Hard sell - hawking Govt's saving scheme

Commerce Minister Simon Power is worried that some people appeared to be being pressured into signing up to KiwiSaver. Photo / Mark Mitchell

When 22-year-old Geoff got a job selling KiwiSaver in January he was stoked.

He had finished university the year before and struggled to find work before a family friend brought him on board to work for Huljich Wealth Management under a franchisee based in South Auckland.

Geoff, who does not wish to have his real name revealed for fear of repercussions, began training with the franchisee by visiting the man's home for a couple of hours each week.

He passed a test and became an accredited distributor but it was the practical experience on the street that began to worry him.

"We were told to go door-to-door. He mentioned this was technically against the law but told us to do it anyway. When they opened the door we were told to step inside and take our shoes off and not wait to be invited in."

The message was don't leave until you get the sale.

Geoff says he was told to take a portable photocopier with him into people's homes because there were no resources back at the trainer's office.

"The office was basically a desk in his shed. There was no internet or phone we could use, it was all up to us to find the people."

Geoff was told to sign up 20 people a week or he would lose his job. The company paid $40 for each sign-up and sellers were told that if they went into a person's home they should try to sign-up the whole family, including children.

The idea was to target those in poorer areas of Auckland, particularly large Pacific Island families.

"If you signed up a family of four you could get $160," he said.

His training included standing outside an Otahuhu supermarket and approaching people directly as well as manning a stall at the Otara market.

But when his trainer asked him to drive another saleswoman around South Auckland so she could go door-to-door without any compensation for the petrol cost, he decided to cut his losses.

"I was trying really hard to get the job done. It was my first real job. But it was appalling."

He left the job after less than three months and says he can't believe his trainer got away with teaching a group of young people and others who were desperate for money to sell illegally.

Geoff is just one of a number of people who have been in touch with the Herald after it was revealed that selling KiwiSaver door-to-door is against the law.

The Securities Commission is investigating after a number of concerns were reported to the Inland Revenue.

But it seems it is not just door-to-door where KiwiSaver is being flogged.

Readers say they have been approached on the side of Great South Road in Papakura and at a mental health facility. One woman was shocked after a person delivered a water cooler to her mother's home and then tried to sell KiwiSaver to the whole family.

Huljich Wealth Management managing director Peter Huljich says the man who trained Geoff is no longer working for his firm.

"As soon as we received complaints we ascertained he was mis-selling KiwiSaver and he was dismissed. It's certainly not something we put up with and does not meet our brand and values."

But he believes the concern over door-to-door sales has been overdone.

"It's a few bad apples which have gone and done this."

He says it is a problem which KiwiSaver providers should sort out themselves but says he sees no issue with KiwiSaver being sold either at the Otara markets or at a shopping centre in St Lukes.

"KiwiSaver is designed for all New Zealanders."

Huljich says as long as people are being provided with an investment statement in plain English that spells out all of the benefits, it is up to them to decide.

"If they want more advice they should see a financial planner."

But Lyn McMorran, chairwoman of the Institute of Financial Advisers, is not convinced.

"If you are trying to sell something on the side of the road how are you going to do a needs analysis for that person? To me it all sounds totally wrong."

McMorran said it was important for people to understand whether KiwiSaver was right for them.

"How can you sell a long-term retirement savings scheme outside a supermarket? How do consumers even know these people understand what they are selling?"

Under the present legislation, anyone can sell KiwiSaver. There are advertisements in newspapers every week promising commissions and one scheme provider, SuperLife, is guaranteeing sellers $100 a day.

SuperLife has also approached university students to sell KiwiSaver on a referral basis, although none have sign up yet.

From the end of next year it will be illegal for anyone who is not qualified or registered with the Securities Commission to sell KiwiSaver.

But until then there is a window.

Gareth Morgan KiwiSaver director Andrew Gawith said it appeared some people were taking advantage of the open door to sign up as many people as they could before the new legislation came in. "It is a classic case of the Government not understanding what they have let loose."

Gawith said while KiwiSaver was a complex product it was essentially a no-brainer for those who could save. It was those who could not afford it that could cause problems. "If people have got debt coming out of their ears, then signing up to KiwiSaver may be the last thing they should do."

Gawith said unlike the auto-enrolment function which signs all people who change jobs up to KiwiSaver, those who signed up through a salesperson did not have the chance to change their mind.

"Where you are getting salespeople you clearly don't have a cooling off - they are in there, including the kids."

Gawith believed it was the responsibility of salespeople to be careful about who they were signing into a long-term contract.

The door-to-door sales investigation has got both of the biggest KiwiSaver providers worried.

"It is certainly concerning from a provider perspective," said ING head of distribution David Boyle.

Boyle said it was very concerning that some providers were all about getting the numbers.

Salespeople were able to get commission of between $30 and $50 per person they signed up. "That is incredibly high. It's not something I have seen before."

Boyle said the level of enticement may be why some were being a bit more aggressive than for any other financial service product.

ING was now looking into its own practices to ensure its salespeople were not breaking the law. Boyle said he was also concerned about the added pressure being placed on people trying to switch providers.

"There are certainly some cases where people have phoned up after the transfer has been notified to try and keep them with the old provider. That kind of behaviour doesn't seem to be in the best interests of the member."

ASB Bank head of wholesale distribution Greg McAllister said the heavily populated KiwiSaver provider market lent itself to the problem.

"The way in which some schemes have set themselves up with commissions is invariably going to lend itself to the possibility for sellers to become overzealous."

McAllister believed the problems were restricted to a handful of schemes and put the blame on sales agents rather than providers.

But the ASB was going back to its adviser network to ensure all the rules were clear and were being followed.

"We do have a responsibility to keep the game clean."

Association of Superannuation Funds of New Zealand chairman David Ireland said the door-to-door selling could be a reflection of the severe restrictions on the fee structures and the way providers were able to be remunerated.

"That could mean there is not enough money to pay people to keep tabs on distributors or salespeople."

He did not believe many in the professional financial advice community would get out of bed for $50 per sign-up.

McMorran admitted there wasn't a lot of money in KiwiSaver for financial advisers but said that was no excuse for salespeople to be breaking the law.

"It seems some of the more vulnerable people are being targeted and that really bothers me. They are people that don't necessarily seek advice from advisers. For me these people are not advisers and they shouldn't be anywhere near a financial services product that requires financial advice."

But Nick McCorkindale, founder of KiwiSaver adviser group Mr and Mrs KiwiSaver, said the issue of door-knocking was complicated and believed there needed to be a public debate on how KiwiSaver was able to be sold.

"KiwiSaver is a product to benefit all New Zealanders and create generational wealth where no opportunities have existed in the past so public debate on how to reach these people is needed."

Commerce Minister Simon Power said it was worrying that some people appeared to be being pressured into signing up to KiwiSaver.

"Although we want people to save for their retirement, and joining KiwiSaver is obviously a key option in this regard, we don't consider it appropriate for these decisions to be made by people who may feel under undue pressure."

As well as the Securities Commission investigation, Power said the Inland Revenue would be providing further advice to the Ministry of Economic Development by the end of the year on the issue.

But the Government would not be bringing forward financial adviser legislation.

"The financial adviser regime is scheduled to come into force by the end of next year. This timetable will ensure the regulations underpinning the legislation will be developed effectively and will allow the industry to prepare for the changes."

THE RULES
* It is illegal to sell investment products including KiwiSaver by going house-to-house.
* Life Insurance can be sold house-to-house.
* Investments can be sold door-to-door at businesses or via the telephone and email.
* A salesperson can visit you at home if they have called first to arrange the appointment.