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Bank staff: Target pressure not in customer best interests

Bank staff are worried that sales targets are causing them to sell products, including KiwiSaver and insurance, that are not a good fit with their customers’ needs, the union that represents them says.

Monday, May 1st 2017, 6:00AM 5 Comments

by Susan Edmunds

First Union is calling for New Zealand banks to adopt the retail banking practice and culture changes recommended by Australia’s Sedgwick report, including an overhaul of targets for staff.

Spokeswoman Tali Williams said bank staff were under pressure to sell things like KiwiSaver and insurance.

New rules introduced as part of the rewrite of the Financial Advisers Act will require banks not to incentivise their staff in a way that does not put customer interests first. There will also be wider "client first" obligations.

But Williams said the changes made with the initial introduction of the Financial Advisers Act had made little difference, so she was not confident that the coming changes would make a difference.

Williams said financial incentives on offer were so small that they were not a concern. She said staff were mainly worried about the possibility of being "performance managed" out of a role if they did not hit their targets.

Many felt they were put under pressure that was not in customers’ best interests, she said.

“A recent survey of our members showed about 60% feel pressure to sell products beyond the customers’ needs.”

BNZ had said it would have a meeting with the union in a couple of weeks’ time to talk about the Sedgwick report, Williams said.  She said the cultural change it pointed out was necessary was vital on this side of the Tasman, too.

But NZ Bankers’ Association chief executive Karen Scott-Howman rejected the criticism.

"Banks continuously review staff remuneration and performance assessment. While there are some incentives, they are relatively small in the scheme of things. Australia's Sedgwick report certainly doesn't recommend removing all such incentives. The point is that they be appropriate, in the context of meeting customer needs,” she said.

"Here we're already dealing with this through the review of the Financial Advisers Act, which will see even greater focus on putting the customer first. It's worth noting that banks already comply with all their consumer law obligations, including the Responsible Lending Code.  Our banks operate in a very competitive environment and work hard to attract and retain customers. That means serving their customers by providing them with products and services that suit their particular needs.

"We've seen no evidence to back up the assertion that banks are not meeting the genuine needs of their customers."

READ MORE: Aussie banks told to scrap commission payments

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Comments from our readers

On 1 May 2017 at 10:13 am R1 said:
"We've seen no evidence to back up the assertion that banks are not meeting the genuine needs of their customers."

Given that the FMA made public comments last year regarding banks mis-selling their products and the need to do better (wet bus-ticket treatment) you would have to believe that the banks really aren't bothered with looking for evidence of such behaviours by staff if they have not yet seen any evidence of it. Their wording is of course very carefully put to avoid reference to the standard of putting the client's interests first.

This is why a fiduciary standard of conduct toward clients' interests is so important in ensuring the banks take their responsibility to clients seriously. The FMA is not showing any signs of doing the right thing by investors either so the fiduciary standard is a must have in my opinion.
On 1 May 2017 at 10:25 am Dirty Harry said:
"We've seen no evidence to back up the assertion that banks are not meeting the genuine needs of their customers."

lol

I've seen no evidence my cat poos in the garden. But then, I haven't dug in the garden.
On 1 May 2017 at 11:47 pm Denis said:
It is unfortunate that the NZ Bankers Association is not acknowledging this as a problem. It is correct to say that the financial incentives are not great but that does not mean that the practice of up selling and cross-selling is harmless. Far from it.

The staff are peer-pressured into meeting targets by regular team meetings where the only purpose is to showcase everyone's numbers. The team may have a collective target of, say, 50 products for the week and a person not achieving their share will be performance managed until they do. If they don't, then they do suffer in their performance review which affects their overall pay. Prolonged underachievement has consequences. It's very much the culture of the main retail banks to operate like this and many staff know no other way. Indeed, many of them enjoy it.

The end result is that the hapless customer may find themselves at the thick end of a persuasive sales pitch about, say, KiwiSaver when their enquiry is about something entirely different.

The products sold have nothing to do with the customer's needs. If the bank is running a campaign on a particular product that week, then that is what the conversation is about.

I do not expect balanced, even-handed advice from a bank that operates such a model.



On 2 May 2017 at 12:56 pm w k said:
here's 2 real cases:

1) prospect referred me one for hse ins quote. i can't do it. reason: bank quoted $1800 for a 650m2 2004 built luxurious masonry hse. sum insured based on improved value in rv which is well over $1m lower than the valuation for ins. not sure how many f&g adviser can beat this rate.

2) client bought a 130m2 weatherboard hse on 600m2+ section for $404k (not in akl). bank insure hse for client for $400k.

both are from different bank.
On 3 May 2017 at 11:35 am M S said:
It will stop when McDonalds stops asking customers "Would you like fries with that?"

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