The new research highlights Kiwi debt behaviours, and approachable advice can make a difference
One third of New Zealanders are concerned about their debt levels, according to the recent Good Cents: Kiwis on Savings and Debt research published by the FMA. This is particularly true for those in the 25-44 age range – a group the FMA noted may be facing financial strain “at a life stage often associated with key financial commitments” such as mortgages, student loans, and childcare costs.
The data also showed that 55% of participants prioritised high-interest repayments, and this trait was noticeably higher in those who hold a mortgage or a credit card.
The research has raised important questions about how different groups handle and manage debt. The FMA said it would like to further study the debt behaviours of mortgage holders specifically.
“It would be useful to disaggregate this group to determine whether they typically hold few other debts, or are deliberately prioritising consumer debts over housing debt – and to consider the implications of this under financial stress,” the FMA stated in its research.
“Given recent sharp interest rate increases, differences in past and expected future financial outlooks may be driven by debt servicing costs and their effects on disposable income. A simple segmentation could provide useful context here.”
Bridging the trust gap
According to Gael Price, head of economics and research at the FMA, these findings highlight the important role of the advice industry in helping New Zealanders navigate an often complex and opaque financial system.
Price said that while every client’s situation is different, the diversity in debt behaviours and financial literacy levels calls for more personalised and accessible advice.
“It’s important that clients are well informed about all the different aspects of their investment decisions – such as their tolerance for risk and how that is matched to products that produce associated returns, liquidity implications, and all the other things they feel are important, but also may not be aware of,” Price told NZ Adviser.
“The advice industry plays a vital role in not only providing this information but also helping clients make sense of it all.”
Price also highlighted another challenge: many people are still reluctant to talk about their finances, particularly when they’re under pressure. The FMA’s research shows a strong appetite among New Zealanders to better understand and manage their finances – 67% said they were open to advice or learning how to make their money go further. However, this openness sits alongside a significant barrier: 42% of respondents reported feeling uncomfortable discussing their financial situation with others, even those close to them.
The FMA’s research note into vulnerability showed that trusted sources of financial advice differ by community. For Māori and Pacifika in particular, trusted personal relationships are important, and Māori are equally likely to approach their partner or whānau for advice as their bank.
Commenting on the role of mortgage advisers in particular, Price said that being open and approachable is crucial to extending the accessibility of advice.
“Be mindful that many New Zealanders feel uncomfortable discussing their financial circumstances, even with people they know well,” Price said.
“Being approachable and accessible to people who might not normally seek advice could potentially make the difference between a person getting good guidance or making a decision on their own.”
A sign-post for the adviser industry
The findings from the Good Cents research are also a reminder of the regulatory expectations placed on financial advisers, particularly in times of heightened financial pressure. While many New Zealanders report feeling confident in their financial decisions, the FMA’s data also revealed widespread vulnerabilities, such as mismatches between financial goals and behaviour, fragmented debt management, and uneven engagement with advice services.
This complexity reinforces the purpose of the Financial Markets Conduct Act (FMC Act), which mandates that advisers must act in clients’ best interests and tailor their services to individual circumstances. For Price, the research is a “sign-post” for advisers to be proactive about making financial advice accessible.
“From an advice perspective, the sign-post is for industry to encourage increasing the uptake of professional and tailored financial advice for average New Zealanders,” Price said.
“This helps promote better financial outcomes. To enhance our understanding of the availability of financial advice in New Zealand, including where consumers go to get advice, we are planning a separate review to identify challenges and opportunities related to access to financial advice.
“The findings in the research will help advisers identify circumstances in which heightened attention is needed to give responsible advice to clients who may be experiencing vulnerability,” Price said. “Our additional research note into vulnerability is especially important in this regard.”
