Most New Zealanders are confident in their ability to make financial decisions, but only one-fifth say they are in a secure financial position.
A new research project by the Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko – has revealed insights into the mindset and motivations of consumers as they manage their money and deal with financial services firms.
The inaugural Consumer Experience with the Financial Sector Survey asked a nationally representative sample of New Zealanders about their financial situation, the financial products they own, and their experiences with providers.
The research 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. Respondents said the three most important factors were for providers to: clearly explain both the benefits and risks of products, be transparent and simplify the small print, and treat people as valued customers.
Samantha Barrass, FMA Chief Executive said: “This survey will provide valuable insights for the FMA as we build capability in our understanding of the consumer mindset. 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 one-third of people (31%) feel nervous about speaking to financial services providers and a quarter (26%) find it difficult to identify financial products that are suitable.
Turning to New Zealanders’ financial situations, just 21% feel secure in their financial position, while 27% are beginning to make progress, 37% are not making much progress and 15% feel insecure. Yet, encouragingly, most (65%) feel comfortable in their ability to make financial decisions.
On average, New Zealanders have three financial goals they are working towards, with the most common being growing their income, starting to save money, and saving for a specific purpose (e.g. holiday, home renovation, education).
However, COVID-19 has hindered these goals – 14% of New Zealanders have experienced a major worsening in their household financial situation in the past two years, with reduced income as a major contributor. And recent global economic conditions have exacerbated the situation – 63% of people say inflation is increasing faster than their ability to save.
Ms Barrass said: “The findings of this survey reinforce how difficult the past couple of years have been for many New Zealanders, particularly those in vulnerable situations. It also shows how essential financial products and services are to help people achieve their goals and focus on their well-being.”
Satisfaction levels healthy, but lack of confidence in complaints
Consumers are generally content with their financial service providers, with 77% of DIY investing platform customers satisfied, followed by bank customers (71%) and insurance company customers (70%). The satisfaction rate of KiwiSaver provider and fund manager customers was lower at 61%.
Trust scores were lower than satisfaction scores, with 67% of consumers trusting banks and only 48% of consumers trusting insurance companies.
Most customers did not report a problem with their provider in the survey, however among one-third of the sample 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.
Of the five per cent of New Zealanders who have made a complaint about a financial services provider, just over half (56%) felt it was resolved to their satisfaction.
“We found an additional seven per cent (above the five per cent who complained) would have liked to make a complaint but didn’t, meaning more than one in ten customers were considering a complaint of some kind. 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.
“This is an area I want to pay much closer attention to, as it appears that many customers simply do not how the complaints process should work for them,” Ms Barrass said.
Other key findings included:
- 22% agreed they 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
- 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.