Morningstar has published the second part of its biannual Global Investor Experience report, which looks at the experiences of managed funds investors in 26 countries around the world.

The second part looks at regulation and taxation.

New Zealand received a below average grade, falling short of the standards set by other markets in incentivising investing and protecting investors.

Top grades were given to the UK, Netherlands and Sweden, partly because they provided strong incentives for ordinary people to invest.

Along with New Zealand, below average grades were given to Australia, Canada, China, Japan and the US - markets where the regulatory and tax schemes needed to improve.

Morningstar did not give any country a "bottom" grade because there was at least basic protection for investors in all of them.

Morningstar data director, Asia Pacific, Greg Bunkall said the Financial Markets Conduct Act had stopped New Zealand from being an outlier.

"But if you're standing still you're going to go backwards because it's a relative report."

He said more should be done in New Zealand to incentivise long-term saving versus short-term or other sorts of investing.

Even KiwiSaver had little incentive to encourage long-term behaviour, he said.

In other countries, there were options such as tax incentives for people who stayed in funds long-term.

There was also a lack of disclosure around transaction and operational costs in New Zealand, he said. While management fees were well disclosed and reported, costs associated wit buying and selling securities could be a hidden cost to investing.

Bunkall said Morningstar was also not impressed by the trend for product providers to offer financial advice. “We’re seeing the complete opposite in Australia – here funds managers are bringing financial advice teams to market and hiring financial advisers for them. We don’t want to see conflicted financial advice.”

He said it was a concern that new financial advice legislation could increase that trend. “It’s a strange kind of direction of travel, very suboptimal.”

Countries at the top of the ranks had introduced commission bans, he said. “If New Zealand wants to go up the scoreboard that’s one of the areas that should be addressed.”