The FSC has released its latest Money & You research

The Financial Services Council (FSC) has released their latest research report, Money & You: Managing Risk Through Challenging Times, which explores the attitudes of New Zealanders towards risk management. Some of the key findings are below.

• Only 41% of respondents had life insurance, 39% had health/medical insurance, 23% had trauma/critical illness insurance, 18% had total and permanent disability insurance.

• For the 12 months to 30 September 2024, FSC industry data showed 1,521,740 health insurance policies and 4,145,287 life insurance products (one person may have more than one policy e.g. life insurance, income protection insurance and total and permanent disability insurance policies).

• The majority (66%) who have life and health insurance consider it value for money.

• The biggest drivers of taking out life and health insurance policies are peace of mind and worry about financial consequences.

• The most common reason given for not having life and health insurance was that insurance is too expensive (74%), followed by being healthy and not seeing the need for it (14%), and not trusting insurance companies (13%).

• Cost of living meaning people can no longer afford insurance was the top reason given for no longer having insurance across life, trauma or critical illness, income protection, total and permanent disability and health/medical.

• For those without insurance, 64% would consider taking out an insurance policy if they had more money, 25% would take out an insurance policy if their health started declining and 18% would take out an insurance policy if they started a family. There is a gap in understanding of how insurance works, with only 3% of those who would consider taking out an insurance policy if their health started declining knew that they might not be able to get cover for certain health issues or they might face higher premiums because of them.

• The majority of health (61%) and life (77%) insurance policies are paid by individuals, with the remainder being partially or fully subsidised by employers.

• When it comes to health/medical insurance or life insurance being provided by employers, 54% really want this and a further 35% might possibly want this.

• 45% of respondents have a poor understanding of the relationship between risk and return.

2,002 online survey responses were collected during March 2024 and were representative of the NZ consumer population in terms of age, gender and income.

It is worth noting that as a low engagement product, life and health insurance is something that respondents find hard to recall accurately. That leads to interesting results - this survey contains a probable over-estimate of the number of people who own health insurance, and a probable under-estimate of the number of people who hold life insurance. But the recalled level of cover is, in itself, interesting. For example, if you think you do not have life, trauma, or income insurance, but in fact you do, you or your estate may fail to claim when you may be eligible to do so.

Readers interested in contrasting these survey results with data on the eligible population should contact us.

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IOSCO consultation proposes responses to risks posed by ‘finfluencers’

The International Organization of Securities Commissions (IOSCO) has proposed a raft of ‘good practice’ measures regulators can use to mitigate risks posed by finfluencers.

Globally, there has been a trend of people turning to social media for advice on making investment decisions. While getting people interested in investing and increasing financial literacy is to be commended, issues arise when finfluencers spread misleading or biased information, promote unsuitable or high-risk products and/or fail to adequately disclose any conflicts of interest.

IOSCO’s Finfluencers consultation report makes a series of recommendations including:

·         Updating legal regimes to explicitly police finfluence

·         Requiring the use of disclaimers and disclosures to help consumers understand the content they are consuming

·         Better-monitor the finfluencer community (e.g. by using data analytics of social media activities) and enforce breaches

·         Conducting joint investigations and co-ordinating enforcement actions in the case of cross-border issues

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Kiwibank report $202 million after-tax profit

Kiwibank has featured in the news a lot recently, from the Commerce Commission’s recommendation that the Government should consider what is necessary to make Kiwibank a disruptive competitor, to the release of Kiwibank’s latest financial results.

Kiwibank posted a record $202 million after-tax profit for the year to June 30 2024, up 15% from the previous year. Kiwibank were able to grow their lending book by 9.3% to $32.4 billion. Impressively, home lending grew 2.7 times faster than the market and business lending grew 3 times faster than the market. Deposits increased by $2.4 billion, growing the deposit book by 9.4% to $28.2 billion

Steve Jurkovich, Kiwibank CEO, has said a $500 million capital infusion would

“give us a lot of runway to keep growing as fast as we are now, which is 9.5%, 10% [per annum], which is pretty large gains. That sort of investment over the next three, four years would give good runway.”

"With the right support and delivery of the right business plan and right initiatives, I think we could double our size in five years.”

Jurkovich has also said it may not be essential for the bank to remain 100% NZ owned, pointing to other examples of successful majority owned businesses like Air New Zealand. Jurkovich cautions that any requirement to pay sizeable dividends could impact their ability to grow, given that capital growth to date has mainly been via retained earnings.

Mortgage advisers now account for around 35% of Kiwibank’s total mortgage book, having originated 71% of Kiwibank home loans this year. Kiwibank’s accredited advisers have grown to about 1,000 now, up from 250 at June 30, 2022.

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What advisers think of KiwiSaver

At our latest roadshows, we’ve been lucky enough to have Generate KiwiSaver Scheme join us, giving advisers insights into the benefits of offering KiwiSaver advice. We’ve also been finding out what our roadshow attendees think about KiwiSaver.

To date, the results show that for those advisers who are already offering advice on KiwiSaver investments, the top reasons for offering KiwiSaver are diversifying revenue, building a KiwiSaver book for long term value and adding value to clients. Advisers have told us that performance, ease of withdrawals and alternative fund options are most important to clients when choosing a KiwiSaver provider. And 27% of advisers were interested in additional resources or support related to KiwiSaver advice and independent research.

If you haven’t joined us already, come along to one of our remaining roadshows to find out more – along with info on KiwiSaver we’ll be highlighting some major new research, talking about two new regtech tools to help keep you safe, giving you a sneak peek at Kiwimonster, and much, much more.

• 20 August -Queenstown

• 21 August - Dunedin

• 22 August - South Auckland

• 27 August - Whangarei

• 28 August - North Auckland

• 29 August - Nelson  

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AIA celebrate 5 years of AIA Vitality

AIA have released some statistics about AIA Vitality to celebrate five years of AIA Vitality being in the market.

• To date, over 60,000 people have joined AIA Vitality.

• On average, an AIA Vitality member in New Zealand completes a health and wellbeing assessment available in the app every 15 minutes.

• AIA Vitality members have completed over 18,500 free Vitality Health Checks.

• Since becoming AIA Vitality members:

  • 79% have moved to a healthy glucose range from an unhealthy glucose range.

  • 64% have moved to a healthy cholesterol level from an unhealthy level.

  • 49% have moved to a healthy blood pressure range from an unhealthy range.

• Less than 50% of New Zealanders meet the recommended guidelines of 2.5 hours of weekly physical activity but 95% of AIA Vitality Silver+ members meet this target.

• AIA Vitality members combined have walked the length of New Zealand 1,295 times.

• Members have achieved over 86,800 Status Reward vouchers and 976,500 Active Rewards vouchers – a combined worth of $9.1 million in rewards.

To celebrate the anniversary, AIA is giving customers who activate their AIA Vitality membership by 31 October the chance to win one of 20 Woolworths Gift Cards, each worth $500. Existing AIA Vitality members who hit their $5 weekly physical activity target anytime between 5 August and 1 September, go in the draw to win 1 of 5 Apple Store Gift Cards worth $729.

AIA have recently made some improvements to AIA Vitality, with a new AIA Vitality app with enhanced features and functionality being launched in April this year.

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Craig Stobo appointed as chair of FMA

Craig Stobo has been appointed as the new chair of the Financial Markets Authority (FMA). Stobo has been appointed for a five-year term and takes over from Mark Todd, whose term expired at the end of April.

Commerce and Consumer Affairs Minister Andrew Bayly said

“Mr Stobo brings a significant depth of experience to the role, having worked as a director, diplomat, economist, and chief executive.

The FMA will benefit from Mr Stobo’s understanding of market issues and regulation, as well as the importance of informed participation from businesses and investors.”

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FSC report finds 70% of kiwis are worried about money

The Financial Services Council’s (FSC) Financial Resilience Index tracker has found New Zealanders to be increasingly under financial pressure.

• The Index tracker revealed 70% of New Zealander's are worrying about money daily, weekly or monthly, the highest level since 2020 which reached 60%.

• Inflation and interest rates are concerning New Zealanders, at 89.6% and 75.6% respectively.

• Confidence in job security has started to fall, down to 85% from a high of 89% in 2023.

• More kiwis are reporting having personal debt than last year, up 6%.

• More kiwis have one month or less of savings on hand to maintain their current lifestyle should they lose their job.

• 60% of non-homeowners have reported meeting living expenses is somewhat or very difficult.  

• 48.5% were very or somewhat unconfident with the overall economy at the moment. 76.4% of respondents were somewhat or very concerned about house prices.

The survey took place in March 2024, with 2002 respondents. FSC members can download the full report in the FSC members area.

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Submissions call for rewrite of FMA’s draft guide about outcomes focused regulation

The Financial Markets Authority (FMA) has released the submissions relating to it’s draft ‘Fair outcomes for consumers and markets’ guide. Chapman Tripp and Dentons Kensington Swan submissions have been released and both critique the guide, with both law firms arguing that implementing outcomes-based proposals will impose confusing and expensive compliance duties of market participants – with no legal basis.  

Criticisms include the guide being unclear on how outcomes focused regulation supports regulatory compliance; the draft guide being too vague to be readily applicable; the lack of tying high level outcomes back to actual legal requirements; and some of the draft guide lacks the authority of Parliament and risks being unenforceable or amendable to judicial review.

Suggested improvements include clarifying the scope and targeted market sector of each proposed outcome; providing detailed examples of how businesses can comply; adding more examples of expected compliance behaviour; and identifying when compliance with existing legislative requirement is sufficient to ensure delivery of fair outcomes.

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Fidelity Life report digs into the role of financial advice in New Zealand

Fidelity Life’s ‘Advice for good: Rethinking New Zealand’s relationship with financial advice’ report highlights some worrying findings in New Zealander’s feelings towards their financial situation. The report found that:

• 28% of kiwis feel their financial situation is out of their control.

• 47% of kiwis often or always worry about money, and 53% of under-35s saying they always worry about money.

• The majority of New Zealanders don’t feel confident making financial decisions until after age 55 – once this age is reached 63% feel confident in their money decisions.

• Only 28% of women feel confident about their financial outlook, compared to 44% of men.

• While 88% of kiwis agree financial advisers are the most trustworthy source of financial information, only 22% have consulted one – though 36% have sought help from family.

• Many New Zealanders don’t know where to get trusted financial advice, with 41% of those under-35 unable to say where to find good advice.

• There are different emotions towards money depending on ethnicity, with 30% of Māori and 38% of Middle Eastern, Latin American and African (MELAA) respondents said their financial situation made them feel overwhelmed. Meanwhile, 27% of Pacific Islanders were ashamed, and 58% viewed their financial situation negatively overall. 74% of Pacific Islanders, 59% of Asians and 56% of Māori respondents feel unconfident or unsure making financial decisions.

There was some good news about New Zealanders’ finances too.

• 88% of New Zealanders feel like they typically have enough to pay the bills.

• 34% feel financially comfortable, especially older New Zealanders – with 81% of those aged 65+ feeling positive about their financial situation.

• Attitudes towards the future seem to be optimistic, with 41% feeling their financial situation will improve in the next 12 months, compared to 28% expecting things to worsen.

Kiwis are generally focusing on short-term horizons, with 89% of people prioritising day to day spending, 65% focusing on saving and 57% concentrating on paying off debt. Only 13% put growing their wealth and 4% put protecting their finances as their highest priority. 34% of those surveyed didn’t have any form of insurance and only 11% had consulted an insurance adviser.

This short-term focus is highlighted again with only 3% of those under 35 mentioning setting themselves up for a comfortable retirement as an aspiration, with home ownership being the number one goal in this age bracket. While retirement seems a long way away when young, only 23% of those in the 55+ age group mentioned a comfortable retirement as one of their aspirations, despite being less than a decade away from receiving the pension. 79% of those surveyed had KiwiSaver, 30% have stocks and shares and 17% have managed funds.

There seems to be a lack of understanding of the benefits financial advice can bring to people at all ages and stages of life. 31% of respondents said they don’t see the relevance of professional advice, and 10% listed being embarrassed or scared or consider their financial position to be private as a barrier to seeking advice. Only 5% of people stated they don’t know how to/who to talk to as a reason. Part of the lack of understanding on the benefits on advice might be due to a lack of familiarity on the role advisers perform, with only 13% being able to describe it with any confidence. Borrowing money was the most common catalyst for seeking out advice (48%) compared to 36% looking to invest to grow wealth. Just 28% have sought advice on products like income protection insurance or mortgage insurance. For those who consulted a professional financial adviser, 81% said getting financial advice provided peace of mind and 70% said it helped them achieve their goals.

Campbell Mitchell, Chief Executive of Fidelity Life said

“…the evidence shows most New Zealanders aren’t seeking financial help, either through regular financial health checks or at key life stages, until they’re nearing retirement – when it may be too late,”

“As a result of seeking amateur advice, we get stuck in the same old ways of doing things and can’t see a way forward – especially when the people we most often turn to for advice, our parents, have experienced different conditions. Baby Boomers who have achieved financial success via the traditional route of buying a home and an investment property may consider themselves financially savvy without taking into account the fact they’ve lived through one of the greatest property booms in our history, and that as the world changes, a different approach might work better today”.

The report was commissioned to explore attitudes towards financial advice and how to overcome the barriers to seeking professional guidance. The report surveyed more than 1,100 New Zealander’s aged 18 – 69, representative across age, gender, ethnicity and income level and consisted of a mix of quantitative and qualitative interviews.

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Gail Costa, chief executive of Chubb Life New Zealand, has spoken to Insurance Business Mag about how the public need to gain a better understanding of the industry during their schooling years to attract more people into the industry. Costa suggests that university courses should be offered around insurance. Costa said

“I’m sure that people don’t really understand insurance because we don’t teach it in school. We know from New Zealand being underinsured that there’s a financial literacy issue. Let’s talk about what the industry does and how it works.”

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