The Senate Economics References Committee’s Scrutiny of Financial Advice has rejected repeated claims from senior NAB Wealth executives that the group itself can be trusted to identify, review and compensate victims of adviser misconduct.
Amid revelations NAB has paid out more than $14.5 million in compensation to around 900 clients over the past five years, the head of the bank’s wealth advice business, Andrew Hagger, issued assurances it can be trusted.
“We do not have systemic issues,” Hagger said when fronting the Senate Committee on Friday. He maintained the group is “proud but not perfect”, and downplayed suggestions it should submit to a fully independent review of its advice business.
“Our situation is very distinct from the Commonwealth Bank’s situation,” Hagger said when Senate Committee chair Sam Dastyari asked whether NAB would undertake an independent review similar to the Commonwealth Bank program.
“We will do some form of look-back process that we agree with ASIC. We’re bringing more independence into our process [including] appointing an independent customer advocate in the next 30 days.
“If we need to pay more compensation, then we are very happy to do so,” Hagger said.
SOFA calls for an independent review
Dastyari repeatedly referred to the lack of an independent process in the way NAB has investigated claims of misconduct and determined who would receive compensation.
“There’s red flags everywhere…yet you come out, put the face on and say ‘everything’s great.’ Everything you’re saying to us is, essentially, ‘trust me, trust me.’
“If there’s nothing to hide, wouldn’t an independent process allow those issues to be cleared up?” he asked
In response, Hagger said: “The best thing we can be doing is exactly what we are doing”. He said repeatedly throughout the proceedings that the group had responded to customer complaints and audits every adviser annually.
“This is ongoing, continuous improvement for us…we are always getting stronger,” he said. “Since 2009 we have paid $14.5 million in compensation…we do act on our planners.”
Around $2.5 million of this was paid to 53 past clients of former NAB adviser Graeme Cowper, who had a total of 430 active clients.
During the Senate Committee hearing, it emerged a total of 41 NAB advisers had either resigned or been forced out of the business over the last five years. Hagger revealed NAB was now reporting all adviser departures to the Australian Securities and Investments Commission, along with the reason for their departure.
Senate Committee representative John Williams said: “it’s hard to grant that trust, when your own documents talk about the fact you’ve suspended, terminated or forced the resignation of 31 advisers over the last five years.”
“How can we do anything other than form the view that there’s a systemic issue within the company and that there needs to be a systemic review?”
The human impact
Earlier in the session, one of Cowper’s former clients, Veronica Coulston, addressed the committee alongside Commonwealth Bank Financial Planning whistleblower Jeff Morris.
She approached him for advice on using the proceeds of an inheritance she had received to pay down her mortgage. Instead, Coulston was advised to take out a NAB margin loan and invest in NAB managed funds.
“I trusted him. I thought he was the professional. But he was just just basically trying to sell me all these different things,” she said.
After the GFC, the value of her investments were reduced to just a few thousand dollars.
“What he said, and the quality of the advice, was gibberish,” Morris said, suspecting the Statement of Advice “had been fudged” and that the adviser hadn’t explained it to Coulston at all.
Since emerging as a whistleblower in the Commonwealth Bank Financial Planning scandal, Morris has suggested broader issues in the way Australia’s financial institutions provide advice.
“The whole aim of the game with bank planning is to build up unearned income with massive fees, to give no service in return, focus all your energies on bringing in new business. That’s what the model is designed to produce,” Morris said.
“I think the only thing NAB has attempted to do here is not address the issue, but to cover it up. They’ve paid off the clients…some clients I know who complained were turned around with nothing because they weren’t forcible enough to push their argument.”
