Bank advice 'an area of concern'
Financial advice from staff in bank branches is a real area of concern, one commentator says.
Monday, September 1st 2014, 6:00AM 
10 Comments
by Susan Edmunds
There have been anecdotal reports of banks encouraging KiwiSaver members to change to their schemes without clear evidence of why it would be a beneficial move.
Advisers have complained that the staff in bank branches are not held to the same stringent standards as independent financial advisers.
Associate professor David Tripe, of the school of economics and finance at Massey University, said there were issues about the financial advice being given in bank branches, as well as what was financial advice and what was not.
“Encouraging people to go into KiwiSaver is hardly a bad thing to do … but one of the things that happens is banks provide online access to KiwiSaver balances and that moves every month. That’s hardly a constructive way to build long-term savings. There are some issues lurking around that someone will have to look at somewhere down the track.”
He said it was not just an issue with KiwiSaver. There could be questions around advice given on term deposits and debt products, too. “In essence, a significant number of people in bank branches are not as well-educated as they might be and not able to give as clear and meaningful guidance on products as they might be.”
Tripe expected to see more cases going to the Banking Ombudsman. “Prior to the GFC people in bank branches were being encouraged to fix for long terms and given advice which wasn’t advice. The consequences weren’t what was desired.”
But he said it was a matter of understand what was advice and who could give it. “If you walk into a bank branch and say ‘should I put money on deposit’ and they say ‘yes’, is that fiving financial advice? You either get to the stage to allow people to answer questions or have some process for what might or might not be reasonable. It’s a potential can of worms we haven’t yet opened to anything like the degree well have to somewhere in future.”
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I went into my bank to make an enquiry. After completing that I was asked if I was in K/Saver. I said I was in K/Saver. I was then told I should switch to said bank.
And "why I asked".
Response - "Because you can see all your balances on line".
Me - "Oh, would I do that with you or someone else"
Response - "You can do that all here with me now. You can just complete a form."
Me - "What is your position."
Response - "I'm the banks concierge."
Me - "Oh, so I don't need to see an investment adviser."
Response - "No, and our scheme is rated with X"
Me - "Really can you tell me something about them"
Response - "Ah, no I don't have any information here."
I said I would think about it and I left the bank. In my personal view I am in a superior scheme than offered by this bank and therefore if I was an uninformed customer and had switched I would now be worse off.
I don't believe the FMA has a problem with this or they would have addressed it by now; a directive to the banks would have been sufficient I would have thought.
In the example you used, who is to say the customer doesn't owe $5,000 to a third tier lender paying 25% interest, and yet the bank teller "advising" them that the TD is a good option for a safe investment, this would clearly be terrible advice.
I have witnessed bank staff give horrible advice. I even coached them how to do it.
Time for a fair playing field I say!
Part of the advice I provided involved mortgage recommendations - again I receive nothing on the recommended changes - other than the fee paid to me by the client for the advice - I suggested they approach their bank with the recommendations I made to alter their mortgage structures, which will be advantageous to the client.
My client emailed mw the other day to say (edited);
"I explained that I had engaged you and she relented to saying – give her a list of instructions and she will be happy to put them through.
She also asked about Kiwisaver, apparently we can have that also listed in our (XXX Bank) portfolio, providing we use (XXX Bank) scheme" (not the scheme the client currently uses)
One has to question when this sort of practice is going to stop.
How is this putting the clients interests first?
I do not believe that AFAs should be able to work inside QFEs it seems to me that it is in clear conflict of the AFA Code Standard 1.
I am not saying QFEs cant give advice, just are suggesting that they should do so as QFE advisers, not AFA, as the client may get the impression they are dealing with someone that is looking after their best interests when in fact that are simply selling the product that they are told to, and not considering any other possible alternatives.
The bank literally switched the customer from ANZ to ANZ. The customer did not know that this move would cut out their valued adviser, switch off his trail and exclude their KS from the advisers reporting systems.
How the regulatory authorities and the Code Committee can work with the existing legislation I don’t know. Quite amusing really.
The bottom line is that any fundamental and proper reform of our industry is going to impact the profitability of the major players but many of the regulators quite logically see the major players as the next move in their careers and/or they have come from the major players. So that’s going to happen, not.
And don’t think that taking these concerns to government is an option because…… hello….. half of them are investment bankers or aspiring investment bankers. Sad.
Regards
Brent Sheather
However, that bleat aside, IMHO, in the immediate case there's nothing really wrong in theory with any advisor giving limited advice provided it’s properly explained and the customer is aware of the restrictions, and can assess it for what it is. If the customer wants further or independent advice then they can go down the road. Where they go is perhaps an issue at the moment….. how many independent advisors are out there? How educated is the consumer about the inherent conflict in dealing with non-independent advisors?
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If someone walks into a bank and says "should I put my money on TD?" and the bank says "yes, then why should that not be called advice? For too long the banks have been given too much slack. The real question is: Is the whole QFE thing really working?
Tripe nailed it with “In essence, a significant number of people in bank branches are not as well-educated as they might be and not able to give as clear and meaningful guidance on products as they might be.”
The fact is that question by that client cannot be answered without considering the client's unique circumstances. In other words, the answer can ONLY be PERSONALISED ADVICE. Switching KS, using TDs, moving to other funds from TD- we know bankers are giving terrible one-size generic advice every damn day, and all the while the regulator is waving their stick at everyone else.
If same client walks into adviser's office with same question we must either not answer it, or get them to sit down, discuss their needs and objectives, current position, provide detailed disclosure, prepare written research and statement of advice recommending whether or not to use TD, compare rates and ratings, sign off on decision.... And don't forget to obtain ID just in case they are funding a terror group...
Advisers by and large have lifted their game, at great cost. Have the banks, really?