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."
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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.