Rachael Joel
Kia ora koutou and welcome to Five Minutes with the FMA. I'm Rachel Joel and today we're talking about something central to the financial well-being of New Zealanders, access to financial advice. The FMA has just released the findings of its review into how people are accessing advice and where the barriers and opportunities are for the sector. With me is Romil Ghelani, Head of Financial Advice. Romil, great to have you here. Can we start by talking about how the review came about and who you talk to?
Romil Ghelani
Sure. So the FMA is the principal conduct regulator for financial advice in New Zealand. And so we do the regular monitoring and supervision of licensed financial advice providers. We'd heard about challenges to consumers accessing financial advice through our business as usual work and decided that we want to do a dedicated review into accessibility challenges for New Zealanders. So we talked to consumers. We sampled a representative sample of New Zealanders, so 1000 consumers commissioned through Ipsos. And we also conducted workshops, workshops with licensed advisors, with the banks, with the insurers, with education providers who give the education services to financial advisors, consultancy firms and law firms as well.
Rachael Joel
Okay, so let's start with the consumers. What did they tell you?
Romil Ghelani
Sure. So the big insight that we garnered is that only 28% of New Zealanders accessed a financial advisor in the past 12 months. We used a financial advisor in the past 12 months. And financial advisor is quite a broad term. So if you break that down, that could mean investment advisor, insurance advisor, mortgage advisor, or whatever the consumer perceives a financial advisor is. And so we think that number is quite low and could be a lot higher. We also learned of certain consumer demographics that are not accessing financial advice, so those from lower socioeconomic backgrounds, and Maori and Pacifica as well. And we saw a big awareness gap. in terms of what financial advice is and what it isn't when it comes to regulated financial advice. How to get financial advice and what are some of the costs that go into receiving financial advice. We saw perceived affordability barriers as well.
Rachael Joel
And so what did you hear from the advice sector?
Romil Ghelani
Sure, so we also engaged the advice sector. We conducted over 80 interviews across the sector, so a lot of in-depth field work. And what we learned is that financial advisors take conduct and compliance very seriously, which is great to hear as a regulator. So much so, though, that it can sometimes result in very rigid approaches to compliance, where there is a bit of inertia to introduce new financial advice journeys, to tap into consumers that are currently underserved and not accessing financial advice. So that was probably the key thing that we uncovered in terms of the role of regulation. But we also uncovered that banks, which is a common... institution that New Zealanders go to get information and guidance for their financial well-being aren't making advice as accessible and available as they should. So that's another key insight that came from our discussions.
Rachael Joel
Okay, one thing that I saw in the reports is the use of technology. Tell me a bit more about that.
Romil Ghelani
Yeah, so innovation was a key topic that we covered in most of our interviews. So what we're learning with innovation in the financial advice industry is there's two broad buckets that we uncovered. Innovation, including AI, is being used to be more efficient. So those are tools within the business to help with things like record-keeping. And also innovation in the second bucket is around using AI and tools to help give actual regulated financial advice. We saw a lot of activity occurring in that first bucket, but less so in that second bucket. And we think there's an opportunity for more innovation to occur in the sector with the FMA guiding the industry in the way forward.
Rachael Joel
Okay. And one of the gaps identified in the review is the accumulation, you know, how people use their savings once they retire. What did you learn in that area?
Romil Ghelani
Sure. So this was one of the most recurring themes that we uncovered through our conversations, which is that There's a lot of financial advice that is available around what KiwiSaver fund you should be in, but less so about what life looks like after 65. So how do you decumulate your retirement savings? So what we found is that there isn't any standardized way of giving advice in that space, but we think that's a really important gap that needs to be plugged because the population of those greater than 65 is only going to increase and Kiwi QCV balances are growing as per our own QCV annual report that shows the importance of that as your retirement vehicle for the future.
Rachael Joel
So there's a real opportunity there for advisors and providers to support better retirement outcomes.
Romil Ghelani
Absolutely. And I think what we want to do when we engage with the industry after we publish our reports is to really understand what new advice journeys can be introduced within the current regulatory regime for advice.
Rachael Joel
So where to from here?
Romil Ghelani
From here. So the reports are not the final word. That's really important for a topic like financial advice accessibility. It is a challenge that the industry, the consumer advocacy groups, and the regulator all need to work together to overcome and to address. And so what we want to do is hold a series of round tables and meetings and discussions and seminars with the various parts of the financial advice sector to discover new ways in which advice can be given and to give some compliance certainty about what that could look like.
Rachael Joel
Fantastic. Thanks so much, Romil. Both reports, the consumer insights and the sector findings are available on the FMA website at www.fma.govt.nz.
