23 April 2018Hot off the Press
ANZ had a leaderboard that displayed the revenue generated by financial planners, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry heard today.
After asking why ANZ needed financial law reform to “to tell it to emphasise the best interests of the client over the growth of the business”, senior counsel Rowena Orr QC wryly asked Kylie Rixon, chief risk officer of ANZ’s wealth division, whether the bank had considered establishing a leaderboard for quality advice.
It was only after the Future of Financial Advice reforms took effect that the bank shifted its performance assessments of advisers away from emphasising sales revenue.
71 financial advisers at ANZ have been “performance managed” over the last 12 months, half of which are no longer with ANZ.
An internal audit of planners’ advice showed that 5% of ANZ clients were given financial advice that is likely not in their best interests, and many more had less serious deficiencies, including failures to discuss expected advantages and implications of recommended strategies, and failures to conduct appropriate product research.
ANZ told its investors that it has already spent $16 million in legal fees on preparing for the Royal Commission, with an estimate of $50 million in total by the end of September 2018. The bank is “unable to predict the outcome of the inquiry or its impact on the bank or broader industry”.
Sarah Britt, AMP’s head of compliance, was the next witness, and was questioned by Ms Orr about AMP financial advisers who were allowed to continue giving inappropriate advice despite receiving poor audit results.
One AMP financial planner received three consecutive “D” ratings for failing to meet financial advice standards, before she was terminated. The planner received commissions for advice that may not have been in the best interests of her clients.
Ms Britt told the Royal Commission that “AMP had the appropriate systems and processes in place to detect her and ultimately to terminate her”, to which Ms Orr retorted that “AMP detected her inappropriate advice but then permitted her to continue providing inappropriate advice.”
Another adviser, referred to as “Mr E”, was allowed to continue giving inappropriate advice, despite receiving a “C” rating in an internal audit in early 2017. During the audit AMP examined 20 the adviser’s client files and found eight contained inappropriate advice.
Two months after the audit, Mr E advised a husband and wife to transfer their non-AMP superannuation accounts to an AMP-owned product, which incurred an exit fee of $16,189.05 — about 25% of the fund’s total.
Ms Britt admitted this was inappropriate advice, but said that AMP had “discharged our monitoring and supervision obligations” by performing the audit and eventually dismissing Mr E. However, AMP has not yet conducted a review of Mr E’s client files, despite determining this to be a necessary step in August 2017. No remediation has occurred yet.
AMP’s shareholders may oust the Company’s directors after it emerged that an “independent” report into AMP’s fee-for-no-service controversy was repeatedly amended by the board. Last week Craig Meller resigned as CEO of AMP, and attention has shifted to the role of AMP’s chairperson Catherine Brenner in the scandal.