Kiwis’ perceptions of their financial literacy continue to decline, according to the latest Financial Service Council Financial Resilience Index.
The 2022 Index reports an overall 5% decrease in financial literacy across four of out of five key indicators compared to 12 months ago.
To help reverse the decline index research sponsor Trustees Executors has called on the NZ financial services sector to be more proactive in educating Kiwi consumers about how to maintain and improve their financial wellbeing.
“The decline in financial literacy should set alarm bells ringing,” said Ryan Bessemer, the CEO of Trustees Executors.
“The Index points to a continuing downward trend in financial literacy across key indicators, such as the relationship between risk and return, diversification, the risk profile of investments, asset allocation and current investment market trends.
“Being financially literate enables Kiwis to make the informed choices to secure their financial wellbeing. It requires planning and reinforces the importance of boosting medium to long term savings.
“The current economic outlook is very challenging for many Kiwis, with rising inflation and interest rates, and low wages growth. There is also the disparity between those Kiwis who bought assets before the boom, and those that have been unable to participate.
“Against this backdrop the drop in financial literacy preparedness is very worrying. As an industry we need to collectively consider what action we can take now to ensure that Kiwi consumers understand the products and services we are offering, and how to use them to maintain and improve their financial wellbeing.
“A recent study by the Retirement Commission found two-thirds of New Zealanders make poorly informed choices about financial products. For example, more than 85% don’t have enough knowledge to compare the terms and conditions of a credit or insurance product.”
Mr Bessemer said the COVID-19 pandemic has made the issue of financial security and stability a priority for investors and businesses.
“The financial advice sector has proven essential in this, with 70 per cent of the professional financial advisers surveyed by the FSC indicating that their clients were more financially resilient because of their role in educating their clients about risk and return.
Considering the ongoing crisis, financial advice is more important today than ever. By providing the expertise needed to adapt to changing policies and conditions, it can make investors and businesses more resilient during tough times, and more profitable in good times.
“Critically, it also encourages prudent investment, as well as greater and more confident participation in financial markets. This, in turn, helps to protect the overall economy and helps to drive recovery.”
Patrick Southam, Reputation Edge +61 419 415 998