This article was published on 4 December 2010. Some information may be out of date.

Q&As

  • Bank’s handling of a fee inquiry leads customer to switch banks
  • One good proverb deserves another
  • Should Gareth Morgan Investments be under more scrutiny?

Plus: Meaningful Christmas gifts

QI see the fees banks charge were featured in a recent letter to you. We have been with the ASB Bank since 1970 so are/were loyal customers. However, the latest bank fee really got up my nose.

It went like this: We went away overseas for eight weeks. Before we took off we put our ASB Bank Visa card into credit — putting a large amount onto our card as part of the spending money for our travels.

When we returned to New Zealand the credit card was still $2000 in credit, so we transferred this money back into our regular ASB travel bank account as savings for our next trip. For this transfer of our own money we were charged the princely sum of $1. The ASB called it a cash advance fee — in this case, a fee to transfer our own money from a credit card to a bank account within the same bank.

Now I would not mind if this cash advance was money “loaned” to us by the bank, in other words the credit card went into “overdraft” when the transfer was made, but it did not.

So I called the ASB and asked them to refund the $1 fee, and to their credit they did so. However, I was less than impressed when the bank staff told me they would make a note in my computer records so such a refund could not be made in the future. This was an ASB bank supervisor whose tone and manner of speaking left much to be desired.

So I am glad you think that the “threat of losing customers will surely help keep banks on their toes,” as you said in your column — because the banks need to do better. Perhaps they need to refer to the British Airways findings, that customers will tell three people if they are satisfied about the service provided, but ten people if they are not.

As a result of the tone and manner of the ASB Bank supervisor, as well as the threat of not being able to get such a fee refunded in the future, $10,000 of travel fund money in our ASB Bank accounts was transferred to Kiwibank last Friday.

So if your bank gets up you nose, don’t get mad get even!

AFair enough — and, as I mentioned last week, the banks have recently made it easier to transfer from one bank to another, without the customer having to chase up all the automatic payments and so on.

But let’s give ASB its say.

Shaun Drylie, general manager cards, transactions and payments, confirms that “a fee is charged any time cash is withdrawn from an ASB credit card.” Generally, this doesn’t seem unreasonable, and it probably applies in other banks. But your circumstances were a bit different.

Drylie continues, “When a customer contacts us to query any of our fees, our people should always explain why the fee has been charged so the customer can avoid the same fee in the future, or have a better understanding of why it will be payable. The ASB staff member also has the discretion to reverse the fee on a case by case basis.”

So far so good. But does ASB normally make a note not to make a similar refund in future? Not usually, says Drylie. “The standard practice, however, is to make a note of every customer interaction, so in this case it would be that the fee had been explained and reversed. This helps any other staff member talking to the customer in the future to understand the history should the same situation occur again.”

That puts it all in a somewhat different light. It sounds as if the supervisor you spoke to was having a bad day, and you copped it.

Adds Drylie, “We were very sorry to hear that a customer was unhappy with the experience they had with ASB, and we apologise for the upset this caused. It is important that we receive this sort of feedback, so it can be taken into consideration as we continue to review the products and services that we offer and the fees that are charged in relation to them.”

There you go — an apology and an assurance that you were heard.

I must say that I wouldn’t have gone to the trouble that you did over a $1 fee. But it’s a good thing there are people like you around.

QYour proverb last week reminded me of one my father used to trot out: “Near enough isn’t right, but right’s near enough” — which used to annoy the devil out of me as a young fella trying to build something. A position that some of the finance company directors should perhaps have taken?

AYour Dad’s proverb is much the same as, “If a job’s worth doing, it’s worth doing well.” And, as I said last week, that can mean other jobs don’t get done at all.

But if the job is running a finance company, clearly “right is near enough.” It all comes down to priorities.

QComing off the plane at Wellington Airport recently, I was confronted by a huge billboard ad for Gareth Morgan Investments announcing that 50,000 New Zealanders trusted them with their money.

Now with the average Kiwi’s savings being around say $50,000 and with GMI’s fees being 0.75 per cent of the principal — i.e. totally unrelated to earnings positive or negative — GMI’s annual revenue must be around $18.75 million. This no doubt delivers a tidy profit for himself and his mates after paying tax, salaries and overheads etc.

So it’s obvious that for GMI and like companies their main preoccupation is with acquiring and maintaining customer numbers rather than maximising returns for them.

Why is it that apart from when involved in a scandal such as Forsyth Barr’s involvement with Feltex, these companies are never scrutinised by the media, and then only cursorily?

My annualised rate of return from GMI over a period of 18 months was a disgraceful 2.7 per cent after tax and fees etc, so you can see why I raise the question. I’ve since got out and into term deposits with BNZ.

AOh dear. Where were you all those times when I’ve said, “If you go into riskier investments such as shares, your returns will be volatile. Don’t bail out when the going gets tough,”?

GMI director Andrew Gawith says your investment must have been partly in shares to get the return you report. He adds, “Interesting that so many investors are flocking to term deposits when interest rates are such that after tax and inflation, they’re pretty much guaranteeing a zero or negative return. That’s typical behaviour for the point of maximum despair for investors” — which is when the share market has plunged.

We don’t know when the market will really boom again, but for those who stick with their investments, brighter days will come. They always do.

Moving on to your other points, Gawith says the average balance for GMI’s KiwiSaver members, who make up the bulk of the 50,000, is around $7000 — which is not quite $50,000. Sure, other investors have considerably more. But, he says, “your reader has grossly overestimated our annual revenues!”

More interesting, perhaps, is your point that GMI’s fees are not related to how well their investments have done. Performance-related fees sound good, but I doubt if they would work. Few would want to be fund managers, earning negative incomes some years. And those who could cope with such volatility might be incentivised to take big risks, because that tends to bring higher average returns, and therefore higher pay for them.

Some managers do receive modified performance-related fees, in the form of a bonus if they exceed a target. But that can also lead to excessive risk-taking — especially as they don’t tend to cut their fees when they do badly.

In any case, even without performance-related fees, there is still a strong incentive for fund managers to perform well, to attract more investors. And while you imply that wanting more investors is suspect, I can’t see why. Every business wants more customers.

Gawith reacts strongly to your comments about lack of scrutiny. “We’ve been such vocal advocates for transparency and scrutiny of fund managers for so long … this guy’s picking a fight with the wrong people! … You don’t lobby government, harass the industry, expose the industry and advocate for investors, and get away with not being scrutinized by pretty much everyone. We of all companies need to be — and are — squeaky clean.”

He adds that GMI has an audit, risk and compliance committee, which scrutinizes its investment processes and safekeeping of clients’ money. “The key point of difference is that this committee has GMI client representatives on it.”

I’m not in a position to check this out, but I do know that GMI boss Gareth Morgan would hardly win a Mr Popularity Award in the funds management industry, because of his criticisms of the way things are done.

And when he sat across the table from me on the Capital Market Development Taskforce, Morgan was pushing strongly for investor rights and transparency.

That’s not to say that more scrutiny of all the fund managers — including GMI — wouldn’t be good. The government is moving towards cleaning up disclosure and watching more closely what goes on. The sooner the better.

MEANINGFUL CHRISTMAS GIFTS

Once again, this year, I’m listing charities through which you can buy a gift for a relative or friend that is really a donation to somebody in need. For example, you could send money to the charity to buy school supplies for a child in a developing country, and then give your relative or friend a document saying they have made that gift.

The following charities offer schemes like this:

Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.