Public confidence in finance sector drops

NEWS RELEASE

14 April, 2011

Public confidence in finance sector drops while people say investments worth more

The latest RaboDirect Financial Confidence Index (FCI), released today, shows that public confidence in New Zealand’s financial service providers to help them grow and protect their wealth has dipped sharply.

The Index, which is the only one to measure public rather than business confidence, shows that public confidence in the financial sector is at its lowest level since the FCI was launched in August 2009.

“This is the fourth time we have run the survey, which provides a good base for making some comparisons,” says the General Manager of RaboDirect, Mike Heath. “In August 2009 at the height of the recession, the overall confidence Index score was 18 per cent. In 2010, confidence levels increased to 22 per cent, but last month they had dropped to just 10 per cent. However despite this, the latest Index has an increased number of people saying their investments are worth more now than six months ago.”

Mike Heath says confidence has fallen for every type of financial service surveyed, with banks, credit unions and building societies declining the least, and insurers suffering the biggest drop.

However, he says, the findings reflect consumer behaviour in times of economic pressure.

“With this Index we have seen consumers increasingly focused on perceptions of fairness, greater demand for good information, products and services, and, not surprisingly, the safety of their investments. Hard times can often become ‘moments of truth’ for organisations, with increased public scepticism and scrutiny of marketing offers, as well as higher expectations of the services being provided,” Mr Heath said.

In terms of general confidence, the effect of the second earthquake in Christchurch has had a severe impact, with 50 per cent of New Zealanders now feeling less confident in the economy overall.

“Major challenges facing the economy as a result of the Christchurch earthquake were identified as funding the rebuild, the job of rebuilding itself, how to repay the debt and increased unemployment,” Mr Heath said.

On the plus side, half of those surveyed have some form of managed fund – largely due to KiwiSaver – and a third said they had no debt. Also, 44 per cent of people are taking active steps to reduce their debt levels. Among New Zealanders as a whole, half of the monthly income is spent, with 28 per cent allocated to reducing debt, and 18 per cent put towards savings.

Confidence in home ownership as an investment vehicle remains strong, with 74 per cent agreeing this is a way to grow wealth. However while 23 per cent said their housing investments were worth more now than six months ago, 32 per cent said they were worth less.

Seven per cent of New Zealanders said they were likely to invest in purchasing their own home in the next six months, while four per cent were likely to invest in property.

“This latest FCI seems to show in some cases a contrast between perception and reality, particularly for those with investments,” Mr Heath said. “General confidence can be knocked by major events, but when it comes to personal circumstances, the responses can paint a different picture.”

Mike Heath says despite some negative sentiment about the financial sector, of those people with investments, 30 per cent thought they were worth more now than six months ago, with 42 per cent saying they remained unchanged, and 28 per cent saying they were worth less.

And while New Zealanders increasingly feel that house, contents and car insurers don’t act fairly or with integrity, just over four out of five continue to have this type of insurance, with 14 per cent of customers rating their relationship as excellent and just three per cent as poor.

Mike Heath says the Index highlights that as economic conditions ease, businesses that are customer-centric, provide good information and are values-driven will do best.

Ends

Editor’s notes:

Until March 2011 there had been no single measure that summarised the New Zealand public’s level of confidence in the financial sector as a whole.

Historic data comparison
To be able to compare historical data from the three previous RaboDirect Financial Confidence Indexes (August 2009, March 2010, September 2010), weights were calculated and applied to the previous FCI measures using a regression analysis. Going forward, there will be no estimation of weights, and overall measures of financial confidence will be constructed directly from responses to questions.

About the RaboDirect Financial Confidence Index
The RaboDirect Financial Confidence Index is a nationwide survey that aims to measure public confidence in - and attitudes toward - deposit-taking institutions, financial advisors and insurance providers. The survey is conducted online by RaboDirect in conjunction with research company TNS, with a random sample of 1,000 New Zealanders. The RaboDirect Financial Confidence Index was first conducted in August 2009 and RaboDirect reports back on survey results every six months.

The latest RaboDirect FCI survey was conducted in March 2011.

Further details on the methodology of the RaboDirect FCI and a full copy of the latest research is available on request.

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RaboDirect changed its name from RaboPlus in August 2010.

RaboDirect is an online banking service designed to complement customers’ existing banking arrangements. RaboDirect offers New Zealanders a high interest, no fees, on-call savings account as well as term deposits and access to managed funds.

RaboDirect is a division of Rabobank New Zealand Limited, part of the international Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 110 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness.

Rabobank has the highest possible credit ratings from both Standard & Poor's (AAA) and Moody's Investor Service (Aaa), and has held these triple A ratings for more than 25 years. Rabobank operates in 48 countries, servicing the needs of approximately 10 million clients worldwide through a network of close to 1600 offices and branches. Rabobank is among the 25 largest banks in the world based on tier one capital. In New Zealand Rabobank employs approximately 290 staff across 31 branches to service its clients. Sixteen staff, including a Wellington based call centre, support RaboDirect customers.

RaboDirect is the winner of Best Online Savings Account for the Sunday Star-Times Canstar Banking Awards, for the fourth consecutive year. RaboDirect is also winner of Best 90 Day Term Deposit and Best New Product (Cash Advantage Fund) for the 2008 Sunday Star Times, Cannex Banking Awards. In addition, RaboDirect won the Emerging Business Award at the 2007 NZ Marketing Magazine Marketing Awards, and won the Gold in New Product or Service Introduction and the Best in Show award at the 2007 Effies (Advertising Effectiveness Awards).

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