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Advisers' concern at bank bundling

Advisers are worried about banks moving in on their turf with home loan offers that require customers to have multiple products with the lender.

Tuesday, September 15th 2015, 6:00AM 3 Comments

by Susan Edmunds

One adviser, who did not want to be named, said he lost the KiwiSaver account of a long-standing client when he was offered $1500 towards his mortgage if he brought a new product to TSB, which offers Fisher Fund KiwiSaver.

“This wasn't a written offer or condition of getting the mortgage but he was given the money once he'd signed it across,” the adviser said.

“He obviously felt pressured as he apologised to me, but I agreed he was best to do it, as in the short term it is an obvious decision. Because it’s not a wise move for him longer term, we're going to bring him back and - to cover ourselves - now need give the appropriate documented advice to do so.”

TSB chief executive Kevin Murphy said he was not aware of an incentive being tied to KiwiSaver, although the bank does offer cash incentives up to $1500 for new mortgages.

When BNZ rolled out its one-year rate of 4.35 per cent earlier this month, it came with the condition that the customer had their everyday banking and one other product, such as KiwiSaver, with BNZ.

Westpac requires that customers have a transaction account, plus a credit card or Westpac insurance product to access its two-year rate of 4.69 per cent. For ANZ’s matching rate, the conditions are the same.

Financial Markets Authority spokesman Andrew Park said it was important that consumers understood the merits of the products they were signing up for as much as they understood the merits of the incentives.

A key point would be whether people were being encouraged to cancel their product with one provider and take it out with another, or just to have products with the bank.

“We are concerned about the level of information, support and access to financial advice that is provided to bank customers when they are presented with the option to transfer or switch KiwiSaver schemes.  This is an ongoing focus for FMA’s work.  In this context KiwiSaver providers need to ensure that incidental rewards or incentives are permitted within the KiwiSaver scheme rules, that they help investors with active decision making and don’t distract investors from choosing a fund based on its merits," Park said.

Tags: FMA KiwiSaver

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Comments from our readers

On 17 September 2015 at 11:19 am LPL said:
The FMAs response here is really concerning; dishcloth and wet fish come to mind.

My observation is that it is standard practice for banks to buy business in the form of offering incentives for home loans. A home loan is pretty vanilla for most customers and while structure and interest rate can have a huge impact on the cost for a customer - it is accepted that banks compete in this way.

What is going on here is the banks buying other business, KiwiSaver and insurance. And doing so when a customer is making a decision about purchasing a property. These customers want to get a home loan (their primary focus) and therefore are they not just compliant?

The reason why the FMA should be more interested is that it affects the most vulnerable in our society. People with expertise, knowledge, and money will have the ability to negotiate around the banks criteria. The customers affected are those that see themselves as having little choice.

On 17 September 2015 at 4:13 pm gavin austin adviser business compliance said:
The comments above are right on the button but there is also another aspect that FMA should be driving home and that is when an existing Kiwisaver is transferred to the bank then there should be written advice provided to the customer at the time. The advice should be from an AFA as Bank advisers can only advise on their own products. Remember there are two sides to this, one is acquiring the bank product (ok for the bank adviser to do this) and the other is disposing of the existing cat 1 product( something only an AFA can do).I'm not sure what Andrew Park does at the FMA but maybe in future he might get the legal team to vet his contribution to these discussions so that the full picture is provided and reflects what the legislation prescribes. I know of RFAs who have had to get rid of clients with cat 1 insurance products just so they don't fall foul of legislation and some of those clients have been getting very good advice from their RFA for 20 or more years. There should be ONE rule for everyone and also the rules need to be monitored more rigorously (especially inside the cosyness of a QFE).
On 17 September 2015 at 8:05 pm w k said:
the two comments make sense. but i'm not holding my breath until advisers make more contribution than the financial institutions and the "old boys' club" ceased.

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.25 2.59 2.89
ANZ 4.44 2.85 3.19 3.49
ANZ Special - 2.25 2.59 2.89
ASB Bank 4.45 2.25 2.59 2.89
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - ▼2.25 ▼2.55 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 ▼2.85 ▼3.15 3.39
BNZ - TotalMoney 4.55 - - -
Lender Flt 1yr 2yr 3yr
CFML Loans 4.95 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 2.50 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.40 3.50 -
HSBC Premier 4.49 2.25 2.35 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - 2.25 - -
ICBC 3.69 2.25 2.35 2.65
Kainga Ora 4.43 2.67 2.97 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.20 ▼3.40 ▲3.64
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.35 ▼2.55 ▲2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.20 3.24 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
Lender Flt 1yr 2yr 3yr
SBS Bank 4.54 2.79 2.99 3.29
SBS Bank Special - 2.29 2.49 2.79
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.09 - -
The Co-operative Bank - Owner Occ 4.40 ▼2.25 2.59 2.79
The Co-operative Bank - Standard 4.40 ▼2.75 3.09 3.29
TSB Bank 5.34 3.05 3.29 ▲3.59
TSB Special 4.54 2.25 2.49 ▲2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 ▼2.85 3.19 3.49
Westpac - Offset 4.59 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - ▼2.25 2.59 2.89
Median 4.55 2.71 2.99 2.89

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