FMA survey shows 1-in-10 Kiwis holding crypto assets, while direct share investment is now more popular than term deposits

One in 10 Kiwis are now holding crypto assets, according to the latest survey conducted for markets regulator the Financial Markets Authority.

And direct investment in shares has overtaken term deposits in popularity for the first time in the survey, although KiwiSaver remains by far (64%) the most held type of investment. 

Meanwhile, confidence in New Zealand’s financial markets has slipped back in the past 12 months, after last year’s record score, but overall, two-thirds of investors remain confident.

The Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko 2022 Investor Confidence Survey shows 66% of investors remain confident, compared to 72% in 2021.

The FMA said this year’s score is consistent with investor confidence levels recorded in 2019 and 2020, and has been impacted by the most recent Covid-19 uncertainty and global events.

This is the 10th FMA Investor Confidence Survey. It was conducted by independent market research firm Fiftyfive5 via a 25-minute survey among a representative sample of 2,509 New Zealanders aged 18 and over between March 15 and April 11, 2022. The FMA said a larger sample size this year has enabled the FMA to obtain greater insights and deeper demographic information beneath the scores.

FMA chief executive Samantha Barrass said: "It is no surprise that overall market confidence fell back in the last 12 months, given the volatility we have seen. The prolonged impacts of COVID-19 on supply chains, the end of quantitative easing by central banks around the world, and the return of inflation internationally, have significantly shifted market sentiment, both at home and abroad."

While the 2021 survey had asked about crypto in terms of 'new' investments made by people, this year's survey has for the first time included crypto assets in the list of investments already held by Kiwi investors. And it shows that 10% now hold crypto.

The FMA doesn't have a regulatory role with crypto as such, but some crypto activities can fall within its regulatory remit. The FMA does include detailed information on the subject on its website.

And it describes crypto assets as "high risk, speculative products that operate differently to traditional investments. Only invest what you can afford to lose and use New Zealand-based platforms to give yourself some level of protection".

Last year the FMA made a submission to Parliament’s Finance and Expenditure Select Committee when the committee held an inquiry into "the current and future nature, impact, and risks of cryptocurrencies". 

In that submission it said: "As a general observation, most offers of cryptocurrencies and most cryptocurrency exchanges deliberately structure themselves to operate outside of the reach of mainstream markets or securities regulation.

"There has not been a regulated offer of cryptocurrencies yet in New Zealand nor is there a regulated financial product market here. We have however seen a number of offers made in other jurisdictions that may have been taken up by people in New Zealand. The regulatory protections available in such circumstances are very minimal," the FMA said in that submission.

Back on the latest survey - it also shows that 24% of those surveyed now directly own shares - IE ones they've bought themselves rather than through KiwiSaver or other managed funds.

That's up from 21% last year. And it compares with just 20% now holding term deposits (down from 28%). Managed funds have also risen to their highest level at 17%.

Barrass said it was the first time since the survey started recording - in 2016 - detailed information of what investments people actually held that there were more investors in shares than term deposits.

"Building on last year’s trend, term deposits have continued to decline, while investments in shares and managed funds continue to rise. This represents a notable shift in investor preferences, as we have traditionally seen New Zealanders choose more conservative assets," she said.

In terms of detailed results from the survey, although overall confidence is lower than in 2021, investors and non-investors alike feel more confident that New Zealand financial markets and financial service providers offer good long-term opportunities (71% in 2022, vs. 63% in 2021), offer protections for investors and customers (66% in 2022, vs. 61% in 2021), and are more confident that they will be treated fairly (70% in 2022, vs. 65% in 2021).

Despite this, just three in 10 New Zealanders feel confident that they would know what steps to take if they experienced unfair treatment from a financial services provider.

Investor confidence in effective regulation is stable at 65% of investors surveyed, slightly down, but within the margin of error, from 67% in 2021. “While market sentiment has impacted investor confidence it is pleasing that confidence in the regulation of the markets has held up and more investors have confidence that they are provided protection, and are fairly treated,” Barrass said.

This year the confidence of non-investors in both the markets and effective regulation has increased considerably, suggesting there is an increasingly positive sentiment towards investments, even from the sidelines.

Fewer people recalled receiving investment materials compared with last year, (down from 80% to 70%), and there was a small drop among this group who found the materials helpful, now at 59% (from 63% in 2021).

"However, encouragingly, among those who found materials helpful, there was a large increase in the investors who said the materials were clear, concise and effective, up from 74% to 85%, this year.

“The usefulness of investment materials is an important focus for the FMA as we want investors to make well-informed decisions. There is an onus on providers to make sure materials are easy to understand. Clear disclosure makes an essential contribution to acting in the best interests of clients.” Barrass said.

Those surveyed who are aware of the FMA are much more likely to say that the FMA helps promote trust and confidence, integrity, and fair and efficient, transparent markets. These scores also tend to be higher among older men, with higher incomes.

“The FMA’s mandate is now expanding from investors to consumers of all financial products. Our surveys will start to reflect this evolution in our mission to the promote the fair treatment of all customers of financial services,” Barrass said.