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Bank staff stressed by conflicted sales targets

A new report shows bank staff are under increasing pressure to sell products such as KiwiSaver, insurance and credit cards to their customers, despite banks being urged last year to clean up their sales tactics.

A survey of 600 Bank of New Zealand, Westpac Banking Corp and ANZ Bank New Zealand staff released today finds many bank staff feel under more pressure to sell financial products to customers than they did this time last year, when an Australian banking report into staff remuneration recommended sweeping changes to ensure customers’ interests were protected.

Today’s report, from First Union, says 87 percent of New Zealand bank staff respondents felt pressure to sell financial products to customers who came into the bank. And 50 percent said that the pressure was stronger than a year ago.

BNZ has the worst result with 93 percent of staff feeling under pressure to sell products, and 64 percent saying it was worse than a year ago.

First Union national organiser for finance sector workers Stephen Parry says the survey is clear evidence of the need for some sort of public inquiry into the New Zealand banking sector, as is happening with the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Parry says it’s clear that previous reform has not improved the situation for under-pressure bank staff, or their customers.

In April last year, Stephen Sedgwick’s year-long review into the retail banking sector in Australia recommended fundamental changes to the way bank staff are remunerated. In particular, he urged banks to break the direct links between what staff sell and what they get paid.

At least some of bank staff remuneration should be based on them producing the best outcomes for customers, not just on selling the most products, he said.

Although banks might argue customers expect in-bank staff to try to sell them financial products - as they would expect a salesperson in a car yard to sell them a car - Parry says the relationship is different.

“Financial products are not retail products. We have an expectation of trust when dealing with a bank, not least because we are handing over our worldly assets to them. And the implications of poor advice are enormous for consumers.

“There is real systemic risk for customers built into way banks are operating. This is not something that can be left to the market. It needs to be regulated.”

Parry says following the Sedgwick report, ANZ and Westpac had moved to targets based on the number of sales rather than the dollar value of those sales. But this hadn’t lessened pressure on staff to sell products to customers that might or might not be suitable.

“ANZ has been the most proactive bank in making changes, but even so their staff are telling us that the new targets are for the most part unachievable. In many areas less than half of bank workers were saying they were meeting their targets, meaning that the situation was even more stressful than it had been before.”

Parry says BNZ hadn’t even made the move away from dollar targets. Even worse, it still had individual targets for individual products - life insurance, for example, or credit cards - a practice Stephen Sedgwick was particularly concerned about.

“Imagine a customer comes into the bank with a particular need, but the bank employee’s target means they need to meet their targets on a different product. How is that in the best interests of the customer?”

Parry said the First Union survey didn’t cover ASB Bank or Kiwibank, because neither had enough First Union members to get valid results. However, he believed ASB practices were close to those at BNZ, although the situation at Kiwibank - the only New Zealand-owned one of the top five - was significantly better.

New Zealand Bankers’ Association deputy chief executive Antony Buick-Constable says the new Code of Banking Practice, which came into force on June 1, “makes a clear commitment to treat customers fairly and reasonably in a consistent and ethical way”.

“Sedgwick recommended that any bonuses be based on a range of measures, including factors like customer satisfaction. The deadline for banks in Australia is 2020. Some of our banks have already completed this work. Other banks are progressing this.”

BNZ chief customer officer Paul Carter says the bank will be looking at the results of the First Union survey, although it represents "just 4 percent of BNZ staff". In addition, the bank is implementing recommendations from the Sedgwick Report and these should be in place by October 1, "12 months ahead of the report's recommended timeframe", Carter says.

"If any of our people have any concerns we encourage them to get in touch with their people leader or via our Whistleblower line."

Several reviews are underway in New Zealand into practices in the banking, financial services and insurance sectors. The Financial Markets Authority started an inquiry in early May, with findings expected in October. And the FMA and the Reserve Bank sent a joint letter to banks asking them to prove they weren’t behaving badly in the way their Australian parents were.

While Parry welcomed the scrutiny, he said it was crucial that any inquiry was conducted in the open - as the Australian Royal Commission is.

“There needs to be a transparent public process by which banks’ practices can be examined.”

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