The Commonwealth Bank has once again come under fire for the actions of its financial advisers, with the ABC airing a story featuring a client whose adviser recommended he replace his existing insurance policy with one issued by CommInsure.
The ABC’s Four Corners program ran an investigation into the conduct of the bank and its financial planning arm, Commonwealth Financial Planning (CFP). The Four Corners program, which aired earlier this week, featured three cases in which clients described being severely disadvantaged by the actions of CFP advisers. Among the clients profiled was Teghan Couper, the plaintiff in what has become known in the industry as the ‘churn case’.
In the case of CFP v Couper, a client who switched his life insurance cover from Westpac to CommInsure on the advice of his CFP adviser was left uninsured when CommInsure voided the contract due to non-disclosure issues. The court concluded that CFP’s authorised representative was negligent and engaged in misleading or deceptive conduct, in that he was too hasty and failed to sufficiently impress upon Mr Stevens (the client) the risk he took replacing one policy for another. The decision was subsequently upheld by the NSW Court of Appeal, and the estate of Mr Stevens was awarded damages in the amount of the original insurance benefit the client was entitled to. For more on this case, click here to view a detailed analysis in our new Case Study Library.
In a statement issued to Four Corners about the case, a CBA spokesperson said:
“We respect the decision of the Court of Appeal, and wish to express our sympathy for the tragic circumstances of the customer and their family.
“We acknowledge that the most appropriate action in this case would have been for the customer to have remained with their existing policy. If the Commonwealth Bank had been aware of all relevant circumstances, there would have been no reason for the customer to terminate his existing policy.”
CBA also went on to apologise to customers impacted by what it termed ‘CFP adviser issues’, including clients of ex-financial adviser Don Ngyuen, whose conduct formed the basis of the recent Senate Committee inquiry into the actions of the Australian Securities and Investments Commission.
“We have significantly transformed our business as a result of these events. We have changed the management team and structure, the culture, the processes and the systems. The substantial investment we have made has resulted in major improvements in the business and demonstrates our determination to ensure that these regrettable events are never repeated,” the CBA spokesperson said.
If it were anyone other than the Commonwealth Bank, the AFSL would be cancelled for less than this. Have we already forgotten the relationship between Storm and CBA? I have lost respect for the system. Maybe CBA should move off-shore like James Hardy Industries!
“If the Commonwealth Bank had been aware of all relevant circumstances…”
This is an explicit acknowledgement that CBA did not take appropriate (if any) steps to “know their client”. It is insufficient to blame the adviser, whether rogue or not, the licencee is responsible for the advice given.
I saw the show and have read the case regarding the insurance non-payment. If you cut away all the legal talk, lack of disclosure etc – none of which a client like that would have either read or cared about – and the assertion that selling something to someone is a mortal sin, the bottom line is the applicant lied during the application process. If he had of told the truth to the questions asked, the insurance would have been rejected, the old policy not cancelled and he probably would have received his Westpac payout. There is no suggestion from what I have seen or heard that that the adviser changed the answers or told him to say ‘no’ instead of ‘yes’.
Further, from what I read he would have received the same level of death cover for the same premium, which he could obviously afford, as well as picking up around $50k of trauma cover which he did not have before. $50k of trauma cover for someone in their 50’s is not ‘insignificant’.
At that level, the client would appear to have improved his situation.
The other statement that shocked me the other night was that “he had a Westpac policy that guaranteed to pay him if he ever got sick” Really?
Have you really read the judgement Greg? By accusing the Mr Stevens of telling “lies”, you are strongly implying that he deliberately concealed information, giving answers that he knew were false. You may want to cut away the legal jargon, but you need to accept that while the judge found he had non-disclosed (given incorrect information) his motives or actions were not fraudulent.
The judge described Mr Stevens as ‘unsophisticated’ in financial matters. People like that need to be properly guided and supported through the application process. Heck, even with all of my experience, I find completing a person statement recently a real test of memory. To put the blame solely on Mr Stevens’ shoulders by saying he told lies is unfair and not reflective of the actual judgement.
Based on the 4 corners program and my own experience the Banks employ some very good advisers, however they also employ some VERY BAD advisers and this issue IMO is that theses bad advisers (if they are good producers of revenue for the Bank) are in most cases protected by the Bank when they blatantly do the wrong thing, resulting in them staying in the profession and continuing to give bad adviser or deliberately misleading clients.
Whilst financial planning is owned by the Banks and Fund Managers and we have ASIC as the “corporate watch mouse” this will never change
Every bank and every licensee would have a “Don Nguyen” type story with the same characters. I have worked in 2 of the Big 4 and the sales culture stems from the fear of not having a job if targets are missed on consecutive occasions (as little as 6 months of underperformance could lead to your “performance management”).
It is not the bank itself, it is not the licensee itself. It is a series of morally bankrupt individuals who make decisions that look after #1. If they had a decent moral compass and subscribed to the industry code of ethics at all, this simply wouldn’t happen.
The saying “hate the game not the player” doesn’t apply here. It is the players at fault. The game is an incredibly worthwhile one for clients if they find the right players for their team.
Having worked at CFP in a management role some years ago, I can certainly confirm that there was a heavy sales culture fostered by all levels of management and almost at any cost or at least as close to the ‘compliance’ wind as they could possibly have got…and beyond.
CFP pre 2001 functioned more like a sheltered workshop, with a limited ‘APL’ of predominantly ‘in house’ retail products. Although privatised a few years earlier, the CBA staff still seemed to be operating with leather patches on their beige jacketed elbows most of the time. Quaint, but ripe for the picking.
Then the real game changer for CFP occurred. Colonial Ltd & the CBA merged and for the nascent wealth channels, that meant CFS was now primed to tap into the almost untouched CBA customer base. Jackpot!
Fast forward (I am showing my age) to around 2003 and in no time at all, the requisite coterie of experienced ‘industry’ suits filed into CFS, chucked out most of the previous dealership people and then got the plan underway.
They proceeded to churn old retail product into CFS coffers (the jargon was ‘orderly migration’), get rid of the IPAC platform (in lieu of CFS product) and then work the branch staff hard with ever increasing ‘referral targets’ to ensure the punters were getting in front of the planners.
Planners who hadn’t reached targets were unceremoniously dumped (irrespective of whether they provided sound and compliant advice or not) and a sizeable batch of new & ‘malleable’ planners came on board nationally, who were then favourably incentivised to sell CFS product
It ‘was’ almost seen as an indictable offence if they sold non CFS product.
As most of these ‘newbies’ had no previous planning experience, their frame of reference was very, very limited, so most did as they were told.
And for a considerable period of time, the planners line managers were retail bankers, not dealer group staff. And in any practical take on it, the ‘Bankies’ simply didn’t appreciate nor care much about ‘compliance’ anywhere near as much as the local dealer group staff did.
Line managers wanted sales. They didn’t want to hear about how long it takes to write up a compliant file. It was all about weekly KPI’s. Targets which correlated into bonuses paid up the line.
From the EGM’s down…the measure was sales.
That was it.
Vertical integration working at it’s finest.
The way this works is that no one person can be held responsible for the shortcomings of a systemic problem other than the MD and the General Management.
Sure you can flog people like Don Nguyen for his abhorent behaviour, but he was just one identifiable risk factor in a system that rewarded his behaviour, given the lack of adequate checks and balances and the almost sociopathic focus on sales numbers by all levels of management.
I agree with Been There, Done That. Having been a CFP planner who was dumped in the past (circa 10 years ago) for not “performing”, I vowed to never return to the CBA. Well, I went out and travelled around the life insurance and IFA world and I can tell you there are advisers, dealer principals and even compliance auditors across the whole industry who turn a blind eye to the client’s best interests in favour of the almightly dollar. I even left a small AFSL because they closed their APL to just one platform with an associated risk provider.
I have been back working for CFP for some time now (post EU). I can tell you first hand that advice in here is most definitely about what is in the client’s best interests. There are no more league ladders, FUM targets or other incentives to simply funnell business into bank aligned products. Most would be surprised that CFP have a process of being able to recommend other retail funds, all insurers and even most industry funds when it’s better for the client.
great summary Been There. Haven’t seen the planning side of the Big 4 but all other businesses within those giants work the same way with the same culture and same motivation. Run generally by people who fit the Bank mould and once in executive ranks can dstance themselves from any adverse behaviours at the coal face. High reward low risk for these individuals
Been there and back, what you havent mentioned is how time consuming the process is to gain approval for the non apl product. It just isnt done if there isnt a really big reason to go off apl (underwriting). Branch planners still only have comminsure and cfs ws super on apl. Agreed that big steps have been taken but its time to open the apl to be truly in the best interest.
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