New Zealand’s FMA white paper on things stopping good investment decisions


The government of New Zealand has shown a keen interest in understanding the best ways to improve financial capability, including through policy design and consumer protection regulation and supervision. Within this framework, the country’s Financial Markets Authority (FMA) has recently published the first in an occasional series of papers that it intends to publish in the near future, in order to set out its thinking, or to describe things the FMA or others are doing, which are relevant to regulation of New Zealand’s financial markets.

The full version of the white paper, which is entitled Using behavioural insights to improve financial capability, is available at

The key conclusion derived from this cross-governmental paper is that feelings and fears are the key things that stop consumers from making good decisions when it comes to their finances or investments. The paper itself is a result of a partnership between New Zealand’s FMA and the country’s the Ministry of Business, Innovation and Employment (MBIE), Treasury, the Inland Revenue Department and the Commission for Financial Capability (CFFC).

Recognizing that using behavioural insights to improve financial capability looks into what influences your decisions and whether you are aware of them or not, the paper argues that the key barriers to good investment and financial decisions are our:

preferences – our emotions and psychological experiences;

beliefs – what we believe is likely, and what we believe about our own abilities; and

decision-making rules – the flawed short-cuts we use to assess information.

The paper also details the four interventions that can assist with making good decisions, under the so called EAST framework:

make the decision easy – for example, with defaults

make it attractive – do something to grab the attention

make it social – encourage commitment, ideally to friends and family

make it timely – prompt a decision when people are likely to be most receptive.

According to the FMA’s relevant press release, which came out under the telling title Three things that stop you from making good investment decisions – and four that can help, the FMA is aware that financial service providers already use behavioural techniques to better understand their customers, but primarily for commercial purposes.

However, as the announcement clarifies, the New Zealand Government agencies that partnered for the paper are encouraging financial service providers to also use the understanding that comes from this work, to help their customers make better financial decisions which are often complex and have long-term impacts.

According to Paul Gregory, the FMA Director of External Communications and Investor Capability: “The best time to help New Zealanders focus on making good financial decisions is when they’re actually making them. That means the investment and broader financial industry has an essential role. So, as well as the work government agencies are doing, we look to industry to use these insights positively: in their product design and marketing, disclosure, and in their sales processes. This is in all of our interests. We can’t have fair, efficient and transparent New Zealand financial markets if decisions are being made on the basis of bias or other emotions.”