How many of the money 'vulnerability' traits do you have?
Wednesday, 3 August 2022
Just one in five people feel financially secure, and the ratio is worse for people with one or more of the 14 criteria for vulnerability, a report published by the Financial Markets Authority Te Mana Tātai Hokohoko shows.
The vulnerability-scoring was included for the first time in a survey of people’s money lives conducted for the Financial Markets Authority (FMA) as it prepares for new laws requiring the likes of banks and insurers to create “fair treatment” programmes for customers.
Vulnerability traits made people especially susceptible to poor treatment by financial services companies, the FMA said.
But they also made it harder for people to achieve financial security, the FMA found.
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The survey, conducted in April and May as inflation eroded households’ spending power, found most people had at least one of the 14 vulnerability “traits”, but 43% had three or more.
The vulnerability “traits” used in the survey were developed by British financial regulators, and were split into four subgroups.
The health sub-group contained mental health conditions, physical health conditions, learning disabilities, and physical disabilities.
The life events group contained recent migration to New Zealand, having become a full or part-time carer in the past two years, having recently been bereaved, having suffered a relationship break-up, and having been affected by a natural disaster.
The resilience group contained having low savings, or having suffered a loss of income.
The capability group contained speaking English as a second language, lacking confidence in complaining, and having a low level of financial capability.
Just 9% of people who had separated from a spouse or long-term partner in the past two years felt financially secure, and just 12% of people who had experienced mental health conditions told the FMA they felt financially secure.
Just 10% of people with neurodiversity felt financially secure.
Low savings was the vulnerability trait most highly correlated with feeling financially insecure, the FMA found.
The research would help inform the FMA as it moves to regulate the 'fair conduct' of banks, insurers and other financial services companies, said FMA chief executive Samantha Barrass.
By 2025, they will all have to have 'fair treatment' programmes demonstrating they are truly committed to looking after their customers.
She said most people would experience periods of vulnerability in their lives.
Just 12% New Zealanders did not meet any of the 14 criteria.
The FMA's survey, which was answered by 2509 people, also probed trust in different kinds of financial services companies.
The survey found 67% of people said they trusted banks, but only 48% trusted insurance companies.
A large minority of people have had a hard two years, the FMA’s survey revealed.
In all, 14% of those polled had experienced a major worsening in their financial situation, the most common reason being a drop in income.
But inflation was hurting the majority of people’s ability to increase their financial security with 63% saying inflation was increasing faster than their ability to save.
The overall financial security of households remains shaky; 21% felt secure in their financial position, 27% were “beginning to make progress”, 37% were not making much progress, and 15% felt insecure.