Urgent action required over banks' KiwiSaver selling tactics
Banks have been put on notice by FMA chief executive Sean Hughes that their sales tactics are under review.
Friday, May 24th 2013, 6:58AM 
5 Comments
One of the biggest gripes in the financial advisory industry at the moment is how banks are coercing customers to switch their KiwiSaver accounts to the bank without proper advice.
The FMA produced a guidance note around this issue last year which Hughes says hit the right spot judging by the negative reaction from the Bankers Association.
Hughes acknowledged when answering a question at the IFA Conference that bank selling practice appears to be an issue judging by the feedback the FMA was receiving.
He said this is an issue the FMA “is more than happy to take on.”
Hughes said he would be concerned if it came to light that bank staff were being appropriately incentivised to get people to switch their KiwiSaver.
“That’s something we would be very concerned about.”
Likewise he was concerned if customers were being pushed into products they didn’t understand or funds with inappropriate asset allocations.
Hughes didn’t outline what steps the FMA would take but he did suggest that the authority could undertake a shadow shopping exercise to gather further evidence of bank selling practices.
“We need to address this issue and address it urgently,” he said.
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Comments from our readers
Code 1 - Putting customers interests first ??? I think not !!
Behind those nice (and mainly innocent) ladies at the bank, lurks huge greed and a less-than-admirable corporate culture
Thomas Jefferson, (Attributed)
3rd president of US (1743 - 1826)
Simply require proof that each client has received written advice before the transfer from an existing scheme into the bank scheme.
If there is no written proof then reverse the transfer. At the banks cost of course!
Would this work?
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It is an on-going bad joke in the industry that customers complain to providers that 'we' have transferred them to a bank's KiwiSaver scheme without consent. Coincidentally, this follows the customer having gone into their bank branch to do some transactional banking. We know this is not a customer choice because many of them demand to be transferred straight back again!
We also see instances where other managed fund money is transferred into bank KiwiSaver schemes. On enquiry, the bank staff seem to have neglected to point out that this locks the money in and reduces flexibility.
Sean, one thing I can't get my head around as a provider is the acknowledgement forms that customers sign stating they have read and understood the investment statement. Quite how they have done that in the 10 minute meeting with the bank staff I don't know.