New Zealand Household Attitudes towards Savings, Investment and Wealth: A Report on Phase One Janice Burns and Maire Dwyer September 2007 SUMMARY This study examines New Zealand household’s attitudes to various forms of saving and investment. A specific objective is to better understand the reasons for preferring investment in property over other investment, particularly financial investments. This paper reports on phase one of the project. The project uses three sources of information – published studies and a review of policy settings, interviews with individuals knowledgeable about investment and savings behaviour and attitudes, and interviews with eight consumers aged between 30-50 years. Investment and savings attitudes and behaviour are influenced by the structure, complexity, transparency and perceived past and future performance of different kinds of investment options; the general lack of independent financial advice; the recent superior performance of property investment; perceptions and personal tolerance of risk; the often low level of financial literacy about products other than property; the nature of the information people use when making financial decisions; the personal or family experience people have with investment; a general wish to have personal control over the investment and trust in the advice of friends and family over unknown professional advisors. Consumer decisions on saving are likely to be influenced by new or proposed changes in the investment environment and in particular the inducements to take up Kiwisaver. The application of lower taxes to earnings in managed funds, and forthcoming regulatory changes aimed at improving disclosure and prudential arrangements applying to financial products, providers and advisors are also likely to have an impact. In addition, this phase one report suggests other possible changes to increase investor protection, information and confidence. Increasing the attractiveness of financial products and decreasing the share of investment held in housing could be assisted by publicly funded and publicly available league tables and/or consumer checks on investment products, providers and advisors; provision for a 7 day ‘cooling off period when specified financial products are purchased; mandatory ‘plain English” disclosure of fees and investment performance and the fostering of more sophisticated financial literacy through programmes in schools.
Overall, the findings suggest that consumers’ current preference for investment in property has been a considered response, made in the light of a variety of factors and experiences.
PROJECT OBJECTIVES The purpose of this study is to capture and describe New Zealand household’s attitudes to various forms of saving and investment. In particular the study focuses on understanding the attitudes of people aged 30-50. It was felt that people in this age group were likely to have already established themselves in their jobs, and possibly in their own homes, and hence were likely to be turning their attention to investment issues. The Reserve Bank is interested in understanding the attitudes of people who are savers, and those who could save, but don’t. Specific objectives are to understand: • • • the reasons for preferring property investment over shares specific barriers to investing in business, including the assessment of risk and access to opportunities information and other influences on the perceptions of savers and nonsavers. Phase one was designed to
The project was designed around two phases. provide an overview of:
(a) what is known about investment attitudes and behaviour in New Zealand and (b) the factors that are known to influence savings and investment attitudes and behaviour. Phase two proposed conducting up to 10 focus groups with people who use a range of different investment/savings options (including not saving or investing). It was agreed that phase two would only take place if the findings...