Call for more effort to explain fees

Consumers hand providers poor report card

The investment watchdog says financial providers need to do a better job of explaining fees and product appropriateness after a poor report card from consumers. Research by t he Financial Markets Authority found just 52 per cent of investors surveyed said their provider had helped them to understand why a product was appropriate and just 53 per cent had their fees explained.

Those in KiwiSaver had an even lower score with 46 per cent of those surveyed saying fees were explained and only 47 per cent being told about appropriateness of joining the retire- ment savings scheme.

Nearly one in four (23 per cent) of the KiwiSaver investors either disagreed or strongly disagreed that fees were explained to them.

Paul Gregory, FMA director of external communications and investor capability, said the research had been done as a baseline to help the regulator judge what consumers thought about the conduct of the industry.

“This survey is not a one-off. We’ll share with providers what their customers are telling us about them and, where there are issues, we’ll expect to see them do better,” Gregory said.

Last year the regulator completed a licensing regime for all financial providers under the Financial Markets Conduct Act and this year it released guidance on what it believes good conduct looks like.

Gregory said the survey was a chance to find out what consumers were actually experiencing.

It found that while financial providers scored well when it came to being fair and professional, they didn’t do so well with fees and appropriateness.

Gregory said explaining why a product was appropriate for a person was based on understanding what they needed.

He said providers should also make it clear if they were only able to talk about their own products even if they believed that was obvious.

When it came to fees he said disclosure was not enough and that was why it had asked people about whether fees were explained.

“Disclosure is only the first step. Good conduct is how you help people to understand fees and why they are reasonable.”

He said the poorer result from KiwiSaver investors was not surprising as similar results had come through in its other surveys and pointed to KiwiSaver investors having a lower level of engagement and confidence than other investors.

Gregory said the FMA would be sharing the findings with providers and those who also attracted attention through complaints and its monitoring would get more attention from the regulator.

It also planned to publicise the results of individual financial providers in the future where sample sizes were big enough.

The survey questioned consumers in March. 1000