Work to do to rebuild trust: FMA boss

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Advisers and other financial services industry participants understand that it will take some time to rebuild trust in the financial markets in this country, the Financial Markets Authority’s chief executive says.

Wednesday, May 21st 2014, 6:00AM 2 Comments

by Susan Edmunds

The FMA yesterday released a survey that showed 70% of middle-income earners – earning between $50,000 and $100,000 per year -  are confident in the country’s financial markets, up 13 percentage points on last year.

Overall confidence is up five points to 59%.

Three-quarters of those surveyed hold an investment product, either through shares in the stock market, KiwiSaver, managed funds or bonds.

FMA chief executive Rob Everett said the increase in confidence was probably driven by rising equity markets, high-profile IPOs and KiwiSaver. “What we would hope is that it feeds through to increased participation in the markets.”

The Financial Markets Conduct Act, taking effect this year, has been heralded by the FMA as a culture change in the marketplace. But Everett said it was likely that consumers did not understand the detail of the new regulations well at all.

“I would hope they understand there is a new regulator in place as a response to the GFC and the issues that were unique to New Zealand, looking out for the interests of investors and the public.”

He said the industry was now focusing on putting customers first and he hoped that would start to filter through. “All of this is quite fresh and new, there are still new functions and powers landing with us all the time.”

He said the feedback from industry participants about the FMA’s client-first focus was generally good. “They understand that trust levels need to be rebuilt. Executives and boards and the adviser population understand that it will take time to fix. Everyone gets it, we’re just helping everyone define what it means in real life, what it looks like.”

Everett said while the increase in confidence was positive, it was likely due in part to the performance of markets. “I’d like to sound a caution that they can go up and down.”

He said the FMA’s focus was not on stopping investors losing money in bad time4s but on giving the public confidence that they would not be ripped off.

Only half of those with investments said the materials they received about them were helpful in making an informed decision about whether to invest.

Everett said that was an area that needed work. But he said the survey was done before the Genesis float. “[The Genesis documentation] made quantum leaps towards where we want them to go.”

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