Rob Everett, chief executive of the Financial Markets Authority, said the research had confirmed what it already knew about KiwiSaver investors, many of whom were likely to be entry-level first-time investors.
"Yes we have created KiwiSaver. It's changed a bunch of habits and that is great. But the real challenge with KiwiSaver is to get to those people who are not actively engaged."
Everett said the FMA was working on the issue through a combination of pressure on providers and materials to help close the gap between KiwiSaver members and other investors.
"The KiwiSaver providers have a responsibility to do everything they can to get confidence to really motor. And we are not seeing it as much as we would like."
KiwiSaver investors were also the least likely to find any investment materials they received to be helpful.
Only 51 per cent of KiwiSaver investors found materials received helpful and 28 per cent said it was not helpful at all, compared to 67 per cent of share investors who said investment materials were helpful and 65 per cent of managed fund investors.
KiwiSaver funds are a type of managed fund but have a lot more rules relating to them because they are focused on getting people to save for retirement.
"Considering managed funds and KiwiSaver have similar characteristics and both are licensed managed investment schemes, there are clearly some improvements that could help make KiwiSaver communication materials more useful for investors.
"Good conduct includes ensuring your customers are fully-informed about the risks and benefits of a product and they understand how market performance and costs impact the final outcome," Everett said.
The FMA is working with providers to help improve materials.
Last year it teamed up with KiwiWealth to look at how to get people to switch out of the default option, and another project with ANZ this year is aimed at encouraging 55-year-olds in KiwiSaver to undertake retirement planning.
Everett said its strategy this year was to continue to work on providers and it would use disclosure data to monitor who was doing what and to "poke a few" that were not doing enough.
KiwiSaver investors will also get more information next year on how much fees they are paying in a dollar figure. The change is limited to the KiwiSaver market but Everett said he hoped it would also be picked up by the managed fund industry as a whole.
Everett said the portion of investors who said they were not confident had shrunk from 32 per cent to 20 per cent since the survey started five years ago.
"All these scores show we are starting to see a shift in the public's historic mistrust about markets and financial services," he said. "Investors seem to have started paying attention to the presence of regulators, as well as ripples from world events, when expressing confidence."
Prior to 2015 confidence had built quite steadily "and then, with market ructions last year, it dipped", Everett said.
"While market performance has been broadly positive this year, there's been plenty of upheaval and uncertainty from Brexit and other international events."
People with no investments saw their confidence dip to 40 per cent from 43 per cent last year.
