Bosses of the major banks apologised to a Senate Inquiry for the millions lost by their customers who fell victim to financial advisers, but they're under fire for moving too slowly and the push for a much broader probe is growing stronger.
The bosses of the big banks were compelled to apologise for questionable financial advice that cost customers millions of dollars.
LEIGH SALES, PRESENTER: Some of Australia's most powerful chief executives have been humbled today before a Senate inquiry.
The unwitting bank clients were victims of a system that thrived on little scrutiny or accountability and, even though the CEOs are promising change, there are growing calls for a much broader probe into why they were so slow to act when the misdeeds of their advisers were exposed.
HAYDEN COOPER, REPORTER: Never did Danielle Wilkie imagine it would come to this: setting out from her home in Sydney for an unlikely appointment with the Australian Senate.
JEFF MORRIS, FMR FINANCIAL ADVISER: It's about a three-hour drive but we can drive right up under Parliament House and just park there and go upstairs.
HAYDEN COOPER: In the driver's seat: Jeff Morris, the former Commonwealth Bank financial planner-turned-whistleblower who lifted the lid on an industry rife with dodgy advice and risky investments.
JEFF MORRIS: But every one of these hearings, you know, it's another brick in the wall. We're just achieving a bit more, getting a bit further.
(to Danielle) All you've got to do, Danielle, is just tell your story as if you were sitting in your own lounge room talking to them. They're very understanding. All they want to do is hear what you have to say.
DANIELLE WILKIE, NAB CUSTOMER: Oh, excellent. I can do that: tell my story.
HAYDEN COOPER: Danielle's story began with a visit to the National Australia Bank, where one of their top advisers convinced her to take out loans and invest in bank products.
But he failed to explain how risky these products were or warn about the unsustainable level of borrowing and high fees. The family ended up with debts of hundreds of thousands of dollars which they're still paying off.
DANIELLE WILKIE: We thought we were safe because we were going to the NAB. It's not like we were going to some independent adviser, so we thought we were safe because it was with the bank - but then learnt even the banks can get it very wrong.
HAYDEN COOPER: This is a scandal that's grown wider by the month. It began with the Commonwealth Bank, where thousands of clients were channelled into risky investments by shonky advisers. They lost millions.
At the NAB: a similar contagion. Customers were duped. Many faced ruin. Macquarie Bank was also caught up in the scandal. And only last week ANZ revealed it is paying $30 million in compensation to customers who never received the reports they were promised on their investments.
JEFF MORRIS: Today is going to be a chance for the victims to tell their side of the story.
HAYDEN COOPER: Today, as well as delivering her own evidence, Danielle Wilkie is in Canberra to hear the banks' bosses explain themselves.
DANIELLE WILKIE: I'm just hoping they're going to take it seriously now that they have to go to the Senate, so hopefully that will push them to open more cases.
JEFF MORRIS: Oh, look, it's a very significant development. It's the first time that the chief executives of a number of the banks are going to be called to account by the Senate for what's been going on.
NICK XENOPHON, INDEPENDENT SENATOR: When Macquarie identified it had a range of compliance problems...
HAYDEN COOPER: Today's inquiry confirmed the extent of the problem. Macquarie Bank revealed it has paid almost $10 million in compensation to customers who have received bad advice.
It's also reviewing the deals done by 11 financial advisers who have now been sacked or resigned.
NICHOLAS MOORE, CEO, MACQUARIE GROUP: And we're now approaching people who we've identified who we think might have received bad advice and actually seeking to compensate them.
HAYDEN COOPER: ANZ took a similar approach.
GRAHAM HODGES, DEPUTY CEO, ANZ: Well, if we've done wrong we want to make it right.
HAYDEN COOPER: Apologising to customers who never received annual reviews into their investments and confirming that six ANZ financial advisers have been reported to the watchdog ASIC. Five were sacked; one quit.
GRAHAM HODGES: This is an industry which really needs to significantly lift its game. And I think as an industry participant we believe that's true.
HAYDEN COOPER: With Danielle Wilkie in the gallery, the National Australia Bank chief executive then stepped up to offer his contrition.
ANDREW THORBURN, CEO, NAB: I apologise to those customers who have received poor advice. Our focus has been and remains the identification of impacted customers and proper compensation delivered in a timely manner.
HAYDEN COOPER: The NAB has paid almost $15 million in compensation to 750 customers and 41 financial advisers have been sacked.
ANDREW THORBURN: There are cases where we have not met our own standards and served our customers well. And we stand accountable for that. Secondly: sometimes when issues get raised we don't deal with them well enough or fast enough, so I agree with the sentiment of it. I just believe that overall we do that well, you know, most of the time.
HAYDEN COOPER: But when customers are compensated, they're also gagged. The bank confirmed that confidentiality clauses apply in most cases.
NICK XENOPHON: Will you here and now say that those confidentiality clauses, those gag clauses, will be lifted as a principle? If you mean what you say, will you lift those gag clauses?
ANDREW HAGGER, GROUP EXECUTIVE, NAB WEALTH: Well, I, maybe...
NICK XENOPHON: No, I'm not asking you, Mr Hagger. I'm asking Mr Thorburn, please.
ANDREW THORBURN: Well, Senator, so, yes, in principle. Yes?
NICK XENOPHON: Yes in principle?
ANDREW THORBURN: Yes.
HAYDEN COOPER: Whistleblower Jeff Morris reserves his harshest criticism for his old employer, the Commonwealth Bank.
JEFF MORRIS: CBA has behaved appallingly since 2008. Under this new compensation scheme they've announced, I've had so many emails from people who've had absolutely nothing from the bank in nine months.
HAYDEN COOPER: In fact, very few Commonwealth customers have been paid anything at all; a point revealed by the bank's beleaguered CEO.
IAN NAREV, CEO, COMMONWEALTH BANK: I know that one of the criticisms of the program is that it's moving slowly. We want to move as fast as we can. But our priority this time is to get it right.
JOHN WILLIAMS, NATIONALS SENATOR: Has there been any compensation paid out at yet?
IAN NAREV: We've only paid to about three customers so far. Offers are in the hands of 207.
HAYDEN COOPER: After this inquiry, Senator John Williams is one who wants a royal commission into the financial advice sector and new rules to stop unscrupulous advisers once and for all.
JOHN WILLIAMS: Because I hear of so many financial advisers who have been breach-reported to ASIC, have been sacked by the institution they work for. The next thing, we find they're down the road working in the same industry for another institution. That is wrong.
HAYDEN COOPER: Danielle Wilkie received some good news from her bank, the NAB, last week: a letter saying her case is finally being reviewed for compensation.
DANIELLE WILKIE: It means so much to us to be compensated, just to lift that burden a bit. So I'm very - probably too hopeful that there's something around the corner, which is a little bit scary because if it's not then, yeah, that wouldn't be good.
That wouldn't be good.
Source: The Sydney Morning Herald
LEIGH SALES: Hayden Cooper with that report.