BNZ scheme may bring bank sales issue to a head
BNZ’s much awaited, full-scale entry to the KiwiSaver market is an opportunity to address one of the biggest issues facing advisers.
Thursday, January 24th 2013, 12:20PM 
6 Comments
There has been a lot of commentary about why it has taken BNZ more than five years to get into what is the biggest and most successful financial product in New Zealand.
I saw a comment elsewhere asking why BNZ had not got into this market previously.
The commentator didn’t know the answer, but I asked that question many years ago.
BNZ’s view was that if it was to promote KiwiSaver then it needed to be giving advice with the product (not mortgages).
At that stage BNZ was developing its storefront concept and it didn’t have the capacity to provide advice.
Indeed it still doesn’t really. Whether it embraces advice will be interesting to watch considering its stance around brokers and home loans.
One thing which has been missed by many is that while BNZ hasn’t offered its own KiwiSaver product it has offered the AMP scheme to business customers.
This too has been a point of contention.
A number of years ago AXA bought BNZ’s managed fund business. As part of that deal there were some agreements relating to how the two businesses operated.
However, when KiwiSaver came along a couple of years later BNZ didn’t pick the AXA product for its clients, rather it started using AMP.
Of course the irony here is that AXA has now been acquired by AMP and one of the key protagonists at BNZ is now with AMP.
My prediction is that BNZ will work to shift these customers from the AMP scheme to its own one.
The other thing which has become clear, and is well illustrated in ASSET Magazine’s annual KiwiSaver report, is that banks are gaining a stranglehold on KiwiSaver.
All the banks are aggressively getting customers to switch to their own schemes. They are being incredibly successful and it goes to show the power of bank distribution when they focus on a strategy.
BNZ will be no different. It will engage in this practice and grow its book reasonably quickly.
However, this is where the regulators need to step in.
One of the biggest issues in the financial planning world is what the FMA is allowing banks to get away with.
It is allowing banks to essentially sell and promote KiwiSaver through non-AFA staff while at the same time telling financial advisers they can only work in the KiwiSaver area if they are Authorised Financial Advisers.
This is patently unfair and needs to be dealt with. Bank customers are being coerced into scheme with no advice and no doubt in many cases will be in inappropriate funds.
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Comments from our readers
People who join KiwiSaver through an employer preferred arrangement (like the BNZ thing with AMP) remain in that scheme until they, personally, choose to switch.
If BNZ now convinces their employer to prefer their new scheme instead, it doesn't matter to the existing KiwiSaver members. The change will only apply to future new entrants.
It’s not uncommon for brokers to outsource capabilities until it becomes viable to internalize. Brand can be retained, and profits maximized (without distractions) - not a bad strategy to adopt for an embryonic industry such as Kiwisaver. Once the optimum point is achieved, the broker can consider whether to build or buy the required infrastructure.
Given the large number of suboptimal Kiwisaver providers around, I reckon that BNZ could make a relatively cost effective purchase and attain Kiwisaver market-share within an extraordinarily short space of time.
Keep a close eye on existing Kiwisaver providers who are struggling to capture market share… as these will be obvious targets
Of course - the next step is retaining Kiwisaver customers once their balances become "significant"... but that's another story...
There is a fundamental difference between "selling" & "promoting" in this instance, which you've so readily coupled together.
It is the banks' perogative to leverage their frontline channels etc to "promote" this product so long as they're smart enough to have an AFA following that with an actual consultation as the "seller".
The FMA and the Commerce Commission should be stepping into the ring any minute now.
Nuff said.
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