Banks tackle KiwiSaver advice question

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Banks are hoping more guidance from the Financial Markets Authority will make it easier for them to advise their clients on switching between KiwiSaver funds and providers.

Wednesday, October 12th 2016, 6:00AM 4 Comments

by Susan Edmunds

In the FMA’s KiwiSaver report this month, it said there had been feedback from some providers that its KiwiSaver sales and advice guidance was getting in the way of members receiving the help they needed to make decisions.

Some said that the guidance invited a conservative interpretation of how they should engage with members, particularly on changing funds, and had led them to prefer to focus on written, information-only advice.

The FMA has noted that class advice and information-only services, such as paper-based information, do not tend to change investor behaviour.

Sharon McKay, manager of wealth strategy and product at BNZ, said it was a complicated area. She said when KiwiSaver launched, there was no Financial Advisers Act in place and the landscape was quite different.

But the FAA introduced the idea of class versus personalised advice and had constrained the ability of bank staff to engage on the product.

“A QFE can give personalised advice but it still held to the same level of accountability and qualification as a financial adviser,” she said. “It’s difficult in a QFE sense to meet those obligations.”

She said most KiwiSaver conversations were offered as class advice but it was difficult, when staff were having those discussions, to draw the line between class and personalised advice.

It’s phenomenally hard for a client to understand, how do they distinguish what they’ve received. It’s not clear whether they’re getting information, class advice or personalised advice.

"How do you help staff understand where the line is and make sure they don’t breach their obligations by crossing that line? It’s so easy to do. Then there’s the public perception – they don’t even know there is a line.”

The class advice process would include directing clients to a risk profiling tool but often they did not take as risky as investment as they should even after completing that assessment, she said, because they did not have the risk appetite.

McKay said there needed to be more clarity on what advice was and more scope for limited advice.  The ability to offer roboadvice, which is coming as part of the FAA review, would be “hugely beneficial”. “There are 2.4 million people in KiwISaver, you’re never going to get around them all face-to-face or on a personalised level.”

Ana-Marie Lockyer, general manager of wealth products and marketing at ANZ, said the industry had matured in its understanding of how it could provide information to KiwiSaver members within the constraints of the rules. 

She said lots of members indicated they wanted information and ideas to help them make decisions, rather than specific recommendations.
Half of ANZ’s members had said they wanted more free, digital financial advice, she said.

ANZ would try to speak to customers as they joined, she said, when accurate contact information was available. But she said with a growing back book it was difficult to talk to them all.
She said ANZ would rely on a degree of class advice, but also had access to AFAs to offer specialised advice when required.

McKay said the 2010 guidance note on KiwiSaver sales and advice was helpful but did not go far enough because not enough thought had been given to how it would interface with the FAA legislation.

The FMA has said it is reviewing its guidance and will update it soon.

Tags: ANZ BNZ KiwiSaver

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