You are using an older browser version. Please use a supported version for the best MSN experience.

AMP, NAB and Westpac paid 'prohibited' kickbacks

The Age logo The Age 4 days ago Clancy Yeates

UP NEXT
UP NEXT
Video provided by ABC News

AMP, National Australia Bank and Westpac have all made payments that breached a 2013 ban on banks and wealth management businesses from paying kickbacks to advisers, but failed to tell the royal commission about the full extent of this misconduct earlier this year.

Financial advisers working for Commonwealth Bank-owned businesses had also received "prohibited" pay, and gaps in a statement from the bank meant it was not possible to say if there had been further contraventions, counsel assisting Rowena Orr said.

In addition, AMP didn't provide detailed information on customers in in-house products to the commission in spreadsheets until 9.30pm on Sunday night, which meant it had not been able to review it yet, Ms Orr said.

As the royal commission's hearings into financial advice kicked off on Monday, Ms Orr said the three institutions had in recent weeks revealed incidents that fell foul of a 2013 ban on commissions, under the Future of Financial Advice (FOFA) laws.

Despite commissioner Kenneth Hayne's request for banks to set out all instances of misconduct and behaviour that fell short of community expectations in submissions lodged in January, Ms Orr said the latest breaches had not been included in these documents, and came to light only as the commission turned its attention to financial advice more recently.

Ms Orr said that since 2013, when the FOFA regime came into effect, AMP had paid hundreds of thousands of dollars in "fee waivers" to financial advisers that amounted to "prohibited conflicted remuneration".

One AMP adviser had received $25,879 in asset-based fees between 2013 and 2017, she said.

“AMP did not disclose any of these events, in any of the three submissions that it made to the commission earlier this year, despite each of these events constituting a breach of the Corporations Act,” Ms Orr said.

Counsel assisting Rowena Orr said all of the major banks had admitted to misconduct in financial advice. © Eddie Jim Counsel assisting Rowena Orr said all of the major banks had admitted to misconduct in financial advice. The latest admissions came after the royal commission sought detailed information from banks on their commissions paid to financial advisers, in preparation for this round of hearings.

Ms Orr said AMP had initially been asked to reply to the commission's request by March 28, but had been granted an extension to April 4. It ultimately handed in its latest submission on April 12, with a separate spreadsheet delivered only on Sunday night.

“This spreadsheet was not provided to the commission until after 9.30 last night and we have not in the time available been able to review it,” Ms Orr said.

NAB's "prohibited" payments included commissions to advisers who referred new home loan customers under its troubled "introducer" program, free support services offered to advisers who recommended NAB products, and more than $500,000 in "non-monetary" benefits paid to advisers.

“NAB did not disclose any of these events of prohibited conflicted remuneration to the commission in the two submissions it provided earlier this year, despite each of them constituting a breach of the Corporations Act,” Ms Orr said.

Westpac's recent submission on advice had also told the commission of various breaches - some of which were not included in its January document provided to Commissioner Hayne. The examples cited by Ms Orr were in the tens of thousands of dollars.

“Westpac disclosed some but not all of these events in its submission to the commission earlier this year,” Ms Orr said.

Ms Orr cited a CBA submission that said within its Count Financial and Financial Wisdom businesses, advisers had received "prohibited" remuneration. This included non-monetary benefits above a $300 threshold, and payments from superannuation businesses. This submission "specifically excluded" the making of prohibited payments by some of its advice businesses, so it was not clear if there were further contraventions.

Earlier, Ms Orr said ANZ Bank, Commonwealth Bank, National Australia Bank and Westpac had all admitted to "misconduct" in the financial advice sector, while AMP admitted to "possible misconduct".

In her opening address,  Ms Orr outlined a long list of admissions already provided to the commission from the biggest providers of financial advice, an area behind many of the scandals in the financial sector in recent years.

Deputy chairman of the Australian Securities and Investments Commission (ASIC), Peter Kell, also told the hearing that the first topic to be scrutinised in detail this week - a failure by advice businesses to provide all the services clients have been charged for - was a result of firms prioritising revenue.

“I think it’s clear from our experience that the firms in question prioritised fee revenue from their advice businesses over the provision of services to clients,” Mr Kell said.

Ms Orr said hearings this week and next would focus on a number of common themes, including whether the misconduct was attributable to a particular culture, the role of remuneration and incentives, and why the misbehaviour often went undetected for several years.

The round of hearings, running until the end of next week, will also probe whether the banks' processes were inadequate, whether they dealt with problems in a timely way, and whether the financial advice laws in recent years had so far been successful.

More from The Age

image beaconimage beaconimage beacon