ANZ ignored the fact that a financial advice firm had failed scrutiny from ASIC and offered some of its advisors up to $150,000 each in incentives to come and work for it.
ANZ tried to lure the firm to its RI investment advice subsidiary and bring their clients with them, the financial services royal commission heard on Friday.
That was despite the fact ASIC had found the firm’s advisors breached the law and were operating under additional licence controls imposed by the regulator to rein in their activities.
A six-month ASIC review of the firm, Australian Financial Services (AFS), found it was operating with conflict-of-interest problems, inadequate complaint resolution processes and without a reasonable basis for its advice, the commission heard.
The bank also allowed one of the advisers who came over from the firm to work while suspended for misconduct after more than two years of highly problematic performance.
AFS had about $1 billion under advice in 2013 and ANZ was particularly concerned about $384 million of funds in products originated by its Oasis product design company which could have gone to Westpac’s BT, then interested in buying the group. ANZ wanted to keep control of the assets to maintain profitability.
One of the AFS staff brought over to ANZ’s RI Advice group was John Doyle, who had $60 million of clients’ money under advice in products developed by Oasis.
ANZ moved to win over the AFS advisers it had targeted in March 2013, less than four months before the Future of Financial Advice (FOFA) regulatory reforms were introduced. These would have banned the transition payments ANZ made to AFS advisors to get them to bring their clients to RI.
RI made offers to the AFS advisers it wanted to win over, subject to audits of the way they ran their advice businesses and a test to ensure they were competent. Mr Doyle, despite having a complaint made against him from a client, was not audited for around 18 months after joining RI.
ANZ financial planning executive Darren Whereat confirmed to the royal commission that Mr Doyle had not been required to sit a competency test before joining.
When he was given a competency test some months after joining he failed it and was found to be “not yet competent”. But ANZ took no action at the time.
On joining, Mr Doyle had said he had a diploma in financial planning and was a member of a number of industry associations.
Mr Doyle’s was suspended by ANZ in August 2015 following growing concern in RI about his performance. He was found not to have submitted necessary internal explanations for the advice he was giving, to have had conflicts of interest and had not giving clients fee disclosure statements.
His actions had breached the corporations laws. However, despite being suspended, he was allowed to service around 700 clients clients despite being suspended.
Mr Whereat admitted that this was “a mistake”. Despite his misconduct ANZ gave him permission to work until June 2016 because it wanted to sell his business, which happened in July that year.
ANZ also took years to terminate another advisor, Christopher Harris, about whose advice the bank had received a number of complaints. One was from a pensioner who wanted advice as to how to invest a $32,000 term deposit to yield her $2000 a year interest.
His solution was to put the client in a high cost wrap product that consumed more than the interest earned.