NAB apologises for wealth adviser breach

NAB failed to tell “at least” 150,000 customers its financial advisers were cross-selling the bank’s own products.

NAB’s Greg Miller, left, with head of wealth Andrew Hagger, at a parliamentary hearing.

National Australia Bank has apologised after another wealth management slip-up, in which it failed to tell “at least” 150,000 customers its advisers were cross-selling the bank’s own products.

An investigation by the Australian Securities & Investments Commission has resulted in NAB making a “corrective disclosure” to its customers about the relationships between the bank, its advisers and its financial advice licensees.

According to the corporate watchdog, NAB’s financial advisers were telling customers to buy products that were ultimately owned by the parent bank, such as products branded by wealth giant MLC.

Customers were issued statements of advice and financial services guides that ASIC said failed to fully disclose the connection between the financial adviser, the financial advice licensee and the products that the adviser was recommending to the customer.

It is understood the legally-required statement of advice left out the disclaimer that NAB was the ultimate owner of the recommended products, but referred customers to the much more lengthy financial services guide where this detail was included. ASIC believes that was not fully transparent.

The investigation, which formed part of the corporate watchdog’s wideranging wealth management project, covered NAB, Godfrey Pembroke, Apogee Financial Planning, GWM Adviser Services, Meritum Financial Group and JBWere Limited. Despite the different brands, all the adviser licensees are wholly-owned subsidiaries of NAB, which is Australia’s fourth largest bank.

Failing to disclose the relationships between products and the owner of the products is a breach of the corporations act.

Between 2007 and early 2016, when NAB acquired or took significant shareholdings in a number of new adviser licensees, the bank failed to update the statement of advice templates provided to customers. Then, between late 2012 and early 2016, NAB shifted the full disclosure of the ownership of its products to the longer financial disclosure statement. NAB said it identified the errors during an internal 2015 review and notified ASIC “shortly” after.

ASIC said at least 150,000 customers fell victim to the “deficient disclosure” in relation to MLC products.

NAB has agreed to send customers who invested in MLC-branded products a corrective disclosure when they log into their accounts “for a three-month period”. NAB has also agreed to write to the remainder of affected customers currently invested in related products, explicitly acknowledging the issue and providing corrective disclosure.

“This investigation is a result of ASIC’s priority of improving compliance and disclosure standards in vertically integrated financial services licensees,” ASIC deputy chairman Peter Kell said.

Greg Miller, NAB’s executive general manager of wealth advice, apologised to customers.

Mr Miller said he wanted to assure customers the nondisclosure did not “impact the quality of advice they received from their adviser, and there is no impact on their investments or portfolios”.

“Since identifying and notifying ASIC of these errors, we have worked to correct them, and to improve our processes to try to ensure they do not happen again,” he said.

“For some years now, NAB has been on a journey of simplification, seeking to make things easier for our customers and to provide more investment options for them. Unfortunately we did not execute some of these changes well. While simplifying some of the documentation that we send customers, and while expanding our range of investments, we omitted disclosures that are important for our customers to receive.”

ASIC’s wealth management project was established in late 2014 following a string of high-profile scandals in the financial advice sector.

Many of the issues, such as poor financial advice, conflicted remuneration and fees being charged for no service, have fed into calls for a royal commission into the banking sector.

Labor leader Bill Shorten has said any potential royal commission will investigate the “vertical integration” of banks and their wealth management arms. The Greens have called for the banks and their subsidiaries to be broken up.

ASIC’s wealth management project focuses on the conduct of the six major financial advice firms: NAB, Westpac, Commonwealth Bank, ANZ Banking Group, Macqaurie Group and AMP. These companies and their subsidiaries control around half the 25,000 financial advisers in the country.

Earlier this year, NAB’s superannuation trustee was slapped with tougher licence conditions and will refund $35 million in fees charged for advice that was not given. NULIS recently became the trustee of the Australia’s largest retail super fund, the $70 billion MLC Super Fund, after NAB merged five of its nest egg funds.