Thank you for the invitation to appear before the Committee. I am Graham Hodges, ANZ Deputy CEO and with me is Joyce Phillips, CEO of our Wealth Division.
Let me start by making some comments about ANZ and the role of our wealth business.
Our wealth division serves more than 2.3 million customers and manages over $60 billion in investment and retirement savings.
We have 640,000 financial advice customers and 1,080 financial planners.
The underlying issue the committee is investigating is whether the industry and its regulators deal effectively with problems that arise.
We need appropriate regulation and management of financial advisers to limit misconduct and to deal efficiently with issues when they occur.
ANZ’s role is to ensure that risk management processes and compliance systems are in place to maintain the high quality and ethical standards our customers expect.
In terms of whether there is an appropriate regulatory framework for the financial advice industry, there are actions in train, including the FOFA reforms, that will contribute to a safer and more accessible financial advice market and better outcomes for consumers.
To improve public confidence, we have changed the way we remunerate advisers, paying a variable performance bonus based on meeting required compliance behaviours.
Another step is improving the training and competence of advisers. ANZ supported improvements in these areas in its submission to this Committee’s inquiry on the Scrutiny of Financial Advice.
We also support the Government’s recently released proposals on lifting the professional, ethical and educational standards of financial advisers.
Regarding the Committee’s term of reference, I have the following comments:
1. The current level of consumer protection
A number of regulatory measures have strengthened the policy framework since the GFC.
- National Consumer Credit Protection Act places responsible lending obligations on lenders
- The establishment of the best interest duty and banning conflicted remuneration through FOFA
- Stronger Super has introduced simple, low cost default products and service reforms
In addition, other measures will also improve financial advice, including the Murray Inquiry’s recommendations that deals with ASIC’s intervention powers and the obligation on product manufacturers and distributors.
2. ASIC’s role in preventing the provision of unethical and misleading financial advice
We recognise that a strong regulator is important for consumers and the Financial System Inquiry recommendations will further strengthen ASIC’s powers.
However, we are acutely aware that there is an important role for the industry to ensure it serves the best interests of its customers.
3. Appropriateness of existing dispute resolution and compensation mechanisms
ANZ has internal and external dispute resolution processes, including a customer advocate, to ensure customer complaints or issues are dealt with fairly and equitably.
We believe that financial planning businesses should hold appropriate levels of professional indemnity insurance and sufficient financial resources to ensure that customers impacted by poor advice can be appropriately compensated.
I am aware that there have been people who have not been compensated because of the insolvency of the financial planner. There’s clearly a gap in this process.
Also the Financial Ombudsman Service’s submission to the financial system inquiry suggested ASIC establish industry-wide principles and operating guidelines for the implementation of major remediation programs, including interaction with independent dispute resolution arrangements. ANZ supports these suggestions.
4. Mechanisms to ensure transparency of misconduct
In the first instance, institutions employing advisers need to ensure that those advisers have not engaged in previous misconduct. ANZ advisers are subject to extensive recruitment checks before they are employed.
The adviser register, which we support, adds transparency and will enable the public to access the records of financial advisers.
5. Responses by financial services providers and companies to misconduct in the industry
The industry must take responsibility for its actions. ASIC will never have sufficient resources to fully police industry behaviour and it is the industry’s responsibility to better supervise its advisers and minimise the chances of fraud and/or poor advice.
Finally, I would like to address Prime Access. ANZ is disappointed with and apologises for its failure to deliver the contracted services to its customers.
In the first instance, we notified ASIC of our mistake and undertook a thorough review of all relevant files. We will now be contacting individual customers and paying compensation.
To avoid a reoccurrence, we have improved training, upgraded technology and increased audit and supervision, as well as including the documented annual review as an essential component of performance assessment for our financial planners.
