Ignorance about finance universal, says professor

David Mayes. Photo / Supplied

New Zealanders are average when it comes to financial literacy but this is not a problem unique to this country, according to the new chair of finance at Auckland University Business School.

Professor David Mayes, appointed to the BNZ-funded position last month, said his focus would be on increasing financial literacy, a topic close to his heart.

Mayes said people needed to be realistic about how financial literacy could be improved and what normal people could be expected to do, but he said it was important there was greater awareness about personal finance.

"There is a great problem around the finance sector. A large number of people who couldn't afford to have lost their life savings."

Mayes says the fact so many finance companies have failed is not surprising as they invested in funds either too risky for banks to invest in, or banks didn't want to invest in them.

A lot of finance company collapses occurred before the global financial crisis, which shows New Zealand "was ahead of the curve on this one", but any company that indulges in risky finance gets into trouble when the economy turns down, Mayes says.

"There aren't any countries that stand out as examples of being clearly informed [on finance]. This is a universal problem."

He said there were obvious advantages to gaining independent advice before investing but it was key to realise when advice was actually independent.

"Almost all financial woes of recent times have been caused by financial ignorance, some unintended, but ignorance nonetheless. My career has focused on addressing this issue."

BNZ chief operations officer Stephen Mockett said the bank had invested $1.35 million over five years to establish the chair of finance position with the goal of promoting public understanding of finance.

A former head of the New Zealand Institute of Economic Research, Professor Mayes has been a senior research fellow in the National Institute of Economic and Social Research in London and also with the Centre for European Policy Studies in Brussels.

He has advised central banks and financial regulators in 15 countries round the world.

His first public lecture on surviving the next financial crisis is on June 22.