Advisers' concern at bank bundling
Advisers are worried about banks moving in on their turf with home loan offers that require customers to have multiple products with the lender.
Tuesday, September 15th 2015, 6:00AM 
3 Comments
by Susan Edmunds
One adviser, who did not want to be named, said he lost the KiwiSaver account of a long-standing client when he was offered $1500 towards his mortgage if he brought a new product to TSB, which offers Fisher Fund KiwiSaver.
“This wasn't a written offer or condition of getting the mortgage but he was given the money once he'd signed it across,” the adviser said.
“He obviously felt pressured as he apologised to me, but I agreed he was best to do it, as in the short term it is an obvious decision. Because it’s not a wise move for him longer term, we're going to bring him back and - to cover ourselves - now need give the appropriate documented advice to do so.”
TSB chief executive Kevin Murphy said he was not aware of an incentive being tied to KiwiSaver, although the bank does offer cash incentives up to $1500 for new mortgages.
When BNZ rolled out its one-year rate of 4.35 per cent earlier this month, it came with the condition that the customer had their everyday banking and one other product, such as KiwiSaver, with BNZ.
Westpac requires that customers have a transaction account, plus a credit card or Westpac insurance product to access its two-year rate of 4.69 per cent. For ANZ’s matching rate, the conditions are the same.
Financial Markets Authority spokesman Andrew Park said it was important that consumers understood the merits of the products they were signing up for as much as they understood the merits of the incentives.
A key point would be whether people were being encouraged to cancel their product with one provider and take it out with another, or just to have products with the bank.
“We are concerned about the level of information, support and access to financial advice that is provided to bank customers when they are presented with the option to transfer or switch KiwiSaver schemes. This is an ongoing focus for FMA’s work. In this context KiwiSaver providers need to ensure that incidental rewards or incentives are permitted within the KiwiSaver scheme rules, that they help investors with active decision making and don’t distract investors from choosing a fund based on its merits," Park said.
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My observation is that it is standard practice for banks to buy business in the form of offering incentives for home loans. A home loan is pretty vanilla for most customers and while structure and interest rate can have a huge impact on the cost for a customer - it is accepted that banks compete in this way.
What is going on here is the banks buying other business, KiwiSaver and insurance. And doing so when a customer is making a decision about purchasing a property. These customers want to get a home loan (their primary focus) and therefore are they not just compliant?
The reason why the FMA should be more interested is that it affects the most vulnerable in our society. People with expertise, knowledge, and money will have the ability to negotiate around the banks criteria. The customers affected are those that see themselves as having little choice.