Royal Commission hears ANZ got rid of 35 financial planners in wake of banking scandal
THE ANZ got rid of more than 35 financial planners as it tightened standards in the wake of scandals hitting the sector. The bank has admitted to the Royal Commission putting cash growth ahead of the “best interests of the clients”.
Business
Don't miss out on the headlines from Business. Followed categories will be added to My News.
THE ANZ got rid of more than 35 financial planners in the last 12 months, tightening standards as scandals hit the sector, the Royal Commission has heard.
The ANZ also stripped away revenue measures in bonus schemes for its financial planners less than two weeks ago as it prepared to appear at the Royal Commission, it has been revealed.
And it has admitted in a written submission to the commission that it was focusing too much on cash growth at the expense of the “best interests of the clients”.
TIME FOR REFORM, NOT SHACKLING OF BANKS
BILL SHORTEN CALLS FOR BANK VICTIM COMPENSATION
A MP CEO CRAIG MELLER RESIGNS IN WAKE OF COMMISSION
ANZ’s wealth risk boss Kylie Rixon said 71 financial planners had been “performance managed” in the last year and “more than half” had left.
Transgressions included not meeting compliance standards, she said.
It was pointed out that ANZ now has 878 planners through all its entities which is 500 fewer than ten years ago.
On bonuses, Ms Rixon told the commission measures that make up 15 per cent of the performance ‘scorecard’ for planners, were related to bringing in revenue for the bank. She said these were stripped out on April 12.
The goalposts now say they have to focus on things such as good lending practices.
She said, under questioning from the commission, these reforms could have been done five years ago rather than this year.
Ms Rixon explained bonus structures which are paid every six months.
She admitted in her submission to the commission that the business had focused on making cash at the expense of customers.
“(The bank had a) culture of emphasising the growth of the business more than the best interest of the clients,” Ms Rixon said.
“This was reflected in the criteria considered by ANZ (and the weighting applied to the criteria).”
Counsel assisting the commission Rowena Orr revealed that the managers sitting above financial planners were still getting bonuses based on revenue growth. This is pegged at 15 per cent.
It was also revealed despite planners this month taking out revenue from bonus hurdle, they were still reminded the size of the entire bonus pool was still dependent on the amount of revenue they all brought in.
“Revenue remains an important measure in the financial health of the business. The (bonus) incentives payment pool remains dependent on overall advice and distribution business performance,” an internal ANZ document from April this year says.
It was also revealed the pay crackdown only applied to ANZ’s own financial planners — those employed and paid by the bank — rather than the “aligned dealer groups” of financial planning businesses who have a contractual relationship with ANZ to write business for the bank for which they get payments from the lender.
Ms Rixon said it was harder to monitor some elements of its dealer groups as they did not centralise some information and practices as much as ANZ’s own planners did.
FINANCIAL PLANNERS FAILED TO MEET CUSTOMER BEST INTERESTS
THE amount of bad advice written by ANZ financial planners detected annually escalated from 60 cases to 2500 in less than ten years, the bank royal commission has heard.
At the same time, counsel assisting the commission Rowena Orr showed an internal audit document revealing one out of every 20 financial planning files audited in 2015 did not meet the “customer best interest” hurdle.
It showed in that year five per cent of files in ANZ financial planning and off shoots RI and Millennium 3 flunked the best interest test.
Ms Orr also showed ANZ’s wealth risk boss Kylie Rixon figures showing internal audit results of instances of “inappropriate advice” given annually.
It showed only 60 cases in 2008. These leap up to 1401 by 2014.
In 2015 it hits 2810 and by 2016 it “dips” to 2499.
Ms Orr questioned if the disparity was due to earlier systems simply not picking up the bad advice.
She asked Ms Rixon if systems weren’t adequate to monitor its financial advice planners before 2015. The ANZ banker replied: “Yes.”
It was also revealed an internal audit report showed fears systemic risk existed due to problems with its systems monitoring the planners, which meant customers were at risk of bad financial advice.
The risk estimate advice said this could lead to licence breaches and having to pay back customers $20m if things went wrong.
The bank accepted the same recommendation over four years as it struggled to fix its systems.
Ms Rixon said it was “very regrettable”.
“(ANZ) has reduced the risk but it has not come down to where we would like it to be,” she told the commission.
Referring to a meeting in 2016 that flagged the issue, Ms Rixon said she was concerned that the technology to fix the systems was taking so long.
“Of course I was concerned,” she said.
Commission chief Ken Hayne asked why technology had to supply the answers rather than better human supervision of staff.
Ms Rixon said extra human supervision can help “to an extent”.
MORE REMEDIATION CASES THAN ANZ CAN HANDLE
A FINANCIAL adviser from under fire advice giant AMP sent his self managed super fund clients to buy property through a real estate company he secretly owned more than half of, the royal commission had heard.
Counsel assisting the commission Rowena Orr, brought up the case of former AMP planner Adam Palmer, who worked for the company’s offshoot Genesys, when he also owned 60 per cent of the “Property Saint” business.
The commission heard he referred clients to a man named “Eddie” at the real estate company to invest in property, but Mr Palmer did not disclose his ownership portion to customers or to AMP. “I accept (his actions) could be interpreted as dishonest,” Ms Britt told the royal commission.
Mr Palmer quit in 2014 when audits picked up problems with his work, but the commission heard none of his clients have yet been remediated.
AMP executive Sarah Britt earlier revealed the advice giant is struggling to resource its team examining and remediating victims of bad financial advice, the banking royal commission heard.
It was revealed AMP also kept possible victims of poor financial planners in the dark as they had not had a chance to look at many client files yet.
AMP said it did not reach out to possible victims so as not to create “worry” until the true state of their files were known.
Ms Britt acknowledged there were more cases than the company could handle.
“Historically we underestimated the task ahead of us,” she told the commission.
She said AMP started to beef-up teams reviewing cases at the end of last year.
“Due to the size and scale of the (review) program these files have not been reviewed, we are currently resourcing the remediation program so it can be expedited.”
Counsel assisting the commission Rowena Orr drew Ms Britt’s attention to the case of AMP insurance adviser Jennifer Coleman who failed to tell customers of the high premiums they would pay in insurance policies she was signing them up to.
About 100 of Ms Coleman’s clients might have to be remediated, the commission heard. No compensation has yet been paid to any of them.
The commission heard of a de facto couple — a tradesman and his wife who was caring for their one year old daughter — who wanted coverage to protect the family in case anything happened to either parent.
Ms Britt acknowledged Ms Coleman misquoted the policy to them.
“I think what she has done is just get it wrong,” Ms Britt said.
“I accept that the clients have been mislead, I accept that.”
A review of her work following this gave Ms Coleman a “D” rating — her third in a row.
It was also found she provided inappropriate advice to two other customers.
After these findings, Ms Coleman resigned in July, 2016.
“It is a concern — there was a pattern of conduct. it is apparent she wasn’t capable of providing good quality advice,” Ms Britt said.
“But AMP had the appropriate systems and processes in place to detect her and terminate her.”
NAB FINANCIAL PLANNER FAIL
ALSO on Monday, Ms Orr revealed how a NAB financial planner filled in customer details himself and had a colleague improperly witness a document, when he was supposed to be helping a couple allocate their superannuation savings in case they died.
NAB chief customer officer Andrew Hagger said in the worst case scenario from such falsifications “creates the potential for the beneficiary nomination form to be invalid”.
Last week the commission heard, NAB identified 353 staff who had incorrectly witnessed beneficiary nomination forms for 2520 customers.
MORE ROYAL COMMISSION NEWS:
COMMONWEALTH BANK WINS GOLD FOR DECEIT
How the NBN has delivered just in time
The NBN has delivered, and it has done so in what can only be described as the ultimate — the hit-the-ground running immediate — stress test, rites Terry McCrann.
Sydney airport the wrong place at the wrong time
Sydney Airport has some of the sweetest acreage in Australia but when passengers numbers have dwindled from 9 million in the March quarter to 400,000 in the June quarter, that doesn’t count for much, writes Terry McCrann.