ANZ tests IOOF on big su­per trans­fer

The Weekend Australian - - BUSINESS REVIEW - BEN BUT­LER MICHAEL RODDAN FI­NAN­CIAL SER­VICES

Fresh doubt has been thrown on ANZ’s plan to off­load about 700,000 su­per cus­tomers to IOOF, with par­lia­ment told the bank has de­manded the trou­bled wealth man­ager an­swer ques­tions raised by scathing find­ings about it in the fi­nan­cial ser­vices royal com­mis­sion.

ANZ deputy chief ex­ec­u­tive Alexis Ge­orge yes­ter­day told a House of Rep­re­sen­ta­tives eco­nom­ics com­mit­tee in­quiry into the big four banks that the chair­man of ANZ trustee com­pany OnePath wrote to the IOOF board raising ques­tions about is­sues aired at the com­mis­sion.

How­ever, IOOF chair­man Ge­orge Ve­nar­dos yes­ter­day de­nied the let­ter, re­ceived by IOOF’s board last week, dealt with a range of is­sues raised at the royal com­mis­sion. He said the let­ter asked ques­tions about con­flicts of in­ter­est, specif­i­cally IOOF’s so-called “dual reg­u­lated en­tity” struc­ture where the same com­pany is both a su­per trustee and a fund man­ager.

IOOF manag­ing di­rec­tor Chris Ke­la­her was grilled about this is­sue dur­ing a tor­rid ses­sion in the wit­ness stand at the royal com­mis­sion in Au­gust.

The DRE struc­ture presents a con­flict of in­ter­est be­cause as su­per trustee the com­pany is sup­posed to act in the best in­ter­ests of re­tire­ment savers but as a fund man­ager it has a re­spon­si­bil­ity to re­turn a profit to its par­ent.

ANZ plans to trans­fer its su­per cus­tomers to IOOF are part of a $1 bil­lion sale of its OnePath wealth busi­ness that last week saw it hand over a string of fi­nan­cial ad­vice busi­nesses.

As The Aus­tralian has re­ported, the board of ANZ’s su­per trustee com­pany, OnePath Cus­to­di­ans, will meet in De­cem­ber to de­cide whether to go ahead with the move.

Un­der su­per­an­nu­a­tion law, to tick off on the deal, which is known as a suc­ces­sor funds trans­fer, the board must de­cide that it is in the best in­ter­ests of mem­bers.

At yes­ter­day’s par­lia­men­tary hear­ing, Vic­to­rian La­bor MP Clare O’Neil laid out to Ms Ge­orge the royal com­mis­sion’s laun­dry list of shock­ing rev­e­la­tions about IOOF, in­clud­ing al­le­ga­tions by coun­sel as­sist­ing of cheat­ing on com­pli­ance and shod­dily kept board min­utes.

In its sub­mis­sion to the com­mis­sion, the Aus­tralian Pru­den­tial Reg­u­la­tion Au­thor­ity also said Mr Ke­la­her “demon­strated a fail­ure to un­der­stand the covenants un­der the SIS Act and obli­ga­tions of a trustee un­der trust law” and made an “un­true” state­ment in a let­ter to the reg­u­la­tor. IOOF has re­jected the al­le­ga­tions.

“IOOF has not come out very well from the royal com­mis­sion — I don’t think I’m ed­i­to­ri­al­is­ing too much to say that,” Ms O’Neil said yes­ter­day.

“APRA has said it’s con­cerned about IOOF’s struc­ture and gov­er­nance. There’s been ev­i­dence pre­sented that half of the mem­bers of IOOF’s Su­per Choice fund would be bet­ter off in an­other ac­count, that they are

ANZ and NAB ex­ec­u­tives re­garded com­pen­sat­ing cus­tomers they ripped off as a “dis­trac­tion”, the banks ad­mit­ted yes­ter­day.

Shayne El­liott, the chief ex­ec­u­tive of ANZ, yes­ter­day con­fessed to par­lia­ment that his bank was “un­for­tu­nately” one of two fin­gered by the cor­po­rate reg­u­la­tor over in­ter­nal doc­u­ments re­fer­ring to re­me­di­a­tion as a dis­trac­tion.

And a spokes­woman for NAB, whose chief ex­ec­u­tive An­drew Thor­burn is to face par­lia­ment next Fri­day, told The Week­end Aus­tralian it was the other bank.

Mr El­liott was grilled by La­bor MP Matt Keogh about a re­port re­leased last month in which the cor­po­rate reg­u­la­tor slammed three banks — ANZ, CBA, and NAB — for tak­ing an av­er­age of a year to start pay­ing com­pen­sa­tion af­ter fig­ur­ing out that they had dud­ded clients.

“We iden­ti­fied his­tor­i­cal doc­u­ments from two of these ma­jor fi­nan­cial groups that re­ferred to re­me­di­a­tion for con­sumers as a ‘dis­trac­tion’,” ASIC said in the re­port. “This is ev­i­dence of a mis­align­ment in these two groups’ cul­tures with their stated val­ues of pri­ori­tis­ing con­sumers.”

Asked if ANZ was one of those two groups, Mr El­liott said: “Un­for­tu­nately, yes”.

CBA chief ex­ec­u­tive Matt Comyn yes­ter­day said his bank was not one of the two groups in ques­tion, leav­ing NAB as the only re­main­ing pos­si­bil­ity.

A NAB spokes­woman told The Week­end Aus­tralian ASIC’s ref­er­ence was to a slide in a 2016 “NAB Risk Cul­ture Guide” ti­tled “Get­ting it wrong al­ways costs more than if we got it right the first time”.

She said the sec­ond dot point on the slide read: “Re­me­di­a­tion tasks dis­tract man­age­ment away from op­por­tu­ni­ties to meet cus­tomer needs.”

NAB was “work­ing hard to be bet­ter for cus­tomers and have made re­me­di­a­tion a pri­or­ity”, she said. “We ac­knowl­edge that in the past we have been too slow to find and fix is­sues and to re­me­di­ate cus­tomers.”

Ap­pear­ing be­fore the House of Rep­re­sen­ta­tives eco­nom­ics com­mit­tee yes­ter­day, Mr El­liott said he was “em­bar­rassed” to read bank­ing royal com­mis­sioner Ken­neth Hayne’s scathing in­terim re­port into the scan­dal-rid­den fi­nan­cial ser­vices in­dus­try, apol­o­gised for the bank’s mis­con­duct and said it had not done enough to hold ex­ec­u­tives ac­count­able for wrong­do­ing.

He said that last year ANZ had fired 200 em­ploy­ees for mis­con­duct, but not all the ter­mi­na­tions were re­lated to the royal com­mis­sion.

Mr El­liott, who has been CEO since 2016 and be­fore that was chief fi­nan­cial of­fi­cer un­der former boss Mike Smith, told the com­mit­tee that “in the past, ANZ has not fo­cused suf­fi­ciently on for­mally hold­ing ex­ec­u­tives to ac­count for fail­ures that harm cus­tomers”.

He slammed ANZ’s pre­vi­ous “ma­trix man­age­ment” struc­ture for blur­ring lines of re­spon­si­bil­ity and said the bank had moved towards a sim­pler com­mand struc­ture.

Un­der ques­tion­ing from La­bor’s Matt Thistleth­waite, Mr El­liott said the bank would take an­other look at its so-called “bal- an­ced score­card”, which is used to de­ter­mine bonuses for staff.

He ac­cepted that a re­fer­ral met­ric on the score­card used by home lend­ing man­agers that was tabled be­fore the royal com­mis­sion “can be in­ter­preted as a quasi-sales target, and that shouldn’t be the case”.

Mr El­liott said read­ing Mr Hayne’s in­terim re­port, handed down a fort­night ago, “was frankly re­ally sad­den­ing. It made me feel em­bar­rassed for the in­dus­try,” he said. “We have bro­ken the trust of many of our cus­tomers, for which there is no ex­cuse and I apol­o­gise.”

He said that while he was ult- imately re­spon­si­ble for the bank’s cul­ture, it was some­thing that had built up over 185 years.

“Di­rect and doc­u­mented links be­tween spe­cific fail­ures and con­se­quences have been lim­ited and in­suf­fi­cient,” he said.

“This is par­tic­u­larly true for events, in­clud­ing those stud­ied by the com­mis­sion, which have un­folded over time or oc­curred un­der a num­ber of ex­ec­u­tives.”

Asked by Mr Thistleth­waite whether he stood by his state­ment to the com­mit­tee in 2016 that a bank­ing royal com­mis­sion would be a dis­trac­tion, Mr El­liott said: “No.”

“I was wrong,” he said.

GARY RAMAGE

Shayne El­liott ap­pears at the House eco­nom­ics com­mit­tee hear­ing in Can­berra yes­ter­day

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