The financial advice market has been hit with yet another scandal following an admission from NAB Wealth that it has paid more than $10 million in compensation to customers who received inappropriate advice from its aligned advisers.
In a statement issued in response to Fairfax Media reports released over the weekend, NAB Head of Wealth, Andrew Hagger, confirmed that NAB had compensated over 750 customers during the past five years. He also stated that NAB had commissioned a review of its Wealth business, following the release of the Senate Economics References Committee report into the handling of the CBA advice scandal (see: CFPL Scandal a Lesson for Entire Industry).
“When we identify or are made aware of issues we will always work to fix them. We perform regular audits and where we see problems we will highlight them because we want to fix them,” Mr Hagger said.
“We were transparent with this information, with our senior management team, the NAB Principal Board and our regulators,” he added.
Among the issues alleged to have occurred within the NAB advice network are instances of inappropriate replacement insurance advice. In its August 2014 review of life insurance advice, the Australian Securities and Investments Commission (ASIC) said it had identified numerous cases where clients were encouraged to switch insurance policies with little evidence that such a switch was in their best interests. ASIC said it could not comment on whether NAB advisers were included in its review.
ASIC will expand its regulatory work on NAB’s financial planning and wealth management businesses
“In response to ongoing problems in the financial advice sector, last year ASIC set up a specialist Wealth Management Project to focus on the conduct of the large advice entities (the four major banks, Macquarie and AMP). We have significant work underway targeting those entities. This includes work that covers NAB Wealth’s business. We cannot comment further on this work at this point in time,” a spokesperson for ASIC told riskinfo this week.
“ASIC will expand its regulatory work on NAB’s financial planning and wealth management businesses to consider any additional issues that are brought to its attention, and we urge Fairfax Media to share with ASIC any material it has, which might be relevant to our work involving NAB Wealth,” the regulator said.
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While we should be concerned about inappropriate advice from Banks regarding insurance advice, what about the poor consumer who receives no advice from on line insurance purchases, which is regulated (what a joke) under general advice. I took the trouble to read the PDS of some of the on line policies and I was shocked. Just one example: how would you like a 5 year exclusion period on your income protection policy for cancer or heart attack? What warning is there in the form or a report for someone considering the purchase of one of these policies or worse still replacing good for bad, other than ‘read the fine print’.
Yep. I had a client explain to me that “insurance is a rort”, that policies are designed not to pay….example cited was a friend of theirs who had an unfortunate experience with an expensive and – when it came to claim – completely useless insurance policy, sold through saturation midday TV campaigns. Like it or not, for many people there is little or no difference between fully-underwritten insurance contracts and “insurance” sold by a B-grade celebrity on daytime TV.
So that’s an obvious concern, but I see one issue that presents a much greater risk to advisers:
Probably like most advisers I’ve had clients where the only policy I could secure for them came with heavy loadings (due to a very sketchy medical record); they rejected my advice because a call to 1800-insurance offered “the same” cover for around $2 per week less, and without any medical checks!
I feel that my explanation and warning of the difference went in one ear, out the other. Fine if they make a conscious decision to reject my advice, but my great fear is that come claim time they’ll come after me for not clearly enough explaining exactly how useless their “direct” insurance policy is, and persuading them to undertake the blood tests and pay the extra $2/week for the certainty of receiving payment… I followed up my advice and warning in writing (letter and email), but is that enough??
I’m all for consumer protection, but as we’ve seen in the past, when clients make dumb choices and “no-win, no-fee” ambulance chasers eye off our juicy PI policy we become fair game.
Anyone else worried about this, or have a simple and watertight answer to this? I’d be very interested.
Further evidence that true Independent Advisers are going to be the scape goats for “Big Business” (banks, industry funds and direct insurers) continually putting our industry into disrepute.
Government should not be manipulated by these power brokers and should instead focus on the poor quality that they deliver on a regular basis.
Leave Independent Advisers alone…..please, we aren’t the problem – commissions are not the problem!
We also should include the not so subtle coercion and marketing of Risk products to clients taking out loans.
Often adviser clients are told that the borrower will enhance their prospects of having their loan approval expedited if they consider the bank offered risk products.
Overselling and replacing current insurances with inferior products by banks is not a new event.
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