by Susan Edmunds
There have been anecdotal reports of banks encouraging KiwiSaver members to change to their schemes without clear evidence of why it would be a beneficial move.
Advisers have complained that the staff in bank branches are not held to the same stringent standards as independent financial advisers.
Associate professor David Tripe, of the school of economics and finance at Massey University, said there were issues about the financial advice being given in bank branches, as well as what was financial advice and what was not.
“Encouraging people to go into KiwiSaver is hardly a bad thing to do … but one of the things that happens is banks provide online access to KiwiSaver balances and that moves every month. That’s hardly a constructive way to build long-term savings. There are some issues lurking around that someone will have to look at somewhere down the track.”
He said it was not just an issue with KiwiSaver. There could be questions around advice given on term deposits and debt products, too. “In essence, a significant number of people in bank branches are not as well-educated as they might be and not able to give as clear and meaningful guidance on products as they might be.”
Tripe expected to see more cases going to the Banking Ombudsman. “Prior to the GFC people in bank branches were being encouraged to fix for long terms and given advice which wasn’t advice. The consequences weren’t what was desired.”
But he said it was a matter of understand what was advice and who could give it. “If you walk into a bank branch and say ‘should I put money on deposit’ and they say ‘yes’, is that fiving financial advice? You either get to the stage to allow people to answer questions or have some process for what might or might not be reasonable. It’s a potential can of worms we haven’t yet opened to anything like the degree well have to somewhere in future.”
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If someone walks into a bank and says "should I put my money on TD?" and the bank says "yes, then why should that not be called advice? For too long the banks have been given too much slack. The real question is: Is the whole QFE thing really working?
Tripe nailed it with “In essence, a significant number of people in bank branches are not as well-educated as they might be and not able to give as clear and meaningful guidance on products as they might be.”
The fact is that question by that client cannot be answered without considering the client's unique circumstances. In other words, the answer can ONLY be PERSONALISED ADVICE. Switching KS, using TDs, moving to other funds from TD- we know bankers are giving terrible one-size generic advice every damn day, and all the while the regulator is waving their stick at everyone else.
If same client walks into adviser's office with same question we must either not answer it, or get them to sit down, discuss their needs and objectives, current position, provide detailed disclosure, prepare written research and statement of advice recommending whether or not to use TD, compare rates and ratings, sign off on decision.... And don't forget to obtain ID just in case they are funding a terror group...
Advisers by and large have lifted their game, at great cost. Have the banks, really?