Martine O'Callaghan was furious with the way her widowed mother was treated by her bank after the death of her husband. Photo / Supplied
Martine O'Callaghan was furious with the way her widowed mother was treated by her bank after the death of her husband. Photo / Supplied
OPINION
The sorry saga of an 87-year-old widow losing access to her money after her bank stripped her of her credit card and closed an account following her husband's death highlights a grey area in financial services.
I have a personal and professional view of the sector, beingboth a consumer of services and a provider of them, and what's become apparent is this worrisome grey area, which is limiting the financial resilience of many Kiwi families.
Even as companies offer savings accounts, KiwiSaver, investments and life insurance, they are frequently omitting or not providing information about what a consumer needs if they have an account, an investment or an insurance policy worth $15,000 or more.
In short, there is no consistent provision of information – whether in pamphlet form, by email or in conversation with a staffer – about estate planning, such as wills, even when the product the provider sells would be protected by one.
Like many Kiwis, I was thrilled to get my first home loan; my husband and I would have to live on tuna and noodles for a while, but it was worth it. When I look back on this period of my life, I shudder – we were extremely reliant on both our incomes and had no life or income insurance.
Angela Vale. Photo / Supplied
The people involved in getting us the biggest loan of our lives included a mortgage broker, a home loan specialist and our lawyer, and all were aware of our financial situation and did their utmost to enable our dream of home ownership. But not one of them brought to our attention how important it was to have a will or enduring power of attorney in case the worst happened.
What is the responsibility of financial providers in this area?
Legally, none. It is up to each provider to decide how much they want to help their customers ensure their savings and policies are protected by a will. They are not obligated by any current law to discuss estate planning with customers, to provide information about it, or to make recommendations about wills or other estate documents in association with savings, investments or insurance. The exception is independent financial advisers, who are required to cover off questions about estate planning with their clients.
The ethical question to be answered is whether there should be an onus on all financial service providers to bridge the gap when there is a crossover, i.e. should every provider be disseminating information about estate planning/wills if the product they sell would be affected by the absence of a will?
These companies do tend to stick to their knitting, which is fair enough, but as we've seen from the advent of online banking, they can revolutionise their services extremely fast when there is consumer demand and a good business case for it.
In the case of home loan, savings, investment and insurance customers, the bare minimum activity by providers should be to require customers to seek advice on setting up a will, at least for their own protection.
For instance, customers should be aware of a will's relevance to home loans; if there is another party with a vested interest in the property, the way in which the property is owned matters when it comes to their will.
Likewise, when opening a joint bank account they must know the difference between a personal asset and a joint asset for legal purposes, because this will affect their estate.
Funds in a joint bank account will remain available if a spouse passes away, but any funds held in a personal account will be frozen, so the management of personal and joint accounts should be considered when couples merge their finances.
What's the solution?
There are several ways to improve the current situation. Those with regulatory and oversight responsibilities – the Financial Services Council, Commission for Financial Capability and Reserve Bank of New Zealand – are doing a great job of making sure companies are looking out for customer welfare.
However, there is an obvious gap on the frontlines of customer service in the financial sector, where – except for those consumers who are routinely dealing with independent financial advisers – conversations around estate planning are either not happening or not getting the cut-through needed to benefit New Zealanders on a large scale.
We need more industry collaboration, including outreach (at least) to MPs and regulators, who would logically need to be involved in a major issue of relevance to all New Zealanders with policies/savings above $15,000.
Involving all financial services providers and regulators in a cross-party action to broadly advantage Kiwis would ensure the discussion is free and fair and does not advantage any provider over another.
• Angela Vale is the chief executive officer of Footprint, a provider of a digital subscription service offering wills and estate administration as part of employee benefits packages, and New Zealand's largest provider of online wills.
