Monday 30 April 2018

Australia must overhaul 'industrial' school model, says Gonski-chaired review

Report says students must move from year-based curriculum to one that’s independent of age or grade

Australia’s education system has “failed a generation” of school children, with student outcomes declining in reading, science, and maths over the last 18 years, requiring urgent action from government, according to a landmark report.
A review chaired by businessman David Gonski found Australia needs to overhaul its “industrial model” of school education, declaring it no longer helps students maximise their learning growth.
The new report, titled Through Growth to Achievement, makes 23 recommendations around assessment and reporting regimes for federal, state and territory governments.
Its chief insight is that Australia needs to shift away from a year-based curriculum to a curriculum expressed as “learning progressions”, independent of year or age.
It says Australia’s industrial model of school education, which reflects a 20th century aspiration to deliver mass education to all children, is detrimental to individual student outcomes because it focuses on trying to ensure that millions of students attain specified learning outcomes for their grade and age before moving them in lock-step to the next year of schooling.
“It is not designed to differentiate learning or stretch all students to ensure they achieve maximum learning growth every year, nor does it incentivise schools to innovate and continuously improve,” the report says.
“Australia needs to review and change its model for school education,” it says.
The report was commissioned by Simon Birmingham, the federal education minister, after the Turnbull government’s “Gonski 2.0” school funding plan was passed by parliament last year.

Birmingham will meet state education ministers on Friday to discuss the report. The review’s chairman, David Gonski, will brief ministers.

On Monday the New South Wales education minister, Rob Stokes, said he welcomed the report’s finding that the current Naplan regime in particular is “limited by its focus on achievement rather than growth”.

“The report observes that the best school systems are moving from standardised testing to a mix of more sophisticated evaluation measures,” Stokes said.

“We are shifting from an industrial model of school education that was fit for purpose last century to new, personalised teaching practices to ensure students are equipped to be productive and engaged            
Birmingham told Guardian Australia he thinks the report lays out a “comprehensive blueprint for change in the way we look at teaching and school operations”.

The report’s recommendations lean on education researcher John Hattie’s calls for a “year’s growth for a year’s input” in learning. Rather than focusing on assessment measures that focus on high achievement, Hattie says children should receive a year’s learning no matter what developmental level they are at.

The idea has implications for Australia’s model of school assessment because it places less emphasis on the idea that students should be achieving a certain year-level average.

The Gonski report says teachers and educators have long recognised problems with the Australia’s industrial education model, but schools’ attempts to address the issue have been hampered by curriculum delivery, assessment, work practices and the structural environments in which they operate.

“This is compounded by a lack of research-based evidence on what works best in education, the absence of classroom applications readily available for use by teachers, multiple calls on the time of teachers and school leaders, and a lack of support for school principals to develop their professional autonomy and prioritise instructional leadership,” the report says.

It recommends introducing new reporting arrangements with a focus on learning attainment and learning gain, to provide meaningful information to students and their parents and carers about individual learning growth.

It recommends the structure of the Australian curriculum be revised progressively over the next five years to build a roadmap that sets out the steps required in learning for each subject.

It also recommends establishing an independent institution – such as a national evidence institute – to improve the evidence base for educational methods to spread the best teaching practices and programs between schools, states and systems.

The Productivity Commission identified the need for a national education evidence base in a 2017 report that concluded it would “turn best practice into common practice”.

The banks, the Government and the half-trillion-dollar super grab

Analysis
 
By business editor Ian Verrender
Posted
     
So close, but no cigar.
Just when they appeared on the cusp of victory, the major banks and AMP have had their ambitions to grab control of a lucrative section of the superannuation industry crushed.
After just two fortnight-long public sessions, Royal Commissioner Kenneth Hayne and his ruthlessly efficient senior counsel Rowena Orr have unearthed widespread corruption, lax regulatory oversight and even potential criminal behaviour at the most senior levels of our financial institutions.
Senior government ministers, including Prime Minister Malcolm Turnbull, have been forced to backflip on their attitude to the industry, with many expressing regret for their staunch opposition to a royal commission.
It may also nudge them to rethink their unwavering support for the banks in a long-running campaign to muscle their way into the MySuper default schemes.
For the past two years, the banks have railed against the current system that restricts their access to around half a trillion dollars of savings in the MySuper system.
Suddenly, they've gone very quiet on the issue which, given the crisis now engulfing AMP and casting a pall over the four majors, is hardly surprising.
Oddly, despite a quarter of a century of outperformance by industry funds over their bank-run rivals, the Government until recently has thrown its weight behind the banks in the fight, arguing not-for-profit industry funds needed greater transparency and accusing them of siphoning off money for unions.
While superannuation — and the role of industry funds in particular — has yet to be examined by the royal commission, only the bravest punter would bet they could come even close to our major banks on corruption, malfeasance and outright theft.
Even if nothing more comes from this inquiry, it's already had one hugely beneficial impact: the Federal Government is almost certain to adopt a far more balanced approach to much-needed superannuation reform.

The great superannuation fee-for-all

Our pollies love to boast about our world-class super system. Except, the only thing world-class about it is in the amount of fees our money managers manage to rake off the top.
In the past decade, a little under a quarter of a trillion dollars has been siphoned off our retirement savings: $230 billion in the years since the financial crisis.
That's from a total pool of around $2.3 trillion. It's an extraordinary number and nothing short of a national scandal.
In 2016 alone, total fees amounted to $31 billion, according to research house Rainmaker.
Of that, about 26 per cent, or $8 billion, was for administration, $7.8 billion went to investment managers and a whopping $8.4 billion for insurance sold through superannuation funds.
As for the rest, financial advisors took around $5.9 billion while $600 million went towards asset consultants.
Why so much? It may come as a shock to learn that almost no-one in the industry is paid purely on performance. For the most part, fees are generated not by earnings but by the amount of money under management.
Given 9.5 per cent of almost every working Australian's salary is shovelled into the industry, the amount of funds being managed grows enormously every week. It's money for old rope.
Perhaps these gargantuan fees could be excused if our money mangers regularly produced world-beating performances. Sadly, that's not the case.
Mostly, they perform in line with stock markets. When markets are rising, they produce good returns. When they tank, as they did a decade ago, super members see their funds shrink. But the fees roll on regardless.

The default fund battle ground

We're a notoriously ambivalent lot, even when it comes to money. Vast numbers of Australians just don't care about superannuation until it's too late.
That's why a default superannuation system was developed several years ago in the wake of the Cooper Review: to put those who can't be bothered into a no-frills, low-fee-charging fund. It followed years of fee gouging which left many working Australians with little or no retirement savings.

The system is overseen by Fair Work Australia, which allocates a superannuation fund to each industry. If you don't specify a fund, you're automatically allocated a MySuper default fund.
Industry Funds dominate this area, primarily because they've traditionally charged much lower fees than the for-profit funds run by the banks.
But as you can see from this Productivity Commission table, there's an awful of Australians who really don't care about super. And so, more than half a trillion dollars now is in default funds, the vast bulk of which is managed by Industry Funds.
To get a foothold, many of the big banks have created no-frills MySuper funds and slashed fees. But they still have to turn a profit, so they've struggled to make much of a mark. Hence the political campaign.

Industry funds and trade unions

The common myth about Industry Funds is that they are trade union-dominated. It's a view commonly reported in most parts of the media and perfectly articulated by Home Affairs Minister Peter Dutton shortly after the royal commission was called.
"There's another element to it — that is to have a look at some aspects within the industry super funds which have union members and whatnot on the board," he told Sydney radio 2GB.
While he was correct that union members are on industry fund boards, the "whatnot" to which Mr Dutton was referring are, in fact, business people who share equal billing.
Industry funds are a partnership between workers and bosses. That's why Inness Willox, who runs business lobby group AIG, is on the board of Australian Super as an employer group representative.

The Productivity Commission escape plan

The bank campaign for a slice of the default fund loot followed their strident opposition four years ago to a proposal that financial advisors should be forced to operate in their clients' best interests.
Despite the shake-up caused by those Future of Financial Advice reforms, the corporate regulator in January found most planners who worked for the big banks still failed to put their clients' interests first.

Combine that with the $220 million the banks and AMP have charged for services they had no intention of providing, and you get some idea of the potential for fee gouging that could take place within the default fund system.
That aside, the default system is far from perfect and, like the rest of the industry, needs an overhaul, particularly when it comes to fees.
Many workers are put into multiple funds, each time they switch industries or jobs. Then there's the issue of performance. Industry funds overall have performed far better than bank-run funds. But not all industry funds have performed well.
Sorting through this mess is the Productivity Commission, which is engaged in a major review of how best to improve our super system.
It's not due to be handed in until next year and won't be released until 2020. But it provides a valuable escape clause for the Government.
It was the Turnbull Government which called for the review in 2016, a call that provides it with the perfect cover for a quiet retreat from its recent support for the banks over super.

Saturday 28 April 2018

Banking royal commission has laid bare the financial industry's toxic culture

Analysis
 
Updated
Think about where you work. Where you've worked. The local community group you're involved in.
Your sports team, the one you initially loved but didn't quite gel with so you left.
That is culture.
Culture is hard to define and easy to dismiss but the culture of teams and work shapes our lives.
When it comes to finance the general impression is that it's like film The Wolf of Wall Street, where the coin is put first and the customers last.
It's not.
Around the country there are honest financial planners and bankers banging their foreheads against their office walls listening to the procession of sloppy behaviour unveiled by the royal commission.
The examples kept coming.

ANZ knew there had been an explosion in instances of poor advice from their financial planners, breaking the law.
The top issue, in internal documents revealed in hearings, was "failure for advice to be in the best interest of the clients".
AMP was no better. An adviser known as Mr E recommended two customers, a husband and wife, roll over three-non AMP super accounts into an AMP-owned product.
The advice cost them a quarter of their superannuation in a single fee.
AMP knew about the incident last year but the customers still have not received a phone call from the company.

NAB knew their staff were breaking the law by falsely witnessing more than 2,500 customer signatures.
The issue arose when customers were trying to nominate a beneficiary to receive their super funds upon their deaths.
The bank knew this, what turned out to be, common practice could make a customer's estate invalid, but still they did little.
But not nothing. Executives who lost bonuses about it complained directly to the chief executive.

Bad advice could have cost customer $500k

Sam Henderson won the Association of Financial Advisers 'Financial Planning Practice Of The Year' award in 2016.
But his advice to a client, high-profile public servant Donna McKenna, was so bad it would have cost her at least $500,000 in superannuation.
One of Mr Henderson's staff was caught on tape impersonating Ms McKenna to the State Authorities Superannuation Scheme. That staffer was not fired.
Ms McKenna complained to the Financial Planning Association (FPA) about the quality of advice she received.


While under investigation, Mr Henderson peppered calls and emails to the investigator, the investigator's boss and the chief executive of the FPA.
Shortly after, the FPA agreed to lower sanctions and to suppress Mr Henderson's name (that was later thrown out by another complaints body).
Then the FPA's head of professionalism wrote to the royal commission urging them not to identify Mr Henderson because it would "cause significant damage to [his] reputation".
After years of scandals about poor financial advice, the regulator ASIC was called to explain its limp response.
We learned that banning a dodgy financial adviser can take two and a half years.

ASIC prefers to make "enforceable undertakings" - negotiated outcomes - to taking on dodgy operators or large institutions.
Lots of what you have heard here comes down to culture.
What colleagues do, what bosses accept.
The most heartening element of sitting through the royal commission is that at almost every turn bad deeds have been picked up by junior members of staff.
They raised the issue with their bosses, often noting that the institution's behaviour meant they were breaking the law.
That those bosses did nothing or did not display the urgency customers would demand, that's the culture the royal commission will likely have a lot to say about when its draft report comes out in September.

Friday 27 April 2018

Banking royal commission: all you need to know – so far

The inquiry into banks and financial services firms has revealed malpractice that in some cases has ruined lives

What is the royal commission?

The banking royal commission was established in late December, after years of public pressure from whistleblowers, consumer groups, the Greens, Labor, and some Nationals MPs.
Its first public hearings began on 13 March, and they will run at irregular intervals through 2018.
The royal commission has been asked to investigate whether any of Australia’s financial services entities have engaged in misconduct, and if criminal or other legal proceedings should be referred to the commonwealth.            
It’s also been asked to consider if sufficient mechanisms are in place to compensate victims.

What have we found out so far?

We’ve heard evidence of appalling behaviour by Australia’s major banks and financial planners from the past decade, including alleged bribery, forged documents, repeated failure to verify customers’ living expenses before lending them money, and misselling insurance to people who can’t afford it.
In this week’s hearings, AMP admitted to lying to regulators, and the Commonwealth Bank admitted some of its financial planners have been charging fees to clients who have died.
AMP’s chief executive became the first high profile casualty of the commission announcing he was standing down from the company with immediate effect.

Which banks are involved ?

The so-called big four banks – Commonwealth Bank, Westpac, ANZ, National Australia Bank – are being looked at. They comprise four of the five largest companies in Australia by market value, holding an inordinate amount of power over the financial system.
Other companies including AMP, BT Financial, Aussie Home Loans and St George, and a number of small car finance companies will also be called, and more financial institutions will be asked to appear as the year rolls on.                               
Last year, the Commonwealth Bank, which is the largest company in the country, posted a full-year cash profit of $9.8bn, up 4.6%. It was followed by Westpac (full-year profit $8.1bn, up 3%), ANZ ($6.4bn, up 12%), and NAB ($6.6bn, up 2.5%).
Australia’s seven largest authorised deposit-taking institutions (including the big four) hold roughly $4.6 trillion in assets – around two and a half times the size of Australia’s $1.8 trillion economy, as measured by nominal GDP.

What is the problem with their financial advice?

The banks discovered long ago it was highly profitable to sell their customers financial advice and financial products. If they could charge customers for financial advice, and if that “advice” consisted of purchasing their financial products, then they would enjoy a profitable feedback loop.

The business model was called “vertical integration”.

Earlier this year, the corporate regulator published a report scrutinising the practice: “Vertically integrated institutions and conflicts of interest.”

It looked at the quality of financial advice being offered by the two largest financial advice licensees owned or controlled by the Commonwealth Bank, ANZ Banking Group, Westpac, National Australia Bank and AMP.

It found their financial advisers had failed to comply with the best interests of customers in 75% of advice files reviewed.

It concluded there was an “inherent” conflict of interest arising from banks providing personal financial advice to retail clients while also selling them financial products.

How has this affected customers?


It’s not just poor financial advice that’s affected bank customers. The poor advice has combined with reprehensible behaviour by bank employees.

Since 1 July 2010, almost $250m in remediation has had to be paid to almost 540,000 consumers by financial services entities for poor conduct in connection with home loans.

The poor conduct included fraudulent documentation, processing or administration errors, and breaches of responsible lending obligations.                                   

Since 1 July 2010, almost $90m in remediation has been paid to almost 17,000 consumers by financial services entities as a result of poor conduct in connection with car loans.

Over $11m in remediation has been paid to over 34,000 consumers by financial services entities for breaching responsible lending obligations in connection with credit cards.

Over $128m has been paid in remediation to consumers by financial services entities as a result of poor conduct in connection with add-on insurance.

Aren’t some banks already embroiled in scandal?


They’re involved in multiple scandals.

In August last year, the Australian Transaction Reports and Analysis Centre (Austrac) announced it was suing the Commonwealth Bank for 53,700 breaches of money laundering and counter-terrorism financing laws after the bank failed to report properly on $77m worth of suspicious transactions through its intelligent deposit ATMs over a number of years.

In November, the federal court imposed pecuniary penalties of $10m each on ANZ and NAB for attempting to manipulate the bank bill swap rate.

What is the reaction so far to the royal commission?


The Turnbull government realised this week how bad the situation is.

After AMP executive Anthony Regan admitted that AMP had lied repeatedly to the corporate regulator, the treasurer, Scott Morrison, warned wrongdoers could face jail. “That’s how serious these things are,” he said this week.

The former Nationals leader Barnaby Joyce admitted he was personally wrong to have argued against a royal commission.

The Nationals senator John Williams said he was concerned the inquiry had been given too little time to unearth wrongdoing, and if it needed an extension of time it should be given it. The finance minister, Mathias Cormann, made a similar argument.

But the government has also tried to take credit for the royal commission, saying it established it, and if it wasn’t for the government the terms of reference wouldn’t be so robust.

But wasn’t it the Liberals and Nationals who were so opposed to the commission?                                

Yes. The Coalition had to be dragged kicking and screaming to establish the royal commission.

For years, they rejected calls by the Greens and Labor to establish the commission, and when Malcolm Turnbull finally relented in November he presented the backdown as a “regrettable but necessary” step to deal with mounting political pressure and uncertainty for the industry.

He made the decision in the face of open revolt from some Nationals MPs and senators who had joined the push by the Greens and Labor to set up a banking commission of inquiry.

After Turnbull’s announcement, Labor said it was “unforgivable” that the government had fought for 18 months against the opposition’s calls for a royal commission, and noted that the prime minister had ruled out a royal commission just 48 hours earlier.

The Greens leader, Richard Di Natale, reminded voters that the Greens had been the first party to propose a royal commission “several years ago” and the idea had been consistently voted down by Labor, the Liberals and Nationals.

So what happens next?


The royal commission will run through the rest of this year. An interim report is due in September, and a final report is due in February 2019.

But there’s a lot of time between now and then. It may have its time extended. It may have its terms of reference changed. It depends on the politics.

Asic's conflict-of-interest policies under microscope after AMP revelations

 Extract from The Guardian 

Greens senator Peter Whish-Wilson also wants donations from major banks and financial planners to go into victims compensation fund


The Greens have written to request the auditor general investigate the declaration of interest and conflict of interest policies of the Australian Securities and Investments Commission.
The letter says the investigation is necessary after concerns “raised in the media in regards to the potential conflicts of interests between former Asic chairman Greg Medcraft and the, currently stood aside, senior counsel for AMP, Brian Salter.”
The banking royal commission heard last week that Salter had helped to draft an “independent” report on AMP – written by his former firm Clayton Utz – about AMP’s practice of charging customers fees without providing any service, before the report was handed to the regulator.
The commission heard the report had gone through 25 drafts, after more than 700 emails were exchanged between AMP and Clayton Utz, and that Salter had revised the wording of the report to remove the name of AMP’s chief executive, Craig Meller.
Salter was stood aside last week as AMP’s general counsel, a position he has held since 2008.
He was also stood aside as a member of Asic’s external Financial Services and Credit Panel whose members advise Asic on whether to make banning orders against financial planners. Salter – who was best man at Medcraft’s wedding – had interactions with Asic commissioners as a member of that advisory panel.
In a letter seen by Guardian Australia, Greens senator Peter Whish-Wilson has written to the auditor general, Grant Hehir, requesting an investigation of Asic’s declaration-of-interest and conflict-of-interest policies across the entire organisation, “particularly for commissioners and senior staff”.

He asks that attention be drawn to how Asic manages and declares such potential conflicts of interest when commissioners are personal friends with individuals under scrutiny.

“It is plain that the public might view the role of Medcraft having regulatory interactions with Salter, and the appointment of Salter to an Asic panel, as a potential conflict that needs to be declared and managed,” the letter says.                                  

“I am not in a position to determine whether this conflict was declared and how it was managed if declared because there appears to be no public documentation or comments on this matter.

“I am not suggesting there was any wrongdoing involved from either person mentioned but I am suggesting that work needs to draw attention to how such potential conflicts are declared and managed.

“I would like you to examine how conflicts are managed in Asic when dealing with them as regulator, where Asic staff or commissioners provide oversight where friends or former colleagues may be in senior positions, and also how conflicts are managed when such people are appointed to government panels.”

In 2015 the commonwealth ombudsman recommended Asic review its conflict of interest policies after a former employee alleged it had been unduly influenced by the Investment and Financial Services Association (IFSA) when granting regulatory relief for superannuation calculators in 2005.

The ombudsman found “no evidence” to suggest that Asic’s decision to grant relief was contaminated by conflict of interest or other undue influence, but it criticised Asic for failing to “comply with its own internal policies for dealing with conflicts of interest”.     
Whish-Wilson has also called on the Coalition and Labor to stop taking donations from banks and financial advisers under scrutiny at the banking royal commission.

According to Australian Electoral Commission donations data, cross-matched with the Greens’ Democracy for Sale database, groups falling within the remit of the royal commission’s terms of reference have donated at least $15m to the Coalition and Labor, at the federal level, over the last decade.

They include commercial banks, insurance agencies, financial advisers, wealth managers and lobby groups for the financial services industry.

Since 2008-09, the big four banks and AMP alone have donated $3.8m to the federal Liberal and National parties and Labor.

The Greens say they do not accept donations from major banks or financial services entities.

National Australia Bank stopped making political donations to the Coalition and Labor in May 2016, saying it wanted to be “respected as a bank”.            

That didn’t stop it coming under fire last month after the royal commission heard evidence of NAB staff being involved in an alleged bribery ring between 2013 and 2016, which covered multiple branches.

Whish-Wilson said the major parties should place political donations from major banks and financial planners into a compensation fund for victims.

“On the one hand Labor and Liberals are now happy to criticise financial service companies for their conduct. On the other hand they have been just as happy to accept their donations. What does this say to the public about their parties’ ethical standards?” he said.

“I am calling on all political parties to stop taking political donations from big finance immediately and for the parties to place any donations they have received into a victims compensation fund.

“Political parties shouldn’t be profiting from the banks and the likes of AMP while victims are currently left uncompensated.”

Wednesday 25 April 2018

Falsifying forms and impersonating clients among revelations at banking inquiry

As the royal commission heard evidence against NAB and ANZ, a class action against AMP was being investigated
 
National Australia Bank’s top executives complained about having their bonuses “shaved” after it was discovered hundreds of NAB employees under their charge had been falsifying client documents.
One NAB executive argued it would send the wrong message to NAB’s leadership team and encourage them to sweep future scandals under the carpet.
It has also been revealed a former ANZ financial adviser advised his clients to invest in a luxury marina apartment for $1.6m through their self-managed super funds, but when it failed to sell he siphoned off $100,000 and ANZ declined to compensate his clients.
And the inquiry heard a client would have lost $500,000 in superannuation if she had followed the advice of a celebrity adviser whose staffer impersonated her on phone calls.                
They were among damning revelations heard at the banking royal commission on Tuesday.
As they were being aired, the law firm Slater and Gordon announced it was partnering with global litigation funder Therium to investigate a major investor class action against AMP after more than a billion dollars was wiped from AMP’s market value after it admitted to lying to the regulator.
On Tuesday, the banking royal commission heard that a former NAB financial adviser, Bradley Meyn, had lost his job in 2016 after doctoring a client’s documents, but that further investigations led NAB to discover the practice was widespread among NAB staff.
An internal NAB review in early 2017 found 353 NAB staff had falsely witnessed the signing of client documents, despite not being present during client meetings, to help colleagues who had failed to properly complete financial forms for their clients.
The NAB executive Andrew Hagger admitted on Tuesday that a culture had developed in part of NAB whereby document falsification was “common practice”, and said staff likely felt they were helping their clients by speeding up the document signing process.
He said more than 2,520 NAB customers were affected, and the bank had written to all customers involved but had had difficulty reaching 30 people.
Hagger also revealed that senior NAB executives were upset that their bonuses would be “shaved” after the scandal was discovered, given they were not directly involved.
Senior counsel assisting Rowena Orr read an internal note from Tim Steele, the general manager of NAB financial planning, in which Steele expressed concern that the leadership team’s morale would suffer if their bonuses were cut.                
In the note from Steele to Greg Miller, the head of NAB’s wealth advice, Steele complained: “In terms of the broader leadership team, I am concerned about the cultural impact to both overall engagement and the potential reluctance of team members to raise future issues which could contravene NAB’s whistleblower policy given the likely perceived unfairness of the consequences and corresponding lack of trust in senior leadership to support our people.”
Orr asked Hagger: “So this was Mr Steele expressing concern about consequences imposed at the leadership level in response to these incidents?”
Hagger replied: “Yes.”
Orr asked: “And Mr Miller expressed a similar view in his discussions with you?”
Hagger replied: “Yes.”
Hagger said he told Miller if bonuses were slightly smaller for one year it wouldn’t matter.
Steele’s bonus was shaved by approximately 10%, while Miller received no bonus. The NAB chief executive, Andrew Thorburn, agreed the bonus cuts were sufficient.
Hagger said his own bonus was reduced slightly, by $60,000, leaving him with a $960,000 variable bonus last year.

Celebrity adviser ‘impersonated client’

The inquiry also heard evidence that a commissioner with Fair Work Australia would have lost $500,000 in superannuation if she followed the advice of a firm whose staffer impersonated her on phone calls.           
Donna McKenna rejected the advice of the planner Sam Henderson, whose regular media appearances include hosting a TV finance show.

A staffer of his advice firm Henderson Maxwell impersonated McKenna on a number of phone calls to gain information from her super fund, with recordings of two calls played to the banking royal commission on Tuesday.

McKenna complained to the Financial Planning Association in March 2017 about the advice.

The commission heard Henderson described McKenna as an aggressive lawyer and said it was a “storm in a teacup”.

He also asked the FPA not to share his response with McKenna as she would find being labelled “nitpicking” inflammatory.

Senior counsel assisting the commission, Rowena Orr QC, asked: “Mr Henderson, is it really nitpicking for Ms McKenna to make a complaint after receiving advice that if implemented would have cost her half a million dollars?”

Henderson replied no.

The Henderson Maxwell chief executive has hosted a TV show on Sky News Business and regularly appears as a finance expert on Network Ten’s The Project and the Nine Network’s Today program.

He also regularly writes general financial advice articles for a number of publications including the Australian Financial Review.

The royal commission also heard evidence from Kieran Forde, ANZ’s head of wealth solutions and partnerships.

He was asked about a financial adviser, working for ANZ’s Millenium3, who convinced clients to invest in property but used their money through his own company to purchase the property.

Forde admitted that ANZ failed to conduct any detailed investigation of the financial adviser, despite receiving the formal complaint in 2013 and being in possession of two earlier audits that raised concerns about his behaviour.

When asked if the financial adviser’s misconduct should have been identified earlier, Forde said it should have. Orr asked: “So ANZ elected not to take an investigation in 2013 or to contact any of the other customers who were in the same position as the customers who had made the complaint?

Forde replied: “It appears so, yes.

Orr asked why, and Forde responded: “The only logical reason is that the commercial interests of Millennium3 took [precedence]”.

Orr: “Over the interests of the clients?”

Forde: “Yeah, I think that’s fair.”

With Australian Associated Press

Tuesday 24 April 2018

Banking royal commission: AMP advice led to loss of quarter of super account

AMP says advice at odds with customer’s interests and man has not been compensated

and
A man lost 25% of the balance of a superannuation account after being advised by an AMP financial adviser to consolidate his super benefits into a single AMP-owned fund.
AMP admits the advice was detrimental to the man’s financial interests but says he has not been compensated, nor even contacted about the issue.
The fourth week of public hearings for the banking royal commission began on Monday, with AMP back in the witness box.
AMP’s former chief executive Craig Meller was stood down immediately after a company executive admitted in the royal commission last week that the company had repeatedly lied to the regulator about charging customers fees for no service.                                 
On Monday the law firm Quinn Emanuel Urquhart & Sullivan said it was considering a possible class action against AMP, looking to hear from shareholders who have seen the company’s stock plummet in the last week.
AMP shares lost more than $1bn in market value last week after the damning evidence presented to the financial services royal commission.
On Monday, AMP’s head of compliance, Sarah Britt, appeared as a witness at the royal commission to respond to questions about the behaviour of a former AMP financial planner.
Rowena Orr, the senior counsel assisting the royal commission, asked Britt about a financial adviser called “Mr E”, for legal reasons, who advised a husband and wife couple to rollover their non-AMP super accounts into a single AMP-owned fund, My North Super, in 2016.
The husband was advised to rollover and consolidate his super benefits from two non-AMP funds, TAL Super and MLC MasterKey Superannuation.
The husband had $68,000 in TAL Super and $73,000 in MLC Super, and was advised to put the balance into My North Super.
In doing so, he had to pay TAL Super an exit fee of $16,189, meaning he lost roughly 25% of his TAL Super balance ($68,000).
A document tendered to the royal commission showed the husband was informed he would lose $16,000 in exit fees because he had not met certain TAL Super conditions but he was told his super benefits would be invested in My North Super’s “Xenith Model portfolio”, which would “provide you better performance so that you could earn more”.
But the financial adviser made no attempt to compare the likely returns from remaining in the TAL Super with the likely returns from moving to My North Super.
Orr asked Britt: “So the advice to the husband from Mr E was to sacrifice close to 25% of the balance of the fund so it could be transferred to My North Super?”
Britt replied: “Yes”
Orr said: “Would you agree that unless the TAL’s funds returns had been, or were likely to remain very significantly lower than the likely My North Super returns, it could not have been in this client’s interest to lose a quarter of their superannuation fund?”
Britt replied: “Yes, that’s right. So unless there were significant benefits that would outweigh the exit fee, um, then yes, correct.”
Orr then asked: “And were there significant benefits that outweighed the exit fee?”
Britt said: “Based on the documents I’ve seen … I couldn’t identify what those benefits were.”
The royal commission heard Mr E was first audited by AMP in September 2016, two months before he advised the husband and wife couple.              
That audit resulted in a C rating, meaning the adviser met all of AMP’s major quality advice principles while some areas of improvement were identified.
He was audited again in March 2017 and given an “E” rating – the worst rating possible – because he failed to meet the minimum standards required for providing advice, but he was not sacked.
The licensee that employed the adviser did not want to sack him, saying he was relatively new and junior. AMP agreed to continue using him, with some restrictions in place. But the adviser’s employer sacked him in August 2017.
The husband and wife client of Mr E have still not received compensation, nor been contacted by AMP to be told they received bad advice.
Britt said that was because the case has been moved into their “remediation program” with every other client on Mr E’s book, along with clients from other advisers.
Britt said AMP had remediated clients of 14 advisers so far. She said she didn’t know how many advisers were subject to AMP’s remediation program.
Britt said AMP blamed Mr E and his employer for giving bad advice.
Orr asked: “Does AMP accept any responsibility for the provision of inappropriate advice by Mr E, its authorised representative?”
Britt did not answer the question directly, saying the adviser had been picked up by AMP’s risk controls.
“In that sense, we would say that we’ve discharged our monitoring and supervision obligations with respect to this adviser,” she said.
Orr asked: “So do you maintain that there was no failing in AMP’s systems and processes?”
Britt replied: “We would maintain that we have a robust system of detecting and if necessary terminating advisers who are providing deficient advice.”
She admitted AMP had made no changes to its processes as a result of Mr E’s conduct.
With Australian Associated Press