Investors in ING funds paralysed by the credit crunch say they were told the products were "just like a term deposit".
The Banking Ombudsman is alerting investors in the funds that they can complain to her office about the way the products were sold to them.
Many investors in the ING Regular Income and Diversified Yield Funds bought in on the advice of their ANZ financial advisers. ING is 49 per cent owned by ANZ.
Around 8000 investors with $521 million in the funds are now unable to access their money after investment manager ING indefinitely suspended withdrawals from the funds two weeks ago citing the effects of the international credit crisis.
The funds, largely based on CDOs and CLOs - complex financial products which bundle various types of debt into a security - had lost significant value because of the severe lack of liquidity in the credit markets.
Investors spoken to by the Business Herald have said their ANZ financial advisers recommended the funds on the basis that they were "just like a term deposit".
After speaking to her ANZ adviser, an 86-year-old Christchurch woman gradually moved her life savings of $242,000 from investments such as term deposits into the two ING funds.
The woman is now in remission from cancer and is keen to move into care, but fears her options are limited because she can't access her savings.
Her sister, who was at the initial meeting with the adviser, said they told him they did not fully understand the products.
"He just said it's as safe there as anywhere else. As safe as the bank - that's what we understood."
Suzanne Edmonds, spokeswoman for lobby group EUFA (Exposing Unacceptable Financial Activities), said her group had been contacted by dozens of unhappy investors who bought into the ING funds through ANZ.
Banking Ombudsman Liz Brown said if investors were concerned about the way ANZ had sold them the products they should first complain to the bank.
If they did not receive satisfaction, or if the matter was not addressed within three months, they could then lay a complaint with her office.
She said her office did not investigate how financial products were managed.
"But if they were actually misled about the nature of it, or it was something that wasn't suitable for the purposes they told their bank about, then they may be entitled to compensation."
Spicers Wealth Management adviser Jeff Matthews said he had been contacted by dissatisfied ANZ customers in his role as a host on Newstalk ZB.
He said selling such products to an 86-year-old was "totally inappropriate".
There was no point in people at that time of life taking risks with their capital.
"Why bother? Just put it in the bank."
Matthews said several years ago - when CDOs were first on the market - some Spicers financial planners had asked for a CDO-based product to sell.
Spicers' economic advisers Arcus Investment Management had looked into it and then-chief investment officer Mark Brighouse had decided against it.
"On a worse case scenario, the returns weren't that great for the extra risk," Matthews said.
ANZ said in a statement that it recognised this was a difficult time for clients who had invested in the funds. The bank was working closely with them to make sure their questions were answered.
It made customers fully aware of their right to seek guidance from the Banking Ombudsman.
It noted that the ING funds were also available through other channels, including other banks.
"ANZ remains confident that it has recommended the ING Regular Income Fund and Diversified Yield Fund to clients in the appropriate manner and for the right reasons," the statement said.
* The ING Diversified Yield and Regular Income Funds have been frozen because too many investors wanted to withdraw their money from the negatively performing products.
* They were based on CDOs (Collaterised Debt Obligations) and CLOs (Collaterised Loan Obligations), financial products which package bank loans and other types of debt into securities. Parts of them have exposure to the US sub-prime mortgage sector.
* The international credit crisis has meant there are virtually no buyers for CDOs or CLOs and their value has plummeted.