Investment Newsletter March 2024

Dear Valued Investors,

I’d like to introduce myself, Chelsea Quinn, your recently appointed dedicated Investment Support Specialist here at FoxPlan. Some of you may recognise my name from recent emails regarding the Consilium Phase 2 changes. I’m excited to be part of your investment experience.

Consilium Phase 2 Updates: Smooth Sailing Ahead

First and foremost, thank you to everyone who reached out with feedback and questions. For everyone who confirmed they were happy to make the suggested changes, this has all been taken care of and the timeframes for any trading requests for the accounts involved are expected to be back to normal from the 8th of April 2024.

Now, let’s talk about something equally important: financial literacy. As investors, we often find ourselves navigating a complex landscape of jargon, numbers, and market fluctuations. But how well do we truly understand these intricacies? Let’s explore the perception gap—the space between what we think we know and what we actually know.

 
 

Financial Confidence vs. Financial Literacy: The Kiwi Paradox

The Financial Services Council (FSC) Research Report 2023

Can Kiwis truly feel financially confident amidst a decline in financial literacy? The FSC’s latest research delves into this paradox, revealing a significant gap between perceived financial confidence and actual financial literacy.

The Perception Gap

A staggering 82% of Kiwis report feeling financially confident. However, when it comes to financial literacy, only 47% demonstrate a solid understanding of basic financial concepts. This discrepancy raises important questions about the roots of financial confidence and the reality of financial knowledge among New Zealanders.

Financial Trivia vs. Self-Perception

The FSC’s approach involved testing actual knowledge through ‘financial trivia’ rather than relying on self-assessment. The findings are telling:

  • Interest Rates vs. Inflation: Only 58% correctly understood that with a savings interest rate lower than inflation, their purchasing power decreases.

  • Investment Diversification: 73% grasped the concept of diversification, recognising that investing in multiple companies is less risky than a single-company investment.

  • Risk vs. Return: A high 90% acknowledged that high returns typically come with high risks.

  • KiwiSaver Fund Options: The knowledge of KiwiSaver funds was less clear-cut, with just over half (57%) understanding that a growth fund entails higher risk compared to a balanced fund.

 
 

Dissecting the Results

The research suggests several potential reasons for the perception gap:

  • Complexity of Financial Products: The financial world’s complexity can lead to misunderstandings, even among those who feel confident.

  • Educational Disparities: Differences in financial education across demographics can lead to varying levels of literacy.

  • Media and Marketing Influence: The portrayal of financial products in media can create false impressions of simplicity and safety.

  • Overconfidence: I’m sure you know what this is well enough.

Age and Gender Insights

The study also confirms that financial literacy tends to improve with age, and women generally outperform men in this area. Notably, 86% of individuals aged 60+ answered three or more questions correctly, compared to only 48% of 29-year-olds. Additionally, 66% of women got three or four questions right, surpassing the 57% of men who did the same.

Conclusion

The FSC’s research underscores a clear disconnect between financial confidence and literacy. It’s evident that while many New Zealanders feel confident about their financial acumen, a deeper understanding of financial principles is needed to bridge the perception gap.

Bridging the Gap: Empowering Ourselves

Whether you’re looking to enhance your own financial literacy and financial plan or know someone who could benefit from having a financial plan and the part investment plays in growing wealth, FoxPlan’s investment seminars are a valuable resource. We encourage you to join and extend the invitation to friends and family. These seminars are designed to help participants of all ages bridge the perception gap in financial knowledge.

The dates and times of our upcoming April seminars are below:

·         A Seminar for SME Success – 23rd of April 2024 at 5:30pm

·         Elevate Your Wealth: Investment seminar – 24th of April 2024 at 5:30pm

You can register for one of our upcoming seminars by clicking this link here.

 

Figure 1: The Perception Gap, FSC research report 2023.

*Very to Reasonably Confident respondents
**Partially/Not Confident respondents

For a more detailed analysis and insights, refer to the full FSC research report 2023. You can register for a copy of it by following this link here.

Holly Jones