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.

« Poor retention rates can be turned around: AMP

IFA working on pro-bono offering »

Special Offers

Comments from our readers

On 24 May 2013 at 8:31 am Silent Bob said:

It is a gripe from product providers as well (of course). You may recall a survey last year that recorded one of the biggest reasons for moving providers was so customers could 'see their KiwiSaver balance on their internet banking'. This appears to be the number one selling tactic.

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.

On 24 May 2013 at 9:03 am Bill said:

The banks did not make $1 billion or so profit each by being good and proper corporate citizens

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

On 24 May 2013 at 9:52 am patrick diack said:

I don't see the FMA taking on the Banks on this one, what can the FMA do to stop bank staff giving advice? Instead they found it easier to pick on a small guy like me, who signed up Winz clients to KiwiSaver outside Winz.

On 24 May 2013 at 12:46 pm Observer said:

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.
Thomas Jefferson, (Attributed)
3rd president of US (1743 - 1826)

On 25 May 2013 at 9:29 am Jimbo said:

Here's a suggestion for the FMA when they do investigate the banks' KiwiSaver practices.

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?

Sign In to add your comment