Appearing before the Standing Committee on Economics into the major banks yesterday, NAB chief executive Andrew Thorburn said the bank has conducted an independent review into its advice practices.
That review, and determinations by the bank at the board level, led to the conclusion that the poor behaviour of 43 of NAB’s 1700 planners did not amount to a “systemic issue”, Mr Thorburn said.
In the five years preceding 2014’s Scrutiny of Financial Advice senate inquiry, NAB compensated $15 million to customers affected by poor advice, he said.
In its most recent update on 28 September, NAB announced it had paid an additional $6.5 million in compensation to 251 advice customers since February 2015.
Mr Thornburn told the parliament committee yesterday that NAB has resolved to take five key steps to improve the quality of its advice.
The bank will: write to customers when there may have been poor advice; respond to complaints more quickly; bring more independence into its process (notably via the appointment of UNSW Professor Dimity Kingsford Smith as an independent customer advocate); strengthen whistleblowing and lift confidentiality clauses; and report all planners who leave the bank to ASIC, he said.
Under questioning from committee chair Liberal MP David Coleman, Mr Thorburn acknowledged no NAB executives have been terminated as a result of the poor advice practices within the bank.
“Managers in this part of the business are managed on a balanced scorecard [which includes metrics such as] customers, risk, financials, leadership and people … overall we believe they still met them,” he said.
“There were some other consequences in terms of monetary consequences, but we didn’t believe that it was appropriate that any individual [executive] be dismissed.”
NAB has put better systems in place to detect poor advice practices in the future, he said.
“We’ve been able to build detective controls that run across our system, so when advice is given we’re able to see all the plans of clients and the type of products that are being advised,” Mr Thorburn said.
“We have additional checks and balances, and we have more people doing compliance reviews. And we’ve invested in more systems to help us do that more remotely, but more actively.”
The reputations of NAB and “people in and around” the wealth management business have suffered as a result of the poor advice practices, Mr Thorburn said.
“I’ve met some of these customers and our advice was poor and wrong and not right, and I’ve apologised to them,” he said.
“We have learnt from this and we have significantly strengthened our controls and significantly strengthened our governance around this part of the business.”
Read more:
Property market subject to China's whims
Reporting deadline looming for AFSLs
Australian GDP growth set to improve: HSBC
Active managers underperforming benchmarks
