ANZ markets its Bonus Bonds as "the much more fun investment" but does not provide any financial advice on the product - even when people want to invest large sums of money into it.
A former staff member of the bank who previously worked for a financial adviser, says he was shocked when a man came in wanting to "invest" $100k in Bonus Bonds and a personal banker told him to just sell the man what he wanted.
"I stressed that since he wanted to 'invest' I felt he should be treated as an investment client. She [the personal banker] spoke with him and he did end up buying the Bonus Bonds, but I can't believe that she provided care and due diligence which would be required of an authorised financial adviser."
An ANZ spokeswoman confirmed it "does not currently provide advice on Bonus Bonds."
Asked why it didn't give advice on the investment she said:"Bonus Bonds funds remain readily available for customers to withdraw when suits them."
There is around $3.25 billion invested in Bonus Bonds which is managed by ANZ Investment Services - a subsidiary of ANZ bank.
Instead of getting interest on their investments savers go into a monthly draw to win a prize of up to $1 million but the odds of winning a prize are low and have been getting worse.
The latest annual report says the average odds were one in 32,294 of winning a prize in any given month, down from one in 26,875 in its 2018 financial year.
The former staffer, who did not wish to be named, said he felt "terribly guilty" every time someone came into the branches where he was working and bought Bonus Bonds.
"They thought they were investing and they were not."
He said even just putting the money in a moderate savings account would earn a better return than Bonus Bonds.
But telling a customer that would have potentially placed him in breach of financial adviser laws, as he was not in an advisory role, he said.
"It killed me especially when working in the lower socio-economic areas where grandparents would come in and buy $20 worth of Bonus Bonds every week for their grandchildren."
"The return you get is less than inflation."
In the year to March 31, 2019 the Bonus Bonds had an investment return of 1.3 per cent while inflation was 1.5 per cent.
He said the scheme, which garnered the bank $40.8 million in fees - more than the $39m in prize money it paid out, should be scrapped.
"People think they are investing and they are not. The fact they are sold by the ANZ gives it legitimacy that they shouldn't have."
"I genuinely think they should be scrapped."
The former ANZ worker got in touch after the Herald revealed a letter had been sent by a current staff member to the bank's chief executive and board concerned about the product, calling it the "biggest rort in financial services in New Zealand" and asking for the fees to be cut.
ANZ cut the fees on Bonus Bonds in July from 1.15 per cent to 0.87 per cent but said it made the decision to do so before receiving the anonymous letter from the employee.
The Financial Markets Authority has also indicated it will take a closer look at legacy products which may no longer be suitable for investors, as part of its new role as the conduct regulator of the banks.
An FMA spokesman said during its conduct and culture review last year it raised the issue of legacy products that were potentially low value for customers and asked all providers to review legacy products with that in mind.
An ANZ spokeswoman said the FMA did not ask it to cut the fees on the Bonus Bonds and it did so as part of a wider review of fees this year.
"In 2019, ANZ reduced a number of fees on a range of investments products including KiwiSaver, investment Funds and Bonus Bonds as we shared scale benefits with our customers."
ANZ is the largest bank and KiwiSaver provider in the country. In the year to September 2018 it made just under $2 billion in profits and it manages more than $14 billion of the $57 billion KiwiSaver pot.