Westpac failed to pass on ‘serious concerns’ about financial planner

Westpac did not pass on “serious concerns” about a financial planner to his subsequent employer, bank inquiry hears.

Westpac did not pass on its “serious concerns” about one of its financial planners to the advice group that hired him after he left the bank, the financial services royal commission has heard.

Andrew Smith left Westpac in 2015 and went on to smaller group Dover, where, according to Australian Securities and Investments Commission documents, he remains an authorised representative.

Banking Royal Commission

What it means for the banks

Opposed by the banks right up until the moment they asked for it in November, the commission presents both obvious dangers and hidden opportunities to the sector.

Their already-battered public reputations have taken further hits and commissioner Kenneth Hayne has mulled the prospect of tighter regulation.

Some of the worst areas exposed by the commission so far - particularly the commissions paid to car dealers and mortgage brokers - are areas where some banks would like to see a crackdown, but lack the guts to take action that would put them in danger of losing market share.

New regulations cutting mortgage broker commissions, for example, would allow the banks to compete on a level playing field while crushing an industry they have allowed to steal away half of all home loan sales.

The commission has heard Mr Smith repeatedly earned poor marks in audits and Westpac identified misconduct including trying to ram purchases by 20 customers of a hybrid instrument — NAB capital notes — through the system on a single day.

This was done on an “execution only” basis, meaning Mr Smith had not given any advice about the transactions.

However, “it was apparent that he advised the customers to enter into the transaction”, Ms Orr said yesterday.

Michael Wright, the head of Westpac’s financial advice division, agreed Mr Smith could earn significant fees by selling the notes.

Ms Orr asked him if he would “accept that those fees offered by NAB in connection with those NAB capital notes influenced the advice given by Mr Smith”.

“On the surface, it looks to me that it did,” Mr Wright replied.

This morning, Ms Orr asked Mr Wright why Westpac did not raise its concerns with Dover.

“Well, clearly, I wasn’t involved in these conversations,” Mr Wright said.

“I just don’t know. I apologise.”

He agreed with Ms Orr that the community would expect Westpac to communicate its “extensive concerns about the conduct of a financial adviser” to the new licensee.