Westpac paid back victims, didn’t tell corporate cop for months
WESTPAC started paying back victims of a shonky financial planner but didn’t tell the corporate cop for another four months because “there was a lot going on” at the time, the royal commission has heard.
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A HIGH flying Westpac executive said the bank was too busy to tell the corporate cop about a shonky financial planner, even though it had secretly started paying back the planner’s victims, the royal commission heard.
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Counsel assisting the commission Rowena Orr said the adviser Andrew Smith, was first flagged in May 2015 and the bank started paying back customers by July.
“But it took until November to tell the regulator?” she asked Westpac’s national head of BT finance Michael Wright.
“I do acknowledge it feels like a long time, there was a lot going on,” Mr Wright said as the reason for keeping the regulator in the dark.
Ms Orr also confronted Mr Wright with the revelation that Westpac had refused to give a bad reference to the planner, Mr Smith, after he quit the bank due to his poor performance.
This was despite Westpac investigating him for “serious misconduct” and interest from the corporate cop.
Despite the company, Dover financial planners, pleading multiple times with Westpac to know if Mr Smith had done anything wrong, the bank refused citing a policy not to speak on ex staff. Mr Smith was hired by Dover six weeks after leaving Westpac and is still registered as a financial adviser.
Mr Wright also said customers did not respect financial advisers the way it does doctors and lawyers: “because we haven’t earned it yet”.
Ms Orr asked if there were occasions when customers were not at the centre of adviser’s concerns.
Mr Wright replied: “I think there are instances where that has not been the case”.
He also said with adviser pay structures there was no real incentive to not up sell clients for products they don’t need.
“(There is) no incentive to them other than feeling they have done the right thing by the customer,” Mr Wright said.
He also acknowledged the industry was sitting on its hands to abandon “grand fathered” commission structures, as no one wanted to be the first to lose the revenue from it.
“I can’t wait for the day it is fully fee for service, for insurance and super, but legislation needs to be part of the conversation as there are significant disadvantages for moving first,” he said.
After government reforms in 2013 selling new commission products for insurance was banned, but old commissions were “grandfathered” and allowed to continue as the system adapts over.
On Thursday it was revealed Westpac took too long to tell the corporate cop about “serious misconduct” by the Westpac and St George planner Mr Smith.
Mr Smith worked for the bank between 2007 and 2015, when he quit during an investigation of his actions.
“These allegations against you, if substantiated, could amount to serious misconduct,” Westpac told him at the time.
Meanwhile, Ms Orr also revealed how an ANZ state development manager was ignored when she blew the whistle on a dodgy planner, saying he should be let go.
And instead the dodgy got a “letter of censure” and continued giving bad advice.
The adviser, Christopher Harris, had already been detected for poor advice when he placed an elderly widow into an inappropriate investment, Ms Orr said.
The widow on a $840 a fortnight pension wanted to see if she could make a little extra cash from $32,000 she had in a term deposit.
Instead she was put into an inappropriate account which saw her charged $1650 for advice, $165 upfront for entering the account and $1152.88 every year for being in the account. It was revealed the bank had not remediated her for the bad advice yet.
Ms Orr said ANZ had a number of problems with financial planners, revealing in 2013 it had splashed out big payments to sign up financial advisers that worked for a failing financial advice firm being investigated by the corporate cop.
The commission heard ANZ desperately wanted to get its hands on the hundreds of millions of dollars of clients money under management which could earn commissions and other fees.
‘MAKING MONEY COMES FIRST’
A CONFIDENTIAL Westpac report into how it paid advisers admitted making money was the only performance measure and good behaviour measures were there “theoretically” but there was no evidence it was enforced, the royal commission has heard.
Counsel assisting the commission Rowena Orr presented the report from last year which also said records for share of revenue payments were so complex that it was impossible to work out some adviser pay arrangements.
The report said making money was put first for advisers.
“Revenue is the primary performance measure, behavioural gates are in place theoretically, however there is no evidence that behavioural assessments occur,” the internal report said.
It also went on to criticise the payment structures in which a share of revenue was paid out to advisers.
“Shares arrangements for both partners and advisers are increasingly complex.”
And a review of this “could not be completed due to complexity.”
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