Tamsyn Parker

Money Editor for NZ Herald

No cash to teach investors

FMA has no budget to improve financial literacy despite billions lost in company collapses Tamsyn Parker.

The FMA is being urged to focus on assisting investors and consumers to understand investment risk. Photo / Richard Robinson
The FMA is being urged to focus on assisting investors and consumers to understand investment risk. Photo / Richard Robinson

New Zealand's investment regulator has no budget to help investors gain a better understanding of where to put their cash despite financial ignorance playing a part in the loss of more than $3 billion in finance company collapses since 2006.

When the Financial Markets Authority was set up in 2011 one of its mandates was to promote informed investor participation.

But industry sources say it has little money to meet the requirement.

In 2010 the Government advertised an investor education role but the position has never been filled.

FMA spokeswoman Diane Maxwell said the authority was committed to improving investor understanding of products and services.

"FMA has been working alongside Government since its inception in 2011 to ensure that delivery of investor education initiatives are as cost- effective and efficient as possible."

But it has come under fire from stakeholders and the man who helped set it up for not doing enough.

A survey of the FMA's stakeholders last year found 17 per cent said it had performed poorly when it came to promoting informed investor participation, a further 43 per cent were neutral and only 40 per cent had a positive view.

Stakeholders said they wanted the FMA to focus on assisting investors and consumers to understand investment risk and to stop the misleading advertising of financial products and services.

The report concluded that concern over investor education was a key theme in the first year of its operation and this could be remedied by putting investors at the heart of FMA activities and working to improve financial literacy.

Simon Botherway, the former chairman of the FMA's establishment board, said surveyed stakeholders clearly found it was lacking in financial literacy education.

"There is no hard performance measure for financial literacy but it is clearly something that is desirable."

Botherway said there were a number of agencies in New Zealand charged with improving financial education, including the Commission for Financial Literacy and Retirement Income, but he believed the FMA should be the one to co-ordinate it.

Maxwell said the FMA had a mandate to work with other government agencies on improving investor literacy.

Last year the commission and eight corporates formed a task force to develop an investor education framework and action plan. The plan was out for consultation, with feedback due at the end of the month.

Help needed

$9.29b worth of finance industry failures since 2006.

$3.11b estimate of losses from finance company collapses.

67 institutions.

[source: www.interest.co.nz]

- NZ Herald

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