Late last year, ASIC announced it had commenced proceedings against Westpac subsidiaries for failing to comply with the best interests duty.
The regulator claims Westpac provided personal financial product advice to customers, specifically recommending they move their other super funds into their Westpac related super accounts, without undertaking proper comparison.
Westpac strongly rejects this allegation, saying customers were given a general advice warning at the start of each conversation, and therefore comparison was not required.
During a hearing yesterday, Westpac chief executive Brian Hartzer told the House of Representatives standing committee on economics that the outcome of this case will be very important.
“Every single one of those calls started with a very clear disclaimer in the script that this is a general advice conversation. ASIC has a view that some of the questions that were asked, notwithstanding the very clear and recorded documented disclaimers, would have tripped into the notion of personal advice,” Mr Hartzer said.
“We disagree and we think it is a pretty important principal because we believe that if the ASIC case was to be successful, it would become effectively close to impossible to deliver general advice as intended by the FOFA regime.”
Labor MP Matt Thistlethwaite said while he has no issue with recommending clients consolidate their super, he is concerned that the switch may have left some clients in a worse situation.
“The notion of consolidating isn’t a problem. But in my view, if you’re doing the right thing by the customer, if you’re acting in the customer’s best interest, you probably should be moving them the other way,” he said.
“You should be moving them out of BT and into the industry super fund where there are lower fees and a better return because that is what is in the customer’s best interest.”
Mr Hartzer responded by saying that choosing the right super fund goes beyond just fees and investments.
“The discussion that we would be having with the customers is also about convenience, it’s about helping them find different forms of super, it’s also about the quality of the insurance cover,” he said.
“There are a lot of different aspects in that other than just investment return, which is of course incredibly important.”
Yesterday’s hearing was the third of back-to-back interrogations of bank bosses.
Earlier this week, one MP accused CBA of covering up misconduct, while NAB was grilled for not terminating a former financial adviser.
Interesting how this will ”define the future of advice” perhaps one day we will read ”advisers define the future of advice” on the hope we can curtail the amount of red tape we must go through to provide advice. It would be good to see a professional association really rock the boat themselves one day, with the aim of defining the future of advice. Until that day we’ll be stuck having to do PHD degrees in Finance and I’m looking forward to that exam and the questions on Aged Care advice, Insurance and Derivatives. Myself, placing a restriction on the term Financial Adviser on anyone that directly sells a product in a Bank would be a defining moment.
perhaps given the discussions above IFA should make a representation to ASIC with the above comments . then again maybe ASIC will run this as a test case . It may stop Industry funds saying to amalgamate your Super funds and save money . How can they justify this ??
I agree with ex Bankie, hope to see a few ‘people (no CEO or GM execs of course) thrown under the ‘someone has to take responsibility for this’ bus. Those terrible planners and one up sales managers must pay for all this !!! Sorry got to fly I accidentally bumped the alternative power source for my wine cellar humidifier with my Maserati yesterday when reversing into my below ground garage after a long lunch at the club. Cheereeooo
“But in my view, if you’re doing the right thing by the customer, if you’re acting in the customer’s best interest, you probably should be moving them the other way”
Great to see the MP provides personal advice. Which is the exact problem the bank is accused of.
So this lot define the ‘future of advice’?
I worked at Westpac/BT as a BDM for their BT Super for Life product and had to train staff on how to “sell” this to clients. Whilst there may (or may not) have been a general advice disclaimer, the fact is that at least 99% of the customers had no idea what was going on, whether they were going to pay more, or less, or whether they were going to loose insurance that they had in other funds. Super is a significantly large asset for most people, but customers, rightly or wrongly, think that people working in the banks know best, therefore will take up the suggestion to “consolidate your super into this simple, easy to access, online super fund”. Cost does not come into the conversation.
It’s not just Westpac and St George, but also CBA with their online super, and probably the other two big banks as well. For them, it’s just another product, not someone’s future retirement income. Let’s get rid of these general advice products and move to a system with education and understanding around super.
Thanks Ex Bankie for some truth. The confusion and mass Financial Advice regulation the govt continues to add to too. is a complete mess.
But wait, i’m a bank teller or industry fund call centre worker only giving general advice so I can say anything i wont, be it true or not and have zero consequence for the outcome. What a joke this industry’s laws are.
Same applies to Industry Funds. My wife had her induction day recently where a QSuper/QInvest adviser, after a ‘general advice disclaimer’, told them all to roll their funds into QSuper as the only impact to them of not doing so was paying multiple sets of fees. There was a side mention of the loss of insurance but not to worry because they will give them some anyway.
This was after the statement of not going to see an independent financial adviser because they only get paid by commissions and will put you in the highest paying product, whereas they are “Impartial”
Seriously, how do they get away with this S**t?
Ah yes, but wasn’t doesn’t apply to union funds is the law. They have ASIC immunity to make all the false and misleading statements they like, and completely ignore the regulations governing financial advice.
Have we really moved on from the markets of Babylon…probably not!
A court case is going to decide the future?? I remember when they told us the Wallis Enquiry back in 1997 would tell us all we needed to know about the future. We waited with bated breath. Hang on they said, we’ll need to tweak a couple of things before the future can begin in earnest, so we had the Financial Services Reform Act in 2001 and then…we were told, the future would begin. But it didn’t. So the government announced in 2009 it would hold another enquiry and to be absolutely sure, this time they would even call it the Future of Financial Advice Enquiry! At that point, most of cottoned on….and the future of financial advice in this country was finally revealed. It’s why we’ve since had the Cooper Review (2012), the Parliamentary Joint Committee on Corporations and Financial Services Inquiry (2014), a Senate enquiry called ‘Scrutiny of Financial Advice’ (2014 and still going), the Murray Enquiry (2015), and another Senate enquiry into ‘Superannuation non-payment guarantee’ plus the current banking star chamber that’s in the press every day, which will no doubt morph into a full blown Royal Commission in a year or so. The future of financial advice in Australia is here….and it’s one long gravy train for politicians.
This case highlights the nonsense of general advice. Simply stating that this is general advice and then directing clients to consolidate their super into the fund they manage is totally unacceptable. The clients may lose vital insurance in the process, the investment strategy may not be suitable, their may be opportunity cost due to the timing of the transfers. The sooner we stop permitting general advice the better. This case clearly shows it is a means for big institutions to flog product and they want a disclaimer to prevent any recourse against any liability.
How could Mr Hartzer make such a broad statement that moving to a industry fund had lower fees and better returns without comparing all industry super funds and all BT investment options in this regard .
He can’t and he didn’t. Union flunky Thistlethwaite did. How does he get away with it? Because union funds and their PR machine have an unofficial ASIC exemption. They can say whatever they like.
Not sure Hartzer said that, I think it was the MP – but I couln’t agree with you more. What a ridiculous statement. BT have a very cheap option that directly competes with the industry funds, as do most of the other big players. He’s totally missed that often adequate insurance is cancelled, which is usually the bigger issue, and people don’t realise they usually have to be underwritten to get it back. Not an issue when you’re on a delicious defined benefit.
Sounds to me like the MP was providing some personal advice without an SOA and demonstrating that he knows his client. All good though right?
Well said and hits the mark exactly. However, there is another dilemma also with Best Interest duty and this has not been debated to date. Should one bank recommend a client go to another if Term deposit rates are better as Planners have to do this now and must also note same for PRS.
Accountants do this everyday with SMSF.
I have seen too many times the devastating effect this has on people’s lives I’m holding my breath, the MyGov super consolidation process is another system letting down Australians
Mr Hartzer forgot to mention that choosing the right super fund also involves avoiding one whose so called benefits are underpinned by a false and misleading advertising campaign, and is run primarily to benefit union officials.
This is not surprising as it is well known that westpac clents especially with current insurers
Are moved in to BT and westpac products with no comparasion undertaken
If a non bank advisor did the same thing and it went pear shaped all hell would break loose
About time this practice was investigated
Oh well, that’s what happens when you make personal advice too costly and inefficient to provide to the public. A small super consolidation and you want fact finds and SOAs and FDSs and Opt-ins. There’s also the small matter of losing or doubling up on life cover etc. Seriously, it’s a dogs breakfast out there and embarrassing to watch.
Anyone standing in a queue at the bank knows that the general advice warning isn’t understood by customers. moreover it is in my opinion an “Ambush” if you want to get someone to do business with you, make an appointment !
The number of times I have heard Bank Customers (not specifically Westpac customers) putting their foot down after repeatedly being ignored by the Bank employee as they continue to insist they (the customer) should move their super is too many to be an isolated case.
My question to the bank is this: “if you convince the customer to roll their super benefits over” will you 100% guarantee they will not suffer any loss should they die or become TPD ? …… I suspect not.
Well said and hits the mark exactly. However there is a dilemma also with Best Interest duty. Should one bank recommend a client go to another if Term deposit rate is better as Planners have to??
We’ve come across plenty of people that have lost valuable insurance cover in this process, both institutional and not-for-profit driven. While we do a fact find and SoA backed recommendation, this murky world of “helping you consolidate your supers” goes on completely unchecked. General advice my A@#.
Looking at the facts of this case, what is the difference between that and what we all know the ISA funds openly do (& worse!), and yet are never hauled over the coals because they have a special carve out, compliments of the ex-Labor Gov? (Who also appointed Kell & Medcraft – coincidence?)
Personally I am cheering on Westpac – before all you ‘Vertical Integration is the spawn of the devil’ zealots start hollering, I want ASIC’s utterly biased, open season, witch hunt and utter persecution of everything planning related, to be moderated. Perhaps a bloody nose in this case would help that.