Attitudes towards New Zealand’s - Financial …...attitudes towards and confidence in New Zealand [s financial markets. This is the seventh year the FMA has carried out investor

Attitudes towards New Zealand’s

financial marketsInvestor confidence research

May 2019

1

Contents

C3

C4

C7 C7

C20

C25

Background

Summary

Findings Confidence in New Zealand’s financial markets

Investor profiles and future behaviours

Awareness and perceptions of FMA and regulation

C41 Appendix: Confidence by demographic groups (gender, age, ethnicity, income)

Background

The FMA commissioned Buzz Channel to measure New Zealanders’ attitudes towards and confidence in New Zealand’s financial markets.

This is the seventh year the FMA has carried out investor confidence research, and the second year Buzz Channel has been involved.

An online survey was conducted using Buzz Channel’s research panel, buzzthepeople.

Fieldwork took place between 23rd April and 7th May 2019.

A total of n=1037 New Zealanders aged 18 years and over took part in the research in 2019. The data has been weighted by age, gender, region, and ethnicity to ensure results are representative of the New Zealand population.

The margin of error on this sample is +/-3% at the 95% confidence level.

The main research objectives were to:- Measure public and

investor levels of confidence in New Zealand financial markets;

- Measure perceptions of the FMA

- Measure attitudes to investment materials

- Capture the level of understanding of diversification and the risk/return trade off.

Investor Confidence in New Zealand’s financial markets:Overall, 65% of investors are either fairly or very confident in the New Zealand financial markets - which is similar to 2018.

Reasons for being confident in the financial markets include being encouraged by the current financial climate (26%), the small, stable market (13%), and confidence from good past experiences (9%). Conversely, reasons given for not feeling confident in the financial markets include not knowing enough (23%), uncertainty about the cycle of the market (25%), political climate (13%) and global financial insecurity (11%).

7% of investors said they have had an increase in their overall confidence in the financial markets in the last 12 months, while 69% haven’t changed and 14% said their confidence has decreased.

This year, respondents who mentioned they had an increase or decrease in their levels of confidence were asked why. Many of the reasons given relate to feelings toward the current government. Main reasons given for an increase in confidence in the last 12 months include: a positive change of government, a rising economy, and because they have a better understanding of the markets now.

Conversely, among those whose confidence decreased, the reasons given include a change in government/policy, past experience, instability and a general lack of faith.

Roughly the same proportion of respondents say they are encouraged by the current market climate, investment returns, as those who say they are not confident in the current cycle.

Summary

Types of investments and future behaviours:86% of New Zealanders aged 18 years or over have some form of investment. The most common forms of investments are KiwiSaver (66%), term deposits (34%), shares (17%), managed funds (14%), residential property (14%), and superannuation scheme other than KiwiSaver(12%).

For 32% of New Zealanders KiwiSaver is their only investment. These respondents are more likely to be aged 18 to 49 and behave similarly to non-investors in the fact that they have lower levels of confidence in the financial markets and its regulation.

Eight in ten people remember receiving investment materials in the previous 12 months, a significant increase on two thirds in 2018. There has also been a strong improvement over the last three years in those finding the information they received helpful in making informed decisions about their investments, increasing from 50% in 2016 to 58% this year.

56% of New Zealanders are considering making one or more change to their investments in the next 12 months. 28% of respondents are considering increasing their KiwiSaver contributions, 16% are considering residential property, 15% shares, and 12% investing more in an existing investment.

Summary

Awareness and perceptions of the FMA and regulation:60% of investors are confident that New Zealand’s financial markets are effectively regulated. Similar to overall confidence in the markets, those aware of the FMA are more likely to have a higher level of confidence in effective regulation.

Reasons for being confident in regulation include that it is well regulated (15%), being well informed and keeping up with the latest news (12%) and seeing improvements/FMA doing a good job (12%). Conversely, 36% of those not confident in the markets effective regulation mentioned there needs to be more regulation and closer monitoring of some entities.

Four in ten respondents agree that the FMA supports the integrity of New Zealand’s financial markets – the same proportion as 2018. Main reasons given by those who agreed include they feel it’s the FMA’s job/what’s expected (23%), that they are seen as doing a good job (23%), and regulation ensures appropriate behaviour (12%). Only a small proportion of 4% of respondents indicated they disagree the FMA supports the integrity of New Zealand’s financial markets. Over half of those surveyed either said they were neutral or didn’t know for this question.

35% of New Zealanders aged over 18 years are aware of the Financial Markets Authority – significantly less than the 41% in 2018. Those who are aware of the FMA show much higher levels of confidence overall.

Summary

Financial risk, return and diversification: This year a new question was added to the survey asking respondents to describe the amount of financial risk they would be willing to take when making an investment. Overall just under half of respondents indicated they would take an average amount of risk and expect average returns (44%), 19% would take an above average risk, and only 5% would take substantial financial risk and expect substantial returns.

Around a third of respondents (32%) indicated they would not be willing to take any financial risks.

Investors were asked how well they expect their portfolio of investments to perform in the next 12 months. Generally investors expect their investments to perform either the same (65%) or better than the market as a whole (13%). 5% expect their portfolio to perform worse in the next 12 months (than the market as a whole).

Nearly half (47%) said they have heard of and understand what diversification is. Of those, 92% correctly identified diversification as ‘Investing all your money across different investment choices such as shares, property and cash’. However only 15% were able to identify this as correct, plus identify all other options as incorrect, indicating there remains some confusion around diversification.

35% mentioned they have heard of and understand what risk/return trade off is – this is significantly lower than in 2018 (42%).

Summary

Confidence in New Zealand’s

financial markets

4%

5%

3%

4%

4%

4%

5%

16%

18%

17%

25%

21%

25%

27%

56%

59%

63%

55%

61%

55%

54%

9%

7%

6%

4%

4%

6%

4%

15%

12%

12%

12%

10%

10%

10%

Not at all confident Not very confident Fairly confident Very confident Don't know

2018

Investor confidence over time Confidence in New Zealand’s financial markets among investors sits at 65% this year, which is similar to 2018.

Compared to 2017, significantly less investors are ‘fairly confident’ in New Zealand’s financial market – however, the drop in total confidence from 2017 isn’t a significant one.

The proportion of investors saying they are ‘very confident’ has been trending upwards slowly since 2016. While those saying they are not confident has been reducing gradually from 32% in 2013 to 20% in 2019.

Confidence in New Zealand’s financial markets:

2017

2016

2015

2014

2013

66%

69%

59%

65%

61%

58%

Total confidence

How much confidence do you have in New Zealand’s financial markets? Are you…Base: Investors 2019 n=888; Investors 2018 n=849; Investors 2017 n=891; Investors 2016 n=885; Investors 2015 n=763; Investors 2014 n=749; Investors 2013 n=742

2019 65%

9

65%

66%

38%

41%

Total confidence

4%

5%

3%

10%

8%

7%

5%

16%

18%

17%

19%

23%

28%

17%

56%

59%

63%

33%

37%

37%

52%

9%

7%

6%

5%

4%

3%

8%

15%

12%

12%

33%

27%

25%

18%


2018

Confidence in New Zealand’s financial market:

2019

2019 61%

How much confidence do you have in New Zealand’s financial markets? Are you…Base: Investors 2019 n=888; Investors 2018 n=849; Investors 2017 n=891; Non Investors 2019 n=149; Non Investors 2018 n=162; Non Investors 2017 n=109; All 2019 n=1037

Confidence by investor / non-investor There have been no significant movements in confidence levels among investors or non-investors compared to 2018.

Similar to last year, investors are more likely to be confident in the markets in comparison to non investors.

Respondents who are willing to take above average or substantial financial risks are more likely to be very confident in the financial markets.

Males are more likely to be very confident in the markets compared to females who are more likely to not know.

2017

Inve

sto

rs

2018

2019

2017No

n In

vest

ors

69%

40%

All

10

Shares you bought yourself

Other superannuation

scheme


Managed funds

Residential property

Confidence by investment type held Confidence in New Zealand’s financial markets is highest among those with managed funds and shares they bought themselves.

Similar to 2018, KiwiSaver investors have the lowest confidence in New Zealand’s financial markets, however KiwiSaver investors are more confident than in 2016 (57%).

0%

4%

2%

3%

3%

4%

10%

7%

16%

16%

16%

16%

66%

68%

64%

62%

59%

55%

19%

16%

12%

10%

11%

9%

5%

5%

7%

9%

11%

16%


85%

84%

75%

72%

70%

Total confidence

Term deposits

64%KiwiSaver

11

How much confidence do you have in New Zealand’s financial markets? Are you…Base: Managed funds n=149; Shares you bought yourself n=186; Term deposits n=352; Residential property n=141; Other superannuation scheme n=124; KiwiSaver n=695

Confidence in New Zealand’s financial market:Shows % of total confidence (fairly or very confident)

Confidence over time by investment

type held

There has been no significant change in confidence levels by type of investment held compared to 2018 results.

Those with investments in shares (84%) and managed funds (85%) indicate higher confidence levels than the average.

80% 80%

82%

85%

74%

78% 77%

84%

71%

75%

72%

65%

77%74%

75%

63%

81%

71%70%

57%

67%

65% 64%

2016 2017 2018 2019

Managed funds Shares you bought yourself

Residential property Term deposits

Other superannuation scheme KiwiSaver

How much confidence do you have in New Zealand’s financial markets? Are you…Base: Managed funds n=149; Shares you bought yourself n=186; Term deposits n=352; Residential property n=141; Other superannuation scheme n=124; KiwiSaver n=695

12

76%

74%

61%

Total confidence


How much confidence do you have in New Zealand’s financial markets? Are you…Aware of FMA 2019; n=373; Aware of FMA 2018 n=419; Not aware of FMA 2019 n=581; Not aware of FMA 2018 n=531; All 2019 n=1037

Confidence by awareness of FMA New Zealanders aware of the FMA are far more likely to be confident in the financial markets and their effective regulation.

Those aware are also more likely to agree that the FMA supports market integrity.

13

4%

4%

5%

6%

5%

15%

17%

19%

20%

17%

63%

63%

46%

49%

52%

12%

11%

6%

3%

8%

6%

5%

25%

22%

18%


2019

2018

2019

2018

Aw

are

of

FMA

No

t aw

are

of

FMA

52%

52%

All 2019

23%

25%

11%

6%

2%

13%

10%

11%

2%

9%

26%

4%

13%

6%

9%

8%

4%

1%

2%

6%

1%

4%

5%

Don't know/ don't know enough to comment

Current climate is encouraging/ returns & growth

Uncertainty with general cycle of market /economy

Small / stable market

Based on the state of other countries/ global financial…

Based on experience - recovery, ups & downs

Investments performing well/ good advisor/ am informed

Based on current climate - housing crisis, property prices, cost…

Don't follow the markets/ not interested

Uncertainty with current political cycle/climate

Lack of faith in - banks, regulators, advisors

Well regulated

High profile companies have demonstrated instability/…

Just a feeling/ it's how I feel

Faith in government policy/ decision making

Not at all confident + Not very confident (n=208)

Fairly confident + Very confident (n=647)

Based on the state of other countries/ global financial insecurity

Based on current climate - housing crisis, property prices, cost of living, etc

High profile companies have demonstrated instability/ shareholders lost out

Reasons for level of confidence

14Can you tell us why?

The main reasons given for feeling confident in the New Zealand financial markets include being encouraged by the current financial climate (returns & growth) (26%), the small, stable market (13%), and having had good past experiences (9%).

Conversely, reasons for not feeling confident in the financial markets include not having enough knowledge (23%), uncertainty about the cycle of the market (25%), political climate (13%), shareholders losing out and high profile companies being unstable (11%), and global financial insecurity (11%).

Similar to last year, females appear to be less confident in sharing an opinion about the financial markets, compared to males, as they were more likely to say they don’t know enough to comment.

Example quotes – reasons confident in the financial

markets

15

“An independent and respected political entity.”

“I believe NZ is in stable market for the most part, for few exception such as

property market.”

“Economy is still fairly stable on world standards.”

“Based on historical performance of the NZ share market. Over the longer term it

provides good returns.”

“Everything is stable at the moment, there's no predictions of a downward

spiral in the economy. We also have a PM with her head screwed on the right way.”

“I feel I may not be as informed as others on the matter - I do not have a great deal of knowledge in this sector, but as a New Zealander I feel we are doing ok and have

faith in our systems.”

“NZ is a safe well-regulated environment in which to invest.”

“I believe we are conservative in investments and therefore I am unlikely to lose money. I am not out for the maximum returns with my money, but just to keep it safe and return me a reasonable income.”

“I don't know a lot about markets, but things seem to be doing okay right now.”

Example quotes – reasons not confident in the financial

markets

16

“Because we've been burnt several times. Don't trust anyone any more. I do lots of

research and unfortunately that only leaves Kiwisaver and term deposits as

fairly safe investments.”

“I don't know enough about the share market, investing etc. and the cost of living seems to be going up while National Super no way keeps up... we're too much at the

mercy of the rest of the world.”

“Don't know much about markets. I have never had enough money to invest so

have never checked them out.”

“The economy has been in a decline for a few months now and I don't see any

improvement.”“So many financial companies have gone bust and most continued taking money

from people [customers] knowing they are not doing well, some are lucky to get

money back, but most lose most or all their money.”

“Government policies change. Hard to know in what direction the finance returns

going with current world and at-home situations.”

“It seems some are making money by having inside knowledge and small

investors miss out.”

Changes in confidence over time

14%

16%

16%

23%

16%

15%

25%

66%

66%

65%

60%

60%

57%

51%

7%

6%

12%

9%

14%

22%

17%

12%

12%

8%

9%

9%

6%

6%

Decreased Stayed the same Increased Don't know

2018

2017

2016

2015

2014

2013

Changes in the level of confidence in New Zealand’s financial market over the last year:

And has your level of confidence in New Zealand’s financial markets increased, decreased or stayed the same over the last year? Base: 2013 n=1021; 2014 n=1015; 2015 n=1000; 2016 n=1000; 2017 n=1000; 2018 n=1011; 2019 n=1037

7% of respondents said their level of confidence in the financial markets has increased in over the last year, while two thirds said it hasn’t changed. 14% said their confidence has decreased. These results are consistent with 2018.

17

2019

Changes in the level of confidence in New Zealand’s financial market over the last year:

14%

17%

12%

14%

14%

69%

68%

53%

54%

66%

7%

6%

8%

5%

7%

10%

10%

26%

26%

12%


2019

2018

2019

2018

Changes in confidence by investor /

non-investor

And has your level of confidence in New Zealand’s financial markets increased, decreased or stayed the same over the last year? Base: Investors 2019 n=888; Investors 2018 n=849; Non Investors 2019 n=149; Non Investors 2018 n=162; All 2019 n=1037

Investors are more likely to say their confidence has stayed the same in the last month, while non investors are more likely to not know.

Respondents who are willing to take substantial financial risks in their investments were more likely to say their confidence has increased in the last 12 months.

Males are more likely to say their confidence has increased in comparison to females who are more likely to not know.

18

Inve

sto

rsN

on

Inve

sto

rs

All 2019

Changes in confidence by investment

type heldChanges in the level of confidence in New Zealand’s financial market over the last year:



scheme

Managed funds


10%

25%

15%

13%

18%

18%

77%

62%

71%

68%

70%

73%

9%

8%

8%

8%

7%

7%

4%

4%

6%

12%

5%

3%


Term deposits

KiwiSaver

And has your level of confidence in New Zealand’s financial markets increased, decreased or stayed the same over the last year? Base: Managed funds n=149; Government or corporate bonds n=39; Residential property n=141; Other superannuation scheme n=124; KiwiSaver n=695; Term deposits n=352; Shares you bought yourself n=186 19

The proportion of investors who mentioned their confidence has increased over the last year is consistent across all investment types.

A quarter of investors with an investment residential property indicated their confidence in the financial markets has decreased over the last year.

Investor profiles

and future behaviours

66%

34%

17%

14%

14%

12%

3%

2%

2%

1%

1%

1%

1%

13%

2%

KiwiSaver

Term deposits


Managed funds/ Unit trusts/ Managed investment scheme/ ETFs

Residential property investments

Other superannuation scheme

Government or corporate bonds you bought yourself

Peer to peer lending (where you are the lender)

Commercial property investments

Equity crowdfunding

Property syndicates

Capital notes or hybrid bonds

Derivatives eg futures, binary options, credit-linked notes, CFDs

I don't have any investments in NZ's financial markets

Don't know

For 32% of New Zealanders 18 years and over, KiwiSaver is their only investment

Which of the following investments, if any, do you have in New Zealand?Base: All 2019 n=1037; All 2018 n=1011

86% of New Zealanders have some form of investment.

The proportions who have each type of investment remain similar to 2018. The 3% who mentioned they have government or corporate bonds is significantly lower this year – however, this could possibly be explained by the description being expanded to ‘government and corporate bonds’ from just ‘bonds’ in 2018.

Respondents aged 18 to 49 are more likely to be KiwiSaver investors, while those aged 60 to 69 are more likely to be hold investments other than KiwiSaver.

Investment types held

21

2018

63%

32%

19%

11%

11%

14%

10%

3%

3%

1%

1%

1%

1%

16%

-

*

*

*

*Had an extended / more detailed description compared to the 2018 survey

Investment materials helping to make

an informed decision

52% 53%

56%

50%

53%55%

58%

2013 2014 2015 2016 2017 2018 2019

Yes

Eight in ten investors received investment materials (significantly more than the two thirds in 2018) and 58% of these investors found the information helpful.

The proportion of investors finding the materials they receive helpful has been on a steady increase since 2016.

Respondents who are willing to take above average or substantial financial risks are more likely to say that the investment materials they received are helpful.

Similarly, males are more likely than females to find the information they received helpful.

Did the investment materials you received help you make an informed decision:

Thinking about your most recent investment, did the investment materials you received (e.g. prospectuses, investment statements, product disclosure statements or adviser disclosure statements etc.) help you make an informed decision about whether or not to invest? Base: (only those who received materials) 2013 n=742; 2014 n=749; 2015 n=763; 2016 n=885; 2017 n=891; 2018 n=570; 2019 n=727 22

Investment materials by investment

type held – over time

Did the investment materials you received help you make an informed decision:Shows those investors who answered ‘Yes’

58%

67% 67%

61%60%

65% 65%

71%

57%

59%

64%63%

56%

65%

60%

63%

54% 54%

56%57%

50%51%

54%

59%

2016 2017 2018 2019

Shares you bought yourself Managed funds

Term deposits Other superannuation scheme

Residential property KiwiSaver

Thinking about your most recent investment, did the investment materials you received (e.g. prospectuses, investment statements, product disclosure statements or adviser disclosure statements etc.) help you make an informed decision about whether or not to invest? Base (those who received materials): Managed funds n=134; Shares you bought yourself n=164; Residential property n=113; Term deposits n=292; Other superannuation scheme n=107; KiwiSaver n=591

Investment materials for managed funds and KiwiSaver are the main contributors to the overall increase from 2018 in the proportion of respondents rating the materials as helpful.

Over three years the proportions for Managed Funds and KiwiSaver materials have increased by around ten percentage points.

23

24

Future behaviours

28%

16%

15%

12%

6%

6%

5%

5%

3%

2%

44%

Increasing your KiwiSaver contributions

Investing in residential property

Buying shares

Investing more in another existing investment

Investing in a new product

Investing in investments with a green or sustainabilitylabel

Buying managed funds or exchange traded funds

Extending your mortgage

Consider providing a lump sum to my financial adviser tomanage on my behalf

Investing in commercial property

None of these

56% of New Zealanders are considering making one or more of the following changes to their investments in the next 12 months.

28% of respondents are considering increasing their KiwiSaver contributions in the next 12 months, 16% are considering residential property, 15% shares, and 12% investing more in an existing investment.

Respondents who are willing to take an above average risk on their investments are the group more likely to consider all of these future behaviours – while those willing to take a substantial risk are more likely to consider increasing KiwiSaver contributions and invest in residential and/or commercial property.

Females are more likely than males to say they won’t be considering any of these behaviours in the next 12 months.

In the next 12 months are you considering doing any of the following?Base: All 2019 n=1037

Awareness and perceptions

of FMA and regulation

Awareness of FMA

34% 35%39% 39% 40% 41%

35%

61%58%

52%55% 53% 53%

56%

2013 2014 2015 2016 2017 2018 2019

Yes No

Have you heard of the Financial Markets Authority (FMA):

Have you heard of the Financial Markets Authority (FMA)?Base: 2013 n=1021; 2014 n=1015; 2015 n=1000; 2016 n=1000; 2017 n=1000; 2018 n=1011; 2019 n=1037

35% of New Zealanders aged over 18 are aware of the Financial Markets Authority –this is significantly less than the 41% in 2018.

Investors are more likely to be aware of the FMA (39% vs 15% of non investors).

Respondents willing to take substantial or average amounts of risk in their investments are more likely to be aware of the FMA –whereas, those not willing to take any risk are less likely to be aware.

Males are more likely than females to be aware of the FMA.

26

Investor confidence in effective

regulation

2%

3%

2%

2%

11%

14%

13%

20%

51%

51%

63%

58%

9%

8%

6%

5%

26%

23%

16%

15%


Confidence in New Zealand’s financial markets being effectively regulated:

59%

69%

Total confidence

2018

2017

How confident are you that New Zealand’s financial markets are effectively regulated? Base: Investors 2019 n=888; Investors 2018 n=849; Investors 2017 n=891; Investors 2016 n=885

Six in ten investors are confident that New Zealand’s financial markets are effectively regulated – this is consistent with 2018, but significantly less than 2017 (likely due to the change in question wording from 2018).

2017 question wording: The responsibility for ensuring effective regulation and oversight of New Zealand’s financial services and markets is shared by the FMA and front line regulators, including NZX, and supervisors (or trustees) of both managed funds and KiwiSaver providers). How confident are you that New Zealand’s financial markets are effectively regulated?

27

60%2019

2016 63%

2%

3%

2%

4%

4%

4%

3%

11%

14%

13%

15%

16%

26%

12%

51%

51%

63%

32%

32%

29%

48%

9%

8%

6%

4%

2%

5%

8%

26%

23%

16%

44%

46%

35%

29%


2017

2019


Confidence in effective regulation by

investor/non-investor

How confident are you that New Zealand’s financial markets are effectively regulated? Base: Investors 2019 n=888; Investors 2018 n=849; Investors 2017 n=891; Non Investors 2019 n=149; Non Investors 2018 n=162; Non Investors 2017 n=109; All 2019 n=1037

Investors are significantly more likely than non investors to have confidence in the effective regulation of the financial markets. Non investors are more likely to not know.

Respondents who are willing to take substantial financial risks in their investments are more likely to be very confident in the regulation of the financial markets.

Similar to overall confidence in the markets, males are more likely to be very confident in the regulation of the markets in comparison to females who are more likely to not know.

28

Inve

sto

rsN

on

Inve

sto

rs

All

2018

2017

2019

2018

60%

59%

36%

34%

Total confidence

57%

69%

34%

2019

1%

1%

2%

2%

2%

2%

7%

13%

12%

14%

13%

12%

63%

60%

59%

58%

57%

49%

16%

14%

12%

12%

11%

9%

13%

11%

15%

15%

16%

28%


Those who invest in government or corporate bonds, managed funds, and/or shares are the groups with the highest confidence in the effective regulation of the markets.


investment type held




scheme

Managed funds


79%

74%

71%

70%

68%

Total confidence

Term deposits

58%KiwiSaver

How confident are you that New Zealand’s financial markets are effectively regulated? Base: Managed funds n=149; Shares you bought yourself n=186; Other superannuation scheme n=124; Residential property n=141; Term deposits n=352; KiwiSaver n=695 29

Confidence in effective regulation by investment type has remained fairly static, the changes from 2018 are not significant.

Confidence in New Zealand’s financial markets being effectively regulated: Shows % of total confidence (fairly or very confident)


investment type - over time

80% 78% 78%79%

75%

79%

74%73%

77%

68% 70%

65%

75%

67%68%

68%

85%

63%

71%

63%

68%

56%

58%

2016 2017 2018 2019

Managed funds Shares you bought yourselfResidential property Term depositsOther superannuation scheme KiwiSaver

How confident are you that New Zealand’s financial markets are effectively regulated? Base: Managed funds n=149; Shares you bought yourself n=186; Other superannuation scheme n=124; Residential property n=141; Term deposits n=352; KiwiSaver n=695

30


Confidence in effective regulation

by awareness of FMA

How confident are you that New Zealand’s financial markets are effectively regulated? Base: Aware of FMA 2019; n=373; Aware of FMA 2018 n=419; Not aware of FMA 2019 n=581; Not aware of FMA 2018 n=531; All 2019 n=1037

Similar again to the investor versus non investor behaviour, those aware of the FMA are far more likely to have confidence in the effective regulation of the financial markets in comparison to those unaware of the FMA.

31

74%

70%

57%

Total confidence

2%

4%

3%

3%

3%

11%

15%

13%

14%

12%

59%

58%

41%

41%

48%

14%

12%

4%

3%

8%

13%

10%

38%

39%

29%


2019

2018

All

2019

2018

Aw

are

of

FMA

No

t aw

are

of

FMA

46%

44%

2019

10%

5%

1%

36%

1%

4%

1%

6%

7%

15%

12%

12%

2%

9%

6%

5%

5%

4%

4%

2%

Don't know/ not familiar with the market

Well regulated

By keeping up with latest news/ being informed/ word ofmouth

Big improvements in recent years/ FMA doing a good job

Increase regulation/ closer monitoring of certain entities

Market is good / stable

Just a feeling/ it's how I feel

Have trust/ faith

Low corruption/ assurance / honesty

Trust the government

Good overall but could be improved/ ongoing process/ findingthe balance

Based on current climate - interest rates/ NZ dollar/ economy/GDP

Not at all confident + Not very confident (n=142)

Fairly confident + Very confident (n=603)

Reasons for level of confidence

in effective regulation

Can you tell us why?

Reasons for being confident in effective regulation include comments relating to the markets being well regulated (15%), being informed on what’s going on (12%) and noticing big improvements / the FMA doing a good job (12%).

Reasons for the lack of confidence in regulation include respondents wanting more regulation / closer monitoring of certain entities (36%), and some not being familiar with the markets (10%).

32

Example quotes – reasons confident in regulation

33

“A lower level of corruption than I see in many other countries.”

“After the crashes of Financial Institutions several years ago there has been many

safeguards put in place for investors as well as transparency and accountability for

executives. Also with Banks there has been a recent inquiry held in Australia which has

been watched with interest here.”

“Because corruption is extremely low, therefore our economy will naturally

increase as businesses grow with population growth and trade growth.”

“Because I trust the people who are in charge of making decisions are making

the right choices for our country..“

“Good regulated bodies and good government policies.”

“Because of research into the topic, has increased my awareness and

understanding..”

“Have trust in the financial market authority and I don’t hear much about

frauds.”

“Again I don't have the financial background to put into words my

knowledge rather a feeling of what I am observing.”

“I think compared to other markets the markets in New Zealand are well regulated,

we haven't seen the turmoil that other markets have had from either over

regulation or under regulated. I think the New Zealand markets are about right with

a little room to move one way or the other.”

Example quotes – reasons not confident in regulation

34

“I've never looked into the regulations around financial markets, but I imagine

they would be difficult to regulate as when people invest they know they're taking a

risk. But I guess regulation at least ensures the level of risk is clearly stated depending

on the type of investment and expected return.”

“There are still many investments around which look bad. People who are the

instigator of these financial opportunities seem to rarely be called to justice.”

“I think there are probably some dodgy schemes out there, always have been, always will be, and governments seem

at times a bit reluctant to deal with them.”

“The government doesn't care about its citizens and the majority of banks and

companies are owned by the Aussies who take all the benefits.”

“Regulatory authority is not involved enough and not taking enough care.”

“Just by nature to not trust fully in any agency. Mostly believe but do not blindly trust. Too many loopholes in the law and

too many wily people in leadership that put themselves first.”

Perceptions of FMA’s support of the

financial markets’ integrity – over time

2%

0%

2%

2%

3%

26%

26%

28%

32%

33%

43%

8%

7%

6%

29%

30%

20%

Strongly disagree Disagree Neither nor Agree Strongly agree Don't know

FMA supports the integrity of New Zealand’s financial markets:

2018

2017

One of the primary roles of the FMA is to support the integrity of New Zealand’s financial markets which, for investors, means making sure NZ financial service providers operate in a way that is fair, honest and effective. To what extent do you agree or disagree that ‘The FMA supports the integrity of NZ’s financial markets’?Base: 2019 n=1037; 2018 n=1011; 2017 n=1000

As in 2018, four in ten respondents agree that the FMA supports the integrity of New Zealand’s financial markets.

There has been a large increase in don't knows since 2017, possibly due to a change in the population sample from 2018 onwards to reflect a more representative sample.

40%

49%

Totalagree

35

40%2019

One of the primary roles of the FMA is to support the integrity of New Zealand’s financial markets which, for investors, means making sure NZ financial service providers operate in a way that is fair, honest and effective. To what extent do you agree or disagree that ‘The FMA supports the integrity of NZ’s financial markets’? Base: Investors 2019 n=888; Investors 2018 n=849; Investors 2017 n=891; Non Investors 2019 n=149; Non Investors 2018 n=162; Non Investors 2017 n=109; All 2019 n=1037

Perceptions by investor/non-investor A significantly higher proportion of investors agree (43%) that the FMA supports the integrity of the financial markets in comparison to non investors (25%).

A reasonably high proportion of non-investors (72%) gave a ‘neutral’ or ‘don’t know’ response to this question.

In comparison around half of investors (53%) indicated they either sit on the fence or don’t enough to comment on this question. This is high in comparison to the other statements in this report.

36

FMA supports the integrity of New Zealand’s financial markets:

2%

2%

1%

2%

4%

0%

2%

3%

2%

3%

2%

2%

4%

2%

25%

26%

27%

33%

24%

32%

26%

34%

35%

45%

22%

21%

23%

32%

9%

7%

6%

3%

4%

2%

8%

28%

27%

18%

39%

44%

39%

29%


2017

2019

Inve

sto

rsN

on

Inve

sto

rs

All

2018

2017

2019

2018

43%

42%

25%

25%

Total agree

40%

51%

25%

2019

3%

5%

1%

1%

2%

3%

4%

2%

1%

2%

19%

23%

29%

27%

26%

50%

47%

22%

23%

32%

15%

12%

4%

3%

8%

10%

9%

41%

45%

29%


FMA supports the integrity of NZ’s financial markets:

One of the primary roles of the FMA is to support the integrity of New Zealand’s financial markets which, for investors, means making sure NZ financial service providers operate in a way that is fair, honest and effective. To what extent do you agree or disagree that ‘The FMA supports the integrity of NZ’s financial markets’? Base: Aware of FMA 2019; n=373; Aware of FMA 2018 n=419; Not aware of FMA 2019 n=581; Not aware of FMA 2018 n=531; All 2019 n=1037

Perceptions of FMA by awareness Those who are aware of the FMA are far more likely to agree that the FMA supports the integrity of the markets compared to those unaware of the FMA – who are more likely to not know.

37

65%

59%

40%

Total agree

2019

2018

All

2019

2018

26%

26%

2019

Aw

are

of

FMA

No

t aw

are

of

FMA

Reasons for perceptions of FMA

Can you tell us why?Base: Strongly disagree + disagree n=40; Strongly agree + agree n=438

This year a question was added asking respondents why they agree or disagree that the FMA supports the integrity of the financial markets.

Those who agreed mentioned that it’s the FMA’s job / what’s expected (23%), that they are seen as doing a good job of it (23%), and regulation ensures appropriate behaviour (12%).

Among the small proportion of 4% who disagree that FMA supports the integrity of the financial markets, reasons given include perceptions of some suspect behaviour relating to regulating the markets, and lack of trust.

38

7%

1%

3%

5%

17%

14%

23%

6%

23%

23%

12%

7%

1%

5%

1%

1%

2%

It's their job/ what we expect them to do

Doing a good job/ portrayed positivley in the media

Regulation ensures appropriate behaviour/ accountability

Past actions and history supports their integrity/ strongreputation

Don't agree or disagree/ just my opinion

Able to prosecute negative or non sanctioned behaviour

Favours the wealthy/ not trustworthy/ not impartial

Poor past performance/ low confidence

Have not regulated some suspect actions and behaviour

Could enforce more regulations and controls

Strongly disagree + disagree (n=40) Strongly agree + agree (n=438)

Example quotes – reasons for positive perception

39

“Any time you hear about them on the news they seem to be doing good work.”

“Because that is their job and from what little I've heard about them, they do it

well.”

“Financial Markets Authority works well as a regulatory authority and does things in

best interests of consumers.”

“As long as there is strong leadership here it should continue to do as it is

required to do.”

“I don't know anything about them but I would trust them to do their job if they

are affiliated with the government.”

“It is important to have an organisation that can monitor the actions of those involved in the markets. This has to be

independent and must set a precedent for others to follow. If there was not an

overriding authority then the markets would be simply in free fall and that is not good for anyone. Without the FMA large powerful institutions could do whatever they like at the expense of the investor. It

makes sense to have a third party monitor any untoward actions and take a decisive

line.”

“There are very few failures amongst listed companies. Conduct is at front of mind. They seem to have the teeth to enforce

rules.”

Example quotes – reasons for negative perception

40

“They are only interested in helping the rich get richer and the poor don't get are look in

now.”

“If the market was fully regulated the big boys would not rip off the small man

operator.”

“Too many past problems and I have no confidence that such things will not

occur again.”

“No checks, or checks and no follow through, and no undesirable consequences except the cheats and criminals finally lose

their gravy train.”

“Because of things you hear in the news where there have been cover ups.”

“Not doing the job at all well if companies continue to be doing underhand business

deals and then find themselves in difficulty.”

Financial risk, return and

diversification

Nearly half (47%) said they have heard of and understand what diversification is.

Of those, 92% correctly identified diversification as ‘Investing all your money across different investment choices such as shares, property and cash’. However, a lesser 15% were able to identify this as correct, and also identify all other options as incorrect –meaning there is still a little confusion around diversification.

There were no significant movements in these results in comparison to 2018.

Investors are more likely to have heard of and understand diversification than non-investors (51% vs 28% of non investors).

Understanding of diversification

I have heard of this and understand it

47%I have heard of this but

don’t really understand it

29%I haven’t heard

of this

24%

92%

60%

49%

4%

3%

3%

3%

30%

34%

91%

91%

92%

5%

10%

17%

5%

6%

5%

Is diversification Not diversification Unsure

Investing all your money among shares in different industries:

Investing all your money across different investment choices such as shares, property and cash:

Investing all your money in government bonds:

Investing all your money between two or three fund managers:

Investing all your money in a technology company that has recently reported very high returns:

Investing all your money in shares in a blue chip company that has performed well over 10 years:

Which of the following statements best describes your understanding of these investing principles? Base: All n=1037 Which of the following strategies are examples of diversification? Base: ‘Understands diversification’ n=473

Which is diversification:

42

Understanding of risk/return trade off

I have heard of this and understand it

35%I have heard of this but

don’t really understand it

33%I haven’t heard

of this

32%

An investment with a high rate of return is more likely to have…

91%

2%

3%

4%Unsure

The same level of risk

A lower level of risk

A higher levelof risk

Which of the following statements best describes your understanding of these investing principles? Base: All n=1037. An investment with a high rate of return is more likely to have… Base: ‘Understands risk/return trade off’ n=374

35% mentioned they have heard of and understand what risk/return trade off is –this is significantly lower than in 2018 (42%).

This year respondents were more likely to have not heard of risk/return trade off (32% vs 27% in 2018).

Similarly, 91% said that an investment with a high rate of return is more likely to have a higher level of risk – significantly less than the 96% who said the same thing in 2018.

Investors are more likely to have heard of and understand risk/return trade off than non-investors (37% vs 19% of non investors).

43

Willingness to take financial risk A new question this year, respondents were asked to describe the amount of financial risk they are willing to take when making an investment.

Nearly half of investors (47%) would be willing to take average amount of risk and expect average returns, while only 5% would take substantial financial risk and expect substantial returns.

Overall, 32% (and 27% of investors) are not willing to take any financial risk.

Those aged 18 to 39 are the groups more likely to be willing to take substantial or above average financial risk in their investments.

44

Amount of financial risk you are willing to take when you save or make investments:

Which of the following statements comes closest to describing the amount of financial risk that you are willing to take when you save or make investments? Base: Investors n=888; Non Investors n=149; All n=1037

47%

26%

44%

21%

7%

19%

5%

6%

5%

27%

62%

32%

Take average financial risks expecting to earn average returns

Take above average financial risks expecting to earn above average returns

Take substantial financial risks expecting to earn substantial returns

Not willing to take any financial risks

All

Investors

Non Investors

45

Willingness to take financial risk - profiles

Those willing to take substantial financial risk are more likely to be:• Males, aged 18 to 39• A part of a group flatting, a student• Very confident in the financial markets• Have an increased level of confidence

over the last 12 months• Very confident in the effective regulation

of the markets• Aware of the FMA• Think their portfolio will perform better

than the market as a whole

Those willing to take above average financial risk are more likely to be:• Males, aged 18 to 39• A young couple with no kids, in paid, full time

employment, earning over $200,000 annually• An existing investor• Very or fairly confident in the financial markets• Fairly confident in the effective regulation of

the markets• Think their portfolio will perform about the

same or better than the market as a whole

Those not willing to take financial risk are more likely to be:• Females• Older, single, retired, or unemployed,

earning under $20,000 annually• A non investor• Not confident, or be unsure about their

confidence, in the financial markets• Not confident, or be unsure about their

confidence, in the regulation of the markets

• Unaware of the FMA• Think their portfolio will perform worse

than the market as a whole

Those willing to take average financial risk are more likely to be:• An older couple with no kids• An existing investor• Fairly confident in the financial markets• Fairly confident in the effective regulation of

the markets• Aware of the FMA• Think their portfolio will perform about the

same as the market as a whole

Expected performance of investments Investors were asked how well they expect their portfolio of investments to perform in the next 12 months.

17% of investors said this doesn’t apply to them, while nearly two thirds (65%) said that they are expecting their portfolio to return about the same as the rest of the market as a whole.

Investors with term deposits, KiwiSaver or another superannuation scheme are more likely to select ‘not applicable’ for this question. Perhaps they don’t see these as investments that they would expect to perform over the next 12 months, i.e. long-term retirement, or fixed interest investments.

46

Expected performance of your portfolio of investments in the next 12 months:

Over the next 12 months, how well do you expect your portfolio of investments to perform? Base: Investors n=888

5% 65% 13% 17%

Worse than the market as a whole

About the same as the rest of the market as a whole

Better than the market as whole

Not applicable

Investors

69%

67%

56%

31%

29%

19%

16%

16%

12%

7%

5%

4%

4%

3%

3%

Term deposits

KiwiSaver - conservative fund

Government bonds


KiwiSaver - balanced fund

Commercial property

Corporate bonds

KiwiSaver - growth fund

Listed property trusts

Shares/equity in companies listed on licensed exchanges

Private equity funds

Hybrid bonds

Shares/equity in a company through equity crowdfunding

Property syndicates

Derivatives

Low Risk

Below is a list of different types of investments. How much risk do you associate with each of the following investment types? Base: All n=1037

Nearly seven in ten respondents identified Term deposits and a conservative KiwiSaverfund as low risk investments.

Over half (56%) see government bonds as a low risk investment, while 16% said the same for corporate bonds.

There were no significant movements for low risk investments in comparison to 2018.

How much risk do you associate with the below investment types:

Investments seen as low risk

47

2018

74%

70%

-

34%

28%

18%

-

18%

-

6%

5%

3%

3%

3%

3%

47%

47%

47%

41%

39%

35%

28%

28%

27%

24%

21%

17%

13%

11%

11%



Commercial property


Corporate bonds



Property syndicates


Hybrid bonds


Government bonds

Term deposits

Derivatives


Medium Risk


Balanced KiwiSaver funds, shares/equity in companies listed on licensed exchanges, and commercial property are each perceived as medium risk investments by around half of respondents.

Four in ten respondents perceive residential property as a medium risk investment.

This year, the perception of shares/equity in companies listed on licensed exchanges as a medium risk investment is significantly lower than last year (47% vs 56% in 2018).


Investments seen as medium risk

48

2018

51%

56%

50%

45%

-

29%

-

26%

29%

25%

19%

-

12%

11%

10%

36%

32%

29%

28%

23%

18%

12%

11%

10%

9%

9%

4%

3%

3%

3%




Derivatives

Property syndicates


Commercial property

Corporate bonds


Hybrid bonds


Government bonds

Term deposits



High Risk


The investment with the highest risk is seen to be shares/equity in a company through equity crowdfunding with 36% saying this is high risk.

32% see a KiwiSaver growth fund, 29% see private equity fund, and 28% see derivatives as high risk.

Perception of shares/equity in a company through equity crowdfunding as a high-risk investment is significantly lower this year than in 2018 (36% vs 45% in 2018).

Investments seen as high risk


49

2018

45%

36%

31%

35%

28%

15%

11%

-

-

10%

6%

-

2%

3%

3%

Uncertainty about investment risk

62%

57%

51%

47%

40%

39%

33%

28%

23%

22%

20%

19%

19%

18%

15%

Hybrid bonds

Derivatives


Property syndicates



Corporate bonds


Government bonds

Commercial property





Term deposits

Don't know


There is a high level of uncertainty about the risk of quite a few investments, but particularly hybrid bonds, derivatives, listed property trusts, and property syndicates.

Non investors were the group more likely to be uncertain about the risk on all of these investments.


50

2018

62%

52%

-

43%

33%

35%

-

23%

-

21%

18%

16%

15%

12%

17%

57%

52%

45%

27%

24%

22%

14%

14%

14%

14%

13%

13%

12%

9%

8%

Term deposits


Government bonds

Corporate bonds



Commercial property


Hybrid bonds





Property syndicates

Derivatives

Less than 5%

And what would you expect the return on investment to be for each of these in the next 12 months? Base: All n=1037

Respondents were also asked what they expected the return on investment to be for each investment type – less than 5%, 5% to 9.9%, or 10% or more.

Investments perceived to have the lowest risk are also seen as having the lowest return (less than 5%): term deposits (57%), conservative KiwiSaver (52%), and government bonds (45%).

What would you expect the return on investment to be:

Low return on investments

51

34%

32%

31%

28%

27%

24%

21%

20%

18%

17%

17%

13%

11%

9%

8%




Commercial property




Property syndicates


Corporate bonds

Hybrid bonds

Derivatives

Term deposits

Government bonds


5% to 9.9%

Over 3 in ten respondents perceive a balanced KiwiSaver fund (34%), shares/equity in companies listed on licensed exchanges (32%), and a KiwiSaver growth fund (31%) as having a medium (5% to 9.9%) return on investment.

Medium return on investments

52



19%

14%

13%

10%

10%

9%

9%

8%

6%

6%

5%

4%

4%

4%

4%


Commercial property


Derivatives


Property syndicates




Corporate bonds

Government bonds


Hybrid bonds


Term deposits

10% or more

A KiwiSaver growth fund and commercial or residential property investments are seen as having the highest (more than 10%) return on investment.

High return on investments

53



Uncertainty about return on investment

69%

65%

63%

60%

57%

56%

51%

46%

44%

41%

38%

37%

37%

36%

28%

Derivatives

Hybrid bonds

Property syndicates




Corporate bonds


Commercial property

Government bonds





Term deposits

Don't know

Similar to uncertainty around the level of risk of each investment, there is also a high level of uncertainty around the return on investment.

Generally non investors were more likely to be uncertain about the return on investment than investors were.

54



Appendix

Confidence by age and gender

65%

57%

61%

Male Female ALL

How much confidence do you have in New Zealand’s financial markets? Are you…Gender Base: Males n=504; Females n=526; ALL n=1037.Age Base: 18-29 n=285; 30-39 n=164; 40-49 n=184; 50-59 n=126; 60-69 n=142; 70+ n=136.

59% 59%

57%

61%

65% 65%

18-29 Years 30-39 Years 40-49 Years 50-59 Years 60-69 Years 70 Years andolder

Confidence in New Zealand’s financial markets:Shows % of total confidence (fairly or very confident)

Gender Age

56

Confidence by ethnicity

60%

52%49% 48%

67%

61%

Pakeha/ NZEuropean

Other European Maori Pacific Peoples Asian ALL

How much confidence do you have in New Zealand’s financial markets? Are you…Ethnicity Base: Pakeha/NZ European n=827; Other European n=76; Maori n=67; Pacific Peoples n=25; Asian n=109; ALL n=1037.


Ethnicity

57

Confidence by income


46%

55%

69%

82%

54%

61%

51%

60%

70%

81%

59%65%

36% 34%

55%

92%

22%

38%

Under$20,000

$20,000 to$49,999

$50,000 to$99,999

$100,000and over

Preferrednot to say

ALL

Total Population Investors Non-investors

49%

67% 67%

77%

50%

57%

69% 68%

76%

55%

32%

53%58%

78%

22%

Under $50,000 $50,000 to$99,999

$100,000 to$149,999

$150,000 andover

Preferred notto say


Annual personal income Annual household income

58

How much confidence do you have in New Zealand’s financial markets? Are you…Total Personal Income Base: Under $20,000 n= 184; $20,000-$49,999 n=280; $50,000-$99,999 n=318; $100,000 and over n=107; ALL n=1037.Total Household Income Base: Under $50,000 n=266; $50,000-$99,999 n=297; $100,000-$149,999 n=182; $150,000 and over n=114.

Appendix

Confidence by age and gender

68%

56%

62%65%

57%61%

Male Female ALL

How much confidence do you have in New Zealand’s financial markets? Are you…Gender Base: Males n=504; Females n=526; ALL n=1037.Age Base: 18-29 n=285; 30-39 n=164; 40-49 n=184; 50-59 n=126; 60-69 n=142; 70+ n=136.

56%

63%

57%

65%67% 68%

59% 59%57%

61%65% 65%

18-29 Years 30-39 Years 40-49 Years 50-59 Years 60-69 Years 70 Years andolder

Confidence in New Zealand’s financial markets (2019 vs 2018):Shows % of total confidence (fairly or very confident)

Gender Age

60

2019

2018

Confidence by ethnicity

62% 61%

57%

46%

69%

62%60%

52%49% 48%

67%

61%

Pakeha/ NZEuropean

Other European Maori Pacific Peoples Asian ALL

How much confidence do you have in New Zealand’s financial markets? Are you…Ethnicity Base: Pakeha/NZ European n=827; Other European n=76; Maori n=67; Pacific Peoples n=25; Asian n=109; ALL n=1037.

Confidence in New Zealand’s financial markets (2019 vs 2018):Shows % of total confidence (fairly or very confident)

Ethnicity

61

2019

2018

Confidence by income


46%

55%

69%

82%

54%

61%

51%

60%

70%

81%

59%65%

36% 34%

55%

92%

22%

38%

Under$20,000

$20,000 to$49,999

$50,000 to$99,999

$100,000and over

Preferrednot to say

ALL


49%

67% 67%

77%

50%

57%

69% 68%

76%

55%

32%

53%58%

78%

22%

Under $50,000 $50,000 to$99,999

$100,000 to$149,999

$150,000 andover

Preferred notto say


Annual personal income Annual household income

62

How much confidence do you have in New Zealand’s financial markets? Are you…Total Personal Income Base: Under $20,000 n= 184; $20,000-$49,999 n=280; $50,000-$99,999 n=318; $100,000 and over n=107; ALL n=1037.Total Household Income Base: Under $50,000 n=266; $50,000-$99,999 n=297; $100,000-$149,999 n=182; $150,000 and over n=114.

Documents

Attitudes towards New Zealand’s - Financial …...attitudes towards and confidence in New Zealand [s financial markets. This is the seventh year the FMA has carried out investor