KEY POINTS:
Fund manager ING will continue to pay some financial advisers commission on its frozen Diversified Yield and Regular Income funds, despite the fact that their clients risk losing millions of dollars.
Up until now it has been paying all financial advisers who sold the funds 0.5 per cent
"trail" commission on the amounts invested for the life of those products. This includes the financial advisory force of the ANZ bank, which has been the subject of numerous complaints to the Banking Ombudsman over the way it sold the funds.
The credit crunch-affected funds were frozen 10 months ago, leaving 8000 investors unable to access $521 million. In December, ING announced a plan to wind them up, offering investors an initial $100 million payout. It's uncertain how much more they would get. Investors are due to vote on the plan in March.
ING wrote to financial advisers this week saying that it would cease paying trail commission because many advisers had said they no longer wished to receive it. However, it said it would still pay advisers who requested it. "Recognising the current environment, ING will make individual trail payments to advisers who believe they should still receive them."
Ongoing trail commission would come out of ING's pocket, spokeswoman Cynthia Church said. ING had also paid the management fees it had earned from the DYF and the RIF back into the funds, and this included the trail commission that had been paid to date, she said.
However, chairwoman of the Institute of Financial Advisers, Lyn McMorran, questioned the ethics of advisers accepting trail in a situation such as this.
She said the payments probably should have stopped when the funds were first frozen. "Really when you get to that point, as an adviser you can no longer add any value to the client relationship."
However, she said that some advisers had been rebating the commission to clients.
It was not clear last night whether ANZ had rebated the payments.
In its note to advisers this week, ING said that it had been getting "more than its share of media".
"We appreciate that recent negative publicity has an impact on advisers who have been loyal to ING and we are currently preparing a different response to this type of media. We are confident that we can explain and defend ING's decisions ... regarding these funds."
It denied that it had been notified by the Commerce Commission that the watchdog was conducting a formal investigation into the way it marketed the DYF and the RIF.
The Commerce Commission confirmed last night that it was investigating ING and that the fund manager had been informed.
A financial adviser told the Herald yesterday that the day the story about the Commerce Commission investigation broke, he received calls from five clients wanting to pull their investments out of ING. Two had subsequently done so.
Group starts campaign to get money back
A group of investors in the frozen ING funds has galvanised into action with the aim of lobbying ANZ and ING to repay their money.
The group is urging other affected investors to join it, and has launched a regular email newsletter entitled The Frozen Funds File as a platform for its activities.
It says under ING's proposal to wind up the funds, investors will receive just 15c in the dollar back.
"ANZ and ING need to do a product recall and reimburse all customers one dollar for each dollar that they have been entrusted with," organisers Andrew Davidson and Hector Fsadni say in the first newsletter.
They say ANZ and ING's marketing of the products misled investors over the level of risk involved, that ANZ customers with significant term deposits were targeted to invest in the funds, and that investors weren't told that ING New Zealand is 49 per cent owned by ANZ.
Email the investors' group