Most Australians have had – at the very least – satisfactory experiences with their financial services.
But unfortunately for our financial giants, stories are more powerful than statistics. The Royal Commission into banks has proven that.
“During the Commission’s hearings, we have heard deeply troubling stories that now define, in the public mind, the conduct of organisations and a whole industry,” director of the Ethics Centre Dr Simon Longstaff said last week.
“It does not matter that the incidents of egregiously bad behaviour were relatively few in type. Like the sting at the tip of a scorpion’s tail, they have caused massive damage.”
The Office of the Royal Commission, including Commissioner Kenneth Hayne and QC’s Michael Hodge and Rowena forensically drew forth these incidents over weeks of live hearings that saw banking executives, superannuation fund heads, heart-broken parents and devastated couples share their insights on just what went wrong inside Australia’s most influential boardrooms.
“Too often, the answer seems to be greed — the pursuit of short-term profit at the expense of basic standards of honesty,” Commissioner Hayne wrote in his interim report released last September.
“How else is charging continuing advice fees to the dead to be explained?”
But that particular nugget, revealed in the live hearings, was just one of the most major moments.
Freedom Insurance pressured a man with Down Syndrome into purchasing insurance
A 26-year old man with Down Syndrome was pushed to purchase a life insurance policy by a Freedom Insurance cold caller.
Later, the man was forced to say “I wish to terminate the policy” over the phone, after his father contacted the insurer three times to cancel the policy.
“He believed he’d done something wrong and was quite embarrassed and didn’t know what he’d done,” his father told the Royal Commission.
In the wake of the incident, his father described the man as “quite distressed”, while the CEO of Freedom Insurance also agreed this episode was “unsettling”.
This chapter raised questions around disability discrimination in the financial sector in general.
A senior couple left ‘humiliated’ after their adviser saw them lose nearly their entire wealth
One of the first rules of holding property in a self-managed super fund (SMSF) is that you can’t live in it.
It’s a rule that saw registered nurse Jacqueline McDowall lose their family home after they received what the head of BT Financial Advice, Michael Wright described as “unviable” and “bad” advice.
The McDowall’s had hoped to sell their family home and take out a $2 million loan to purchase a bed and breakfast which they would hold in their SMSF and would run to fund their retirement.
But the couple was unable to secure the loan, and it’s against the SMSF rules to live in a property held within an SMSF.
“I’ve decided to tell my story because I wouldn’t wish this to happen to anyone again,” a teary McDowall told the Commission.
“I want it to get out there that when the banks, Westpac or other, train these people up to be professional advisers, that they tell the truth, and they don’t skimmy by things and make you feel that anything’s possible, and then all of a sudden, they pull the rug from under your feet after they have gained all that money from you and transferred everything in your trust, because, at the moment, I don’t know if we’re ever going to be able to get into our own home again.”
The adviser gained a total of $16,000 in upfront commissions through giving the advice.
Fees charged for no service
Everyone likes to win gold, but not like this.
Australia’s biggest bank, the Commonwealth Bank would be a “gold medalist” when it comes to charging fees for no service, counsel assisting the Commission Mark Costello alleged.
But it wasn’t just the Commonwealth Bank. The other major banks and AMP were also found to have charged customers fees for services that just weren’t provided.
Fees charged to dead people
The Commonwealth Bank was also found to have charged fees to dead people, with at least five planners admitting to knowingly do this.
But NAB also charged adviser service fees to dead superannuation customers, and AMP charged dead people fees for life insurance.
As noted in his interim report, Commissioner Hayne found these misdemeanours particularly galling.