National Australia Bank is the latest Australian financial institution to become embroiled in a financial advice scandal, prompting calls from members of the Senate for a broad inquiry into the state of the Australian financial advice sector.
Fairfax reported on the weekend NAB had “quietly” taken five years to compensate more than 750 customers between $10-15 million for inappropriate advice.
A leaked report by NAB Wealth group executive Andrew Hagger, obtained by Fairfax, also shows 31 NAB financial planners and advisers have been sacked over the past two years “due to conflicts of interest, inappropriate advice, inappropriate practices or serious repeat compliance breaches”.
According to Fairfax, another six advisers had been sacked from NAB-owned advice business Meritum.
The report also identifies areas within the NAB Wealth division that require further investigation, including stockbroker JBWere, advice business Meritum, “product and investment strategy, suitability including gearing; compliance audit process; training and exiting; and insurance substitution”.
The revelations come after both Commonwealth Bank and Macquarie Private Wealth have been implicated in financial planning scandals and the parallel was referenced in the report, which states “under political or media attention … links could be made to the CBA situation”.
Nationals Senator John Williams, who previously led the Senate Economics Reference Committee inquiry into financial advice last year, is leading a group of cross-party senators calling for a royal commission on the industry.
“The few colleagues I’ve talked to are very supportive and I’m confident the push for a royal commission will build, and build strongly,” Williams told Fairfax today.
Labor Senator Sam Dastyari told Fairfax “it’s a pattern of behaviour in how the banking sector is operating and that’s really worrying”, while independent Senator Nick Xenophon said the fact the NAB compensation was paid behind closed doors means other NAB customers may be at risk.
“These financial victims are being re-victimised again by NAB undertaking these negotiations in secret,” Xenophon said.
The federal government has previously resisted calls for a royal commission on the CBA financial planning scandal and Treasurer Joe Hockey and Assistant Treasurer Josh Frydenberg are yet to respond to the revelations about NAB.
In a statement issued to SmartCompany, NAB said it commissioned a report into its wealth business following the Senate’s inquiry last year to “review and determine whether it needed to change its standards for customers, employees and advisors”.
“We were transparent with this information, with our senior management team, the NAB Principal Board and our regulators,” said NAB Wealth group executive Andrew Hagger in the statement.
“Over the past five years, we have compensated over 750 customers and paid out between $10 and $15 million in compensation in situations where we didn’t get it right the first time,” he said.
“We have over 1.7 million customers and clearly we want our customers to get the right advice and good advice every time. But when we have problems, we will face them and fix them.”
Hagger said “NAB believes in doing the right thing” and performs regular audits. “Where we see problems we will highlight them because we want to fix them,” he said.
“If there are issues in our business, we encourage our employees to use our whistleblower process, or for our customers to contact us … If they are unsatisfied, we want them to reach out to the regulators.”