The financial services Royal Commission this week has turned into a sort of episode of The Biggest Loser for superannuation funds.
And there has been no shortage of strong contenders to take out the title as the dirty linen being aired really opened up the question of which superannuation fund will lose the most reputation in the final weigh in.
There was Suncorp (ASX: SUN) which in a very unconvincing way had to admit that its “low fees” were actually quite high and that members would have a hard time working out exactly what they were.
Conflict of interest
There was a doozy of a conflict of interest in Catholic Super, with the now stood down institutional relations chief Robert Clancy belatedly revealing that his brother Paul was chief executive of a group called Australian Family Network, which has long been paid by the super fund to provide services.
Not only that, but his wife was a shareholder on Australian Family Network!
Tickets to the tennis
There were the startling revelations that Hostplus was plying a range of individuals with tickets to the Australian Open tennis and other sporting events, as well as handing out tickets to staff who needed to “feel special.’’
At least Hostplus’ funds have performed well and despite all of the wining and dining their fees are actually quite low, which is some consolation for fund members.
Then there was ANZ’s (ASX: ANZ) admission that it was getting bank tellers to sell superannuation policies, before it realised that could be in breach of the law and threaten its financial services licence.
We charge dead people
Then there were many dead people being charged for financial advice by a range of players – which is one way to ensure you get a client that won’t answer back.
Once again Commonwealth Bank (ASX: CBA) offshoot Colonial First State was in all sorts of trouble over this issue with general manager Linda Elkins first of all saying that in 2015 and 2016 the bank decided that it should notify people that their estates could be charged fees after they died by putting it in the Product Disclosure Document.
However, nothing happened and now the bank believes estates should not be charged fees and is bringing in accounting firm Deloitte in an attempt to find out why the practice wasn’t stamped out in 2015.
All of which has a bit of a befuddled, Mr Magoo feel about it.
NAB wins the prize
The biggest loser of all though must be National Australia Bank (ASX: NAB), which went through a torrid time trying to account for the apparent decision to “snow’’ ASIC about the extent of its superannuation compensation bill in 2016 which at that stage had just blown out from $12.4 million to $34 million.
It seems fairly obvious that back then NAB wanted to appear to be in the middle of the ruck when revealing its super compensation and left ASIC to find out for itself the full extent of the bill, although NAB chief customer officer Andrew Hagger did a sterling job of defending his bosses and not conceding this point.
Damning ASIC document
All of that hard work came to naught in the end though with the disclosure of an ASIC document that NAB tried to have supressed which really blew the whistle on how widespread NAB’s “fee for no service’’ problem was and how seriously ASIC was taking it.
That document from October 2017 also shows that the bank was alerted to the problem as early as 2009.
Some of those complaints from customers included: “Client alleges he has paid adviser fees for 4 years but has not received any service in that time” and “Client alleges he has received no ongoing service since 2008”.
Another customer complained in early 2015 that they had not received any initial or ongoing advice from NAB Financial Planning for the 2013/14 financial year and up until December 2014 but had been charged $12,300.
In the face of this problem – which occurred “system-wide” across a range of NAB subsidiaries – there seemed to be a particularly tardy response, with ASIC having to put on the big boots and make some serious warnings.
ASIC said it suspected NAB had committed numerous ‘serious and systemic’ contraventions and charged fees to deceased estates and that some of these suspected breaches are punishable by the cancellation or suspension of a financial services licence.
NAB admits to 84 breaches
NAB has now admitted breaking the corporate law 84 times between 2014 and 2017 because it failed to inform the corporate regulator quickly enough about the fees-for-no-service scandal.
Under the Corporations Act the bank should have told ASIC about breaches within 10 days.
NAB is now in the process of paying back nearly $90 million to customers who were wrongly charged.
ASIC said it suspects that NAB and its related entities have committed numerous contraventions of several sections of the Corporations Act.
“The suspected contraventions … are serious and systemic,” ASIC said.
“As is evident from extracts from the breach reports submitted by NAB and the related NAB entities reproduced within this paper, those entities have, by their own admission, fallen below the standard expected of a responsible Australian financial services licensee.
“In short, they have failed to do all things necessary to ensure that the financial services provided by them are done so efficiently, honestly and fairly.”
The report carries a blunt warning that NAB’s failings “demand a significant regulatory response”.
“Moreover, the failures have occurred across a number of NAB group entities, meaning this was not an isolated problem, but a systemic failure of fundamental controls within the NAB group.”
ASIC said in the report the law breaches concerned NAB charging fees for services not provided and various breakdowns in fundamental systems and controls.
All of which sounds like that “significant regulatory response’’ – along with the title of biggest loser – will finally arrive in the Royal Commission report.