AMP slow to learn lesson

AMP must learn from its mistakes of the past Picture: Hollie Adams

If there was only one lesson for AMP and the big banks to take away from the bruising Hayne royal commission, it would be to negotiate with customers in good faith.

The COVID-19 turbulence only underscores this further, as banks and financial advice companies have to deal with unprecedented and delicate customer situations. But AMP it seems, in at least one longstanding case, is dragging its heels and not partaking in equitable engagement with former customer Adam Check. His case is egregious and this columnist has seen evidence of poor advice, followed by years of AMP cover-up.

What’s worse is that the corporate regulator has already dealt with Check’s former financial adviser by slapping him with a four-year ban in 2018.

In fact, Graeme Cowper shouldn’t have been allowed into the AMP network given the findings of the Australian Securities and Investments Commission.

In banning him, ASIC said Cowper had a “fundamental lack of understanding” of the duties and obligations imposed by the Corporations Act 2001. He gave advice to a number of clients over a six-year period that didn’t appear appropriate.

Among other things, the regulator found Cowper recommended gearing strategies the client could not afford; and recommended clients switch to a new superannuation fund without warning them the new fund was more expensive, or that it included insurance that did not cover a pre-existing health condition.

Thankfully, the financial planning industry is in the process of weeding out poor advice practices following a spate of scandals and the royal commission’s findings and recommendations. It’s about time professionalism was embedded in the industry if those doing the right thing want to repair the sector’s tarnished image.

AMP boss Francesco De Ferrari has said as much in stressing he wants more professional and compliant advisers in his stable.

Part of that process, though, is cleaning up the mess of the past and ensuring customer negotiations are fair and balanced. If AMP is serious about rectifying its many compliance shortcomings and being the advice firm customers turn to in the future, it has to work hard on both the legacy issues and the model for the future.

That includes De Ferrari joining his big bank peers in meeting or having direct dialogue with customers that have been entangled in AMP’s many past mistakes. Handballing the issue to a customer advocate is not acceptable in a post royal commission era.

The title of customer advocate is a clear misnomer, not only at AMP but at some of the banks which have attempted to avoid taking responsibility for many past mistakes.

The COVID-19 crisis provides an opportunity to make good.

Former AMP board member and acting CEO Mike Wilkins, fronted the royal commission in late 2018, and said the company was “facing into” its compliance, accountability and cultural issues.

He has since left the board but AMP still has work to do if De Ferrari’s turnaround is to succeed.

Fraser’s antics

John Fraser, AMP non-executive director and Future Fund board of guardians member, is perhaps unsurprisingly a staunch advocate of the vertically integrated model which sees banks and asset managers sit under the same organisation. In a colourful podcast conducted by Blenheim Partners on Thursday, Fraser said concerns about vertical integration had been “massively overdone”.

“At least we have the backing of the bank and the capital that if you do something wrong, touch wood, we have the wherewithal to make good,” he said, comparing that to smaller organisations that may not survive blow-ups. “You won’t see the owners for dust.”

Vertical integration took a heavy beating during the royal commission as conflicts of interest weren’t managed well. The major banks are unwinding the bulk of their wealth and asset management operations.

The podcast was full of anecdotes of Fraser’s stints at Treasury and UBS, in an at-times candid but grounded assessment of his ­career. Fraser spoke about his father completing and submitting his initial application to join Treasury’s cadetship program. Later, it was an anecdote about how former PM Tony Abbott convinced him to return to Canberra as Treasury Secretary.

The podcast was littered with Fraser’s love of red wine and drinking antics, before it delved into serious topics of how the economy would navigate out of COVID-19 turmoil.

Westpac’s woes

Newly minted Westpac CEO Peter King, otherwise known as Kingy or Peking Duck, saw his to-do list get longer this week as his front bench got even thinner.

While the upcoming departure of retail banking boss David Lindberg was not completely unexpected, given he missed out on the top job, the concurrent loss of information chief Craig Bright made it a double blow. Those executives are headed to Royal Bank of Scotland and Barclays respectively.

King and his board are also yet to formally appoint a permanent finance boss as Gary Thursby continues to act in his former role. Alastair Welsh remains in Thursby’s role of operating chief in an acting capacity.

These vacancies come even before any changes or departures stemming from an accountability review of Westpac’s millions of anti-money laundering breaches.

The bank continues to negotiate with Austrac over the size of a financial crimes penalty, with the regulator pushing for an amount of at least $1.5bn. That’s a big task particularly coupled with needing to restock the executive front bench.