The Global Financial Crisis was the catalyst for significant change in the regulation and supervision of financial markets. Just like an earthquake, the Crisis shook the very foundations of financial systems and any weaknesses resulted in damage and destruction. Unfortunately many investors suffered losses and to reduce the risk of this happening again, the foundations of our financial system have had to be strengthened. The Financial Markets Authority (FMA) was established in 2011 with the objective of promoting and facilitating the development of fair, efficient and transparent financial markets in New Zealand. One of the ways it achieves this objective is by educating and informing New Zealanders on investing. Over the last year the FMA has been steadily building an inventory of resources to help all market participants, including investors. It now offers a comprehensive section on its website called ‘Help Me Invest’ – click here. It is well worth listening to Sue Brown’s video clip which covers how to be an informed investor. Sue is Head of Primary Regulatory Operations at the FMA and her top three tips for investors are:
- Understand what you are investing in. How does it work, what are the costs, fees and limitations? Does it match your goals and risk tolerance? What are the risks? Don’t invest in something you don’t understand.
- Do some research. You don’t need to become an expert, but you do need to know enough to judge whether the investment will meet your needs. Read the product investment statement as it contains the basic information you need to know.
- Use a financial adviser, and be aware there are different types. An Authorised Financial Adviser (AFA) can advise on most investment products, and a Qualifying Financial Entity Adviser (QFE Adviser) can advise you on the investment products provided by their company.