NAB slow to compensate customers hurt by planners

The Australian 12:00am April 25, 2018

Ben Butler

The signature project of NAB’s chief customer officer Andrew Hagger has been making little progress in compensating customers hurt by shoddy financial planners, raising questions about oversight of the program by the corporate regulator.

News that the “Customer Response Initiative” — set up by Mr Hagger in 2015 in response to pressure from the Australian Securities & Investments Commission over financial planning scandals at the bank — was stalled as late as November emerged yesterday at the banking royal commission.

Yesterday, the commission also heard an employee of celebrity financial planner Sam Henderson impersonated Fair Work Commission member Donna McKenna in six phone calls to a super fund, and details of an ANZ financial planner who stole money from his customers.

Mr Hagger also gave evidence that NAB financial advisers involved in falsely witnessing forms signed by thousands of clients were allowed to keep three-quarters of their bonuses. Senior executives in the bank’s financial planning division also complained bitterly when they were told their bonuses were cut over the scandal.

When the CRI was set up in October 2015 the remediation process was to be overseen by an independent expert reporting to ASIC.

But in November last year NAB chief executive Andrew Thorburn and the rest of the bank’s board were told the initiative was only 10 per cent of the way through remediating ripped-off clients and a major funding boost was needed.

In a report to the board, Professor Dimity Kingsford-Smith, who was appointed as NAB’s “independent customer advocate” as part of the CRI in 2015, said the program “has not progressed adequately since its commencement in mid-2015”.

“Determining the number of advisers of concern and, therefore, customers at risk is ongoing,” she said.

She said NAB executives running the CRI asked for “adequate funding” in April last year so that the program could be finished by September 2020.

“That timing was based on the review of 33 advisers,” she said.

“However, there is no practical likelihood of this without a significant increase in resources.”

She said the number of advisers being looked at by the CRI was increasing, from 24 to 48, and the work of more than 540 advisers was yet to be looked at to see if customers should be compensated.

“At best, customer remediation is less than 10 per cent complete and this is largely for want of financial support to date,” she said.

“Management has been unable to determine or provide a whole or life cost or commit to funding which is plausible for a target end date.”

Mr Hagger said that increased funding was approved at the board’s meeting on November 9.

The meeting was held less than three weeks before Malcolm Turnbull backflipped and announced a royal commission into the banks.

Last night, an ASIC spokesman declined to answer detailed questions posed by The Australian, including whether the independent expert appointed as part of the process had told it of the lack of progress and if so what, if anything, it did about it.

Mr Hagger last year lost $60,000 of his incentive payment due to a separate incident, the false witnessing of death benefit documents, the royal commission heard. However, he still collected $960,000.

He admitted to the commission that NAB had been too slow to report the saga to the corporate regulator.

With the assistance of customer service officers, more than 200 financial advisers falsely claimed to have witnessed forms in which customers set out who they wanted to receive their superannuation death benefit.

NAB has identified 2520 customers whose forms were falsely witnessed, potentially putting at risk their choice of who should get the payment.

The bank discovered the issue in November 2016, when a routine audit of financial adviser Bradley Meyn discovered that he got a customer service officer to falsely witness death benefit nominations signed by a husband and wife.

Mr Meyn was sacked the following month, and the bank began a wider investigation into the issue.

However, Mr Meyn was not reported to the Australian Securities & Investments Commission until June last year.

“It should have been made in March,” Mr Hagger said.

“It should have been quicker.

“There’s a balance to be struck between the timeliness of the report and the information that ASIC wants to see in the report.

“They would expect to see it quicker than six months, and so they should.”

The commission heard that in May, NAB asked advisers to come forward and admit to false witnessing.

Those that did were to be given an “irreversible amber gate” — NAB jargon for a 25 per cent cut in their bonus.

Asked what the debacle said about the ethical standards of NAB employees, Mr Hagger said there had been a “failure of discipline”. “I believe that the client service officers and the advisers concerned thought they were taking a shortcut in the interests of the client,” he said.