Shelley Hanna: Bank broke rules with its KiwiSaver bid

Photo / Christine Cornege.

Q. I opened a new bank account last week at one of the big banks. One of the first questions was: "Do you have KiwiSaver, and would you like me to transfer that across?" I said: "No thank you, I am already in Fisher Funds KiwiSaver and it is great where it is." The staff member replied: "Oh but I think that scheme's closed now. And our scheme is better. Do you know what sort of fund you are in?" She said if I transferred it over to the bank, then it would be easier for me to keep track of the balance, as it would be there when I logged into online banking or used the mobile banking app. Why was she so keen for me to change to the bank scheme?

A. Why was she so keen? My guess is that she is rewarded by meeting certain sales targets and selling KiwiSaver to customers is one of ways that she can get points towards that.

The banks are bound by obligations under the Financial Advisers Act in terms of their sales practices. This teller's conversation with you breached the guidelines issued by the Financial Markets Authority (FMA), which is the Crown entity responsible for regulating all KiwiSaver providers.

In determining whether the correct procedure was followed, the FMA looks at who prompted the discussion, whether the client has an existing KiwiSaver scheme, whether any pressure is applied and how the distributor is remunerated. In their guidelines they comment that: "An incentive to sell the product, such as commission based on actual sales, may encourage a distributor to go beyond the scope of an intended 'no advice' service, and to recommend or give an opinion rather than simply provide information."

I talked to the FMA about your experience and asked for their feedback. Elaine Campbell, FMA director of compliance, said: "KiwiSaver sales practices remain a key priority for FMA. We are hearing of other cases like this and we are engaging with some of the banks to discover whether these are isolated incidents or more general. The guidelines are very clear in terms of providing advice when recommending or switching KiwiSaver. The fair dealing provisions under the Financial Markets Conduct Act require providers to place their customer's interest first, and this means we have a range of ways to take action where we find instances of mis-selling."

What about the scheme you are in? Fisher Funds Management manages two KiwiSaver schemes, one of which is a government-appointed default scheme. Since the inception of KiwiSaver in 2007, they have acquired a number of other KiwiSaver schemes and today look after over 220,000 KiwiSaver members. That makes them the largest New Zealand owned and operated KiwiSaver provider, so they are far from "closed" as the bank staff member suggested.

I passed on your question to Vedran Babich, operations manager at Fisher Funds Management. He replied: "I'm sorry to hear you have received such misleading information, which must have caused confusion for you. This is unfortunate, as all KiwiSaver providers have a responsibility and a legal obligation to ensure the information they present is accurate and up to date."

He added that: "This type of feedback is nothing new to us, unfortunately, and has been pubic knowledge within our industry for some time. We've come across it on multiple occasions over the years. However, clients have not been that willing to lay a formal complaint or report it to the FMA." Would you be willing to lay a formal complaint?

Most people don't want to fall out with their bank, or do not realise what level of advice they should receive when reviewing their KiwiSaver Scheme.

The FMA would like to see all bank staff complying with the regulations. Elaine Campbell added: "Please do encourage your readers to raise their complaints directly with us. You can direct people to our website, where there is an online complaints form."

Indeed their "Make a Complaint" form is quite user-friendly and enables anyone to "make a complaint, report misconduct or just give us a 'tip-off' about a person or organisation offering financial services or products". You can choose to be completely anonymous or for your identity to be withheld from the organisation you have contacted them about.

A further comment from Vedran Babich: "Convenience of being able to look at balances on your bank software is just one, and a relatively minor, aspect that members should be considering when deciding on their preferred KiwiSaver provider. Other aspects such as performance, communication and client service are somewhat more important considerations over the long term than the convenience of using online banking or a mobile banking app. Note that almost every provider offers members online access to their KiwiSaver accounts."

Next time a bank teller asks you: "Would you like to see your KiwiSaver balance online?" be aware that they are asking you if you want to close your existing KiwiSaver account and open a KiwiSaver account with the bank. The advice process should take at least half an hour, and involve a risk profile analysis and discussion of your timeframe, including whether you plan to make a first home withdrawal. This is not a discussion which should be conducted in the queue at the teller's desk.

• Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 870 3838. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz.