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Call for Royal Commission into Banking

Written By: - Date published: 8:00 am, May 23rd, 2018 - 13 comments
Categories: capitalism, class war, Deep stuff, loan sharks - Tags:

Bankers united
Sam Stubbs, a longstanding outspoken commentator in New Zealand’s financial industry, continues to advocate for a Royal Commission into banking and insurance.
This would be a great thing in my view.
The Reserve Bank governor has written to all our banks with a much narrower set of questions, and it’s all polite with no public hearings or accountability.
Here are the questions Sam Stubbs would like to see all of them ask:

Are the banks sales practices based on needs, or simply measured by the number of products each customer has?

Are sales staff of financial institutions incentivised to do the right thing, or to sell more products?

Are customers making fully-informed decisions before they transfer their banking or KiwiSaver to a bank?

Are sales staff being paid a commission to sell their own products while representing themselves as ‘advisers’?

Do commissions paid by fund managers and insurance companies prejudice the advice New Zealanders receive?

What is the sales culture and what pressure is applied to sales staff?

Do high customer penalties discourage good financial behaviours?

Are penalties applied to cover costs and discourage bad financial decision making, or simply to increase profit?

Like utility statements, should all financial fees be disclosed in dollars and cents each month/year and be shown how and where they are charged, for full transparency?

Are merchant fees at appropriate levels for the market?

Why do NZ companies pay higher merchant fees than Australia?

Insurance

Why are life insurance premiums remaining so high in a competitive environment?

Who is controlling what is paid, the product manufacturer/provider or the sales
agent?

How do we measure churning of policies to generate new commissions?

With so few NZ adults insured, how can the industry deliver such high profits and
shareholder returns?

NZ has not followed Australia’s lead to reduce commissions paid to life insurance sales agents. The high commission incentives have not led to more New Zealanders being insured. Does this mean they are driving the wrong behaviours?

Have non-cash incentives paid by life insurance providers e.g. overseas trips, incentivised appropriate sales behaviours?

Funeral, credit card and repayment insurance are criticised as expensive and delivering poor value to customers.

Do customers really understand what they are paying for, and the real cost relative to the benefit?

Are some customers being sold funeral insurance by companies that could sell them lower cost life insurance with better terms?

When is credit card repayment insurance in the best interests of customers? How profitable is it for banks?

KiwiSaver

KiwiSaver fees are high by global standards for long-term superannuation funds. They have averaged around 15 per cent of total return since inception. If the fee differential for an average KiwiSaver member is $65,000 between the lowest cost provider and the average cost provider at retirement, what value does that $65,000 provide?

Why haven’t KiwiSaver members benefited from economies of scale. The pool of savings is now $50 billion but there has been very little downward pressure on fees over the last 10 years.

Should NZ follow the UK and cap fund management fees?

Managed funds

When do performance fees add value to an investor?

What performance fees are being charged by fund managers when an investor is getting a return that is below similar products or the market?

How can performance fees be justified and valued in a fair and transparent way?

13 comments on “Call for Royal Commission into Banking ”

  1. tc 1

    Overdue however it means nothing unless a govt has the bollocks to enforce change and police whatever emerges.

    Eyes on oz as their big 4 own ours and the reaming practices have a global basis with local tweaks.

    As for all the bs the rwnjs have about different markets, not being the same etc funny how it doesn’t seem to effect the seamlessness with which the senior managers go back and forth across the ditch.

    • cleangreen 1.1

      tc 100% ”I am with you there, – as the new Government needs urgently to grow big balls now, – as they are seen as being so scarred of upsetting the ‘rich and powerful’ aren’t they nowadays?

  2. adam 2

    I think if you think of yourself as left, is it not time you stopped using banks and buying insurance.

    Try a co-operative bank, it really not that hard a thing to do. And you will be helping other people.

    These institutions are at the core of oppression.

    • Rosemary McDonald 2.1

      Kiwibank was offering to takeover mortgages with other banks, waiving the transfer fee of a couple of hundred bucks. Partner and I inquired, and were rejected for the free transfer as our mortgage and income were too small.

      So we’re stuck. Trapped.

      • adam 2.1.1

        Kiwibank is not a co-op bank.

      • tc 2.1.2

        Try TSB and in further news on the limited choice front ASB are closing down their well liked, self service ‘Bank Direct’ model.

        A phone/web based bank whose clients didn’t have to deal with branches that do nothing except hold atm machines and appointments for the head office staff to come out and do the jobs they used to.

        A model most banks would prefer I.e. no branches, staff, technology not people driven process.

        An atm was broken a few weeks back at a BNZ, the staff inside were so happy to be serving customers again they couldn’t hide the excitement. I had an interesting chat with the tellers who were older hands that had rolled with the changes that see them doing SFA in today’s branch.

      • cleangreen 2.1.3

        Rosemary,

        Bless , as we also some years ago (under national) in 12012 were also rejected by Kiwi-bank for being a new client with Kiwi bank.

        This was even though-our long time TSB account was flawless, and we had a mortgage free property!!!!!

        So ‘Kiwi-bank is really a false profit’ simply.

        The new Government need to make Kiwi-bank change it’s character of being unfriendly to Kiwis such as us all.

        We are still happy with TSB and highly recommend this Kiwi owned Bank.

        • Gosman 2.1.3.1

          Do you want Government to interfere in the operational decisions of Kiwibank?

        • dukeofurl 2.1.3.2

          Doesnt make sense.
          Rejected as a new client – why dont you say they didnt give a new loan. Surely if you had security AND could afford the repayments you would qualify.
          I think you have missed saying something like either:
          a) too many existing commitments,
          b) you have been declined or have been hunting around for credit
          c) late payment much higher than the average customer.
          d) asked for too much for what you can afford
          e) other things you dont want to mention here

        • Ffloyd 2.1.3.3

          Re TBS. Good to have a glowing report. We have been mulling over whether we would change to them.

  3. Zorb6 3

    The redemption of Sam Stubbs,ex Hanover director, who may have seen the writing on the wall.
    No appetite for politicians to take on the banks in NZ.

  4. Are customers making fully-informed decisions before they transfer their banking or KiwiSaver to a bank?

    The irony of an ex-Hanover Finance CEO asking if “customers are fully informed before making a financial decision” is so huge you can actually see it from space.

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