This was published 6 years ago
Elderly pensioner widow charged thousands for dud advice
An elderly widow on the pension was advised by an ANZ Bank financial planner to put her $32,000 in savings into an investment that came with fees of more than $1100 a year.
In another case outlined at the royal commission on Friday, a client was charged thousands of dollars a year in order to save several hundred dollars annually on their superannuation, a strategy that would have taken 14 years to break-even for the client.
ANZ's Darren Whereat conceded the bank had been too slow to compensate Mr Harris' clients.
The hearing probed dodgy advice by banks and the lengthy delays in banks compensating customers and taking action against poor advice, drawing on examples from Westpac and ANZ Bank.
Senior counsel assisting Rowena Orr, QC, told the hearing that in one instance in 2015, an elderly widow on the pension sought advice from Christopher Harris, who previously worked at the ANZ-owned Millenium3 advice business. The client had a $32,000 term deposit and she wanted to invest to earn an income of $2000 a year.
Ms Orr said the widow was advised by Mr Harris to invest in an “asset choice investment wrap,” charging her $1650 for the advice. In addition, there was a $161 up-front fee to open the account, plus ongoing fees of $1152 a year.
The client was told she could draw $2000 a year from the account, but there was no analysis to support that this could in fact be done, Ms Orr told the hearing.
“Do you think the advice Mr Harris gave to this client was appropriate?” Ms Orr asked Darren Whereat, ANZ's head of aligned licensees and advice standards
“No I don’t,” Mr Whereat replied.
“I believe the right advice for the client at this stage was to not actually give the advice and certainly not to incur that upfront fee.”
Ms Orr also described a client of Mr Harris who was charged thousands of dollars for advice that would save her just hundreds of dollar a year, by rolling her superannuation into a new account.
"For the advice that she could roll her super over and save $238 a year, this client paid a $3300 upfront fee, and signed up to $3790 as an annual ongoing service fee,” Ms Orr said.
Mr Whereat acknowledged the advice was inappropriate, and his statement to the commission said it would have taken 14 years for the client to break even under this arrangement.
None of Mr Harris' clients had yet been compensated, Mr Whereat said.
In the months following these examples of poor advice in 2015, ANZ Bank conducted an audit on Mr Harris' files that delivered the second lowest rating, and the regional manager raised internal concerns Mr Harris was a "high risk" to the organisation, but the company only decided to send him a letter of censure.
It also put in place "vetting" of Mr Harris' advice, but he continued to provide advice to clients until he was ultimately terminated in April 2017.
"Do you think it's acceptable that it took so long for Millenium3 to terminate Mr Harris' status as an authorised representative?" Ms Orr asked Mr Whereat.
"Absolutely not," he replied. “I’ve been looking at the file from end-to-end and I can’t find a reason why swifter action wasn’t taken.”
The hearing also heard that another former adviser at ANZ-owned RI Advice, John Doyle, was allowed to continue advising clients for up to a year despite failing several audits and a competency test. The bank last year made a provision for more than $700,000 to compensate his clients, with an average of $18,000 compensation per client.
The commission also examined the role of incentives for advisers, exploring the case of Westpac former adviser Andrew Smith, whose conduct has cost the bank $2.2 million in compensation payments.
General manager of advice at Westpac-owned BT, Michael Wright, agreed that one reason Mr Smith had given inappropriate advice was to increase or maintain his share of revenue and increase his monthly bonuses.
“The only justification I could see was to maintain your level of remuneration,” Mr Wright said.