Latest News

Public Libraries and Financial Literacy

Public Libraries, both here and overseas, are often described as stakeholders in the financial literacy field. Their role ranges from being venues for pamphlets and internet access to sites such as Sorted, to hosting seminars on aspects of financial literacy. An example of the latter is the seminars hosted by Hamilton City Council Libraries in the 2011 April school holidays for children aged 8-12 years. The seminars called Spend Stash or Save – The fun way to learn about money, were fully subscribed.

An overseas example is the Leeds Library (UK) partnering with the Yorkshire Bank to support numeracy and financial literacy for families. The three strands of the programme were targeted at preschool, primary and secondary school pupils. The primary school programme was available in multiple languages.

Recent development overseas indicates that the role of libraries may be expanding. Staff of Project Read, a South San Francisco library initiative promoting lifelong learning, used a ‘webinar’ (on line seminar) to share their experience of developing a Financial Well-Being programme with staff of other libraries and offered tips to create a financial literacy programme at a library.

Webinar participants learned how to offer a financial training program at their library, including how to train volunteer tutors and how to draw patrons in for financial management coaching

The South Francisco library programme included financial coaching for adults as well as financial story times for children.

Another interesting initiative has been Money Smart Week @ your Library. This year the Federal Reserve Bank of Chicago and the American Library Association (ALA) partnered for Money Smart Week. The ALA hosted 131 classes, bringing in 1,523 attendees. When asked “How valuable was this Money Smart Week Session?” 98.9% of consumers surveyed replied either “valuable” or “very valuable”.

After a successful first year with libraries in over 30 states participating, the ALA is again partnering with the Federal Reserve Bank of Chicago for Money Smart Week @ Your Library in 2012 and is inviting more libraries to participate.

The ALA and the Federal Reserve of Chicago are also planning to host a number of webinars, and in-person presentations at number of state association conferences later this year.

One of the 14 research projects undertaken this year by the Financial Literacy Research Consortium (FLRC) is Public Libraries as Financial Literacy Providers. Lead researchers Catherine Arnott Smith and Kristin R. Eschenfelder see the results of the study, ‘informing the education of future librarians and the development of library professional continuing education/training materials with the hope of increasing the capacity of libraries to serve the financial needs of their patrons.’
A full list of current FLRC projects is here.

KiwiSaver ‘tinkering’ has hit confidence in scheme

A banking specialist has called for both major political parties to show their support for the KiwiSaver scheme to boost public confidence.

Dr Claire Matthews was speaking after completing research that was commissioned by the Financial Services Institute of Australasia and the Institute of Financial Advisers.

The report KiwiSaver and Retirement Savings found that nearly 30 per cent of non-members said they had not joined because they were concerned a future government would change the rules and 21 per cent feared a future government might abandon the scheme.

Dr Matthews, of the Centre for Banking Studies, says New Zealanders don’t trust the Government not to change the KiwiSaver scheme.

“Given there have been two changes since KiwiSaver was introduced in 2007 that’s not all that surprising,” Dr Matthews says. “However, this is a key reason given for not becoming members, and therefore the Government needs to overcome those concerns. In my view the only way that will happen is if the political parties agree not to further tinker with the system.”

More than a fifth of respondents said they were worried about the Government’s ability to manage money, which reflects a lack of understanding in the scheme as savings are held with private providers.

Dr Matthews, who is a board member of the New Zealand Centre for Personal Financial Education founded by Westpac New Zealand and Massey University, designed the survey and analysed the findings, with data collected by UMR Research.

It aimed to gauge perceptions of KiwiSaver, the importance of saving for retirement, where they obtained advice and views on the changes to KiwiSaver in the 2011 Budget.

The full report is available here.

Third-tier lenders research

In August Consumer Affairs Minister Simon Power released research into third-tier lending.

The main piece of research, undertaken by the Ministry of Consumer Affairs, identified 218 third-tier lenders (lenders who provide personal, non-mortgage loans, excluding banks, building societies, and credit unions) operating in New Zealand, and examined the advertising methods they used.

The research reports are available here.

One issue of concern is that two thirds of those who borrowed from third-tier lenders were offered a further loan, a credit top up, or more credit than they initially asked for.

Responsible Lending Guidelines – What you should expect from your lender when you are borrowing money

The Financial Service Federation - FSF (the association for building societies and other NZ finance companies) has launched the above leaflet on www.fsf.org.nz. As part of a joint venture with the Ministry of Social Development the leaflet aims to ‘tell you what a responsible lender will do to help you and make sure you don’t get a loan you can’t repay’. It covers how lenders should understand the borrowers’ needs, deciding if the loan is right for you, making sure you understand the details of the loan and information on helping you if things go wrong. The NZ Federation of Family Budgeting Services has welcomed the guidelines, although cautions that they do not guarantee consumer safety in that not all lenders belong to the FSF and there is the challenge of getting the information out to the right people.

The New Zealand Centre for Personal Financial Education

The New Zealand Centre for Personal Financial Education was launched on June 16th. Set up by Westpac Bank and Massey University the Centre aims to increase the financial literacy of New Zealanders. The University will offer programmes for financial educators and also undertake longitudinal research to assess changes in financial literacy over the next 20 years.

Relevant articles about the launch are available here:

New effort to improve New Zealand's financial nous

Massey starts longterm probe of financial literacy

Financial Markets Authority (FMA)

Launched on 1 May, the FMA's major goal is to restore investor confidence in New Zealand's financial markets.

FMA chair, Simon Allan said, New Zealand's economic prospects depended on 'lifting international and national investor confidence in the country's capital market'.

The FMA is now the single regulator for New Zealand's financial markets, taking on the regulatory functions of the Securities Commission, the Ministry of Economic Development and the NZX. The FMA chief executive Sean Hughes says that the FMA has new powers, new functions, a greater mandate and significantly increased budget compared to its predecessors. One of its roles is to ensure that investors have access to timely information to help them invest wisely.

Their first new release can be found here.

Sean Hughes has been quoted as saying that to him a totally deregulated financial market is like an airline industry without air traffic controllers!

This NZ Herald interview with Mr Hughes gives an indication of his approach to the new FMA and his role

A FMA representative will be joining the National Strategy for Financial Literacy Advisory Group.

Boston College Centre for Retirement Research

The Centre has just released two new financial literacy research papers.

The first, Financial Literacy on the Web by Kimberly Blanton (March 2011) includes a reference to the NZ Retirement Commission's very own Sorted site describing it as transcending the 'status quo' of dull and unengaging websites.

'Nearly 4,100 personal finance websites exist on the World Wide Web, according to The Nielsen Company, and they target individuals of all ages, income levels, and needs. Personal finance websites now attract one in four people who use the Internet", said comScore.com, which tracks Internet traffic, rivalling Facebook in popularity.

At the forefront of this trend are websites that monitor budgets for young professionals with high disposable income, deliver coupons to the thrifty, and host calculators capable of boiling down personal financial information into a single chart or a long-term financial plan.

This report imposes order on the Internet's chaos by providing a framework to assess personal finance websites. We determine what features make them most effective in promoting financial literacy and what marketing and advertising strategies are most successful in attracting visitors. To promote financial literacy, a website must give its users useful information and the tools they need to examine their personal finances and prepare sound financial plans and also the confidence to act on those plans.'

The second research paper Financial Literacy: What Works? How Could It Be More Effective? was commissioned by the Centre and written by William B Gale and Ruth Levine (February 2011)

'This paper highlights the extent and effects of financial illiteracy among American households, reviews previous efforts to promote financial literacy, and discusses new directions for such initiatives. None of the four traditional approaches to financial literacy – employer-based, school-based, credit counseling, or community-based – has generated strong evidence that financial literacy efforts have had positive and substantial impacts. Nevertheless, the apparent success of financial planning efforts and of simplification initiatives suggests that there are both private actions and public policy strategies that can influence saving behavior.'

New board members for Workplace Savings NZ

Workplace Savings NZ (the voice of workplace savings) has announced the appointment of four people to its Council Board at the association's Annual General Meeting in Wellington.

In a move which demonstrated strong support for the work being undertaken by Workplace Savings NZ, eight member representatives were nominated to fill four vacancies on the board.

The successful candidates were:

Ian Miller (Head of Wholesale Investments at Tower Investments) – elected for a second three year term;
Graham Evans (Director of Breaker Bay Group Limited) - elected for a second three year term;
Kerry Haycock (Financial Controller at Airways NZ) who had been co-opted to the board in 2010 to fill a casual vacancy; and
John Smith (General Manager Investments at ASB Bank Limited), a first time board member.

“Workplace Savings NZ is very pleased to have attracted such interest in working on our governance group” said Chairman David Ireland.

“Our new board members collectively bring a wealth of experience to the table, and they will capably support our objective of advancing the sustainable, effective and efficient delivery of workplace savings outcomes for all involved,” he said.

Special mention was made of retiring board member Dianne Kidd, who stepped down after serving 6 years on the board, chairing its professional development initiatives during that period.

Workplace Savings NZ has also announced a new membership group for whom “Continuing Profession Training” will be a core criterion.

David Ireland said the name given to the new membership group is “Workplace Savings Professional” (WSP).

“Given the current direction of regulatory reforms, we believe it is important that those who demonstrate a commitment to expertise in the industry in which they work are able to be formally recognized for that commitment,” he said.

For further information contact:
David Ireland (Chairman, Workplace Savings NZ)
Bruce Kerr (Executive Director, Workplace Savings NZ)

BNZ to chair New Zealand Bankers' Association

The new Chair of the New Zealand Bankers' Association (NZBA) for 2011/12 is Bank of New Zealand Managing Director and Chief Executive Andrew Thorburn.

David Hisco, Chief Executive Officer of ANZ New Zealand, is the Deputy Chair.

Thorburn, who takes on this role in NZBA's 120th anniversary year said, “BNZ is pleased to be taking the Chair position for the next 12 months. As an industry we will continue to strive to deliver a strong, stable and responsive banking system for the benefit of all New Zealanders.”

BNZ takes over the mantle of Chair bank from ASB Bank. “I look forward to working with Andrew Thorburn. I am also very grateful for the leadership, support and assistance initially of Charles Pink, and then Ian Park, over the last year while ASB was our Chair bank,” said NZBA Chief Executive Sarah Mehrtens.

Established in 1891, NZBA is a non-profit unincorporated association funded by member banks. In conjunction with its members, NZBA develops and promotes the banking industry viewpoint on non-competitive issues in policy discussions and in the media. NZBA also facilitates good practices in the banking industry through the Code of Banking Practice.

NZBA membership is open to any bank registered under the Reserve Bank of New Zealand Act 1989. Currently 12 registered banks are NZBA members. NZBA's governing body is its council, comprising the chief executive of each member bank.

James Banks's Seminar

James Banks is deputy research director of the Institute for Fiscal Studies, London and Professor of Economics at the University of Manchester. He joined the Institute in 1990 having studied at Bristol University and the London School of Economics. His research focuses on empirical models of household spending behaviour and intertemporal consumption patterns; savings, retirement and household asset holding; equivalence scales and welfare measures.

In December 2010 James gave a presentation, hosted by the Retirement Commission, on numeracy, financial literacy and retirement saving trajectories.

His presentation can be viewed here.

Financial literacy and banks

The New Zealand Bankers' Association has now established a Financial Literacy Advisory Group made up of representatives of its member banks. The group, which had its first meeting in October 2010, aims to develop a closer working relationship among banks on non-competitve issues in the area of financial literacy.

Retirement Commissioner Diana Crossan attended the first meeting and addressed the Group on lifting New Zealanders' financial literacy. The group expressed an interest in working with the Retirement Commission and other agencies on issues of mutual relevance.

Workplace Savings Conference

One of our sponsors Workplace Savings NZ, recently held a conference with the theme Workplace Savings 2020 - where our industry wants to be in 10 years time. There was a wide range of presentations which are worth checking out. They can be viewed here.

Legislative Changes

There are important changes pending for the financial advisory sector which will raise professional standards and should increase public confidence in the sector. This can only be good for the quality of advice consumers receive.

The Financial Services Providers Registration and Disputes Resolution Act (FSPA) which takes effect on December 1st and the Financial Advisers Act, which comes into effect in July 2011 will together prescribe: