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Bank boss backs AFAs and says no to Royal Commission

BNZ chief executive Angie Mentis, like her counterpart at ANZ, says there is no need for a Royal Commission in New Zealand and one of the reasons she cites is the existence of AFAs.

Friday, May 4th 2018, 6:40AM 14 Comments

Mentis doesn't think a Royal Commission is required in New Zealand: "I don't think there is a need for one in New Zealand".

She, like David Hisco at ANZ, said New Zealand has a different regulatory environment to Australia and says the bank is "well-regulated" and has "open and constructive relationships" with organisations like the FMA, Commerce Commission and Reserve Bank.

One example she uses is the existence of Authorised Financial Advisers. "We have Authorised Financial Advisers in New Zealand. We have 50 AFAs. of them in BNZ. They are on a balanced scorecard. They are on base salary and incentive not commission based."

The AFAs are regulated by both the bank and the FMA.

She says AFAs use third party products as BNZ is not an asset manager. "Their scorecard is agnostic to product. It is is about revenue, and compliance. It is about customer outcomes."

"We don't have a vertically integrated model here in BNZ.

"We don't own brokers or aggregators so we don't the introducer issue."

"I believe, from what I have seen here, we are not seeing the systemic behaviours which are being revealed in Australia."

BNZ is not complacent, she says. Rather it is "ruthlessly vigilant" around what is happening not just in Australia but in other jurisdictions: "We're not complacent, we're listening to the learnings."

One example she uses is the Sedgewick report which was produced in Australia last year. It addresses issues like good conduct, incentives and rewards. "That report we picked up here and we are almost through implementing it  here in New Zealand."

Mentis says the number of complaints which go to the Banking Ombudsmen each year have been reducing.

Tags: banks BNZ

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Comments from our readers

On 4 May 2018 at 7:12 am Murray Weatherston said:
Mmmmm
So the BNZ CEO thinks the thing that makes NZ different from Australia is the existence of AFAs.
So what have the clever officials who have redesigned the regulatory environment in the FAA review done - well well they are abolishing AFAs.
BTW I doubt that BNZ has only 50 people providing financial advice in New Zealand - who sells all their mortgages, term deposits Kiwisaver life insurance and uncle Tom Cobley and all? and all?
On 4 May 2018 at 7:43 am Ron Flood said:
I recently posted details of two recent cases regarding clients of mine who had canceled their life insurance cover and insured with a bank. One client was told that a mortgage approval was subject to them having to replace their life insurance with cover through the bank.

The second involved a client whose occupation was stated as clerical worker with minimal manual duties. The client had disclosed that they were involved in a dangerous manual occupation.
I discussed these cases with a BDM from an insurer and they had similar stories from other Advisers.

In both cases, the insurer was BNZ Life. As these cases are within the past three months it would appear that there is still a lot of work to be done, despite the protestations of the CEO.
On 4 May 2018 at 8:24 am Rohitr said:
@ronflood... I to have had this incident occur twice! Where the same lender used manipulating tactics to make a sale, and did not care for the clients. By offering interest rate discounts and a cash back offer, but had to change their insurance cover to get the deal of the century. Who is looking at the big boys, because their always seems to be plenty of scrutiny on the small (fall) guys #smallguyeasiertarget
On 4 May 2018 at 8:58 am Compliance Guy said:
I have worked for every Australian bank in NZ, other than National Bank (which they lead that horse out the back paddock and shot it)they all follow the same script.

You are incentivised to sell at a very high level, requiring the adviser to either act in the banks best interests or be performance managed out.

I was purchasing some foreign currency from ANZ, I overheard a conversation between a teller and my wife.

'Suggesting' we transfer our KiwiSaver to ANZ so that the balance could be seen with our usual bank accounts.

Little did the teller know, or care, these were invested in small cap NZ shares. Right at the time the market had bottomed out. Thank you ANZ for dramatically trying to impact my retirement. Banks transact, our KiwiSaver balance is just a sale to them. As the BNZ CEO noted, profit first, then compliance, oh then that bit about advice outcome.
It is simple, if the Banks have nothing to hide then lets waste the money on a Royal Commission.
On 4 May 2018 at 9:00 am Mark Sheehan said:
Turkeys don't vote for thanksgiving.
On 4 May 2018 at 9:35 am w k said:
@ron flood: re 1st case, yup seen that before. saw that some 7-8 years back.

got ins quote from nzi & vero for $4k+ & $5k+ for a prospective client some years back. bank quotation under insured property by over $1m because it was based on market valuation rather than the valuation for insurance. and premium ......... $1,800. what do you think?
On 4 May 2018 at 9:49 am Rachelle Bland said:
Very well said @Mark Sheehan.

@Compliance Guy, your foreign currency story reminded me of my own ANZ story. Last year I took my ten year old daughter "shopping" to convert the NZ$200 that she'd saved up for spending money for her Australian holiday. At the ANZ, we got told the exchange rate (which wasn’t particularly good) and got told that there would also be a fee of $12. The teller asked me if I was a customer of that bank, to which I said ‘no’. She then looked directly to my daughter, and said to her “of course, if your mum switched her every day banking to us, then we would waive that fee”. Needless to say, we left straight away, much to the disappointment of my daughter who struggled to see why I wouldn't help her get more $ for her holiday. I couldn't resist looking at their website later on though, and existing customers still get charged a $12 forex fee.

And no, I didn't make a complaint. But just because I didn't pursue it, doesn't mean that it didn't happen.
On 4 May 2018 at 10:23 am smitty said:
I'm puzzled by thew fact we have had wide coverage from the respective heads of the banks to say "nothing to see here", yet our media have not sought a perspective from the Banking Union. If you can seek the view from a bank CEO, I'm sure you can seek the other side of the fence's view as well.
On 4 May 2018 at 10:39 am Richard Harden said:
Banks have become serious players in the wealth management space and particularly in the last 10 years with the growth of private banking and now Kiwisaver.

Whats been interesting to watch has been their change of strategy over the years from in house products to then so called "independent portfolio advice" ie non bank products. It would appear some seem to be doing a uturn on this again with BNZ being one of them.

Following reviews it appears now that NAB aligned product seems to be creeping back into portfolios, presumably in the client's best interest?? I wonder
On 4 May 2018 at 11:04 am Pragmatic said:
An open note to Kris Faafoi:

What have you got to lose by sponsoring a Royal Commission into NZ banking practices? If nothing else, any inquiry will reinstate fragile consumer confidence in the system. Who knows, there may actually be practices discovered that you’re unaware of / haven’t been advised about

I’m sure that the various working groups are keeping a very close eye on the Royal Commission in Australia and factoring in the inevitable impact that this will have upon our domestic financial services sector. It’s also worth appreciating that the larger financial services entities will do what’s best for their shareholders in preference to their customers, which (again) will shape their involvement in the NZ industry. Just saying.... it may be worth considering these inevitabilities now rather than reshaping outdated structural reforms / legislation after the event
On 4 May 2018 at 11:07 am Adviser1 said:
Maybe I'll go work at the BNZ as it seems like a great place to receive a salary, focus purely on what's best for the client without any sales targets or pressure whatsoever - fantastic - where do I send my CV?
On 4 May 2018 at 11:37 am Dirty Harry said:
These bankers remind me of Horatio Nelson.

Horatio Nelson, would become Admiral Lord Viscount Nelson as he was successively promoted and honoured by the Royal Navy and a grateful British nation, was a consummate leader of men. A brilliant strategist, politically well-informed and adept, he was always likely to achieve a senior role in the navy.

I'm sure the bankers would be flattered.

Nelson was a complex leader who balanced a personal longing for honour and glory with a compassion and respect for his men. As a commander he was known for bold action, and for the occasional disregard of orders from his seniors. This defiance brought him victories against the Spanish off Cape Vincent in 1797, and at the Battle of Copenhagen four years later.

Over the period 1794 to 1805, under Nelson's leadership, the British Navy proved its supremacy over the French. In battle at Calvi he lost the sight in his right eye. He would later lose his right arm at the Battle of Santa Cruz de Tenerife (1797). His dedication to defeating the French was a passion, and he is reported in Robert Southey's Life of Nelson as saying:
"You must consider every man your enemy who speaks ill of your king"

Mmm hm.

Nelson never wore an eye patch. He added an eye shade to his Admiral's hat, like a peak. Though often misquoted as saying it, He didn't actually say 'I see no ships'. What he said, during the Battle of Copenhagen, was: , 'Foley, you know that I have lost an eye, and have a right to be blind sometimes. And, raising his telescope to his blind eye: ‘I really do not see the signal'.

Thus the Etymology of the saying "Turning a blind eye".
On 4 May 2018 at 1:35 pm Denis said:
Over many years the banks have created a nice environment where their own interests are paramount and embedded sales practices (which cannot be challenged) must be accommodated in legislation.

The regulators were worn down by the unlimited legal resources that the banks can call on to protect their patch. Have you seen how surprised the execs were at the Royal Commission? They seem to be saying "but...but...I thought we were friends...?".

Exactly the same scenario would unfold here. The banks and the FMA don't want a Royal Commission because it will be humiliating for everyone. It's a shame that the Regulators don't have the same healthy scepticism that the Royal Commission is showing.
On 4 May 2018 at 4:17 pm Jeff Tobin said:
Quote. "They are on base salary and incentive" Please define and clarify "incentive".

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Lender Flt 1yr 2yr 3yr
ANZ 5.79 4.55 4.79 4.99
ANZ Special - 4.05 4.29 4.49
ASB Bank 5.80 ▲4.45 4.69 4.89
ASB Bank Special - ▲4.05 4.29 4.49
BNZ - Mortgage One 6.50 - - -
BNZ - Rapid Repay 5.95 - - -
BNZ - Special - 4.10 4.29 4.49
BNZ - Std, FlyBuys 5.90 4.69 4.79 4.99
BNZ - TotalMoney 5.90 - - -
Credit Union Auckland 6.70 - - -
Credit Union Baywide 6.15 5.20 5.25 -
Lender Flt 1yr 2yr 3yr
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.70 4.85 -
Housing NZ Corp 5.80 4.69 4.79 4.79
HSBC Premier 5.89 3.99 4.19 4.69
HSBC Premier LVR > 80% - 3.79 - -
HSBC Special - - - -
Lender Flt 1yr 2yr 3yr
ICBC 5.80 4.59 4.69 5.09
Kiwibank 5.80 4.55 4.69 4.99
Kiwibank - Capped - - - -
Kiwibank - Offset 5.80 - - -
Kiwibank Special - 4.05 4.29 4.49
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 6.10 5.10 5.45 -
Resimac 5.30 4.86 4.94 5.30
RESIMAC Special - - - -
SBS Bank 5.89 4.85 5.05 4.49
Lender Flt 1yr 2yr 3yr
SBS Bank Special - ▼4.15 ▲4.29 4.49
Sovereign 5.90 4.45 4.69 4.89
Sovereign Special - ▲4.05 4.29 4.49
The Co-operative Bank - Owner Occ 5.75 4.10 4.35 4.49
The Co-operative Bank - Standard 5.75 4.60 4.85 4.99
TSB Bank 5.80 ▲4.55 4.69 4.99
TSB Special - ▲4.05 4.19 4.49
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.95 4.69 4.79 5.19
Westpac - Offset 5.95 - - -
Westpac Special - 4.15 4.29 4.59
Median 5.89 4.55 4.69 4.79

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