KEY POINTS:
ANZ financial advisers who marketed two now-paralysed ING funds were given incentives to do so as part of an internal scheme.
The scheme did not target any one fund, however - ANZ says its advisers earn "points" for every product they sell, not just ING's.
Angry ANZ investors
are asking why the bank sold them into the ING Diversified Yield and Regular Income Funds, which were frozen last month due to the effects of the credit crisis.
The funds are largely based on CDOs (collaterised debt obligations) and CLOs (collaterised loan obligations), complicated products which bundle various types of debt into a security and which have some exposure to the notorious US sub-prime mortgage sector.
Unsophisticated mum and dad investors have told the Business Herald they were lead to believe the investment was "as safe as the bank".
Since the credit crisis the funds have lost significant value. After a run of withdrawals, ING indefinitely suspended further redemptions saying there was not enough cash to fund them.
ING New Zealand is 49 per cent owned by ANZ, and ANZ financial advisers sold the ING funds as did other financial advisory outlets.
Sales of the funds earned a 0.5 per cent annual trail commission on the lifetime of the investment. However ANZ said such commissions go to the bank as its financial advisers are paid on salary, and their remuneration "is not influenced by the products that they recommend to clients".
"In short, there are no product targets for ANZ financial advisers," it said in a statement on March 25.
However yesterday the bank said that advisers earn points depending on how many products they sell, and if they earn enough points they qualify to go to the annual conference.
A bank spokeswoman said not all advisers qualified to go to the conference. She could not say how long the event was, or where it was held.
The Business Herald understands incentive schemes, whereby advisers can earn bonuses based on sales, are commonplace in the banking industry. Industry sources said they would be very surprised if ANZ did not run something similar for its advisers.
Andrew Campbell, campaigns director for the bank workers' union Finsec, said this was common to any role with a sales component, and the union was against it.
"Target-based incentive schemes skew results towards selling products that achieve the highest number of points," he said.
The ANZ spokeswoman said sales of the ING funds earned advisers the same amount of points as other managed funds.
ANZ customers who were advised to invest in the ING funds have complained of the funds' unsuitability for their needs.
The son of one elderly Christchurch customer got his mother out of the Diversified Yield Fund last October when he found out she had invested in it.
When her term deposits with the ANZ, worth more than $110,000, were about to mature a bank financial adviser had approached her telling her she would do better putting the money into the ING fund, the son said.
"It was not appropriate advice for an 85-year-old woman. There's no way she could understand what a 'CDO' is."
He was concerned that she had been targeted, given the bank knew her term deposits were coming up.
"To me it just seems that these people are kind of a captive market. If the bank hadn't pushed it she would never have been in it."
He was also unimpressed that his mother had been charged a 2 per cent fee when her money was transferred from the term deposits into the ING fund.
The ANZ spokeswoman said the bank charged a capped 2 per cent implementation fee for entering a managed fund, irrespective of where the capital came from.
The man pointed out that in a document given to his mother, entitled 'Enjoying the benefits of professional financial advice', the ANZ said: "Because your adviser is product neutral, you will never feel pressured into making an investment decision you are not comfortable with, and you can rest assured the products we recommend from a range of investments will be appropriate to help achieve your financial goals, consistent with your appetite for risk."
The lowdown
* ANZ advisers earned points for selling two ING funds, now frozen because of the effects of the credit crisis.
* Investors have lost on their initial investment, and cannot remove their funds until further notice.
* Many ANZ customers are asking why they were put into an unsuitable product.
