Bank staff should make clear their limitations

There are calls for QFE advisers’ disclosure statements and scope of service documents to make it clear that their advice is limited to only the products their employer offers – and that there might be better products in the market for a client.

Friday, September 19th 2014, 6:00AM

by Susan Edmunds

Bank advice has been a topic of debate lately, after the FMA warned QFEs that it was concerned at some KiwiSaver switching practices.

Massey University commentator Claire Matthews said it could be worth considering a requirement that banks must include a statement saying that while they suggested a particular product, consumers should be aware there were others in the marketplace.

Adviser Chris Hardcastle agreed, saying: “There should be a big disclaimer to make the consumer very aware that the advice provided is restricted to only that QFE’s products and that there may be other products better suited to their situation.”

QFE adviser disclosure documents were scrutinised by the FMA in its first QFE monitoring report, released last week.

It said some AFAs were being given shares in their QFE as a bonus but were not disclosing that in their secondary disclosure statements.

“This could be perceived as a potential conflict of interest when an AFA recommends the products marketed by their QFE. The FMA expects AFAs to disclose any shareholdings in the firm (or its ultimate parent company) for which they provide financial adviser services.”

It also said their scope of service statements needed to offer customers enough information to make an informed decision about whether to use their services.

“It is important that customers understand the scope and in particular any limitations of the advice being given. We recommend that AFAs set out a clear scope of the services that will be provided (and in some cases, clearly outline the services they will not be providing), to ensure that their customer is able to make an informed decision about whether or not to use that AFA’s financial adviser services and follow any advice provided," the report said.

Hardcastle said banks should also have to make it clear to customers the difference between information and advice. “One couple I advise interpreted a suggestion from a bank employee regarding an insurance product as being advice – technically it may have been information being provided but that was not my client’s perception.”

We discuss bank practices further in the next issue of ASSET magazine.

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