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Focus on bank sales may be good news for advisers

There's welcome news for advisers who bemoan an uneven playing field with bank staff - their sales targets are under renewed scrutiny, as two big banks promise change.

Monday, June 19th 2017, 6:00AM 10 Comments

by Susan Edmunds

Tali Williams, First Union organiser

The union representing bank staff said regulatory change, such as the review of the Financial Advisers Act, was doing little to counteract pressure on the workers to flog debt products, KiwiSaver and insurance.

First Union launched a "Service before Sales" campaign today in Wellington.

It comes two months after the release of the landmark Sedgwick Report in Australia, which recommended 21 changes to help transform banking culture and practice from “sales first” to “service first”.

The report was commissioned by the Australian Bankers’ Association after widespread criticism of the way banks sell their debt products to consumers.

The major Australian banks, which own the big four in New Zealand, have agreed to adopt all of the recommendations.

First Union said ANZ and Westpac in New Zealand had made commitments to the bank workers’ union that they would do the same.

ANZ revealed on Friday that it is changing its remuneration structure. From October, 25% to 30% of frontline staff's bonuses will be derived from how much they sell. Currently this is about 50%.

First Union organiser Tali Williams said bank staff reported feeling stressed by their targets and concerned about being forced to sell products to customers who did not need them or could not afford them.

She said life insurance was a key focus for banks at present.

“They are all reporting first and foremost that they have got to sell life insurance.”

She said new rules, such as the new obligation under the Financial Services Legislation Amendment Bill not to incentivise staff in a way that did not put customers first, did not help.

It created a situation where they had to “tick boxes” before they could sell a product to a certain customer, but the expectation was still there to shift the same number of products overall, she said.

“They have to be seen to do right by the regulations and they are doing that by making sure the right boxes are ticked but then they go back to the manager who says you haven’t sold the five you said this morning you were going to what’s wrong with you.”

She said the union wanted banks to follow others internationally to lessen the target pressure and focus more on service.

Claire Matthews, of Massey University, said banks were profit-making entities and sales were what generated that.

“It is certainly competition for advisers, but I’m not convinced you can describe it as unfair competition.  These people are the customers of the bank, and it is reasonable for the banks to try to provide them with more of the products that the banks have available.  In many cases, these people simply don’t have access to financial advisers.  I don’t think advisers can complain about the competition from banks, until access to financial advisers is more universal.”

Tags: banks

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Comments from our readers

On 20 June 2017 at 7:25 am Murray Weatherston said:
I count 13 references in this article that refer to selling, sales targets, flogging products in the context of banks.

I wonder what it would take to get the bankers Association to respond? My guess is its an impossibility - having already captured the regulators, the way to shut down any debate is to deny the subject oxygen - i.e. remain silent.

How can it be that FSLAB without batting an eyelid would legalise all this sales stuff as "advice".

Also I find Clare's comment a bit hard to follow - " In many cases, these people simply don’t have access to financial advisers". [BTW I don't think they don't have access; I don't know any physical or legal impediment to these people having access - it's more they don't want to pay.] But the way I read Clare's comments, she is saying its OK for the banks to step in to this vacuum and sell these people the banks own products.
On 20 June 2017 at 9:33 am John Berry said:
can anyone please explain for me whether someone in a bank with 50% of compensation linked to sales targets would be an AFA, an RFA or neither?
On 20 June 2017 at 12:16 pm Murray Weatherston said:
Working from first principles, most of the bank staff will be QFE advisers.
Some of them will also be AFAs - but unlikely to be more than 200 AFAs per bank. David Chaplin will have those numbers.
I can't see why a bank employee not an AFA would be individually registered.
On 20 June 2017 at 1:10 pm John Berry said:
thanks Murray

Whether they are AFAs, RFAs or QFE advisers, I am struggling with the idea that the word "adviser" appears in the title and at the same time 50% of remuneration is volume related.... Putting aside whether they do or don't do a good job aligning with client interests, its just not a good look for putting "client interests first". In fact its a really, really bad look.

Employees should not be put in that totally compromised and conflicted position (especially where not bound by the Code of Conduct i.e. QFE advisers).
On 20 June 2017 at 3:21 pm Ron Flood said:
I agree with you that the bank staff should not be classed as advisers when in fact they are product sales people. Instead of being called Financial Advice Representatives, as proposed, they should be called Financial Product Representatives.

I personally know several past and present bank staff whose health has been affected as a result of the pressure to meet financial product sales targets.

As far as requiring staff to place client's interests first, the FMA has already stated that putting clients first could be different in a banking situation compared to what would be required of licensed adviser.

Unfortunately it appears the Banks and other QFE's will be given carte blanche under the proposed changes as long as they 'make good' any adverse client outcomes and discipline any miscreants.

Any person quilty of such actions will remain anonymous under the new rules as they will not be required to be individually licensed. They could therefore leave their employer and gain employment within the financial services industry and a new employer would be none the wiser.

It is time that the stick be waived at ALL industry participants and not just those of us individuals who refuse to become part of the Big End Of Town Jugganaunt.

This may have deviated a bit off track but I feel it is important that those tasked with providing good workable regulation realise how dangerous it will be for consumers to enable sales people to operate under the guise of being called advisers.

By all means let bank staff give advice, but if they are working in that space require them to be licensed and subject to the Code of Professional Conduct.

On 20 June 2017 at 4:47 pm dcwhyte said:
Claiming that these adjustments to front-line staff sales targets and bonuses will create a "service first" culture is nonsensical.

Only when the front-line staff have achieved the desired level of sales to obtain the bonuses (and keep their jobs) will there be any possibility of an appearance of "service first".

Should they continually achieve sales targets, is promotion an "inappropriate incentive"? What if the promotion comes with a pay rise?

Clare's definition is accurate - profit-making entities driven by sales. Conversely, banks are most assuredly NOT offering "client first" advice.
On 20 June 2017 at 5:07 pm Broker said:
May be good for advisers but it's also kind of sad this attack on 'sales'. We are living in an under insured nation and people don't exactly pick up the phone and buy life insurance. Watch the industry suffer as a result?
On 21 June 2017 at 10:01 am Prospect said:
... and then there is the extremely low quality of the advice provided by bank QFEs. Having provided a Kiwi Saver client a 15 page SOA justifying my recommendation including performance comparisons, and providing primary disclosure, scope of advice, terms of engagement etc., the client was swiftly transferred by a bank teller with the promise that they could see their Kiwi Saver balance on the bank statement. This is unfair not only to me but to the client. No justification for the transfer apart from the statement issue, no potential fine for the individual for not dispensing proper advice. The playing field is skewed and bank clients are getting screwed.
On 21 June 2017 at 11:41 am Ron Flood said:

This is not an attack on sales. If it was, I would have left the industry years ago as my income is based around sales on the back of giving the appropriate advice.

It is an attack on the lack of advice around sales that are made with the only one objective, that being the requirement to attain KPI's to retain a job.

Many of these sales involve replacing comprehensive quality benefits already in force, with cheaper inferior 'plain vanilla' benefits. In many cases the person selling these benfits has absolutley no idea what they are replacing.
On 21 June 2017 at 4:13 pm dcwhyte said:
Absolutely right Ron. No attack on selling at all. Banks and other direct-to-consumer product providers have every right to set out their stall and sell whatever products they decide are commercially viable.

But don't disguise this function as advice or as looking after the client's interests first. If, as is suggested, bank clients are being disadvantaged, Financial Advisers need to be more effective in getting the message across - nobody else will do it for you.

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