KEY POINTS:
You will see them proudly sitting on the main streets of provincial New Zealand: old-fashioned banks with columns flanking their main entrance, usually the most impressive heritage building in town.
Nowadays they're more likely to house restaurants or gift shops. But the statement remains - that the bank is a pillar of the community, solid, reliable, respected.
That's the view many New Zealanders hold of their banks. For the older generation in particular, if the bank manager says it, it must be right.
That they are more likely to be dealing with a personal banker or a financial adviser these days has not diminished their trust in the brand.
That trust has been called into question, following the revelation that ANZ financial advisers actively marketed two ING investment funds with exposure to the US sub-prime market.
After significantly losing value, the funds were indefinitely frozen last month leaving 8000 investors unable to access their collective $521 million investment. It's far from clear when, if ever, they will get their money back.
The Banking Ombudsman has received a spate of complaints since the suspensions. Liz Brown says last year investment-related complaints accounted for about 2 per cent of cases her office handled. "Right now they're making up probably around 10 per cent of our caseload."
Financial advisers or planners remain largely unregulated. There are no minimum qualifications, and they are not required to belong to any industry or professional body. A stiffer regulatory wind is taking some time to start blowing in the industry's direction.
Bank financial advisers offer a limited repertoire of investment products - mostly either the bank's own, or those of a related party.
ING New Zealand is 49 per cent owned by ANZ, a fact many burnt ING Diversified Yield and Regular Income Fund investors claim they weren't told when they invested. The DYF fund was set up in 2003, and the RIF fund was opened in 2005.
The Institute of Financial Advisers (IFA) argues the new disclosure regime takes care of that kind of situation.
As a result of amendments to the Securities Markets Act, from February 29 financial advisers of any description must give you a document declaring everything from their experience and qualifications, to any fees, commissions or incentives they earn, and where their interests lie.
"If you have a potential conflict of interest, such as `we're recommending that you invest funds in this which we own', that should all be disclosed," David Hutton, chief executive of the IFA, says.
He says this has been policy for IFA members for some time.
However, this was far from the only problem with the way ANZ advisers marketed the ING funds.
Investors say their ANZ advisers painted the funds as low risk and akin to term deposits - "as safe as the bank", several investors told the Weekend Herald.
But the funds invested in Collateralised Debt Obligations (CDOs) and Collateralised Loan Obligations (CLOs), financial instruments your average investor is highly unlikely to have ever heard of. The products bundle different types of debt, including some US sub-prime mortgage debt, into a tradeable security. The international credit crunch spelled the end of any market for these securities.
Many of those targeted to invest in the funds seemed to be older people who had term deposits maturing, or who had cash from the sale of family property.
Like Wellington man John Waddilove, they put large chunks of their wealth into the single products.
Through his ANZ adviser the 85-year old put half the proceeds of the sale of his home into the ING Diversified Yield Fund, and the rest into ANZ-owned UDC Finance.
The adviser told him the fund was "conservative". His family, who attended the initial meeting, can recall no mention of CDOs or CLOs, or of the link between ANZ and ING or UDC.
After initially agreeing, ANZ this week refused to participate in the Weekend Herald's story.
"We're working hard to respond to our client concerns," a spokeswoman said in a statement. "This is a complex situation and our process is not yet complete."
Exactly why ANZ advisers were so eager to market these funds to often unsuitable investors remains an unanswered question.
Bank financial advisers are not necessarily under-qualified.
ASB's head of investment services, Jonathan Beale, said the bank required all its advisers to be studying towards a Graduate Diploma in Business Studies specialising in Personal Financial Planning. All are members of the IFA.
However, Beale concedes advisers do work with clients before finishing the qualification, but they must have done a "fundamentals of financial planning" course and are assessed by the bank to ensure their competency.
"You don't just turn up and then start giving investment advice," he said.
Similarly Westpac advisers can be giving advice before they've finished their studies. In a statement, the bank said its wealth advisers either have or are working towards a Certificate in Financial Planning, and are all members of the IFA.
The certificate is the top qualification and is awarded by the IFA after the adviser completes professional training requirements on top of the graduate diploma.
The BNZ says it does not hire people into its investment advisory force, known as its private bank section, without some form of qualification. The graduate diploma is considered the standard, but people often have different letters after their name, particularly overseas graduates.
They only offer advice dependent on the bank's assessment of their competency, head of the private banking section Ralf Hohwieler says, and are all members of a professional association.
Spicers Wealth Management adviser Jeff Matthews, who is a CFA, believes the qualification is the only way to go.
He says Spicers' aim has always been that everyone attains that standard. "If you want to be taken seriously as a company in this business that needs to be your mindset."
If there is this industry surge towards upskilling everyone, how did ANZ get caught out with its enthusiasm for selling the ING funds?
North Shore independent financial planner Charles Lloyd once worked as a salaried adviser for National Mutual.
"Just because I got a salary didn't mean to say I didn't have to make sales. There was more pressure when you're salaried, because you have to justify that salary."
Matthews also believes bank advisers see their clients more as "account holders" and don't actually own the relationship with that person. "They're given a bunch of people to look after."
The four main retail banks pay their advisers a salary without commission, and so argue that they are "product neutral". That comes with some qualifications. Beale says ASB's advisory team gets paid bonuses for achieving certain sales levels, but those are not product specific.
Hohwieler confirms BNZ advisers receive end-of-year bonuses based on business performance. He says this is structured around developing long-term relationships with clients, not just sales.
The disclosure statement of a Westpac wealth adviser shows the bank offers its advisory force performance-related incentive schemes.
Over the ING fund situation, the ANZ has said that there are no product targets for its advisers, but they do earn points for sales which determine whether they qualify to attend the annual conference.
Hohwieler says in the last five or six years the industry has moved away from specific sales incentives. "I've heard in the past that some people [sold] products specifically with the higher risk content because there's a higher margin or better commission to be earned."
Exactly how sales-driven bank financial advisers still are, or what the incentive environment still was when the ING funds were first sold, remains unclear.
Most of the banks do have tie-ins with particular institutions. Just as ANZ has ING, insurer Sovereign is part of the ASB group of companies and Westpac owns BT.
Hohwieler argues the BNZ is the only one of the majors not to have such link-ups, instead selecting the investment products it sells on a "best of breed basis" from the market.
"I think the models that some of the others operate leaves grounds for a potential conflict of interest."
Beale says ASB's funds carry the bank's brand but it has an index-tracking approach to investing, "so we're basically giving people the market". The funds are diversified and ASB doesn't sell off-the-shelf single product funds such as the ING funds, he says.
The Institute of Financial Planners fully supports the Government's Financial Advisers Bill.
Chief executive David Hutton says he wouldn't single banks out. "In fact the banks are probably on average better than many, because while the people don't actually have formal qualifications they certainly would have received [internal] training."
ING WOES PREVENT ESTATE FROM BEING WOUND UP
Beth Holden and her siblings can not settle their late father's estate because $90,000 of their inheritance is now frozen in the ING Diversified Yield Fund.
John Waddilove, who was 88 when he died in January, had been an ANZ customer since leaving school at 17. When he sold the family home to move into a retirement village in 2004, he listened to the bank.
He wanted all his money in one place, daughter Beth says, and didn't want to deal with anyone else.
ANZ adviser Brian MacLean recommended the $90,000 investment in the ING fund. He recommended ANZ-owned UDC Finance for the rest of the money.
"We felt because the financial adviser was from the ANZ bank, that the ANZ bank was quite solid, and it certainly was a low risk option to either investing in shares or those financial companies that advertise on TV," Beth says.
ANZ had contacted her father when the $189,000 proceeds from the house sale appeared in his cheque account, and an appointment with a financial adviser was offered.
Beth feels the bank used personal account information to target him when the money become available.
MacLean told them the ING fund was high yielding and invested in several investment types. "The fund does not have share exposure and uses a mix of cash and fixed interest investments - and can therefore be seen to be on the more conservative end of the scale," he wrote.
Beth and husband Murray say the first they ever heard of CDOs or CLOs was in recent weeks.
"We can't find anywhere, and neither my husband or I can remember, those CDOs being mentioned.
"I think that we would have made it quite clear that we would have wanted a very low risk [investment]."
She says the family was also not aware until recently that ANZ owned UDC or had a half share in ING New Zealand.
