Financial advisers will be kept very busy over the coming year as savings rise and the “substitution effect” kicks in, according to economist Cameron Bagrie, who says New Zealand is currently in a significantly better economic position than most major global economies.
Bagrie says he expects demand for advice from insurance, mortgage, investment and wealth planning advisers to see a significant uptick, given customers are still wary about putting money into anything other than savings - however, he says there are also clear signs of that money being redeployed, which is a promising sign for New Zealand’s recovery.
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“COVID-19 is very clearly accelerating around the globe,” Bagrie commented. “We’re going to go through another bout and get disrupted, so we have to brace for that.”
“We have to give a pat on the back to New Zealand - we’ve come out of lockdown part two,” he said.
“But it would be a pretty big punt to bet against there not being lockdown part three, because the reality is this thing is very hard to contain. But the good news is that New Zealand is pretty much COVID free in an environment where the global economy is getting increasingly ravaged by that.”
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Bagrie says New Zealand’s substitution effect has been a “pleasant surprise,” and that financial advisers should expect to be “very busy” as savings and term deposits increase, and customers start looking at ways of channeling their funds.
“The effect has actually shown that people are adapting to the new normal,” he said.
“Embracing technology, working from home - these things are real, and they show that the economy is accepting change and we’re getting on with life. We’ve still got a long way to go, but that substitution effect means money gets redeployed, and people are actually re-pitching their businesses.”