ANZ recommends a $540,000 nest egg all be invested in ANZ products

ANZ claims its structure “helps ensure that investment selections are not conflicted.” (Photo: Tinaz Karbhari)

Jenny Ruth on ANZ Bank's investment advice.

0
0:00 0:10

LATEST: FMA prompts changes to ANZ's disclosure on investment advice

Advice an ANZ Bank representative gave to an investor would have seen all or most of that person’s $540,000 nest egg invested in ANZ products.

And yet the brochure provided to the investor insists ANZ has no conflicts of interest in selecting investments.

This comes as a group appointed by the previous National Party-led government works on extending the rules that govern authorised financial advisers (AFAs) to all those involved in recommending investments, including the staff of banks and fund managers such as AMP.

As well, Australia has a royal commission under way looking at misconduct by banks and other financial institutions. It has already uncovered scandals at AMP, which led to its managing director and chairman resigning and the employment of its senior counsel being terminated. AMP New Zealand has said it operates differently from its Australian parent company.

In the case of the ANZ advice, on one of two pages from the brochure provided to NBR, the ANZ representative advised that, as a base case, 40% of the nest egg should be invested in New Zealand, Australian and international shares, including in listed property vehicles.

The weighting toward equities would vary between 25% and 55% of the investment portfolio. The rest of the nest egg was to be invested in international and New Zealand fixed interest and cash.

The representative called this a “conservative balanced strategy.”

Such advice would be regarded as unexceptional by most advisers when a client wants a conservative approach but still wants some access to some higher-returning and higher-risk investments.

However, in each class of investment, with the exception of Australian equities, the representative recommended ANZ funds. The brochure doesn’t say how ANZ would invest in Australian equities.

The advice says that “for some asset classes, we only buy products provided by us or other ANZ Group companies” and proceeds to list ANZ products for every category apart from Australian shares.

For example, the base case recommendation that 22% of the portfolio be invested in international equities would be achieved solely by buying units in the ANZ Private Global Equity Fund.

For the base case recommendation that 10% be invested in Australasian shares, the New Zealand part of that would be achieved solely by buying units in the ANZ New Zealand Share Fund.

Basic investing rules make it highly unlikely that any independent financial adviser would recommend an entire portfolio be invested in a single bank’s products.

A higher return
It isn’t hard to demonstrate that products other than ANZ’s would be a better deal for the investor.

For example, the base case recommendation is that 6% of the portfolio, or $32,400, be invested in cash and that would be achieved solely by buying ANZ group products.

The www.depositrates.co.nz website shows ANZ is offering to pay 2.2% for that amount on call while Westpac, a bank with the same credit rating as ANZ, is offering two different products at 2.55% and 2.6%.

Over the period of a year, the 2.6% Westpac product would return $129.60 more than the ANZ product.

The brochure says that in selecting investments, “we are not influenced and are not likely to be influenced by our relationship with ANZ group companies or other areas of our business. Therefore, we have no conflicts of interest in our investment selection process.”

The brochure goes on to explain why products and services provided by ANZ are used.

“We do this because they are either required by your investment strategy or chosen objectively through our investment process,” it says.

“When we select investments under our service, including Australasian equities and New Zealand fixed interest, these selections are based on objective research that considers growth opportunities, investment quality, availability and price,” it says.

“As a result, your portfolio may invest in products issued by ANZ Group companies, such as ANZ corporate bonds.”

The brochure goes on to explain that ANZ’s structure “helps ensure that investment selections are not conflicted.”

NBR asked ANZ if it had any comments about this advice provided to NBR.

“We do not comment on individual customer situations,” ANZ says in its written reply.

“The page supplied is one page of a comprehensive group of disclosure documents, which outline the use of ANZ group products in portfolios,” the bank says.

“Where we use ANZ group managed funds, those funds have exposure to a diversified range of investments, which includes third parties and international managers,” it says.

“The materials also outline the fees charged, including those charged within ANZ group managed funds,” it says.

“We are always open to suggestions of how we can make our disclosure process more transparent. We have recently been working on enhancing our disclosure in this area and will have revised documents for new clients by July 1,” ANZ says.

All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.


26 · Got a question about this story? Leave it in Comments & Questions below.


This article is tagged with the following keywords. Find out more about MyNBR Tags

Post Comment

26 Comments & Questions

Commenter icon key: Subscriber Verified

Jenny you found the one example of bad behavior in the whole NZ market......ANZ, AMP, BNZ, Westpac have all told us they are different to Aussie, they operate differently etc......should we not just believe them......

I am sure if you asked for stories you will be inundated......keep on this.

Reply
Share
  • 3
  • 0

Should have added it was interesting to see almost the exact same statement released from all the NZ institutions.......either some "collusion" between PR advisors or plagiarism.

Reply
Share
  • 2
  • 0

This is how it works.

Politicians leave regulation that affects monopoly practises alone, and end up with plumb jobs (and goodness knows what else) with those same businesses they leave alone.

There's is no coincidence there's a handful of ex politicians in banking jobs, and its time we get the gas torch out on them and the businesses they represent.

There is lays the problem. Will the current politicians leading the country have the courage to burn their mates. History has shown they haven't, but with ongoing public marches in the street they haven't been able to avoid it in Australia.

Other businesses will be aware banks have eaten into their share of the consumer spend, and those that have low or no debt positions need to make some noise also. I'm one of those, who is currently being screwed over by the banks with the money I have on call with them.

Time to join hands, and demand better value for money from the banks, along with more objective long term lending practises; rather than their current business practises which are driven by short term bonuses.

Reply
Share
  • 0
  • 0

A better adage to follow is to own the bank (buy shares) rather than deposit within it. However, I'd be avoiding that tactic with a massive commission hovering over all Aussie banks at the moment, ready to level record fines and new regulations upon them.

Perhaps "put some winter shorts on" would be better advice from ANZ!

Reply
Share
  • 1
  • 0

You wouldn't be doing all that well lately following your advice.

The better advice would be to bank with a locally owned bank, where the profits are retained and spent for the good of the local community.

The Trustbanks used to do it, and some of those left still do. TSB and the Cooperative Bank are but examples.

You see locally owned banks tend to operate for the good of the community, both short and long term. The others (too large to fail) don't give a rats ass, and are more focussed on short term profit maximising; recognising governments will come to their rescue.

Reply
Share
  • 0
  • 0

I was given specific information relating to a particular individual investor that just happened to have come from ANZ. I definitely don't think this sort of investment proposal is unique to ANZ and would welcome being provided with similar evidence about other institutions.

Reply
Share
  • 4
  • 0

The banks have all been pushing their "added value" proposition. On many occasions staff on the front desk at ASB ask me if I would like to talk to an adviser (after seeing my account balance). I did once, and the whole push was to their products.

Basic human nature is at play here, greed, an adviser who works for ASB (any retail bank) is pushing products not the wealth and well being of the depositor.

Banks in NZ are owned by the Australian Banks, and all have TOP DOWN governance and strategy. NZ might be an international flight away from the Board Rooms of Sydney and Melbourne but to the banks we are just like another 4.5M population State with customers waiting to be plucked.

There will be hundreds of tails of very poor financial service from the banks, there just hasn't been an outlet that isn't sanitized.

Reply
Share
  • 3
  • 0

Dead right. I am very pleasantly surprised to see NBR putting out articles like this. i don't imagine the "corporate media" would be permitted by "their handlers" to produce quality of this kind

Reply
Share
  • 1
  • 0

I’d be surprised if anybody is surprised by this. I’m sure the same story would be told across all the banks.

To be balanced though, I suspect the same thing happens with NZ fund managers like Milford and Fisher Funds which have in-house ‘wealth’ divisions, and with the NZ trust companies with in-house funds.

Wherever there is integration of product and ‘advice’, there will be a majority of in-house product in client portfolios regardless of whether this is in the clients’ best interests.

Reply
Share
  • 3
  • 0

I should also have mentioned the sharebroking firms (Forbar, Craigs) where you’ll find the in-house funds used extensively.

Quay Street (owned by Craigs) has an international equity fund which is over 80% invested in ETFs but charges 1.25% p.a. in fees. Not surprisingly it has failed to beat its benchmark net of fees over all time periods, but still has over $210m invested. Now whose clients did all that money come from I wonder?

Reply
Share
  • 3
  • 0

This happened to me at ANZ:

Needed to bank a cheque. Bank teller asked if I wanted to join ANZ kiwisaver. I said no because the fees are too high. She looked shocked and told me the fee was only $2 per month. I said "I don't think that's right..."

Went away and read the materials she handed me. The fee she was talking about was the $2 to be able to see my kiwisaver balance on my internet banking. That costs $2 per month. The actual management fee was much higher. This was incredibly misleading.

I called the bank to tell them how outraged I was. They said they'd look into it.

This was a few years ago. I doubt anything has changed.

Reply
Share
  • 4
  • 0

Had the same experience with HSBC in HK. Asked them about the fees on the fund they were touting. The officer mentioned the subscription fee of 0.80% (turns out that's HSBC's sales commission). Omitted to mention the Fund's management fee of 1.25%pa. All you need to do is look at the age of the person "advising" you to know you can't rely on them for the full picture. Or try asking them a "hard" question about how the Fund works and then you soon discover the extent of their knowledge.

Reply
Share
  • 0
  • 0

Same. I went into a Westpac branch, and almost immediately the person I was talking to hijacked the conversation in trying to get me to sign-up to Kiwisaver. I told her that I wasn't here for that, and that I wasn't interested, but she just persisted anyway. Obviously on commission. I just walked out.

Reply
Share
  • 0
  • 0

It is time for New Zealand to consider an investigation into bank behaviour and regulation (like in Australia).

Reply
Share
  • 1
  • 0

Dead right Richard B. But, with all due repsect, I personally feel that the time for "considering" is way past, it is time for doing.As an ex mortgage and insurance broker who "saw the light," I would like to see insurance companies included. The scandal of PPI (Personal Protection Insurance) in Australia ($ Millions in refunds) UK (40 Billion in refunds) India, I don't know how much, but it couldn't/wouldn't happen HERE, would it?

Reply
Share
  • 0
  • 0

Great story. Now you might wonder where the NZ regulator stands on this issue? The Head of the FMA said a few years back that all advisors must put their clients' interests first but what this means depends on whether you work for a vertically integrated organisation or not. He gave the example of ASB and said if you choose to only recommend your own firms products then you must pick the best of those high cost products. In other words Mr Everett said all clients' interests must be put first but some clients' interests will be put less first than others.

That comment by Mr Everett was in my opinion a low point for financial regulation in NZ. Compare and contrast the NZ regulators view with the independent enquiry going on in Australia. The QC representing the Royal Commission asked the big 5 (ANZ, CBA NAB Westpac and AMP) via a mafia like invitation to tell the Commission whether "it was possible for financial advisers to manage the conflicts associated with providing advice as a representative of an institution that also makes products."

We have seen above the implications of the FMA's approach to regulation which accommodates the profitability of banks at the expense of the retirements of New Zealanders. The politician in charge of the FMA is Mr Faafoi. Perhaps a good story leading on from this one would be for Jenny to ask Mr Faafoi whether his government is happy with the FMA's definition of putting clients' interests first at the expense of retail investors. Jenny's story provides graphic evidence of how light handed regulation costs New Zealanders their retirement.

Reply
Share
  • 3
  • 0

Interesting one of the architects of the ASIC overseeing banks and financial institutions in Australia has said they got it wrong. That ASIC and the institutions became too close. He said that the consumer watchdog should have had the role because their mandate is to protect consumers.

Reply
Share
  • 0
  • 0

If you look at the board of the fma it is dominated by bankers so how on earth can anyone expect anything other than what we have got.the labour government needs to move.

Reply
Share
  • 1
  • 0

Dead Right Brent but as 'for the labour government needs to move," question is WHERE will they move if they do move? I fancy laterally or backwards, certainly not forwards as far as the banks and their system are concerned

Reply
Share
  • 0
  • 0

The FMA is now under the control of an ex-reporter. That's what Mr Faafoi basically is.

Reply
Share
  • 0
  • 0

I wonder what it will take to get an Aussie type investigation here.
Here are the latest that I received from AFR 1) Commonwealth Bank hit with $1b capital charge after scathing APRA report
http://www.afr.com/business/banking-and-finance/financial-services/commo...
2)CBA heads should roll, says Scott Morrison following APRA report
http://www.afr.com/news/cba-heads-should-roll-says-scott-morrison-follow... I reckon some jail time would be better, but I won't hold my breath
3) Insult to injury? "ANZ interim cash profit rises 4.1pc to $3.49b
http://www.afr.com/business/banking-and-finance/financial-services/anz-i...
4)ANZ CEO Shayne Elliott has a $3.5b conundrum http://www.afr.com/brand/chanticleer/anz-ceo-shayne-elliott-has-a-35b-co...
Maybe ANZ should give it to the customers

Reply
Share
  • 0
  • 0

If you walk into a business and ask them to make a recommendation to you it would be naive to believe they will not act out of self interest in doing so. A life lesson to teach children as soon as they are old enough to understand

Reply
Share
  • 0
  • 0

That's a fair comment but buying a vacuum cleaner or a car is much less important than investing your life savings .so the public needs higher levels of protection and standards like we have with doctors.we also need consistent laws...I'm required to look at all the products available when I do a recommendation like this and to pick the best ones.why should the banks be required to do any less for their clients?

Reply
Share
  • 0
  • 0

Hi Brent

Not sure if the Doctors are objective these days either. A lot of GP's are contracted to privately owned medical clinics, who are likely to be more interested in more patients rather than the good of their clients. When you go next time, ask the doctor whether he is under pressure (from his employer) to push customers through within an unwritten allocated time. That's not too mention the drugs they peddle. Look no further than how the medical profession operate in the States. Even Buffet & Trump is having difficulty dealing with vested interests. The whole system is sick as a dog; largely driven by dishonest politicians and corrupt business practises.

Our job is to get this message out to the masses, as so many have been brain washed by propaganda, and cant see the wood from the trees.

Keep what you're doing. I like your style.

Reply
Share
  • 0
  • 0

It is not just individual instances of poor behaviour that need investigating, the whole industry model has become corrupted. You only need to look at how credit scores are calculated to understand this. Paid off your mortgage? Debt free? Spend less than you earn? Pay cash? Middle of the road score for you. Have multiple large credit card debts, several loans, large mortgage - you are a financial unicorn. From this stems targeted marketing stating you have 'pre-qualified' for a loan, you receive unsolicited increases on your credit card limit etc etc
Even more insidious is examples where some low income money advisors actively tell their clients not to open bank accounts for their children with the Australian banks. The counter intuitive reasoning being as soon as they turn 18 they will receive a credit card so the bank can push them onto the debt cycle as soon as possible.

Reply
Share
  • 0
  • 0

WOW Tomato Sauce, great comment! You could have been watching the “Money As debt” movies to make a comment like that. In the first one, the narrator says “If there is no DEBT, there is no MONEY and if there is no MONEY, there is no DEBT.”
The whole system is founded on debt and the bankers have sooooooooooooooo much power that very few, if any, will stand up to them. Look at what happened to Abraham Lincoln and John Kennedy, both were “anti bankers.” Andrew Jackson, who survived an assassination attempt, was also anti banker, his portrait now hangs in a prominent position in the Oval Office and is considered by many to be a sign of President Trump’s plans to get rid of the Federal Reserve. A relatively “local” example of banker power is the fact that the Australian “bak bail in” law, a really important piece of “banker protection” legislation was passed with only 7 out of 76 senators present in the house.
The debt problem goes back thousands of years. The Old Testament says in Proverbs 22:7, “The RICH rule over the POOR and the BORROWER is SLAVE to the LENDER.” In the New testament, the only example of physical violence committed by Jesus is when he throws the money changers out of the Temple. There is a very interesting definition, and description of the activities, of moneychangers in “Ungers Bible dictionary.”

Reply
Share
  • 0
  • 0

Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.