Amid the same hand-wringing and anti-bank sentiment that accompanied the CBA Financial Planning (CBAFP) scandal, the NAB Wealth case ultimately points to the same overall shortcoming in Australian financial planning.
Group executive of NAB Wealth, Andrew Hagger, faced a grilling from a panel of senators led by Sam Dastyari last Friday. This was prefaced by the appearance of a former NAB Wealth client, Veronica Coulston, alongside CBAFP whistleblower Jeff Morris (pictured).
The case has seen inevitable comparisons with that of CBAFP, which also resulted in senior bank executives being hauled before a Senate Inquiry.
Hagger was at pains throughout the hearing to say the issues impacting clients of NAB Wealth and CBAFP were not the same. “We do not have systemic issues,” he said. “Our situation is very distinct from CBA.”
Indeed, there are differences. One of the most important is that NAB has already sought to remediate some clients before ASIC became involved, having already paid out $14.5 million in compensation to around 900 clients. CBA didn’t compensate any clients until prompted by the regulator.
Dastyari highlighted another difference when he asked Hagger whether the bank would submit to independent scrutiny – such as CBA’s Open Advice Review announced last year. Hagger declined to reject the suggestion outright, but said he believed its current course of action was the best one.
Both the NAB Wealth and CBAFP cases show a distinct failure on the part of the individual banks to prevent gross misconduct by their financial advisers.
It’s telling that neither of the banks’ CEOs fronted the Senate Inquiries. In both cases, it was instead the heads of the banks’ respective wealth divisions that faced the grilling. This could be seen as an attempt to minimise damage to the bank’s core operations.
Both also exhibit flaws on the part of the regulator – particularly in the instance of CBAFP, which saw ASIC a joint focus of the Senate Inquiry alongside the bank. The regulator only became aware of issues at NAB Wealth due to the alarm raised by a whistleblower.
However, a major difference here is the speed with which news came to light. Morris noted that the whistleblower must have learned from his own experiences of long delays after reporting problems to ASIC. Instead, the NAB whistleblower went straight to the media.
Taken together, these cases highlight problems with the current process of financial planning regulation. The banks’ wealth divisions have been found wanting in regulating behaviour, as has ASIC. Morris also said the Financial Ombudsman Service is grossly ill equipped to handle cases of the scale seen inside CBA and NAB. “FOS was never set up to deal with massive systemic problems like this,” he told the SoFA Inquiry.
A later comment from Morris possibly hints at another, as-yet-untried regulatory approach. “Unless planners as a whole resolve to prove that they’re going to change things…the industry’s always going to be tarred.”
Self-regulation from within the financial planning sector – not by an under-resourced regulator or the banks themselves – is a feature of most professions. Profession is the key word here. Until the lack of unity is addressed, and a true financial planning profession created – for all that these things entail – the same problems are likely to be repeated.
