Andrew Thorburn unsure of NAB fee compo

NAB’s boss does not know how much might have to be repaid back if the bank extends its existing compensation scheme.

NAB CEO Andrew Thorburn leaves the banking royal commission in Melbourne. Picture: David Geraghty.

NAB boss Andrew Thorburn has told the banking royal commission he does not know how much of up to $600 million in fees reaped from customers who got nothing in return might have to be paid back if the bank extends its existing compensation scheme.

The figure — the fees clients of NAB-endorsed advisers who don’t work directly for the bank have paid over the past six years — was aired by counsel assisting the financial services royal commission, Michael Hodge QC, as he grilled Mr Thorburn at a hearing in Melbourne yesterday.

In the course of evidence yesterday that ranged across topics as diverse as Uber, robotics and “pride in the [NAB] badge”, Mr Thorburn also defended NAB’s practice of paying a commission to people who introduce home loan customers to it — a program that the commission has previously heard led to gym owners and hairdressers bringing business to the bank.

The Australian Securities & Investments Commission last month filed a Federal Court lawsuit against NAB over $100m in so-called “plan service fees” it charged more than 500,000 super customers without providing anything in return, and The Australian understands the regulator is close to launching more legal action against the bank over the fee-for-no-service scandal.

The royal commission has previously heard of ASIC’s anger at what investigators felt was NAB’s recalcitrance over the issue, which culminated last year with the regulator hitting the bank with a scathing document detailing its “suspected offending”, including alleged criminal breaches, in October last year.

Because of the lawsuit that is already on foot, Mr Hodge concentrated his questions on another fee NAB charged without providing savers with anything in return, called an adviser service fee.

Mr Thorburn said NAB was yet to agree to ASIC’s demand the bank extend a plan to remediate customers of its in-house NAB Financial Planning to customers of four external adviser groups who operate under the group’s licence.

“I think that is in active discussion with ASIC, though, right now, Mr Hodge,” he said.

“They’re not employees — they’re under our licence.

“And to get access to files and especially going back in time, it’s a bit harder.”

He said he wanted an “industry solution”, overseen by the Financial Services Council, that would “cause the whole thing to be resolved in a much quicker way”.

Mr Hodge took Mr Thorburn to events in April, when the bank was in talks with ASIC about how to remediate customers.

In a letter to ASIC on April 13, NAB’s chief legal officer, Sharon Cook, proposed a scheme under which customers who joined before the Future of Financial Advice reforms introduced in 2013 abolished commissions would be treated worse than those who joined later.

NAB management felt the bank’s “industry leading position in moving away early from commission based remuneration for advisers prior to implementation of the FOFA reforms should be taken into consideration [by ASIC] when compared to peers”, according to board committee minutes tendered to the commission.

However, ASIC rejected the proposal. Mr Hodge accused Mr Thorburn of trying to pin the blame for the proposal on former chief customer officer Andrew Hagger, who left the bank last month after a torrid stint in the royal commission witness stand.

“It’s not just Andrew Hagger,” Mr Thorburn said.

“Sharon Cook was closely involved. And they were the two who had sort of day-to-day responsibility for it. I have ultimate accountability and David Gall as chief risk officer does have some responsibility as well.”

He said Mr Hagger advocated for discriminating against pre-FOFA customers after telling him that ASIC deputy chairman Peter Kell was “open to this approach”.

However, NAB was unable to produce any documents to the commission in which Mr Hagger advocated for the approach.

Mr Hagger defended NAB’s home loan introducer program against Mr Hodge’s charge that it acted to “corrupt” the relationship between accountants, lawyers and other professionals who signed up to the scheme and their customers.

“We still think it’s a legitimate commercial transaction to pay the referrer,” he said. “Now, I — you’re pushing into some risks in this. I agree. And that’s part of the reason I want to keep our finger on it because it could be open to the wrong sort of behaviour but I think we’ve really contained it at the moment and we’ve got some better controls in place to prevent it from happening.”

Earlier, Mr Thorburn admitted that the bank’s push into financial advice with the purchase in 2000 of MLC had been part of an industry-wide failure to successfully move into wealth management.

He also said NAB in the past lacked a purpose and the entire banking industry was too fixated on short-term returns and needed to refocus on looking after customers.

In addition, he admitted that cuts to bonuses already made following a review by the Australian Bankers Association had not harmed NAB’s ability to attract talent.