National Australia Bank will compensate thousands of pension fund customers who paid for advice they did not receive, according to a massive financial sector inquiry that has turned its sights on the pension industry.The first day of hearings into Australia’s trillion-dollar pension system heard that a unit of National Australia Bank (NAB), the country’s fourth-largest bank, had charged customers “plan service fees” for advice they did not receive, calling the charge a commission.
The misconduct occurred between 2012 and 2017 and affected more than 220,000 customers, said Michael Hodge, a barrister assisting in the inquiry. The NAB subsidiary had promised to pay 87 million Australian dollars (€55.6 million, $64.3 million) in compensation, he added.
These current hearings into the country’s retirement system are part of the ongoing Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and are expected to last two weeks.
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Under questioning, Paul Carter, a former executive general manager for NAB’s wealth division, said that in 2016 management had considered whether it could keep the money that had been misappropriated from customers.
Asked if the company had looked into justifications for why NAB might not need to refund that money to customers, Carter replied: “I would rephrase that to say we were conducting an investigation to understand the issues and make sure the right decision was ultimately made for customers.”
Digging deeper
The powerful Royal Commission inquiry has already roiled Australia’s banking and wealth management industry since it started its investigations in December 2017, wiping billions of dollars off the value of some of Australia’s biggest firms as investors brace for higher compliance costs and stricter regulation.
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Now it has turned its attention to the country’s pension fund sector and wants answers to questions about alleged misconduct, poor performance and especially the fees-for-no-service problem.
The latest round of hearings may pile more pressure on the shares of the country’s four biggest banks and top financial planner AMP, all of which have been called to appear at the commission in relation to their pension businesses.
Besides NAB other institutions like AMP Ltd, Commonwealth Bank of Australia (CBA), Australia and New Zealand Banking Group, and Westpac Banking Corp have also charged thousands of customers fees for advice that was not provided, Hodges said.
In an attempt to contain the public backlash, late last month NAB announced it would stop charging such service fees for selected products by the end of September. Additionally, both NAB and CBA have announced plans to offload their wealth management and pension funds, two of the country’s largest, in the wake of the damaging disclosures.
A drought at the bank
For National Australia Bank this latest inquiry comes less than two weeks after it was forced to try and soothe public anger after another inquiry — also part of the Royal Commission — showed it dealt harshly with rural borrowers.
After the stir, the bank, which is also the country’s largest rural lender, said it wound no longer penalize farmers for loan defaults in droughts amid a record dry spell in parts of the nation.
Farm banking in hot, dusty Australia has long been tough and although it is a small component of the overall system, rural loans are some of the riskiest and most politically sensitive. That has made them a lighting rod for criticism as the worst drought in living memory sweeps over parts of eastern Australia.
Production of wheat, Australia’s largest rural export, is set to fall to an eight-year low this season and farmers are killing cattle and sheep by the thousand to keep them from dying of starvation. For farmers, already disillusioned after years of watching city executives shutting local bank branches, the drought and the pension scandal has brought financial industry misconduct much closer to home.
tr/uhe (Reuters, the Sydney Morning Herald)
