GUEST COLUMNIST – KATRINA SHANKS

A new report dispels some of the myths surrounding the value of financial advice and how Millennials are embracing technology to manage their money, writes Katrina Shanks, CEO Financial Advice NZ.

 

As the chief executive of Financial Advice NZ since the organisation was launched, I have always been a staunch advocate of the value of financial advice in transforming Kiwis’ financial health, wealth, and well-being.

A new global consumer research report – Value of Financial Planning Consumer Study 2023 – that we commissioned with FPSB is the latest confirmation that this cause is worth pursuing.

Drawing responses from 15,336 people spanning 15 regions, including New Zealand, Australia, Canada, South Africa, the US, the UK, and more, the report shows that getting financial advice makes a difference in many aspects of people’s lives, though there’s still work to be done in addressing some prevailing myths. 

So, here are some interesting global and New Zealand-specific findings. 

The financial benefits

By surveying both advised and unadvised consumers, we were able to establish that those who receive professional financial advice have better outcomes compared to those who don’t. 

Looking at respondents’ financial confidence and financial satisfaction, we found that:

  • Advised people are more highly satisfied with their wealth. 60% of advised clients around the world (and in New Zealand) are highly satisfied with their wealth level, compared to four in 10 of their unadvised peers. 
  • Advised people have higher financial confidence. On an index score of 0-100, clients of a professional financial planner score a financial confidence level of 67, compared to 59 for unadvised consumers. The gap is even bigger (70 advised vs 57 unadvised) when we look at New Zealand data alone. 

And it doesn’t end there. Advised clients also mentioned that their financial planner has helped them make the most of the money they have in many ways, including building a realistic plan as well as defining and achieving long-term goals. 

These findings speak volumes about the intrinsic value of quality, tailored financial advice. And when we delved deeper into the data, it was evident that the depth of satisfaction extended beyond just financial metrics. 

Better quality of life

As you might remember, in 2020 we set out to understand the difference that quality financial advice can make to Kiwis’ quality of life. Ou Trust in Advice report was unequivocal: financial advice leads to improved financial well-being, which in turn has a ripple effect throughout advised Kiwis’ overall quality of life, including mental health, family life, and confidence in the future. 

The new global report, this time focusing exclusively on financial planning, came to the same conclusion. Globally, almost one in two (48%) advised clients said working with a financial planner has helped improve their family life and mental health. Plus, many also found it has benefitted their work satisfaction (37%), social life (35%), and physical health (34%). 

New Zealand

When it comes to Kiwis specifically, we found very similar trends, with most advised clients always or often feeling optimistic about their lives. In particular, they believe that seeing a financial planner has helped improve their family life (50% of respondents), mental health (50%), work satisfaction (42%), physical health (37%), and social life (36%).

Of course, the rising cost of living was the greatest concern for New Zealand respondents across generations. There were differences, however, in the goals they were more concerned about.

Boomers (1946-1964), for example, worried the most about the Government’s budget decisions, while Gen X (1965-1981) were more concerned about saving enough for retirement. Lastly, Gen Y or Millennials (1982-1996) felt their ability to save for a health scare or mortgage affordability was at risk. 

Speaking of Millennials, the survey found significant differences in consumer behaviours compared to previous generations.

Unsurprisingly, Millennials Kiwis are a more digital audience than their predecessors, with around three in five respondents already using apps and websites for money management.

More interestingly, unadvised Millennials are twice as likely to consider financial advice than Baby Boomers – so there are opportunities to cater to this tech-savvy and increasingly financial-conscious demographic. 

However, there are barriers too: two in five Millennial Kiwis perceive advice as too expensive, and three in 10 feel their circumstances don’t justify it. This brings me to the next point…  

Dispelling myths

As we often find when exploring the value of advice, there seems to be a disconnect between the value recognised by those who receive advice and the perceived value among those who refrain from seeking it, largely influenced by existing barriers and misconceptions. 

In line with global findings, some prevailing myths continue to keep unadvised Kiwis from engaging a financial planner. These include:

  • Financial planning is only for the rich – Fact: even clients with lower incomes ($120k or less) have seen their confidence improve.
  • Financial planning is only needed at retirement – Fact: all generations can benefit, and four in 10 Millennials seek financial advice for goals other than retirement, like buying a house and a desire to gain more financial control. 
  • Financial planning costs more than it’s worth – Fact: our research shows that eight in 10 advised clients believe financial advice has brought more value than it costs.

These are just some takeaways worth mentioning, but these highlights already paint a clear picture: the profound impact that sound financial advice can have on people’s lives. 

Financial Advice NZ will continue to promote this message, ensuring that more and more people get access to the knowledge they need to make informed decisions. 

Here to help

If you’d like to find out more about Financial Advice NZ, please visit financialadvice.nz.