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Despite concern over banks' KiwiSaver behaviour, FMA boss says the regulator doesn't see a systemic problem

Despite concern over banks' KiwiSaver behaviour, FMA boss says the regulator doesn't see a systemic problem

By Gareth Vaughan

The Financial Markets Authority (FMA) has "some issues" with banks' KiwiSaver behaviour, but doesn't see a systemic problem, CEO Rob Everett says.

The FMA recently aired concerns about bank KiwiSaver behaviour in a monitoring report, highlighting the interests of customers weren't being put first, saying this reflected poorly on the bank’s attitude towards the customer or the product.

Everett told in a Double Shot interview the FMA would look to take action against repeat offenders. However, Everett said he doesn't blame banks for wanting to increase their scale in KiwiSaver, and there is no issue with that specifically.

"But obviously it does pose the risk that you've got an unbalanced market place in terms of the competitive environment," Everett said.

"And we have seen in our monitoring, and we have seen in some of the complaints we've had, the beginnings of behaviour, particularly around encouraging people to switch, that suggests to us that some of the bigger providers need to spend more time on training their people and making sure that they're not encouraging people to switch who actually don't have a reason to switch. Or indeed having someone switch who hasn't realised that has happened."

"We are seeing some issues there, but we're not seeing anything systemic at the moment. But our view is we need to jump on it as quickly as we can because with that ever growing component of the market (KiwiSaver) we can't afford to end up in some sort of switching scandal," said Everett.

Bank dominance

ANZ and ASB are the two biggest KiwiSaver providers with $5.3 billion and $4.1 billion of assets under management, respectively, as of June 30. Westpac is fourth biggest with $2.6 billion. NZ Post-Kiwibank's Kiwi Wealth KiwiSaver scheme had $1.4 billion under management at June 30, and BNZ which launched in February 2013, had $293 million under management by June 30 this year.

ANZ, ASB, BNZ, Kiwi Wealth and Westpac are five of the nine default providers. Another default provider, Fisher Funds which had $2.1 billion under management at June 30, is 26.39% owned by TSB Bank. In total KiwiSaver providers had $22.3 billion under management as of June 30 on behalf of 2.35 million members. Of that $22.3 billion, some $13.7 billion, or 61%, was managed by bank controlled KiwiSaver providers.

KPMG's latest quarterly Financial Institutions Performance Survey notes KiwiSaver income continues to increase, and is having a major impact on operating income at the major banks.

"A growing number of customers are switching their funds into bank schemes from non-bank alternatives and the average level of fees is increasing despite the improved fee disclosure requirements introduced through the KiwiSaver periodic disclosure regulations," KPMG says, adding the broad range of fees is 0.4% to 1.5% per annum.

Do you want KiwiSaver with that?

In its monitoring report the FMA said, in terms of KiwiSaver, banks were largely dependent on branch managers to ensure branch staff were actively supervised, but this wasn't necessarily a formal process and provided little assurance to senior management.

"Lack of reporting also made it difficult for senior management to identify any performance issues. An issue occurring in one branch might be an issue across the entire network and if so, would present a very different risk. Current systems had no way of determining this."

The FMA also listed some examples of bad practices within banks it was aware of;

•Asking customers if they would like to be able to access their KiwiSaver information online alongside other bank account information, without explaining that this will mean the customers must transfer to the bank’s KiwiSaver product.

•Stating that an application for credit (e.g. student loan, credit card, mortgage or other) will be more favourably considered if the customer transfers their KiwiSaver to the bank.

•Signing customers up for a credit card, personal loan or other products and providing a KiwiSaver transfer form alongside other documentation for signing, leading to customers inadvertently agreeing to transfer their KiwiSaver to the bank.

The regulator pointed out, none of these scenarios place the interests of the customer first.

"They reflect poorly on the provider’s attitude towards the customer or the product. We encourage KiwiSaver providers to think about the value they can add for customers in relation to their KiwiSaver investments. For many New Zealanders, KiwiSaver is their first investment and will play an important role in their future financial security," the FMA said.

'We're very focused on the tone that's set at the top of organisations'

Asked what the FMA can do about this, Everett said there was a combination of things.

"We're very focused, generally at the FMA, on the tone that's set at the top of organisations. So we have conversations with the boards and executive management of these organisations to make sure they understand they own the outcomes happening in the bank branches and the tills, if you like," said Everett.

"And secondly, the monitoring we do enables us to pick up instances where we think the practices aren't working as well as they should, or the training's not working as well as it should, or indeed in some cases the sales incentives are causing poor behaviour or mistakes to be made."

"So it's a combination of talking at the very senior end of the banks and the providers. But also having a monitoring framework and a complaints framework, a source where we can get the information from people who feel bruised by their interactions to make sure we put those two together. We're as open and transparent as we can (be) in terms of the feedback we're giving to the banks, hence the monitoring report that's to try and make sure everyone's on the same page in terms of what we're seeing and what needs to be fixed," Everett added.

'Repeat offenders beware'

Asked whether the FMA was considering taking any action against the banks over their KiwiSaver behaviour, Everett said there were a number of situations the FMA's looking at to work out "what the right regulatory response would be."

"The primary, or the first response, would always be to try and be open about what we're seeing so that banks and other providers have got a chance to look for themselves at what they're doing to make sure it's fit for purpose. But obviously if we see organisations that are repeat offending, or not setting up the governance that would enable them to monitor this for themselves, then we'll be looking at taking action," said Everett.

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First of all we run our kids through state education systems which requires them to learn compliance by compulsion.......which makes one obedient to a power or authority.

Once that is achieved we have the majority of the people fully trained to be ignorant then we can have an overseer like the FMA to run to your rescue when you're hoodwinked by others!

I'm looking from the whip between my chase the get extra dosh from your leverage up a point with Government contributions.....and then you sign it over to a smiley face at bank.....and you didn't think to read it......and so you didn't bother.......cos there's a Government Agent when you need a mother.


“This work was strictly voluntary, but any animal who absented himself from it would have his rations reduced by half.”
George Orwell, Animal Farm

“No one believes more firmly than Comrade Napoleon that all animals are equal. He would be only too happy to let you make your decisions for yourselves. But sometimes you might make the wrong decisions, comrades, and then where should we be?”
George Orwell, Animal Farm


“Can you not understand that liberty is worth more than just ribbons?”
George Orwell, Animal Farm



“The distinguishing mark of man is the hand, the instrument with which he does all his mischief.”
George Orwell, Animal Farm


The only redeeming feature of Kiwisaver is that it is voluntary. Only those that wish to pad the lifestyles of the banker class need do so. If compulsory, it differs not a jot from taxing your income now to provide for your future retirement apart from replacing the fund managers with public servants.

Just another case of maintaining the tax take while offloading the cost centre, thereby freeing up those funds for non-core special interest vote catching.

Does it not occur to anyone that as long as the fund managers satisfy a basic return, marginally better than bank deposits, they can easily make the rest disappear into "expenses" without threat of exhaustive investigation?

This is a future industry to be in, no responsibility and a gushing teat to latch onto.


Never put your Kiwisaver with a big bank. They have to many conflicts - and other interests. For example they just might find it useful to lend your money to the bank (themselves) at a cheap rate. Good for them - bad for you.