Bankers and senators debate best way of insuring financial advice clients against loss

There were plenty of grizzles but not much insight yesterday as a Senate committee laboured to produce a show intended to somehow bring bank chiefs to heel over malpractice in financial planning.

Bank CEOs and subordinates dished up the requisite apologies for the worst past practices, while explaining their diverse approach to reviewing the files of disgruntled customers and, where necessary, compensating them.

The pros and cons of different methods of insuring clients against loss from future misdeeds were among the few insights generated by the hearing.

ANZ deputy CEO Graham Hodges proposed that larger financial institutions with strong capital  - that is, the big banks - be allowed to self-insure.

Others must take out insurance, Hodges said.

At least one senator on the Economics References Committee, Nick Xenophon, is pushing for an industry compensation scheme.

Commonwealth Bank chief executive Ian Narev agreed with calls for "an industry standard" for addressing compensation claims from financial planning customers.

National Australia Bank CEO Andrew Thorburn said NAB would, at least "in principle", lift confidentiality clauses in relation to recent settlements. Commonwealth Bank has also dropped similar restrictions.

Macquarie provided new data on the progress of the review of its own files, a process imposed on the group by ASIC.

Macquarie Bank head of banking and financial services, Greg Ward, said the group had sent 198,000 letters to clients of its financial planning business.

"We have had 820 clients write to us and say they had a concern or a complaint in relation to the advice they received from Macquarie," said Ward.  

"Of the 820, we have reviewed 664 of those cases and in relation to that batch there are 43 cases that are eligible for compensation of A$4.2million.

"We reviewed every adviser that we had and out of that we identified 11 advisers that we were concerned about. Of course, we have reported those to ASIC.

"So we are looking at all of the files of those 11 advisors and that is about two and a half thousand files. We have reviewed 320 files already and there are 65 clients eligible for compensation there."

Deloitte is assisting Macquarie with the review, with the same firm also involved in a similar fashion at National Australia Bank.

Ward said Macquarie had overhauled its governance framework, bringing in new management, a new compliance team and a new practice management team.

The practice management team is made up of a dozen people who sit alongside advisers overseeing the advice given to clients.

"They listen to the clients' conversations, they review advice, they look at the performance of the advisers on the job," Ward said.

Commonwealth Bank chief executive Ian Narev said the bank had so far paid compensation totalling $79,000 under its Open Advice Review program, launched in July last year.

A bank spokesperson said 20,000 customers had asked for more information about the program. Of those, almost 5000 have confirmed that they would like to have their advice assessed and have provided documentation to assist that process.
 
The bank has sent completed assessments to 207 customers and, of those, it has offered remediation payments to 28. The average size of the offers is $15,000.

Forty-three planners have left CBA's planning business over the last three years. In addition to the $79,000 paid out under the Open Advice Review, the bank has paid $52 million under past remediation programs.

Narev concurred with calls for "an industry standard" for addressing compensation claims from financial planning customers.

He said one thing he'd learned "was how hard it is for some people to deal with big institutions [and] giving certainty to people."

Narev told the committee that reports through its whistleblower hotline were sometimes escalated to him and on occasions shared with the chair of the bank's board.

Xenophon pursued a line of questions with Commonwealth Bank CEO Ian Narev over the work, past and present, of bank executive Brendan French, the general manager of customer relations, over the bank's complex measures to mitigate past losses.

Fans of a royal commission into banking - such as the energetic Bank Reform Now group on Facebook and those behind the petition for "bank regulation" sponsored by Change.org - won't have found much in the hearings to further their cause.