Banking royal commission live: superannuation hearings - 16 August
Royal commission | “I’m just trying to understand ... how this could possibly make sense.”
- AMP revenue threat
- AMP’s Rachel Sansom appears
- Cash returns? ‘You would have to ask the client
’
- Mr Hodge’s watch
- AMP’s Richard Allert appears
- Retail distribution risks
- Is this even advice?
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry is conducting the second week of its fifth round of hearings, focused on superannuation, in Melbourne. Follow the proceedings with us live.
4.15pm Hearing adjourned
Mr Hayne and Mr Hodge agree everyone’s getting an early mark today, and the hearing is adjourned.
Thanks for joining us at another day of the superannuation round of hearings at the financial services royal commission.
Here’s what we learned:
- AMP had policies which meant the board of its superannuation business was not told about “significantly underperforming” products for more than five years.
- Some AMP super savers whose funds were invested in the cash option were being charged so many fees they were actually losing money.
- The trustee for AMP’s super funds had its hands tied and could not cut fees for members unless the holding company approved.
- AMP took years to transfer members into low-cost default MySuper products, warning of the risk involved in a complex transition, but also mindful it would lose $86.5m in fees if it made an immediate transfer.
- Elsewhere, ANZ had a strategy to sell super through its branches that saw more than $2 billion rolled into one product since the start of the strategy but ASIC warned it was crucial to make sure customers didn’t think they were getting personal advice.
We’ll be back live from 9.30am tomorrow.
4.02pm: Cash or not cash?
Focus returns to cash assets.
An internal document refers to cash and cash equivalents - the investment option might also hold mortgage backed securities and corporate debt.
The lowest credit rating of whatever assets are pooled and described as cash is BBB+. But one of AMP’s “cash” funds with that asset pool has a lower rating of BBB-.
“Do you know whether any decision has been made by AMP as to whether it will continue to describe as ‘cash’ things that are not cash?” Mr Hodge asks.
There is analysis underway, Ms Sansom says.
APRA has raised the issue across the industry, she says.
Commissioner Hayne ask how long the analysis might take.
Ms Sansom says she’s not sure, but it won’t be long.
This draws raised eyebrows from the commissioner.
The commission looks at a statement from a member from October 2016, when the member was almost 70.
Their net investment earnings were $3.23.
They are invested 100 per cent in cash.
The member has had an adviser service fee deducted from their account every month.
The trustee doesn’t monitor the provision of any services.
“Is it a matter of concern to the trustee ... as to why a member paying an adviser to advise them in their best interests would be left 100 per cent in cash, with AMP making either no meaningful, or a ngative return, on that cash?” Mr Hodge asks.
Ms Sansom says it’s hard to know if it’s appropriate without seeing the rest of the member’s assets.
“Do you think it’s possible that there a rational basis on which a member would knowingly remain invested in cash with AMP over the last three years,” Mr Hodge wonders.
Perhaps if it was part of a diversified portfolio, and they weren’t looking at this particulur option to drive returns, Ms Sansom suggests.
“But it’s cash,” Mr Hodge insists, saying the member would have plenty of cash investment options.
“I’m just trying to understand what view ... the trustee has formed as to how this could possibly make sense.”
“I haven’t formed a view,” Ms Sansom says.
“Is it something that the trustee has thought about?”
“Not at this stage.”
The commission turns to the AMP Capital expense recovery incident - a misunderstanding between AMP Capital and the custodian about fees for some investment options. The fees were applied evenly instead of being split up pro rata. So fees were charged that should not have been. In aggregate it’s about $3m to $3.5m.
In the AMP Capital fee rebate incident, some fees should have been rebated but this did not happen - to the value of about $23m.
AMP Life reported this to trustees.
Ms Sansom agrees the trustee does not have visibility over the indirect costs beyond what they’re told by AMP Life or AMP Capital.
This issue of overcharging dates back to about 2014, she says.
Commissioner Hayne wonders if the trustee is in a position to fulfil its obligations in light of the information underpinning the breach notice?
Ms Sansom believes so but needs to keep working with the other arms of the business.
How can she do that with a staff of 15?
Through the outsourcing arrangements, she says. Through the regular reporting it receives and the attendance of other staff at its meetings.
But Mr Hayne says the information comes from the parties that the work has been outsourced to.
Ms Sansom insists the trustee does cross-checking.
3.39pm: Unwarranted fees
Focus turns to an APRA document that warns AMP Super relies on AMP Advice and AMP Life to monitor adviser activities and to manage the associated risks of distribution of super products.
AMP Super does not have visibility of the advisers who direct members to invest in their super products, nor if this is appropriate for members.
Some changes have been made to address this, but there are some still to make, we hear.
AMP Super is getting increased visibility. There will always be a limit to which the trustee can add value, AMP’s Ms Sansom says, but it’s increasing its interest in advice.
Sometimes the advice business will look at an issue from an advice lens and not necessarily a product lens, she says.
Mr Hodge raises the issue of fees deducted for members who did not have advisers.
For the administration component, the trustee was told the issue was closed in the second quarter of 2017. The trustee first heard that the continued deduction of adviser service fees was intentional during the second session of royal commission hearings, Ms Sansom says.
She says this was subject to a confidential investigations and expects the trustee would have been formally notified later.
What about breach reporting?
A member of Ms Sansom’s team went to the breach review committee for the plan service fee. The board would find out because the issue would trigger an exception, as more than $100,000 in compensation was needed.
Ms Sansom is not sure which part of the business is responsible for causing plan service fees to be deducted from accounts after they had left employment.
3.29pm: Repricing MySuper fees
The hearing turns to an email from APRA about AMP’s generic MySuper products.
It hasn’t been properly redacted but Commissioner Hayne agrees to show it “with a giant black block” over the email addresses.
In the email, an APRA analyst explains that some of the MySuper options were bottom quartile for the second year - from a scale test that is taken to the board annually.
Board papers for December 2017 are displayed. They show the year four MySuper scale test.
AMP Capital does this review which then goes to Group Investment Committee, and Ms Sansom’s team checks the findings.
It shows the fees are poor for lifecycle products.
If someone comes in through an employer plan, they get a discount on fees, and the bigger the employer the better the discount.
The report says fees for lifecycle options “would be in concern territory” in isolation, but AMP is at the top of the industry for investment performance for several of the younger cohorts.
Ms Sansom agrees that after the inflation-linked return targets were cut, AMP Capital was able to consistently meet them.
Next, a paper for the board proposes a reduction in fees. The board is being asked to approve the changes. The AMP Life company actuaries will also need to look at and “ensure it doesn’t cause any issues for the life company” and the changes will need to also go to the AMP Limited board. Both boards would need to approve the pricing change.
Conversations with APRA continued over the fees for the generic MySuper product.
Ms Sansom had been in conversations with the product team, advocating for costs to go down. Although she ultimately depends on the product team to determine whether there would be a cut in costs but she said she would also keep pushing. She had been “actively advocating” for lower fees “throughout 2017”.
And the repricing of MySuper fees require a decision of the holding company board, because of the size and the impact on the profitability of the group as a whole, she agrees.
3.04pm: Trustee board blind to fees, performance
AMP’s Rachel Sansom became aware the AMP MySuper products were, in some cases, not performing well compared to competitors.
She took it up with the board when she became aware of the issue.
The trustee board minutes are displayed. They show AMP’s MySuper performance compared to its objective and also in response to a media report calling these products among the worst performing funds.
It emerges that the trustee board was receiving reports on returns net of investment fees but not net of administration fees.
Another internal document shows the AMP quarterly investment manager reports show performance on a gross basis, before fees and taxes, but the APRA reporting methodology includes all fees and taxes.
An analysis shows rankings of different super funds for people based on age. For people born in the 1940s the AMP MySuper Capital Stable product ranked 19th out of 29 on gross return, 26th for administrative fees and costs, so 23rd on net return.
For those born in the 1950s, the ranking was 49 out of 63 and on fees was 59 out of 63.
For the 1960s AMP ranked 27th from 34 and 31 out of 34 for fees.
Ms Sansom agrees that almost invariably standard AMP standard MySuper products did not fare well.
She does not go to the board about this and does not think anyone else did.
2.48pm: Targets revised down
The commission is hearing about AMP’s transition of members to low-cost MySuper products.
The transition covered $4.8 billion for more than 270,000 members.
Senior counsel assisting Michael Hodge QC wants to know if AMP’s Ms Sansom has reviewed a particular document in preparation for evidence.
“I have glanced through it,” she says, in an extremely Jane Austen voice.
“There was a considerable number of documents, Mr Hodge.”
The internal document shows a significant number of advice practices, about 17 per cent, will have a reduction in their register value by more than 5 per cent because of the MySuper transition.
The transition strategy was designed to mitigate risk by smoothing the transition, to encourage advice practices to keep growing their business rather than exiting the industry, the document says.
The commission turns to board papers focusing on the AMP investment committee.
A paper presented to the life boards and super boards looked at the investment implications of an extended period of lower returns, which was followed by a recommendation that inflation-plus-return targets be lowered for some MySuper products.
AMP Capital has sought to reduce the return targets on a number of occasions in the last three years.
In a low-return environment, to get a higher return might mean taking on more investment risk on behalf of members, so an option is to reduce the target to something more reasonable, Ms Sansom says.
2.32pm: Revenue threat
Focus is on the trustee’s MySuper transition plan.
The plan shows the trustee was told the transition plan had been determined by another part of the business, Ms Sansom agrees.
The commission sees a report from PWC that warns “MySuper will impact planners and AMP significantly”.
Some 10 practices had more than 60 per cent of their corporate super revenue predicted to be “exposed” to MySuper - that is, the revenue would dry up for advisers after the switch to MySuper.
Mr Hodge wonders if it was difficult to act in the interests of members unless other parts of the business tell the trustee what they were up to? Ms Sansom says they may have spoken to the trustee but she wasn’t there and didn’t know.
The PWC report proposes “heatmap value propositions” and research into the effects of the MySuper transition. Was this used to guide the MySuper transition?
Ms Sansom doesn’t know, but thinks it’s fair for different parts of AMP to analyse the effects for different stakeholders. But she adds the overarching reason for the transition was managing risk.
The PWC review shows two products - Flexible Lifetime Super and Custom Super - which have the two highest gross margin basis points exposure. These were transferred last. So was the revenue information taken into account in working out the transition plan?
Ms Sansom expects it would have been one of the issues taken into account, but thinks the overarching issue was minimising risk.
Mr Hodge notes that another part of the business designed the transition plan and brought it to the trustee though.
Ms Sansom notes the higher revenue products were also the most complicated to transition.
Mr Hodge suggests that these two higher revenue products were the ones where the members would benefit most in terms of fees by moving over to MySuper.
Ms Sansom says that could be the case, but adds there are other considerations like insurance and tax.
2.18pm: My Super transfer
AMP’s Rachel Sansom has returned to the stand, having been given a MySuper pricing report about the group’s transfer of members into low-cost default products to read over lunch.
“I have read through it over lunch but I should note that it is a technical paper prepared by an actuary,” she deadpans.
“I just wouldn’t profess to be an expert on this paper from having read it over a lunchbreak.”
The report, from 2013, says that the timing of when super funds will transfer members into MySuper was still to be determined but some members might transfer their money in earlier.
The paper has a lot of detail about working out pricing for the MySuper product and how that pricing would affect margins.
It was suggested that 5 per cent of super balances would be transferred by 1 July 2014, 10 per cent by 1 July 2015 and 60 per cent by 1 July 2016.
Were the reasons for this timetable communicated to the trustee, Mr Hodge asks.
The plan was to do the most simple transfers first and make sure they were done accurately, Ms Sansom had been told. “It was a very complicated process.”
The internal report shows that if 100 per cent of the members transferred in 2014, then there would be a reduction in the present value of profits of $86.5 million.
This was not necessarily the type of information Ms Sansom would expect to be communicated to the trustee.
The paper explains that the modelling would let AMP “build comprehensive value propositions” for financial planners, employers and members to “minimise impacts on AMP’s net cash flow and operating earnings arising from the introduction of MySuper products”.
The trustee was told AMP was trying to minimise the effects on the group’s cash flow. But an issue of primary concern for the trustee board was the management of risks associated with moving money around, she says.
1.04pm: AMP’s Rachel Sansom appears
AMP’s director of regulatory governance, Rachel Sansom, who provides trustee services to AMP Superannuation Limited and NM Superannuation Limited which are the trustees of AMP’s superannuation funds - takes the stand.
She was previously the director of trustee services, which was in effect the office of the trustee.
Commissioner Kenneth Hayne asks the softly-spoken Ms Sansom to speak up and she leans into the microphone. “The people in front of me will work out what that’s doing to the recording,” Mr Hayne quips.
We hear there’s an agreement set up that means AMP Capital decides which investment manager manages which assets. When AMP Capital makes such a decision, it needs the Group Investment Committee’s approval.
Focus turns to MySuper.
Transition plans to MySuper were drafted by a special project team and the board endorsed the plan.
An internal AMP memo is displayed about the MySuper fees that would be charged. The original fees were approved by trustees in 2013 and revisited in July this year.
The 2013 memo shows that the proposed fees had been discussed but not yet approved. A related schedule of fees is displayed.
Ms Sansom does not sit on “PERC”, the pricing committee in AMP, we hear.
An internal MySuper Pricing Report is displayed, which Ms Sansom has not had the opportunity to consider in depth. She’s given a copy to study over her lunch break.
The hearing will resume at 2pm.
12.42pm: Member compensation
AMP counsel Robert Hollo has a few follow-up questions for AMP’s Richard Allert. We’ve heard more from Mr Hollo than most witness counsels today.
Mr Hollo displays an internal document showing nine investment options had been identified with negative net returns. The paper shows the steps taken to rectify the incident - members in these options will have their admin fee reduced and IT changes were scheduled for July 27.
Mr Allert says members will be compensated and agrees he advocated for this.
Commissioner Hayne checks how widespread this was - about $43 million in funds under management with about 12,500 members. Remediation has been set at about $5 million, Mr Allert says.
Mr Hollo tenders board papers from July 2018 but does not want the document displayed as part of it is subject to a commercial in confidence claim that hasn’t been decided.
Commissioner Hayne excuses Mr Allert, who does not quite hear him.
“You may step down and are excused. Don’t miss those words when they’re uttered, Mr Allert,” a smiling Mr Hayne says, to laughter.
12.34pm: Related party conflict?
AMP’s Richard Allert is back in the stand talking about AMP Super companies’ plans to lower their administration fees.
This would address negative returns on cash, Mr Allert says.
But senior counsel assisting the commission Michael Hodge QC points out there’s also an issue about the competitiveness of the fees being charged.
A letter from APRA is displayed that raised an issue last year about funds having high costs for members for their generic MySuper products - this issue will now be addressed by cutting administration fees.
Mr Allert had said before the break that it would be necessary to ask a client why they chose to invest 100 per cent in cash.
Members who are in the Super Directions for business product can end up in the fund because it’s a default fund nominated by their employer.
But there is still an obligation for the trustee to act in the best interests of members, Mr Hodge points out. Cutting fees on cash could be one way to act in members’ interests.
But Mr Allert agrees cutting the admin fee is not enough to be compeititve with other available super funds.
So is the trustee unable to do something in the best interests of members because it depends on the related company deciding to cut fees?
Mr Allert concedes he can’t force related party companies to lower the fees.
Is his ability to act for members dependent on the decisions of related groups like AMP Life or NMMT?
Mr Hodge rephrases: the trustee couldn’t sensibly say to AMP Life that this structure was not acceptable for members so they were going to move investments out of AMP Life and invest them elsewhere?
Not in relation to this matter, Mr Allert concedes.
In what situation could the trustee withdraw their investments from AMP Life?
Perhaps a trigger event like the AMP group going into insolvency, would be an example. Counsel and the witness agree - completely deadpan - that such an event would be “catastrophic”.
11.56am: ‘You would have to ask the client’
The commission turns to super savers who have their money partly or wholly invested in cash.
One product had managed to generate negative returns on cash for three years, which was brought to the board’s attention in May.
Mr Hodge wonders if it’s good enough that the first time Mr Allert found out about negative cash returns was after an APRA inquiry?
Mr Allert says the board wasn’t asking for reports on negative cash returns.
Why are there negative returns on cash?
Where a member was wholly invested in cash, the admin fee could exceed the cash return, he agrees.
A member statement of someone and 100 per cent invested in cash is displayed.
The rate of return for the year to February 2015 was 0.47 per cent.
As for the fees, the direct fees are $76.85, the rebates are $20.10, the other management costs are $1,666.72.
The investment return is $381.59.
Mr Allert initially thinks the return of about $381 is the return after fees are taken.
The next page of the statement, three years on, shows this member had a net investment option rate of return (which Mr Allert says factors in fees) of negative 0.39 per cent.
The investment fees are $786.22 and the admin fee is $1202.83. The statement shows net investment earnings of $451.12 in the deductions column.
Mr Allert points out that this member has a net negative return of $451.12.
Mr Hodge: “Have you made any inquiries as to why it is that a member that is invested in 100 per cent cash was paying fees that were higher than the gross return?”
Mr Allert: “I’ve made inquiries about how this could all happen… the outcome of that is the administration fees have been reduced to 50 basis points.”
Mr Hodge: “Has that already happened?”
Mr Allert: “It’s happening.”
This member has an administration fee of about 1.2 per cent which will fall by about 70 basis points to 0.5 per cent.
So the return will be “marginally positive”, Mr Allert says.
Mr Hodge: “From the perspective of the trustee does that mean the issue will be closed?”
Mr Allert: “Yes.”
Mr Hodge suggests AMP’s return on cash will then stay uncompetitive compared to other super funds such as some industry funds.
“If you just invested in an interest-bearing account with AMP Bank, you’ll get a much higher return,”Mr Hodge suggests.
“That’s true,” Mr Allert concedes.
“Why is it that a member who puts their retirement savings into NM Super, and has those retirement savings invested 100 per cent in cash, ends up with a substantially lower return than if they had just invested their retirement savings in an interest bearing account with AMP Bank?”
Mr Allert: “You would have to ask the client.”
Mr Hodge: “I’d have to ask who, sorry?”
Mr Allert: “The client. Why they’d do that.”
Mr Hodge: “Your point is why are they foolish enough to invest their superannuation with AMP?”
Mr Allert: “No, that’s not what I’m saying at all.”
Mr Hodge: “But isn’t that your point?”
Mr Allert: “I’m saying you would have to ask the client what’s in their mind when they put money into a cash account, and as you’ve pointed out this person has had a cash account with AMP at least from 1 March 2014 to 28 February 2018. They left the cash there knowing the return they’re getting.”
The commission will have a 20 minute break now to finish uploading documents.
11.28am: Exception reports
Mr Hodge is mid-question when a computerised voice briefly interrupts the proceedings. Mr Hodge apologises. “It’s just my Apple Watch getting excited.”
Mr Allert dryly observes he’s glad someone is getting excited.
Some laughter before focus promptly turns to the performance of investments.
The Group Investment Committee, which is within the AMP business but has a trustee representative, will set performance targets for investments and targets for particular super products. Significant changes would be reported back to the trustee.
What if a product consistently fails to meet a performance target?
That would get reported back to the super trustee board.
Mr Hodge is having trouble with the court book this morning, and some documents are slow to load. “Look, we’ve got that document that we’ve entirely finished with,” he quips.
Commissioner Hayne wants to know if everything is running on time. “It’s undesirable that all this should go on as a private little conversation between three of us I think,” he says, referring to the lack of documents.
Just in time, the next document appears. It’s the quarterly investment management report.
There is some discussion about whether the board receives this document. Mr Allert thinks the Group Investment Committee sends it to Trustee Services.
The document shows the board receives the quarterly investment management report if an exception is triggered; for example, significant underperformance against peers or benchmarks over a rolling 36 month period. Then, for an “exception report” to be triggered, the investment option would need to remain under investigation or on the exceptions list for a period of eight or more quarters.
Mr Hodge wonders if an exceptions report could come to the board any earlier than if there was underperformance over a five-year period.
AMP’s counsel Mr Hollo interrupts to say it’s clear from the document there other ways this might happen.
Commissioner Hayne is having none of it and says Mr Allert is an experienced director showing no difficulty answering questions.
Mr Allert says it is possible for the board to get an exceptions report earlier than in a five year period, say if there was something “really bothering” the Group Investment Committee, it would alert the board.
Mr Hodge says he is “getting a groan from my friend”. Mr Hollo insists that is not fair and he is not giving evidence.
Commissioner Hayne just wants to hear what the witness has to say.
When does the board get exceptions reports? For example over issues of underperformance, Mr Allert says. Maybe if a member read the news and saw fund comparisons in the newspaper they would get asked questions about what the group is doing about it.
11.09am: Review of fees
Focus turns to the approval of payments made to AMP Life and NMMT.
A paper to the boards of the trustees from 1 August 2017 is in focus titled “Review of Fee Arrangements”. It asks the board to note existing fee arrangements - where the trustee doesn’t have to approve or review anything before payments are made.
The board is being asked to note that there’s no explanation of what fees or identification of what fees AMP Super receives from AMP Life.
AMP Life, AMP Services and NMMT retain margins of the trustee’s superannuation business in return for providing the trustees with financial, technical and admin support to provide products and services to its members.
AMP Life pays $2.17 per member to AMP Super.
AMP Super pays $1.96 per member to AMP Services per annum.
AMP Life in 2016 paid $6.186m to AMP Super and AMP Super paid $5.6m to AMP Services.
But this paper did not have information about how much money AMP Life takes out of the AMP super funds.
AMP Life pays $1m to NM Super to cover the cost of being the trustee.
Platform fee revenues are all of the fees charged for the Wealth Personal Superannuation and Pension Fund and the Retirement Plan. The basis of that calculation is the product disclosure statement. Whatever is disclosed to the member as the fee to be charged, all that money goes to NMMT.
The document says all these fee arrangements except the platform fees are not subject to schedule reviews and are not legally documented and are based on existing practice.
Did it seem strange the trustee was paying money to related companies without any documented arrangement, Mr Hodge wonders?
“Reading it now, I’m surprised that it says that,” Mr Allert says.
10.49am: AMP’s Richard Allert appears
The next witness is chairman of AMP Superannuation and NM Superannuation - the trustees of AMP superannuation funds - Richard Allert.
Senior counsel assisting Mr Hodge starts by outlining the structure of AMP’s super trustees.
There are two trustees, AMP Superannuation Limited and NM Super. Each trustee is the trustee of more than one super fund and the trustees share the same board.
AMP Super has an entity, AMP Services, that does its administration. Its functions are delegated to other companies in the AMP Group.
For NM Super is slightly different, but there’s a related party member of the group that deals with the operation and management of the fund: NMMT.
NM Super has appointed NMMT - and their agency agreement is now displayed to the commission.
Services to be provided by NMMT include performing on behalf of the principal (NM Super) all obligations imposed on it. For example, operating as agent of the principal’s bank accounts to collect and disburse funds.
Mr Allert agrees that everything, from collecting money, to administering trusts, to deciding to enter into investment management agreements, is handed over to NMMT.
Mr Hodge summarises: NMMT collects the money paid by fund members, pays for whatever services need to be paid for to operate the fund and keeps the balance.
What is the role of the trustee after it subcontracts NMMT to carry out everything?
Mr Allert agrees the trustee depends on the reporting that comes back to it.
There are about 10 employees in the office of the trustee, and the trustee’s board has three members and is looking to appoint more.
10.20am Retail distribution risks
Mr Pankhurst discovered during preparing his witness statement that bankers were authorised to give general advice to customers about the super product during the review of customer needs. This had always been after, not during, the review.
How successful was the selling of the super product through branches, senior counsel assisting Mr Hodge wonders?
Clients took out the product but about 47 per cent of customers that opened an account actually invested in the product, Mr Pankhurst says.
The value of contributions or rollovers into the Retail Smart Choice Super product from 2012 to 2016 - since the start of the “in-branch distribution model” was more than $2bn. And this product has about $3.6bn in total, Mr Pankhurst says.
The commission sees an internal ANZ document labelled “Assessment of Mis-selling Risk Drivers”.
The risk assessment warns that it is “essential” customers understand staff are not making a recommendation about the product, and that there was a “potential conflict” between a personalised review of a customer’s finances and the “scripted” general advice Retail Smart Choice Super sales process.
The bank aimed to mitigate the risk with a “de-linking statement” and a general advice warning. The general advice is “just, ‘Here are the facts’,”, Mr Pankhurst says.
Mr Hodge displays another internal risk assessment that says ANZ is aiming to increase its penetration of the wealth market but warning of the risks of mis-selling.
The retail distribution model is listed as “extreme” - and regulator breaches could be seen by the regulator as “systemic” which would put ANZ’s licence at risk.
With “treatment”, the model could be “medium” risk.
Mystery shopping was one way to reduce the risk.
Mr Pankhurst says a small number of customers who tried mystery shopping the product weren’t read out appropriate warnings - so ANZ staff members were retrained.
The commission sees an internal ANZ account of an engagement with corporate regulator ASIC - the wealth division had engaged ASIC to examine proposals to distribute the online investment account in branches.
ASIC had said it was crucial to avoid a personal recommendation of the product but the ability to provide general advice was not compromised by the existence of a customer review or fact finding process.
Mr Pankhurst does not believe any customers who signed up for the Smart Choice super product were worse off than sticking with their existing product.
9.56am: Is this even advice?
Mr Pankhurst is explaining how bank staff do a review of customer needs, looking at their assets, money owed and spending.
If a consumer expresses interest, a banker could give them information about a superannuation product. But they must read out a general advice warning first, he says. The banker is not tailoring the advice to their needs but only giving them information about the features of the product, what it costs and how it works.
Mr Hodge wonders if “it’s appropriate to even call this advice?”.
It’s “challenging”, Mr Pankhurst says, because bankers are trying to give information within the legal framework of the general advice rules.
Mr Hodge wonders if the bank is trying to persuade people to take the product up.
Mr Pankhurst agrees it is.
So is the bank indifferent as to whether the super product is in the best interests of members?
Mr Pankhurst agrees that this is not a process that compares different available products but is “not comfortable” with the word “indifferent”.
How has this super product performed?
“I think we would always like better returns,” Mr Pankhurst admits. “We’ve made some changes to it.”
The super product in question is not a MySuper product, but is very similar to another ANZ product with an almost identical name that is, the commission hears.
9.30am Hearing resumes
The hearing is back underway and ANZ Wealth head of superannuation Mark Pankhurst is back answering questions from Mr Hodge.
9.15am: Preview
Good morning and welcome to another day of the superannuation round at the financial services royal commission.
Today will start with ANZ’s Mark Pankhust continuing to answer questions from senior counsel assisting the commission Michael Hodge QC.
Here are the stories that will bring you up to speed with yesterday’s developments:
ANZ’s OnePath sale to scandal-hit IOOF under cloud
Comyn lobbied ASIC on super undertaking
Regulators face music over retail super funds
ASIC files detailing alleged NAB criminal offences aired
MLC not so super, NAB execs admit
Catholic Super defends caution over merger
Join us live from 9.30am
- Wednesday 15 August: CBA’s Comyn lobbied ASIC
- Tuesday 14 August: Colonial’s ‘different hats’
- Monday 13 August: NAB’s Hagger hammered
- Banking royal commission: full coverage
More Coverage
ASIC to pursue fiscal rogues
ASIC has vowed to test the law to its fullest in tackling financial crime and deterring future misconduct within the fiscal sector.
Bligh urges legal action to build trust
ABA chief Anna Bligh is urging the next government to introduce an industry reform bill within 100 days.