Banks are attempting to poach KiwiSaver clients by saying customers will be more favourably viewed for credit if their KiwiSaver funds are with the bank, the Financial Market Authority says.
In a review of financial advice given by banks and other financial institutions, the FMA raises red flags as to the lack of observation of advisers by senior staff, and recommended a formal supervision process be put in place across banking networks.
The watchdog found some authorised financial advisers neglected to keep notes on file after certain customer interactions, and if notes were taken, there was no review by a more senior member of staff to make sure suitable advice had been given.
However, due to lack of reporting, it is not known how widespread performance issues are, FMA says.
KiwiSaver is a particular bugbear, with the FMA saying it continues to receive reports from sources about dodgy KiwiSaver sales and switching practices in the marketplace.
With 22% of the 2.35 million members still in default conservative or cash funds, poaching is rife, particularly by the big banks.
The FMA is aware of banks asking customers if they would like to be able to access their KiwiSaver information online alongside other bank account information, without explaining that this will mean the customers must transfer to the bank’s KiwiSaver product.
Banks have also told customers that an application for credit – be it student loan, credit card, or mortgage – will be more favourably considered if the customer transfers their KiwiSaver to the bank, FMA says.
Customers have complained they accidentally agreed to switch their KiwiSaver to their bank after being given a KiwiSaver transfer form to sign alongside documentation for a credit card, FMA says.
The watchdog also found although the financial institutions have financial advisers available to help customers with KiwiSaver choices, very few customers are referred to them or made aware the service is there.
“None of these examples place the interests of the customer first. They reflect poorly on the provider’s attitude towards the customer or the product,” its report says.
The FMA monitors authorised financial advisers to make sure they comply with the Financial Advisers Act 2008 and professional codes of conduct.
In the first six months of this year, it checked up on more than 50 bank advisers and reviewed 45 adviser business statements – which includes disclosing how the adviser is paid and whether they are providing broking services – and concludes more detail and care is needed.
The FMA found advice given is not always personalised to customers, and does not adequately explain the risks and benefits of acting on the advice.
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