Banking royal commission: Dover next as Hayne saves ‘best’ for last
The Australian 12:00am April 26, 2018
Richard Gluyas
If it’s any solace to celebrity financial adviser Sam Henderson, whose cross-examination in the financial services royal commission on Tuesday resembled a high-speed car crash, he won’t be able to look back and think he was unfairly singled out.
That’s because Dover Financial Advisers has been lined up as the final case study in the commission’s unrelenting, 10-day assault on the $4.6 billion-a-year advice industry. Suffice to say that the Melbourne-based advisory shop has come to ASIC’s attention and the watchdog has taken a serious interest.
As for the royal commission, nothing is left to chance.
Over the last week or so, senior counsel assisting Rowena Orr has been baiting Dover by questioning other witnesses about their dealings with the firm. Those dealings involve advisers who left ANZ, Westpac and AMP under a heavy cloud, only to continue plying their trade at Dover.
All three cases predated March last year, when an Australian Banking Association protocol on reference-checking and information-sharing became effective.
For insight into Dover’s culture, Orr might also want to question its responsible officer, Terry McMaster, about a blog he wrote in January 2016 about the Financial Ombudsman Service.
As responsible officer, McMaster’s task is to ensure Dover complies with the Corporations Act and other relevant legislation, making sure the firm’s advisers act in the client’s best interests.
If you thought he might understand that FOS gives clients some comfort, you’d be sorely mistaken.
McMaster complains about the dice being “loaded” against advisers with special rules that favour the client, making “fairness and equity impossible”.
“Do expect systemic distrust, disapproval and discord,” McMaster tells his adviser audience.
“FOS likes a fight. The bigger the fight, the bigger its fee. FOS is unique in that inexperienced and unqualified non-professional employees form opinions on what experienced and qualified professionals should have done.”
The commission has already heard what ASIC deputy chairman Peter Kell thinks of the argument that financial advice is a profession.
In short, he says it’s not.
For McMaster, though, FOS is at the root of all evil. “Yes. FOS is scary,” he says. “Don’t assume FOS is a moral organisation, dedicated to always doing the right thing.”
Full marks to McMaster for speaking his mind, whatever the consequences.
The royal commission has heard evidence concerning three advisers who left their shops to join Dover — Christopher Harris (ANZ), Andrew Smith (Westpac) and Adam Palmer (AMP).
In relation to Palmer and AMP, the commission also heard a further, unnamed adviser terminated by AMP in July 2014 had joined Dover without any reference checks.
As for Palmer, AMP reported him to ASIC after he left the company in October 2014.
The commission heard that ASIC reviewed Palmer’s files at Dover and found multiple potential breaches of the Corporations Act.
ANZ told Dover there were four client complaints about Harris resulting in compensation payments and two unresolved complaints.
However, it didn’t tell the firm about a notification to ASIC about Harris only three weeks before.
Dover heard from Westpac in relation to Smith that an ongoing investigation was taking place.
The firm requested notification of the outcome as soon as possible if Smith had committed a breach.
Word on the street
So the Turnbull government is now open to the idea of extending what was to be a short, sharp and year-long royal commission beyond next February.
Who’d have thought?
The word on the street is that flexibility in the election timetable has a lot to do with it. Last month, Malcolm Turnbull ruled out an early poll, saying it would be held in the first half of 2019.
With commissioner Kenneth Hayne due to release his final report next February, it would be much more convenient if the inevitable public anger and finger-pointing were to occur after the election rather than before it.
What better way to ensure such an outcome than allowing an extension of commissioner Hayne’s worthy mandate well into next year?
“We will take our advice from (Hayne),” Finance Minister Mathias Cormann said last week.
“If the royal commissioner says to us that there is more work to be done, that he needs more time, then obviously the government would act on that.”
Speaking of Cormann, the links between the government, national law firm Clayton Utz and the royal commission are now worthy of former ALP president Barry Jones’s famous noodle nation graph in 2001.
Cormann’s wife Hayley is a senior associate in Clutz’s Perth office, where Foreign Minister Julie Bishop was a commercial litigation lawyer before becoming a partner in 1985 and managing partner in 1994. Bishop’s brother, Doug, is a litigation partner in Clutz’s Sydney office.
As we now know courtesy of the Hayne royal commission, AMP group counsel Brian Salter retained Clutz, where he was once a partner, to do a so-called “independent” report on AMP’s fees-for-no-service scandal.
We also know that Clutz prepared 25 draft reports, workshopping them with AMP and Salter, among others.
Clutz is also advising Commonwealth Bank in the royal commission.
Sadly, a Google search of Clayton Utz, Kenneth Hayne and financial services royal commission only yields 3420 results.
There’s more work to be done.