Providers need to find ways to make KiwiSaver “feel real” to a large bloc of members, according to Financial Markets Authority (FMA) chief, Rob Everett.
Everett said the FMA’s latest ‘Investor Confidence’ survey, released last week, shows KiwiSaver has not acclimatised all members to financial markets.
The survey found respondents whose only investment was in KiwiSaver were the least confident in NZ financial markets while those who had invested in a managed fund were the most confident.
About a quarter of KiwiSaver-only investors had little or no confidence in financial markets, 13 per cent didn’t know what they thought and 65 per cent said they were ‘fairly’ or ‘very’ confident. Conversely, 82 per cent of investors who had bought managed funds were confident about NZ markets, 16 per cent had little or no confidence and only 1 per cent had no opinion.
Everett said the disconnection between the two groups – who essentially invest in similar underlying products – was striking.
He said KiwiSaver members “ought to be thrilled” by how the regime has performed since inception.
“But [KiwiSaver-only investors] show a lack of understanding about markets,” Everett said. “KiwiSaver is abstract to them – the problem for providers and us is how to make it feel real.”
The difference in attitude between KiwiSaver-only investors and those who hold managed funds on their own account was due to both demographics and the process of investing, he said.
“It’s about how people get into KiwiSaver,” Everett said. “A lot of members haven’t made an active decision or thought about their investments.”
But he said managed fund investors – who tend to be older and male – have made an active choice and may also have sought financial advice.
“Some segments need a leg-up and [the investment industry] has to find how to give them a leg-up,” Everett said. “And it’s not by churning out the same investment materials they’ve used for the last 15 years.”
He said the while the industry hasn’t figured yet out how to engage with lower-value or younger investors the new breed of fintech firms could fill the information gap.
Overall, the FMA survey found a slight drop in confidence year-on-year with 62 per cent of respondents upbeat about NZ markets in 2018 compared to 65 per cent last year.
“In some respects I expected a bigger drop,” Everett said, given the spike in market volatility in 2018.
He said the upcoming Money Week – slated for September 3-9 – would include a look at what might happen during a serious market downturn.
The online survey of just over 1,000 New Zealanders aged over 18 was carried out this May by research firm, Buzz Channel.