Understanding of financial fairness measured

What constitutes fairness in financial services is generally something people agree on.

Thursday, July 18th 2024, 9:23AM

by Sally Lindsay

Research commissioned by the Financial Markets Authority (FMA) shows 72% of people expect fair treatment from their financial service provider.

The research comes before March 2025, when financial institutions, including banks, insurers, and non-bank deposit takers, will be required to ensure they treat consumers fairly under the Financial Markets (Conduct of Institutions) Amendment Act (CoFI).

The research centred on a consumer survey of about 3,000 New Zealanders who answered a range of questions about fairness.

They assessed 33 hypothetical scenarios that people could have experienced with financial providers, evaluating how fair each scenario was on a scale.

In one scenario, 86% of respondents believed it was unfair a bank took over a year to repay a client who had been overcharged fees.

At the other end of the scale, 63% believed it was fair that one client’s investment fund had lower fees than his mother’s because his fund manager spent less time researching markets and making changes to his investment.

Of the 33 scenarios, 29 described people experiencing potentially unfair treatment by a financial services provider and four other scenarios without an unfair risk were also included.

While results are not absolute, the two key findings suggest there is a consistent understanding of what is fair or unfair in financial services, the FMA says.

“The findings are helpful in distinguishing between a consumer outcome with financial services that may be disappointing, but is not necessarily unfair.”

Although not a guidance for financial service providers, the research was designed to offer a methodology to test whether there is a consistent view of how people qualify fairness.

“It is intended to support evidence-based conversations with industry and stakeholders on what fair treatment means.”

Key findings:

81% of respondents believe it’s important everyone has the same opportunities in life;
69% believe they receive fair treatment from their KiwiSaver provider;
63% believe they receive fair treatment from their bank; and
57% believe they receive fair treatment from their insurance provider.

Tags: CoFI