Bank’s suggested investment scheme was low-risk, not no-risk

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Bank’s suggested investment scheme was low-risk, not no-risk

Categories:

Kiwisaver,

Summary:

After Emory retired in 2021, he told the bank he wanted to transfer the money in his workplace savings scheme to a KiwiSaver scheme. He said he was risk-averse and intended to use the money to buy a property in the next few years. He completed a risk assessment that confirmed he had a very low appetite for risk. The bank had a KiwiSaver scheme with a low-risk fund, a higher-risk fund, and a fund combining the two. The bank recommended he invest all his money in the low-risk fund. Emory followed the bank’s advice. However, around this time, many investments worldwide began suffering losses, including low-risk investments. The bank sent him quarterly updates on the value of his investment, which showed steady declines. Emory was in poor health and did not pay much attention to the quarterly disclosures. In mid-2022, having looked more closely at his latest update, he realised he had suffered a significant loss and withdrew his remaining money, putting it all in a term deposit. He complained to the bank that it should never have recommended the scheme to him and should have contacted him directly about the scheme’s losses. The bank’s response did not satisfy him, and he asked us to investigate.

Published:

September 2024

Our investigation

We found the bank’s recommendation that he invest in the low-risk KiwiSaver fund was appropriate. It was reasonably fit for the purposes Emory, had made known to the bank, being the lowest-risk KiwiSaver fund offered by the bank, consisting of cash and fixed-interest investments which are generally considered to be low-risk. The disclosure statement said it was low-risk, but not no-risk. We told Emory the fund’s poor performance had coincided with significant volatility and losses around the world for many types of investment, including low-risk investments. We were satisfied the bank had clearly and appropriately disclosed that the fund had been suffering losses. The bank was under no obligation to contact him directly about the scheme’s poor performance.