NAB prolongs gouge and has no plans for refund

NAB has no plans to refund customers it has stung with a so-called ‘adviser contribution fee’.

Nicole Smith leaves the commission hearings in Melbourne.

National Australia Bank has no plans to refund customers it has stung with a so-called “adviser contribution fee”, which has come under heavy fire at the financial services royal commission, when it ends the impost in October.

The bank planned to announce an end to the charge, a hefty payment to financial advisers when savers contribute to their retirement nest egg, a fortnight ago but decided to delete references to it from a media release, the financial services royal commission heard yesterday.

NAB executive Paul Carter this week revealed the bank was insisting the impost was not a fee but a commission in order to avoid any potential compensation over the gouge, as no services had to be provided in return for the payment.

NAB’s super trustee continues to bleed members with the fee, which could be as high as 5.88 per cent of contributions to a member’s savings, and transfer it to financial advisers despite Future of Financial Advice laws in 2013 that clamped down on commissions.

The bank’s efforts to keep the details from the public were laid bare at the hearing yesterday when a draft version of the media release was displayed.

It came on a fourth day of grilling for the bank’s executives, during which NAB lost a bid to keep secret details of a probe by corporate regulator ASIC in which the regulator has accused the bank of more than 100 potentially criminal breaches of the law.

And documents published by the commission yesterday have also revealed that the investment earnings of several older funds run by NAB are completely gobbled up by fees, leaving members with nothing.

In a week that has blown out the royal commission’s schedule for the current round of hearings, the commission has also probed how NAB executives went to extraordinary lengths to justify to themselves how the bank could keep charging fees where no service was given, or for extremely basic “services” such as the provision of marketing material.

NAB-backed wealth business MLC issued a press release two weeks ago to announce it would stop charging a different fee, the “plan service fee,” and refund about 305,000 members about $220 each, plus interest — which works out to about $67 million, plus interest.

But an internal NAB email outlining figures to quote in the media release listed an average refund of $260 per person totalling about $79m.

NAB has since admitted the total refund will be even higher at $87.1m, which includes compensation.

A draft version of the release also said the adviser contribution fees would stop on October 1, the same time as the plan service fees finish.

But a comment inserted in word processing software warns: “I support not mentioning this as ACF has been around much longer, is effectively a grand­fathered commission, much less $$ impact. Would need us to explain why there is no refund of ACF.”

Witness Nicole Smith, the former chairwoman of NAB super trustee NULIS, could not say why the adviser contribution fee was not being refunded.

She was not aware of whether there had been a review into the charge, or whether there was any issue with the deductions.

“I think we discussed this yesterday when I said I — I haven’t thought about it before and I didn’t — I would be speculating on a — you know, the legal construct of the fee for me to answer,” Ms Smith said.

The commission also returned to the difference between a fee for service and a fee for access to service.

Ms Smith insisted she always believed the plan service fee was a fee for service, yet it emerged that she signed a letter referring to the charge as a fee for access to service.

Ms Smith: “I would suggest that that was an error on my behalf.”

Mr Hodge: “It’s on the first page of the letter.”

Ms Smith: “I know.” Someone else had drafted the letter which she reviewed and signed.

Meanwhile, it emerged that the fees the group charged on some low-risk investment options ate up most or all of the returns.

Quarterly figures for returns on cash investment options were detailed in the witness statement of Paul Carter, NAB’s former executive general manager in the wealth division.

NAB charged fees on the MLC MasterKey Superannuation (Five Star) of 0.5 per cent until the March quarter this year, enough to eat up gross returns that have been languishing at 0.45 per cent for much of the past two years.

The bank milked members of the MLC MasterKey Allocated Pension (Five Star) option even harder, charging 0.55 per cent a quarter, well in excess of returns of between 0.45 per cent and 0.51 per cent over the past eight quarters.

“NULIS regards the fees and returns for its products as competitive with those of its competitors,” Mr Carter wrote.

“NULIS’s process for assessing the competitiveness of investment returns involves active monitoring by NULIS’s investment advisers and consideration on a quarterly basis by the funds’ investment committees by reference to competitors’ performance and/or benchmarks.”

additional reporting: Michael Roddan