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Macquarie drawn into Commonwealth Bank financial planning row

Macquarie is thought to be implementing new advice documen­tation, training and systems. Macquarie is thought to be implementing new advice documen­tation, training and systems.
Macquarie Group’s private wealth unit has been accused of not co-operating with the Senate committee that delved into unethical financial planning ­practices at the Commonwealth Bank of Australia.

Inquiry chairman Labor senator Mark Bishop said Macquarie had ­similar “systematic problems” to those uncovered at Commonwealth Bank, and he criticised Macquarie’s engagement with the committee.

“Arising out of confidential infor­mation provided to us, we wrote to Macquarie asking them to address the significant number of complaints we received,” he said in an interview on ­Friday. “They wrote back and politely told us to mind our own business.”

Internal sources said Macquarie received the letter from the committee a month before its report was made public.

Nationals senator John Williams said Macquarie still had a myriad of issues to address.

“There are a lot more questions for Macquarie Wealth to answer and they need to look pretty hard in the mirror in terms of their compliance,” he said.

“We had individuals from Macquarie give evidence to us in camera, which unfortunately we are not able to discuss. But needless to say, there are still serious questions for them to answer.”

The Senate committee’s report last month recommended a royal commission into conflicted financial advice, focusing on conflicts within the ­Commonwealth Bank.

No long-term effect from scandal

CBA chief executive Ian Narev told Financial Review Sunday that the ­scandal would not have a long-term impact on the company.

“When you are thinking about reputation as a chief executive, you really want to be thinking about the long term and that’s why we never want to take events that may have reputational impact at all lightly,” he said on Sunday.

The Senate committee report recommended that the Australian Securities and Investments Commission undertake “intensive surveillance” of Macquarie Private Wealth, to ensure that previous concerns were being addressed and that there were no other compliance failures.

The report says ASIC needs to be “far more intrusive and less trusting”.

The 2013 undertaking on Macquarie related to a string of shortcomings within the unit, including a series of lapses in record keeping, risk management and employee training. Among eight concerns raised was that Macquarie may not have provided financial services “efficiently, honestly and fairly”.

Senator Williams said the inquiry found the banking operations had engaged in “predatory lending”.

The senators also called for Macquarie’s enforceable undertaking to be extended beyond its end date in ­January 2015.

Macquarie’s head of banking and financial services arm Greg Ward declined to answer any questions when contacted last week by The Australian Financial Review. However a Macquarie spokeswoman on Sunday said: “Macquarie is continuing to work constructively with ASIC to implement the enforceable undertaking.”

Regulator to pursue enforceable undertaking

ASIC chairman Greg Medcraft and his deputy Peter Kell last month told journalists the regulator was pursuing the enforceable undertaking against ­Macquarie, which would hopefully see the bank “dramatically improve” its standard of advice to customers.

“There is a substantial amount of work going on in the implementation of that [Macquarie] enforceable un­dertaking,” Mr Kell said. “It involves reviewing the activities of a wide range of planners . . . and it involves developing remediation for clients.”

The undertaking includes remed­iation for customers who have been affected by compliance failures at ­Macquarie’s ­private wealth unit that date back as far as 2008.

Macquarie is, however, thought to be implementing new advice documen­tation, training and systems. A pilot program for a new advice platform is also due to commence .

Several former Macquarie advisers contacted by the Financial Review noted a strong and sometimes toxic sales culture.

“Nothing got in the way of sales,” an adviser who declined to be identified said. “Write $2 million, you got to go to the annual Hamilton Island trip.”

It has also emerged that Macquarie has turned to several independent experts to assist with meeting ASIC’s requirements. Deloitte was initially helping to assess the risk culture within the business, while KPMG is understood to be working with Macquarie in other areas. Additional consultants are also thought to be involved.

UBS Wealth Management, which was also named in the Senate report, was dealt an enforceable undertaking in 2011, for not sending clients a ­statement of advice outlining the risks and fees associated with investments.

UBS under fire again

Last year, UBS again come under fire after some clients incurred losses from internal systems failing to link wealthy clients’ options trades with their cash equity holdings.

Several clients referred the matter to the Financial Ombudsman Service, while others are believed to have settled with UBS.

CBA outlined a new remediation process for aggrieved customers on Thursday, including potential assessments by a yet to be set up independent panel.

ANZ Banking Group, whose custodians unit was mentioned in the Senate report, told Fairfax Media it began reviewing thousands of broader customer files last year and referred some irregularities to the regulator.

ANZ spokesman Stephen Ries said the bank began reviewing thousands of files last year and first notified ASIC of “irregularities” in August that year.

“We found some instances where we hadn’t delivered all the services that we said we would,” he said.

“We promptly reported that to ASIC and we are continuing a review of all our files and reporting that to ASIC.”

 Author : Joyce Moullakis and Patrick Durkin With Sarah Thompson
Source : The Australian Financial Review
Last modified onSunday, 06 July 2014 20:57

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