ANZ allowed a financial adviser who continually failed audits and vetting by the bank to keep working, even after he had been suspended.
VIDEO: ANZ executive grilled about bank’s vetting systems (ABC News)
- An ANZ aligned financial advisor with 700 clients kept operating for almost a year after being told he would be suspended by the bank
- Clients were encouraged to move from safe defined-super schemes to high-risk and complex structured investments not approved by ANZ
- ANZ has set aside $475,000 for up to 200 client refunds, but has already returned $415,000 having dealt with just 29 cases two years after the advisor left the business
In the latest blow to the reputation of banks, ANZ conceded it had failed its clients and took too long to start remediation and refunding their losses.
Details emerged at the banking royal commission that the adviser, John Doyle who was aligned to the ANZ’s RI Advice (RIA) group, had for several years failed to keep appropriate documentation of dealings with clients, advised them to buy complex and risky investments not approved by the bank and breached the Corporations Act numerous times in the course of providing advice.
The head of the RIA group, Darren Whereat, accepted Mr Doyle should not have been allowed to continue advising his more than 700 clients after he was suspended in 2015 for continued failings.
Mr Doyle kept advising for about a year and in the end sold his businesses without ever being terminated by ANZ.
Adviser failed all ANZ standards but had large client base
The ANZ aggressively pursued an alignment with Mr Doyle in early 2013, hoping to bring his Australian Financial Services business and its $660 million of investor funds under its financial advice umbrella.
At an exam on joining ANZ’s RIA business, Mr Doyle was found not to be competent in four out of seven categories assessed by the bank.
Over the next two years, Mr Doyle received the lowest possible rating in two audits of his files, including one audit where he picked the files to be audited, despite not being allowed to do so under ANZ protocols.
Senior counsel assisting the commission Rowena Orr, QC said the bank’s vetting procedures failed to weed Mr Doyle out and was not only an ineffective tool for Mr Doyle, but all advisers.
A second audit in 2015 found Mr Doyle was assessed as having a “risk to profits of clients”. He also advised clients to shift their defined-benefit superannuation accounts into riskier, non-approved investment platforms.
Ms Orr said a third “targeted” audit in May 2016 produced even worse results and more evidence of breaches of the Corporations Act.
Adviser given 6 months’ grace after suspension, kept working for year
Four days later, RIA informed Mr Doyle his services would be terminated in December, six months after the failed audit.
Ms Orr pointed out to Mr Whereat the RIA had the power to terminate Mr Doyle immediately, but instead continued to allow him to operate.
Orr: “Despite five breaches of the Corporations Act … you allowed Mr Doyle to stay in business and provide advice to existing clients.”
Whereat: “Yes we allowed him to continue under supervision to remediate [clients’ losses].”
Orr: “You suspended Mr Doyle because he didn’t comply with your procedures, but you allowed him to continue.”
Whereat: “That was a mistake.”
ANZ allowed Mr Doyle to continue, hoping a buyer could be found to take over the business and sort out client remediation.
In addition to breaches of the Corporations Act, Ms Orr said Mr Doyle had shifted clients out of safe defined-superannuation schemes into riskier and complex “structured’ investment products linked to the stock market.
Most of these clients were teachers and public servants.
Affected clients a ‘low priority’
Despite ANZ deciding to start remediation for Mr Doyle’s 200 affected clients, Mr Whereat conceded very few were contacted about the plan.
Indeed Mr Doyle encouraged them to stay invested in the risky, “structured” products.
ANZ considered their issue to be a “low priority” compared to others, as they were “financially literate” school teachers and not vulnerable.
It wasn’t until late 2017, 18 months after Mr Doyle sold his business, ANZ started contacting affected clients.
Mr Whereat conceded that was “too late”.
ANZ had calculated the average refund for Mr Doyle’s affected clients was $18,000 and had set aside a total of $756,000 to deal with the matter.
Only 29 of 222 identified clients had so far been contacted and refunded a total of $415,000.
Mr Whereat agreed that payout would significantly erode the total provision, but couldn’t say whether further provisions would be made. (By Stephen Letts, abc.net.au)