Banks still behaving badly

Even the banks have been forced to agree that they are still behaving badly.

As witnessed at the Senate Inquiry in Canberra into the scrutiny of financial advice yesterday,  even the banks have been forced to agree that they are still behaving badly

CEOs of Australia’s major banks including the CBA, Macquarie, ANZ and NAB were all required to give evidence into their banks’ handling of financial advice and customer complaints. This is the fifth inquiry into wrongdoing by the financial planning arms of these major companies and it really does beggar belief that we are no closer to a badly needed Royal Commission.

Once again leading the charge were senators from very different points of the political spectrum: Labor’s Sam Dastyari, The Nationals' John Williams and Independent Nick Xenophon. Also present was the CBA whistleblower Jeff Morris and many victims of the greed of the rogue planners. Whilst all banks declare they are on the front foot investigating all claims of wrongdoing and paying out many millions of dollars in compensation, they are still insisting on their right to investigate these claims internally. This is simply not good enough.

Australian retirement savings constitute a money pot equalling $1.9 trillion – an amount far in excess of our GDP. Bank-employed financial planners are still able to offer conflicted advice. They are paid on a commission basis that favours recommendation of their own bank’s financial products. We are told to save for retirement and yet, we have nowhere to go where we will be guaranteed independent and trustworthy advice concerning our savings. Australian consumers deserve a well-regulated financial planning system wherein planners are held accountable for their actions and charged with a criminal act if they are found guilty of white-collar crime. Not moved to another branch of their bank – or paid income protection insurance when they leave.

As Nationals' Senator John Williams noted, rogue planners are like paedophile priests who can simply move down the road and set up again.

Given the obscene levels of bank profits in this past year, the $30 million paid in compensation by ANZ and the $14.5 million paid back by the NAB is chicken feed compared to the overall losses of these clients. Not to mention, as Mr Morris reminded the Senate Inquiry, the personal pain and reported suicides of some of the bank clients most severely affected.

Answering questions at a Senate Inquiry on one cold day in Canberra is not a substitute for a thorough root and branch review of our severely flawed financial advice system. Nothing less than a Royal commission can fully expose and eliminate the systematic misbehaviour and cover-ups in order to create the conditions for trusted and independent financial advice.

What do you think? Was yesterday’s Senate Inquiry the ‘showstopping’ event to change matters financial? Or is a more rigorous inquiry, such as a Royal Commission, needed to straighten things out?





    COMMENTS

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    btony
    22nd Apr 2015
    10:09am
    Get the money and worry about the rules later, and spin out of it.
    wally
    22nd Apr 2015
    10:35am
    Looks like that's how they worked it. Investors should have realised that they would not be getting independent advice from bank employees. After all, who was paying the bank's loan advisers? Would the banks continue to employ advisers that did not promote the bank's own investment products? The "Let the Buyers Beware" advise appears to have been ignored by the investors at their cost.
    fearlessfly
    22nd Apr 2015
    11:06am
    Nationalise the bastards !
    particolor
    22nd Apr 2015
    1:42pm
    Too many of them Nationalized already !!! :-(
    maxchugg
    22nd Apr 2015
    4:13pm
    After the Commonwealth Bank was sold the ACCC was regularly in the news complaining about the latest impost from the banks, almost invariably lamenting that "It's not fair but there's nothing we can do about it."
    Government ownership of the Commonwealth Bank meant that there was a lot that could have been done, - the Commonwealth Bank could be instructed not to pass on the latest impost, meaning that the other banks would follow suit or lose their customers.
    Re-nationalize the Commonwealth Bank!
    James
    22nd Apr 2015
    11:08am
    Would never trust a financial advisor they are on a par with used car salesmen.
    If they were any good at their job they would be making to much money to bother working as an adviser
    LiveItUp
    22nd Apr 2015
    12:39pm
    Agree how many advisers really know what they are talking about.
    LiveItUp
    22nd Apr 2015
    11:21am
    I had a fellow tell me about an investment strategy his bank had set up for him where he borrow heaps of money to put into their high performing products. I showed some interest she he showed me how it worked. He asked me was I interested and I said not I was very concerned as it was way too much risk for me. So he asked me what to do and I said that I would cut down the risk level. Nothing was said until a few years later and I know he had moved so I asked him where. Now this fellow had a very nice home and a couple of investment properties before taking out this investment so as already quite well off. He has now sold everything but the worse investment property and is living in it. He tells me that it is mortgaged and that he is now on a pension. So was it greed or poor advice that this fellow suffered? I've heard many stories like this one and I think people themselves have to take some responsibility here as well as the banks as to me these people were taking way too much risk for nothing more than greed.
    Tom Tank
    22nd Apr 2015
    12:16pm
    It is too easy to blame the people who trusted these advisers and yes it is true "Buyer Beware" but not everyone has the necessary background to sort out good from bad financial advice.
    Consumer protection is urgently required in this area and i agree that a Royal Commission is definitely warranted in this case.
    Governments are fast of the mark with such a Commission if they see some political gain to be made but in this case it could fly in the face of their largest election fund donors.
    biddi
    22nd Apr 2015
    12:23pm
    You're absolutely right, Tom T. ....... not everyone has the necessary background.
    My late husband used to deal with this stuff.
    LiveItUp
    22nd Apr 2015
    12:38pm
    If people weren't so greedy then it wouldn't be an issue.
    MITZY
    22nd Apr 2015
    12:50pm
    If Joe Hockey's mother-in-law can be duped by Comm.Bank's Investment Adviser(s) and even Comm.Bank itself duped (supposedly) by 7 of its in-house investment advisers giving poor advice to its customers, who can you trust with your money?
    Many hundreds of people would have thought dealing with an investment adviser from a bank such as the CBA, ANZ,Macquarie etc. would have been a safe haven.
    These people have been duped as far back as 2003/2004 and some still have not b been compensated. It took a CBA whistleblower investment adviser to come forth and expose it. I don't know how many investment advisers the CBA had working for them, but seven (7) of them were of the lowest form of human beings and eventually were sacked.
    These seven have given the many hundreds of independent highly qualified "good" advisers for the likes of JAMES's post above to say he could never trust a financial adviser and they are on a par with car salesmen! I'm pleased my dearly departed husband is not around to hear those words, as he bent over backwards to do the right thing for his clients. I am friends with many of his clients, who he handed over to another first-class adviser when he could no longer look after them himself, and they never fail to mention to me what a good job he did for them.
    LiveItUp
    22nd Apr 2015
    1:07pm
    What would of happened if their advice did bear the fruits for them? Nothing. All I see is that people what someone to blame for their loses and not take some responsibility for themselves.
    MITZY
    22nd Apr 2015
    1:51pm
    Bonny: No fruit-bearing tree from these seven (7) crooked CBA advisers, they were rogues, see my post below and if you are interested google the article re Joe Hockey's mother-in-law. You can't put everyone in the same basket, there are "smooth-talking" advisers out there putting people off from doing anything about their dwindling investments, just like the Treasurer's mother-in-law. And, again, what does it say of ASIC in 2009 banning that adviser for only 5 years from practising? Even the CBA tried to cover up the rotten efforts of that other
    Gnuyen(?) adviser who worked for them and handled approx. 900 of the bank's clients!
    The banks would not be sitting in front of ASIC apologising and advising ASIC of the compensation they have paid back or the compensation they intend to pay out if they were squeaky clean, would they? I've never dealt with a charitable bank!
    LiveItUp
    22nd Apr 2015
    2:11pm
    The whole saga is only happening because things went wrong.
    MITZY
    22nd Apr 2015
    2:47pm
    Yes, things went wrong and we need more than a saga to correct them.
    The Senate enquiry is a step to uncover what went wrong so that people are aware. However, maybe what Kaye asks us above is whether the Senate enquiry doesn't go far enough and possibly a Royal Commission is required to dig deeper.
    These are expensive enquiries, so maybe if the government acts on the findings of the Senate enquiry and legislates so it doesn't happen again, that would be a government doing its job in protecting its people, just like it attempts to protect its people with the decisions it makes in many other areas, such as Defence.
    LiveItUp
    22nd Apr 2015
    2:55pm
    Royal Commission is definitely not necessary.
    KSS
    22nd Apr 2015
    12:48pm
    If you go to a Holden dealership, they will not sell you a Ford car! Telstra will not sell you an Optus plan. MacDonalds will not sell you KFC. Why then do people complain that a bank only sells its own products?

    Financial planners employed by banks are salespeople for the bank products. That's it. As soon as you walk in the door you know that - or should know that.

    Unless signatures were forged, (in which case a criminal act has taken place so go to the police) any action taken by these employees is at the behest of the customer. The customer is responsible for understanding what they are signing. If you don't understand, don't sign. And that goes for mobile plans, electricity suppliers, investment advice or anything else.

    Having a few years on the clock does not make you illiterate. Take the written information away. Study it, think about it, understand it, discuss it, decide on a course of action. Then do it or don't do it. And for goodness sake take responsibility for your own actions. There is no suggestion anyone was forced into these products.

    And by the way, the days are long gone when women can throw up their hands and say "My husband did all that". That is no excuse for not understanding your financial position. Any more than for man to be unable to cook or wash clothes in a washing machine because "My wife did all that."
    LiveItUp
    22nd Apr 2015
    12:49pm
    Exactly right.
    MITZY
    22nd Apr 2015
    1:29pm
    Bonny: Not exactly right: Google Joe Hockey's Mother-in-law and the CBA. Even Joe Hockey's wife was a banker too, so surely Mrs. Babbage Snr. felt safe with the CBA's advisory set-up.
    The CBA has admitted these seven (7) were "rogue" advisers who had not followed proper procedures in determining their clients' financial situations. Mrs. Babbage saw her savings dwindling and contacted the adviser who told her it was the GFC's fault and leave things as they are. She lost so much money she contacted the CBA and they gave her a different adviser, however by that time she had lost much of her savings. The adviser appointed to look after Mrs. Babbage's investments was banned for five (5) years by ASIC in 2009, so he could be back in the fold now, doing exactly the same thing, leopards never lose their spots. That other
    Gnuyen(?) adviser and others were also banned. He had around 900 clients, just imagine the damage he has done to people's superannuation/retirement savings? They all should have got life sentences, never to give advice again, that would have been more fitting.
    Unless you are a licensed financial adviser you cannot give advice on a person's financial affairs. It is suggested you go to the Financial Planning Association/ASIC where there are lists of qualified advisers, however it takes such a long time to get the crooks off the listings, people still get duped.
    A lot (but not all) of my deceased husband's clients were recommended to him for advice and they were referred to him by his existing clients.
    It takes a life time of perspiration and hard work to accumulate a nest egg to invest in retirement, the best place for the nest egg is in the bank until you are fully convinced you are placing it to its best advantage at whatever source.
    Sceptic
    22nd Apr 2015
    2:47pm
    Mitzy, what exactly is the relevance of Joe Hockey's MiL? So she decided to take a risk with high risk products, like many people who do not understand the meaning of high risk. I have not seen anywhere that the country's treasurer advised her, or even the treasurer's wife advise her, as you seem to imply. Or is it just that to your mind,a relative (and not even a blood relative), by osmosis has the same economic intelligence as a son in law and the son in law's wife. This is woolly headed logic.
    MITZY
    22nd Apr 2015
    3:55pm
    I didn't state or "imply" the treasurer or his wife advised Mrs. Babbage Snr. I indicated that she probably felt safe going to the CBA because her daughter was in banking. Do you know that Mrs Babbage took a risk with high risk products? I don't know what she invested in.
    If you read about her case she queried the CBA's in-house adviser on her dwindling finances and he assured her it was due to the GFC and it would recover? He lied and cheated.
    Having dozens of hits on the internet with headlines all stating "Joe Hockey's mother-in-law caught by CBA rogue adviser" and loses substantial part of her retirement savings, forced the CBA to investigate and account to its customers. It still owes many compensation. If the headline had said "Sceptic" or "Mitzy" how much attention would that have got?
    At the time Mrs. Babbage hit the headlines Joe Hockey was returning from China and on Fox News he indicated that the CBA had handled the matter appallingly. However, as Treasurer, he stated: "That as his mother-in-law had been affected by the fraudulent activity it would be up to Finance Minister, Mathias Cormann as to what the federal government did next".
    As to the last part of your comment, it was entirely unnecessary, irrelevant and ascerbic.
    Sceptic
    22nd Apr 2015
    4:11pm
    Surely Mitzy the only reason for referring to Mr Hockey and his wife is to imply that she received advice from them. Maybe the fault lies with the journalist's reports and you are only repeating what they say. The implication may have been unintentional, but that is what it was.

    Having followed your advice and Googled Joe Hockey's MiL, I read the first article which said that she invested in high risk products.

    It matters not if it is you or journalists seeking attention by using Joe Hockey's name, that fact is completely irrelevant to their story, and they know it. As surely also do you, thus the relevance of "woolly headed logic."
    MITZY
    23rd Apr 2015
    12:43pm
    Sceptic: In response to Bonny: Even though I repeat again that I didn't state or imply and said google the articles and read for yourself, I did state that Mrs. Babbage would probably have felt comfortable taking advice from the CBA. Not having a crystal ball to hear what transpired, logically one could assume that as her Mother was also a banker, she could have felt quite comfortable dealing with the CBA. Again, I could have also assumed she may already have been a customer of the CBA in the first place and trusted the bank and its staff and advisers. Who knows.
    Every day on this site the LifeChoices team state, imply, quote, just like all the posters respond to their comments. I guess you are not immune to this either.
    Anyhow as far as my comment is concerned it is crystal clear to me, and I don't consider myself "woolly headed", and one thing I don't do is denigrate or name call anyone in any of my comments.
    There were many articles regarding Mrs. Babbage's savings which started at $200,00 and after querying and being fobbed off, according to my memory and not a quotation, dwindled to somewhere around $92,000 before she got action from her complaints. After a lengthy time she was offered compensation of something around the $52,000 mark and she refused it. The CBA then make another offer around the $65,000 mark or similar, and she accepted it. She accepted it because she didn't have the energy to go on fighting. Her plight being broadcast afar surely would have helped others to claim, I assume.
    franwall
    22nd Apr 2015
    1:30pm
    The Millionaire Factory changed my superannuation balance of $30,000 to $90 in 4 years. How is that?
    particolor
    22nd Apr 2015
    1:38pm
    OOOW ! They might be Affiliates of the Warning I left below ! :-(
    particolor
    22nd Apr 2015
    2:10pm
    I wont do it again Goodbye !
    Stof
    22nd Apr 2015
    1:41pm
    If you put a fox in charge of the hen-house and expect anything other than dead hens, you should not be in control of your children's pocket money let alone your retirement funds!
    The only way to get a decent adviser is to ask them four questions and get the answers in writing.
    Do you get any incentives from anyone or any organisation to sell me a product, including trailing commissions?
    How much do you charge per hour?
    Will you give me a FULL list of your previous clients together with their phone numbers?
    Will you take responsibility for any losses more than 10% in any 2 years and pay those losses back?
    If you do not get satisfactory answers.....move on until you do.
    LiveItUp
    22nd Apr 2015
    2:32pm
    It's simpler than that. If you don't understand it then don't invest in it. Further more if the adviser can't explain how an investment works run a mile.
    Sceptic
    22nd Apr 2015
    2:51pm
    Stof,I wonder how you will feel when you get a phone call from someone saying, "I am an investor with x and he/she gave me your name and phone number. I know that I would not remain a client for long.
    LiveItUp
    22nd Apr 2015
    2:58pm
    Exactly I too would not be amused either.
    Stof
    22nd Apr 2015
    3:09pm
    Sceptic and Bonny,
    You are missing the point.if the advisor is prepared to give the names of his clients then then the chances are he has done well by them. It's all about finding out how happy they are with his service. It's about checking up on his record of success and failure. If you don't check up on an advisor, don't be surprised if you lose money.
    Do your homework before you give an advisor your life savings.
    LiveItUp
    22nd Apr 2015
    3:45pm
    For an adviser to use my details in such a way I would have to give him the authority to do so under the Privacy Act. Personally I haven't used advisers to manage my money for decades but I may pay an adviser to give me a second opinion on an investment strategy or taxation matter.

    A couple of years back I had a health scare and it started me wondering who I would get to take over my affairs if I couldn't. So for the last couple of years I have been looking for a possible solution but I'm no closer today then when I started.
    KSS
    22nd Apr 2015
    3:47pm
    Problem is Stof investments can and do go down as well as up. The small print on every form of investment always makes a statement to the effect that past performance is not a guarantee of future performance. It is not necessarily the advisor's fault if investments go down. That is the risk you are taking. People assume that risk when they make the investment. They must understand that risk and that is their responsibility. Not something you can outsource to a third party then hold them responsible.
    pate
    22nd Apr 2015
    5:05pm
    Oh for the old days when the Commonwealth Bank was wmed ny the Federal Govt. and the Wales was the bank of New South Wakes so owned by the State Govt.etc., none of this double charging. They did what they were told to do.
    Paulodapotter
    22nd Apr 2015
    6:09pm
    Now they do whatever they deem to be justified, like the cat whose in charge of looking after the pigeons.
    Stof
    22nd Apr 2015
    5:41pm
    I'm fully aware of that, but it's again all about getting to see if he is prepared to put your money where his mouth is. It's not that I want him to guarantee an ever successful rising or constant investment performance. It's about what risk is satisfactory for you, and his ability to adhere to your risk tolerance level.
    I.o.w if you feel comfortable not contacting existing clients and have some other method of assessing how good or bad he is then go for it. But at least feel comfortable with his abilities by research and more research.
    KSS
    22nd Apr 2015
    5:56pm
    Stof the advisor can do nothing until you instruct him/her to. So I don't get where you are coming from when you say :"and his ability to adhere to your risk tolerance level". You decide that and instruct them so its your responsibility to understand what is being offered. I do agree that it is also your responsibility to research the individual/company advising you. But this does not include asking for them to lay open their client list for public consumption. I would be furious if someone mad my details available to all and sundry without my knowledge or consent.
    Paulodapotter
    22nd Apr 2015
    6:15pm
    Yes KSS, that's why we have a problem. Businesses are treated under the law as individuals/people. They're not. They are an entity and should be treated as an entity, having no rights under individual law. This was introduced in the US early in the last century and has been a problem ever since. Companies should have no rights of privacy where the public risk is high, just as governments should not be allowed to operate in secret.
    Paulodapotter
    22nd Apr 2015
    6:07pm
    It's easy to acknowledge unfettered wrongdoing when you've already been caught out. The fact is Banks write into all their contracts conditions that allows it to do anything they like. I have a perfect example with QTMB (without fear of defamation), who prides itself on being there for its members and clients. After passing on interest rates cuts to its customers when the Reserve Bank reduced rates over the last two occasions, QTMB decided arbitrarily not to pass those cuts to business customers who held loans with them. As my wife and I hold a business loan with them, we were shocked not to be informed that this was a likely scenario when we took out the loan. Loan agreements state banks can charge whatever interest rate they like depending on circumstances they deem to be justifiable at the time. They have you by the throat so don't think banks have morals, they have safes.
    tasmainia
    22nd Apr 2015
    6:58pm
    I can't believe Westpac were not present, I did receive money back on one share they told me to hold that fell apart, but it took months from their "Wealth Creations Complaints Manager" and then they had the cheek to try to make me sign a confidentiality contract. My six figure investment (from sale of a business) has currently made me $200 over 9 years, the bank has made $34,000.00 plus advisors commission. I should have left when the person who signed me up did and reading all your comments makes me feel stupid for leaving my money with them. It's taken until LFY to come back to square one so thanks for the push I will move it tomorrow
    Kato
    22nd Apr 2015
    9:17pm
    Let overseas Banks in.
    Not Senile Yet!
    23rd Apr 2015
    12:18am
    No one is getting the point here!!!!
    The advisers acted without regard for their customers....and so di their Supervisors within the Banks.....it was corruption within the Banking System that was self feeding because it got results!!!
    Whilst the Banks are responsible to a degree....the buck stops at the top......the way to stop this in the future is to DE-Register any Financial Adviser who is found to not comply with the Legislation currently in for.....not for 1-2 or 3 yrs.....BUT 10YRS.
    As for the Managers in charge of them (at the Banks) THEY Need to be DISMISSED by the Banks themselves if they say they want to self administer the Investigation......then they need to do some Public Sacking of ROQUE Managers......
    The Current Enquiry is focussing on the BANKS....not the INDIVIDUAL within the Banks!!!!
    If you speed....you pay the Fine!!!
    If they Cheat and Lie or Fiddle the numbers .....they need to be suitably Punished!!!
    A Royal Commission costs far too much Money!!!
    Just send in the Federal Police and give them proper boundaries to Prosecute the Guilty and remove their Licences to Practice!!
    Seizetheday
    23rd Apr 2015
    1:35pm
    Royal Commission or Inquiry is essential. As one of the victims of the Big 4 it is vital that the unconscionable and illegal activities of these banks is put out there in the open. Buyer Beware was not a luxury afforded to me by my greedy bank. I had a loan I could well service, had never fallen behind in repayments, and had plenty of assets and was not remotely interested in financial advice, however this did not stop the bank preying on me. I was badgered to see their financial adviser as suddenly my assets weren't suitable for my loan. I declined on three occasions saying I wasn't interested. Then I was threatened. Before I knew it I was forced to borrow further to set up a "balanced portfolio" which would satisfy the bank. I could not afford this new loan as the bank well knew. I was set up to fail and it didn't take long before I was deeply in debt and about to lose everything. I have been under severe financial stress for the last 7 years due to the bank's actions and it has ruined my and my family's life. I was forced to take legal action (very difficult against a bank). I was under compensated and forced to sign a confidentiality agreement. Had I not taken what was offered and signed I would have lost everything. I am still indebted to the same bank. No other financial institution will touch me as I no longer have the ratio of assets for my loan. The bank is still making plenty on my loan which is 7 years down the track (and with all compensation plus sale of several assets poured into it) bigger than when the bank approached me. Over 7 years I have heard plenty of similar stories and know of people who have not been as fortunate as I have in still having a roof over their head. The Banks all knew exactly what their financial advisers were doing. It is time they were investigated and their management made to face the consequences of their illegal activities. Instead they are allowed time for their CEOs to take enormous bonuses and ditch their sinking ships. Overseas countries are investigating their banks and charging the wrongdoers. Time for Australia to do the same!
    biddi
    23rd Apr 2015
    1:45pm
    No doubt current advisers are pulling their heads in right now amid all the rumblings.
    When all 'settles down' again, if ever, the sharks could emerge unless stringent laws and checks are implemented. Get the feeling that advisers could be 'on their best behaviour' right now until the storm has passed.
    BundyGil
    24th Apr 2015
    1:22am
    It's all about the bottom line, the banks' and the advisors', nothing else.

    The advisors are underr incredible pressure from their management to get results. ie. Your money under theit management in their poorly performing financial products. The management didn't give a rat's arse how the advisors did this, and didn't want to know.

    They say now that they were wrong and how contrite they are, but we all know once the dust settles it's back to business as before.

    How many times has this sort of thing happened with the banks previously? Not the same products, of course, but the same methodology, where dodgy advisors flog dodgy products to naive bank customers with the tacit connivance of the bank management. The shit hits the fan and everyone runs for cover, a few of the worst offenders get sidelined for a short period, the banks fix up a few of the worst ripoffs, the government closes the current.round of loopholes, and everyone is on their best behaviour for a couple of years. Then the management wants more dollars in the till as the bottom line is looking shaky so another lot of dodgy products are invented for the dodgy advisors to flog to the next generation of naive bank customers in line to be ripped off.

    And so it goes on......
    Linuxisfree
    24th Apr 2015
    11:50am
    I have a few shares in Westpac. They owe me dividends dating back to 2011.
    They admit owing the money but still to date have not paid. It is peanuts to them but not to me. They refer me to Link who hold their registry. Link speak in acronyms and blame Westpac. They suggest I complain to the banking ombudsman. Good chance I will be deceased by the time the ombudsman gets to me, given the massive volumes of complaints that office must get. We need a regulator with teeth and more banking institutions plus a regulator that does their job. Apra seems to be pretty ineffective when it comes to the larger institutions. Why on earth were Westpac and St. George allowed to amalgamate? Trusting oligopolies with retirement funds I have learnt is unwise. Retirees need, I feel, a body that provides specialist consumer protection. But I don't count because I, like so many, am retired with limited resources.
    Rose
    24th Apr 2015
    4:08pm
    You cannot trust a bank or any financial institution to work for you.They just take advantage of your trust. No valid regulation to save you and your money.


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