know how to make a complaint if they feel they’ve been treated unfairly.

But the research also throws up valuable insights for those working in the financial services and advice sectors.

As law firm MinterEllisonRuddWatts puts it: “The clarity the survey gives to what financial services providers should be looking to offer consumers serves as an exciting opportunity for the financial sector to serve New Zealanders in a way to better accommodate their needs and build financial wellbeing.”

Of those surveyed (2500 people during March and April this year), 14% say their household finances have deteriorated significantly since the first covid-19 lockdown in March 2020. As reasons they cite increased expenses, higher debt, redundancy and mental and physical health issues.

Only 27% of respondents said they were comfortable with their level of savings and 31% said they had barely enough money to scrape by.

Their greatest concern is keeping ahead of inflation (63%) but 37% say they cannot afford financial advice and 35% can’t afford investment advice. More than a quarter (27%) feel overwhelmed by the range of financial products available, 27% say they don’t know how to compare products or to find a product or service that suits them and 23% have no idea where to start when it comes to learning about finances.

Nearly a third (31%) feel nervous when speaking to a financial adviser. But those aged 55 or more are significantly more likely to undertake a periodic review of their finances (47%) when compared with younger age groups (27%).

The survey reveals 94% of respondents own at least one banking product, 81% have at least one insurance product and 82% have at least one investment product (although this drops to 44% when KiwiSaver and other superannuation products and term deposits are excluded).

The top financial products owned by New Zealanders are savings accounts (76%), car insurance (68%), transaction accounts (66%), KiwiSaver (64%), credit cards (59%), contents insurance (55%), house insurance (49%), life insurance (32%), mortgages or other home loans (30%), health insurance (27%), term deposits (20%), managed funds (17%), crypto (10%), residential investment property (9%) and pet insurance (6%).

Of those considering investments in the next 12 months, shares (15%) are the most popular, followed by savings accounts (14%) and term deposits (13%).

Throughout the survey, the low level of financial literacy is the elephant in the room and it underpins much of the findings.

FMA chief executive Samantha Barrass says this is the remit of the Retirement Commissioner with whom she has shared the research.

Barrass says she has a strong personal interest in financial literacy and supports the “right conversations” taking place in schools and in homes to build all New Zealanders’ understanding of financial services.

But the role of the FMA as a regulator in this instance is to deliver fair treatment to consumers.

“Literacy is important because it is a point of vulnerability but my particular focus on literacy is going to be what providers are doing to support engagement in the financial services sector of people who aren’t confident and well-versed in all things finance,” she says.

“What it comes back to for me is that all New Zealanders have the benefit of a quality financial services sector, and my job is to work to support that happening, irrespective of the literacy level of the people in it.”

Tags: FMA