Pandemic has increased the number of Kiwis who need advice

Minister says more Kiwis are now struggling with their finances

Pandemic has increased the number of Kiwis who need advice

The government has provided an update on its priorities for the financial advice sector over the coming year, and Minister for Commerce and Consumer Affairs David Clark said that the pandemic has clearly illustrated the need for good financial advice, with more Kiwis struggling financially and making financial decisions that don’t benefit them.

Minister Clark, who spoke at the Financial Advice New Zealand annual conference, also highlighted some of the work that has been done in the conduct and culture space over the past few years.

He said the FMA and Reserve Bank reviews highlighted how important it was to tackle the concerns around incentives, conduct and customer outcomes head-on, and that although this has caused ‘concern’ for advisers, the ultimate aim is to make sure they are working effectively with product providers for the benefit of customers.

“A recent release by the Retirement Commission in October 2020 found that 41% of New Zealand households were exposed to financial challenges and pressures,” Clark said.

“They’ve got few reserves, little financial resilience, and are at serious risk. The decisions they make about their money at the moment can change their life course.”

“During the pandemic, we’ve also seen an increase in the amount of KiwiSaver members applying for significant financial hardship withdrawals, and that demonstrates the way that some people have needed to use retirement savings to get them through short-term financial stress,” he explained.

Read more: Ombudsman offers tips on protecting older people against financial abuse

“We all know that those decisions can have long term implications for them.”

Clark highlighted that the focus on fairness is therefore more important than ever, and although the licensing journey has been difficult for some, it is important to ensure that every adviser and financial institution is working in the customer’s best interests.

He said that the government is now also looking to progress other areas of change, and these would be more aimed at giving advisers and financial institutions tools to develop better products, and to provide more tailored solutions.

“Focusing on fairness is partly a response to the reports by the FMA and Reserve Bank on the conduct and culture of financial institutions, which did raise some real concerns,” Clark said.

“However, the COVID-19 pandemic has also highlighted the importance of fairness and putting clients’ interests first more generally. It’s illustrated how important it is for financial institutions and advisers to consider and address their customers’ changing needs and interests, particularly when they’re vulnerable.”

“The FSLAA Bill requires institutions to have systems and processes in place to ensure they are treating customers fairly, and it requires banks and insurers to monitor the distribution of their products and services, including when they are dispersed through financial advisers,” he explained.

“I know that this issue has caused some concern in the financial advice community. However, I want to assure them that the intention is not to interfere with the provision of financial advice, or to create costly oversight obligations. The intention is simply to ensure that providers and distributers are working together in the interests of consumers.”

Clark said that data collection and dispute resolution have been earmarked as areas of focus for the coming year, and customers will be able to access and share their data more easily - something he hopes will allow for the development of more tailored products.

Read more: Government cracks down on predatory lending

He said that looking at dispute resolution schemes would also be a key focus, as well as ensuring that customers know their rights, and are aware of where to go if they have a complaint.

“I’m progressing other initiatives aimed at supporting financial resilience and wellbeing,” he said.

“We are also improving the ability for consumers to access and share their personal data through a consumer data right. We expect that through this, businesses will have the ability to develop unique products and services, resulting in a more tailored and higher quality consumer experience. This could mean new tools for providing advice, which are enabled by better access to client data.”

“Our work on aligning financial dispute resolution schemes aims to provide fairness as well,” he said.

“The review looks to align the scheme rules, and ensure that consumers have better access to justice and compensation via these schemes.”

“We need to ensure that people are equipped with the tools and resources to cope with unexpected life events,” Clark concluded.

“Financial capability goes beyond preparing for emergencies - we need to enable New Zealanders to make positive decisions about their finances every day, from insurance to KiwiSaver. Advisers play a crucial role in helping Kiwis with their financial capability, and in making their finances work for them.”