GUEST COLUMNIST – KATRINA SHANKS
Katrina Shanks says a big part of her work is to help Kiwis understand the value of quality advice, and over the years she has gained some powerful insights into consumer behaviour and trends…
As a proactive step to improve Kiwis’ financial well-being, a big part of what we do at Financial Advice NZ is helping people understand the value of quality advice. Over the years, we’ve been able to gather powerful insights into how they perceive advice.
We’ve produced two reports, Trust in Advice and Better Behaviours, so it’s all-the-more encouraging to see our findings echoed by the FMA’s inaugural Consumer Experience Research Report, released earlier this month.
The survey sheds light on consumer experience of financial services – what’s working well and what could work better – and there are key takeaways to drive home for anyone in our industry. Narrowing the focus on financial advisers alone, here are some findings that stood out most for me.
According to the FMA consumer survey, financial advisers are the second most trusted source of financial advice for most New Zealanders.
This backs up our independent research Trust in Advice. Conducted in 2020, the survey found that financial advisers were trustworthy for 94% of respondents who had worked with one, and for 72% of those who hadn’t.
What’s more, both surveys also show that New Zealand consumers across all demographics rate professional financial advisers very highly about service, results, and fair outcomes. But alongside these highlights, there are lowlights to confront as well.
Highly trusted but not well-utilised
Despite being highly trusted, advisers are not well-used, the FMA survey found. Only 18% of respondents said they had consulted a financial expert in the previous 12 months, including financial, mortgage and insurance advisers. That’s compared to 52% of respondents searching online, and 32% relying on word-of-mouth from friends and family or advertising.
When it comes to insurance advice, a closer look at demographics provides more context. For example, the survey found that:
- Consumers with a household income of $100,000 and over were the most likely to use an insurance adviser (65%)
- The percentage dropped to 18% for consumers with a household income of $50,000 to $99,000, and 11% to those earning between $20,000 and $49,000
These stats confirm our Trust in Advice findings around the main barriers to seeking advice: not lack of trust but rather perceived unaffordability (29.1%), circumstances (37.5%), and an overestimation of own abilities (37%).
With underinsurance remaining a widespread issue in New Zealand, finding the solution starts with identifying the root cause(s) of the problem – as these reports do. And together, as stakeholders in the financial services industry, we can join forces to address these barriers, through clear communication of the true value of advice.
What Kiwis want
According to the FMA consumer survey, Kiwis are actively working towards 2.9 financial goals on average, the top three being growing their income (37%), starting to save money (33%), and saving for a specific purpose (33%).
With this in mind, it’s somewhat concerning that protecting their wealth ranked 12th, with only 8% of consumers surveyed listing it as a current financial goal. On top of this, FMA’s data shows that only 21% of respondents felt in a secure financial position. And instead of getting ahead, more than half felt they were going backwards or just treading water, largely due to inflation and the impact of Covid-19 on their income.
It’s essential that we help people understand that building wealth and protecting wealth go hand-in-hand in achieving financial well-being.
Once again, this is where quality advice can make all the difference, by helping Kiwis boost confidence and create long-term habits.
Our 2022 independent research Better Behaviours proves that people who receive advice tend to perform better across all facets of financial planning, because they have stronger ‘financial muscles’ to manage their money proactively.
Yes, financial advice changes lives, and the evidence is right there, in the first-hand experience of clients who work with trusted advisers. Our job is to encourage more people to enjoy the benefits.
The rise of ‘finfluencers’
Lastly, it’s interesting to note that social media (including YouTube tutorials, social network and ‘finfluencers’) is the least used source of financial information for most people. But I wouldn’t be surprised if it gained ground in future surveys.
The generational shift is already happening, with young people being more likely to trust what they read on social media than older consumers (47% among 18-24-year-olds compared to 22% overall).
This is something no industry can afford to ignore. In just a few years’ time, ‘Gen-Zers’ will make up most of the workforce and be the largest group of consumers, with incomes to protect, mortgages to pay down, and families to grow. It’s time to focus on understanding their needs and ways that we can better serve them.
Here to help
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Financial Advice NZ was founded with a single-minded purpose: to help New Zealanders, and New Zealand as a whole, be financially better off.