Why Kiwis don't get money advice

Many Kiwis don't ever seek out professional financial advice. Photo/iStock.

Worries about the cost and fears over conflicted advice are two of the biggest reasons Kiwis don't seek out professional advisers, research shows.

The Commission for Financial Capability has today released two surveys on people's attitudes to professional financial advice.

One questioned a sample of over 50 year olds about how prepared they were for retirement in conjunction with the Financial Markets Authority while the other was based on adults who use the financial planning website sorted.org.nz.

Both found many New Zealanders do not seek professional financial advice at all.

Of the over 50 year olds six in 10 had never sought advice while the sorted survey of people found 46 per cent had never received professional advice.

Of those who had seen an adviser just 26 per cent paid for the advice.

Asked why they hadn't sought advice 44 per cent of the sorted respondents said they managed their own finances while 30 per cent said they couldn't afford it.

A further 25 per cent said they didn't know how to find or choose an adviser with the same number worried an adviser would just try and sell them something.

Only 16 per cent said they had not sought advice because they were happy with their financial situation.

In both surveys the biggest reason people would seek out advice was if they received an unexpected sum of money.

A third of the sorted users would seek advice to help plan for retirement but only 21 per cent of the over 50s questioned would get advice if they were close to retiring.

Trust in the integrity of the advice was the biggest factor in choosing a professional for the over 50s followed by whether they could help achieve financial goals.

It's clear that investors have fears about the way some financial products are being sold and transparency will help to build up trust and lead to better outcomes for the public.

David Boyle

How well an adviser disclosed any links between themselves and products they recommended was also seen as being important.

David Boyle, head of investor education at the commission, said there were times in life when it was really important to seek advice but many people seemed reluctant to do so.

"We would like to see better transparency around some of the issues that have been raised about the way advisers are paid, bias to particular products or providers, and incentives to sell products.

"It's clear that investors have fears about the way some financial products are being sold and transparency will help to build up trust and lead to better outcomes for the public."

Last week actuary firm Melville Jessup Weaver called for upfront commissions paid to life insurance advisers to be slashed over concerns that people are being moved unnecessarily around insurers so that advisers can collect the high fees.

Its research revealed advisers were being paid around 180 to 200 per cent of the first year's premium plus soft bonuses including overseas trips which put New Zealand out of line with other countries.

Advisers have hit back at the criticism warning many would go out of business if the commissions were cut leaving consumers with less choice.

The Financial Advisers Act is currently under review and the government wants to make it more consumer friendly.

It has come up with a number of options for ways to improve the advice industry which are open to submissions.

You can see the surveys here.