Westpac admits they made mistakes with financial planners
WESTPAC has admitted it gave “poor advice” to a couple who went to the bank for retirement advice but ended up losing their family home while the staff member who gave the advice scored a $3000 bonus.
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WESTPAC has admitted it gave “poor advice” to a couple who went to the bank for retirement advice but ended up losing their family home.
And the bank, in another day of damning testimony at the financial services royal commission, has conceded it splashed a $3000 bonus on the staff member who gave the advice.
The royal commission on Thursday heard nurse Jacqueline McDowall and her husband, a truck driver, sold their home — with a plan to buy a bed-and-breakfast business — on the advice of financial planner Krish Mahadevan. They ended up with neither.
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Appearing before the commission on Thursday, Westpac executive Michael Wright, the general manager of its BT Financial Advice unit, agreed the advice should never have been offered.
“This was poor advice,” he said. “It’s very clear this was not a viable strategy for the McDowalls.”
Confidential documents presented to the commission revealed the adviser brushed aside concerns flagged by Westpac staffers who review advice.
Mr Wright also revealed Mr Mahadevan still works at Westpac as an adviser.
The commission heard the McDowalls sold their home at Narre Warren, in Melbourne’s southeast, on Mr Mahadevan’s advice but were left in limbo when his promise of securing a $2 million loan came to nothing. They had wanted to buy a B&B in country Victoria to live in, and to help fund their retirement.
Ms McDowall revealed they still had no house and had moved to the Northern Territory for better-paying jobs so they could save for one.
In an internal analysis of Mr Mahadevan’s advice to the McDowells, a Westpac staff member stated: “I think Krish has put them in a worse position.”
Counsel assisting the commission Rowena Orr, QC, cited a report showing Mr Mahadevan had succeeded in overriding the concerns about his work. The report showed how “easily circumvented” Westpac checks were, Ms Orr said.
Mr Wright argued bank processes generally weren’t easily circumvented, to which Ms Orr responded, “well it was here”. Mr Wright said: “I agree with that.”
She revealed the bank also sold the McDowells life, total permanent disability and income-protection insurance, securing $27,000 in upfront commissions and $2471 a year in ongoing fees.
Mr Mahadevan got a $3000 bonus for his work.
It was revealed Mr Mahadevan had already been brought to the attention of the corporate regulator, the Australian Securities and Investments Commission, over two other issues. These included collecting fees without providing a service. One customer was repaid $2213.
It took 18 months before Mr Mahadevan was marked down with “consequence points”.
Ms Orr said Westpac had to pay $2 million compensation to clients of another financial planner, Andrew Smith, who quit the bank in 2015.
Mr Wright said the group’s systems had failed and would be improved.
Separately on Thursday, a report found the Commonwealth Bank’s reputation had been so trashed by a series of scandals that the public now liked the lender even less than they did the taxman.
A poll of almost 6000 people, carried out over a period overlapping with the royal commission’s first round of hearings last month, showed the CBA ranked at No. 57 out of 60 major Australian organisations in terms of reputation.
That is 21 places lower than in last year’s Australian Corporate Reputation Index, and six places below the Australian Taxation Office.
with AAP
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