The Financial Markets Authority (FMA) has completed its inaugural Consumer Experience with the Financial Sector Survey. This identified the ways in which the financial sector is failing to foster financial confidence among New Zealanders, both in terms of engaging with financial products and in their personal financial position.
Who needs to read it? Why?
Financial service providers (FSPs) should be aware of the trends and issues identified in this survey. It both indicates areas where change is needed to improve the services and products offered to consumers, along with what issues the FMA will be focussing on in terms of regulation and monitoring going forwards.
What does it cover?
This nationally representative survey asked New Zealanders about their financial situation, the financial products they own, and their experiences with FSPs. It is the most significant consumer research that the FMA has undertaken to date and is intended to aid the financial sector in creating a better understanding of consumers and to help shape regulation.
New Zealander’s financial situation
The survey found that only one-fifth of New Zealanders feel they are in a secure financial position. COVID-19 has hindered the ability of New Zealanders to meet their financial goals, and 14% of households have experienced a major worsening in their financial position in the past two years. Reduced income was identified as a major contributor. The financial situation globally has also had its impact, with 63% of respondents saying that inflation is increasing faster than their ability to save.
Financial products New Zealanders own
94% of New Zealanders have at least one banking product, with the most popular being savings and transaction accounts for credit cards. Women and young people are the most likely to utilise Buy Now Pay Later services, while credit cards have an older user demographic.
Over eight in ten New Zealanders have at least one insurance product, with car insurance being the most common. The most significant barrier to insurance was found to be cost and consequently young people, people of Māori, Pacific or Asian ethnicities and those on low incomes are less likely to have insurance.
82% of consumers have at least one investment product, with KiwiSaver being the most popular. A strong gender skew was identified in the area of investment, with males being more likely to have a variety of investment products including shares, managed funds and cryptocurrencies. A considerable gap was identified in the preference to invest ethically, and action taken to do so. Seven in ten say they care about making ethical investments, though only one quarter have actively selected ethical investment funds. Key barriers to investment are cost and a lack of understanding or experience.
New Zealander’s experiences with providers
Generally, consumers are content with their FSPs and most did not report a problem with their providers. DIY investing platform customers had the highest satisfaction rate (77%), while KiwiSaver providers are at the tail end with 61% satisfaction. Trust scores were lower than satisfaction scores, with 67% of consumers trusting banks and just 48% trusting insurance companies (though on average most insurance claims were found to be successful).
Although 65% of respondents feel comfortable in their ability to make financial decisions, the survey found that 31% have felt nervous about speaking to their FSPs, and 26% find it difficult to identify financial products that are suitable for them. This serves as a clear call for FSPs to work on being more approachable and comprehensible to the average New Zealander in order to improve consumer confidence and decision making.
The complaints process is a key area in need of improvement, with just over half of the 5% of those who made a complaint to an FSP feeling that it had been resolved to their satisfaction. Another 7% wanted to make a complaint but felt that it would be pointless or too difficult. This view can be partially attributed to the finding that only 31% of people are confident in their ability to handle a scenario where they experience unfair treatment. The FMA’s Chief Executive Samantha Barrass identified the complaints processes as an area she intends to “pay much closer attention to.”
The survey also revealed what consumers thought to be ‘fair treatment’ from their provider, which is a key requirement the FMA expects from FSPs. Respondents said the most important factors to feeling they had been treated fairly were:
- a clear explanation of both the benefits and risks of products;
- transparency and simplification of the small print; and
- being treated as a valued customer.
Ms Barrass stated that the FMA will use this data to guide the way the FMA regulates and promotes fair outcomes for consumers. The FMA views work on fair treatment as particularly important following the passing of the Conduct of Financial Institutions Bill (see our Financial Services Update on its passing here) which has expanded the FMA’s duty to address the needs of all consumers of financial products and services.
This survey identifies the work that can be done by the FMA and FSPs in order to foster financial confidence among New Zealanders, particularly in the face of the current economic downturn. Consumers need products that are better suited to their needs, and want contact with their providers that is more meaningful and proactive. The clarity this survey gives to what FSPs should be looking to offer consumers serves as an exciting opportunity for the financial sector to serve New Zealanders in a way that better accommodates their needs and builds financial wellbeing.
If you have any questions in relation to the findings of the FMA’s survey, or are considering ways to improve the financial services you provide please contact one of our experts.
This article was co-authored by Elise Plunket, a Law Clerk in our Financial Services team.
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