Including their concepts of fair treatment and how they manage their money
Most Kiwis are confident in their ability to make financial decisions, but only one-fifth say they are in a secure financial position, new research by the Financial Markets Authority (FMA) has found.
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A nationwide survey of 2,509 New Zealanders has shed light on what consumers consider to be “fair treatment” from their provider – a core element of the FMA’s expanding regulatory mandate with banks and insurers – as well as their experiences and mindset when it comes to managing money and dealing with financial services firms.
FMA’s inaugural Consumer Experience with the Financial Sector Survey revealed that for consumers, it was most important that providers clearly explain both the benefits and risks of products, be transparent and simplify the small print, and treat people as valued customers.
“This survey will provide valuable insights for the FMA as we build capability in our understanding of the consumer mindset,” said Samantha Barrass, FMA chief executive. “We want to use data and evidence to shape the way we regulate and ensure fair consumer outcomes. 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.”
The survey also found that 31% of Kiwis feel nervous about speaking to financial services providers and 26% find it difficult to identify financial products that are suitable.
When it comes to their financial position, only 21% feel secure, 27% are beginning to make progress, 37% are not making much progress, and 15% feel insecure. Encouragingly, 65% feel comfortable in their ability to make financial decisions.
The survey also found that Kiwis are working towards three financial goals. These are growing their income, starting to save money, and saving for a specific purpose, such as for a holiday, home renovation, or education.
COVID-19 has hindered these goals, however, with 14% of Kiwis experiencing a major worsening in their household financial situation in the past two years, with reduced income as a major contributor. Recent global economic conditions also haven't helped, with 63% of people saying inflation is increasing faster than their ability to save.
“The findings of this survey reinforce how difficult the past couple of years have been for many New Zealanders, particularly those in vulnerable situations,” Barrass said. “It also shows how essential financial products and services are to help people achieve their goals and focus on their well-being.”
The FMA survey revealed that consumers are generally content with their financial service providers. Most satisfied were DIY investing platform customers, at 77%, followed by bank customers, 71%, and insurance company customers, 70%. The satisfaction rate of KiwiSaver provider and fund manager customers was lower at 61%.
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Compared to satisfaction scores, trust scores were lower, with 67% of consumers trusting banks and only 48% of consumers trusting insurance companies.
Although most customers did not report a problem with their provider in the survey, for a third of the respondents who did experience a problem, the top three concerns were investments not performing as they were led to believe, poor service, and unexpected fees/charges or interest rates. And of the 5% of Kiwis who have made a complaint about a financial services provider, only 56% felt the problem was satisfactorily resolved.
“We found an additional 7% (above the 5% who complained) would have liked to make a complaint but didn’t, meaning more than one in 10 customers were considering a complaint of some kind,” Barrass said. “Those who decided against making a complaint felt the process was either pointless or too difficult. A separate finding helps to explain this – only 31% of people are confident in knowing what to do if they experienced unfair treatment.”
Other key findings included:
- Some 22% don’t understand the financial products they have and whether they got a good deal (46% disagreed and 30% were indifferent)
- Māori and Pacific Peoples are significantly less likely to feel in control of their day-to-day finances but are more likely to have high-risk products. Young men, Māori, and Indian people have significantly higher ownership rates of cryptocurrencies, while young women and Māori and Pacific Peoples have higher usage rates of buy-now-pay-later services
- 18% of people have used a financial adviser, mortgage broker, or insurance broker in the last 12 months
- On average, most insurance claims were successful (90% across health, car, contents, and pet insurance), although travel and house insurance claims were significantly less likely to be successful
