FMA: Advice at retirement 'crucial'

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New Zealand needs to address a financial advice gap, the chief executive of the Financial Markets Authority says.

Tuesday, May 24th 2016, 6:00AM 1 Comment

by Susan Edmunds

Rob Everett spoke at the Commission for Financial Capability's decumulation forum.

He said, although New Zealand had had a solid market  run over the past five years compared to some countries, investor confidence was low.

There was also a lack of confidence in financial institutions, regulation and regulators.

"That's a backdrop we need to be honest about confronting."

He said one of the FMA's priorities was retirees and the risks they faced. People in general were not good at financial planning, and people in retirement or approaching it were especially susceptible to scams in a low-interest environment, he said. "Where people are feeling pressure to get yield."

He said research showed many people had not adjusted to the low interest rates on offer but people over 50 had very little time to recover from failed investments.

"We are trying to encourage people to plan ahead and invest productively," he said. "KiwiSaver is a massive game-changer but so far it hasn't translated into what needs to happen. We have to accelerate the process of helping people understand how to plan and use KiwiSaver. We are encouraging people to seek advice."

He said the FMA wanted to see more people able to get advice, and advice of different levels, from relatively simple advice through to complex financial planning.

"That level of engagement is really critical," he said. "In addition to our really big push for providers to put customers first we want them to design products and deliver them in ways that responds to what the customer needs as opposed to what customers will buy, which are often two extremely different things. We want providers to focus on behaviour biases and be mitigating them, not taking advantage of them."

Everett said the Financial Advisers Act review should help to encourage the development of a healthy financial advice industry and a healthy and trusted mass market advice sector.

The FMA will soon issue a survey about advice at the point of retirement. "We think this is one of the most critical areas to focus on. We all acknowledge there is a gap there. People are not getting advice and financial planning. But we need to make sure people are confident enough and wiling to ask for help."

Tags: financial advisers FMA

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