KEY POINTS:
Angry investors are questioning why their ANZ financial advisers put them into funds now paralysed by the credit crisis.
On Wednesday investment manager ING announced it was indefinitely suspending withdrawals from its Diversified Yield and Regular Income funds "due to the recent extreme deterioration in liquidity in credit
markets".
Around 8000 clients have $521 million invested in the funds.
The funds were based largely on CDOs (Collaterised Debt Obligations) and CLOs (Collaterised Loan Obligations), complex financial products which bundle various types of debt into a security.
ING New Zealand is 49 per cent-owned by ANZ National Bank.
Investors who have lost tens of thousands of dollars on the value of their investments in the funds have been left wondering why ANZ steered them towards these products.
One retired Taranaki farming couple put their life savings of $110,000 into the ING Regular Income Fund last March on the advice of their ANZ adviser. They have since lost $34,000 on the value of that investment.
Their son says his father has had a nervous breakdown over the stress of the losses, and he has had to take over power of attorney.
The son said his parents had been in an ANZ superannuation fund which wasn't providing a high return, so they asked the bank for advice on a better investment.
He said a financial adviser was sent round who put them on to the Regular Income Fund, "in their words saying, 'it's as safe as being in the bank but you get 1 per cent higher'."
"That's basically how it was sold," the son said.
Retired investor Eddie Graham and his wife invested $490,000 in a portfolio devised by their ANZ adviser. The money was put into four ING-managed funds, including more than 30 per cent into the Diversified Yield Fund, and into UDC Finance - owned by ANZ National Bank.
The Grahams have lost around $23,000 on the value of their Diversified Yield Fund investment.
They have since sought independent financial advice, and have been told their investment portfolio did not match their request for a conservative risk profile - the adviser categorised the portfolio as medium risk.
In addition the adviser told them no more than 10 per cent of their funds should have gone into the Diversified Yield Fund.
"Research by investment advisers would have raised warnings about the significance of this risk, even before the credit crunch occurred," the independent adviser wrote.
An Auckland woman in her 50s, who has lost around $20,000 on the value of her investment in the Regular Income Fund, said the politest way to describe her sentiments was "very angry".
She had come into a large amount of money and invested in the fund after seeking the help of her ANZ adviser.
"I needed somebody that I felt I could trust and put my faith into that they were going to do the right thing by me, and I made that quite clear to him actually."
ING confirmed all financial advisers who sold the funds were paid a 0.5 per cent annual trail commission on the lifetime of the investment, to assist with the costs of servicing the client. However ANZ said its advisers were salaried and fees or commissions went to the bank.
ANZ said it was confident it had recommended the ING Regular Income Fund and Diversified Yield Fund to clients in the appropriate manner and for the right reasons.
The ING funds were available to bank clients only through ANZ's qualified financial advisory team, and could not be accessed through the branches.
"All client situations are different and we will be working with clients on an individual basis to establish the best course of action based on in their own personal circumstances," it said.
* FROZEN FUNDS
ING has suspended withdrawals from two funds hit by the credit crisis.
The funds' $1 units were this week worth 81.05c and 70.5c.
The funds invested in 'CDOs' and 'CLOs' - complex securities based on a basket of different types of debt.
Advisers with ANZ National Bank, which half-owns ING, put a lot of investors into the products.
