Kiwis confused about risk on growth investments, survey shows.

Tuesday 14th October 2014

Kiwis are clued up about straight-forward low-risk investments but are far less confident on riskier choices, a Financial Markets Authority survey shows.

The survey of just over 1,000 people nationwide, commissioned by the regulator as part of Money Week, was aimed at getting kiwis to consider how they manage risk with their personal finances.

Respondents were asked to assign a risk level to a range of investments including shares, KiwiSaver, funds, term deposits, bonds and residential property. They were also asked whether these investments involved a money back guarantee.

People seemed to understand that term deposits and fixed interest investments were low-risk investments but were confused over the level of risk for more growth-focused investments and whether they came with some form of guarantee, said Simone Robbers, FMA Head of Primary Markets and Investor Resources.

“We want to raise awareness of risk and people’s risk profile. What’s right at the beginning of your working career is quite different to when you head to retirement,” Robbers said.

Those who are too risk averse when young won’t see their assets grow at the rate they may need for their retirement while people approaching retirement shouldn’t be taking on too much risk when they’re about to need their nest-egg, she said.

Some 81 percent of respondents considered term deposits low risk while 73 percent said KiwiSaver conservative funds were low risk. But just over half thought term deposits came with a guarantee and 42 percent thought KiwiSaver did when in fact, neither do. Only 17 percent surveyed thought none of the investments included in the research came with a guarantee.

Robbers said people should read the descriptions in the product disclosure statements, which spell out the risk and returns for each product, including any guarantee. New rules meant providers were having to provide shorter disclosure documents for retail investors, she said.

When it came to residential property 43 percent thought it was a low risk option while 48 percent thought it was medium risk. Of those that thought it was high risk, younger people were more likely to do so than older respondents.

Almost two-thirds of respondents preferred steady investments offering a reliable return compared to 39 percent wanting the best returns. Aucklanders were the most likely to prefer the best returns and were also more likely than average to want an investment which would double their money within 10 years.

Half of those surveyed would take a day or less to choose how to invest $10,000 while nearly one in five would take an hour or less.

BusinessDesk.co.nz

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