Global financial research firm Morningstar has rated New Zealand the lowest in a report into the fund management industry in 16 countries.
New Zealand is the only country to score a D-minus, and is ranked below countries such as China and Taiwan.
The Morningstar report looked at investor protection, transparency of reports, fees and expenses, taxation and distribution choice.
A spokesman for Morningstar in New Zealand, Chris Cloete, says there is insufficient legislation to protect investors against things going badly wrong in the management of funds.
The report highlighted the lack of portfolio holdings disclosures, an under-resourced Securities Commission which it says is failing to achieve industry consensus, and a lack of uniformity in fees.
The report also says there is no tax incentive for long-term investing.
AXA New Zealand chief executive Ralph Stewart describes the report as unfair, saying Morningstar should give New Zealand more credit for KiwiSaver and for the PIE regime that caps the overall tax rate for investment managed funds at 30%.
However, Mr Stewart says the funds management industry does need to improve the quality of advice given to investors, bring in lower fees and charges, and increase sales transparency.
Paul Markham, who runs Independent Investment Brokers, says the report should receive Government attention.
He says the report is not a good look for New Zealand at a time when the Government is trying to encourage more investment from within New Zealand and from overseas.