Screwed by the 'CAN' bank?
Recommendation
Yesterday, a bloke called Narev blundered his way into the Commonwealth Bank Financial Planning omnishambles. Oh, you haven't heard of him? True, he hasn't been around much lately, but he should have been.
This scandal, now a decade old, has tarnished the reputation of the bank's wealth management division – which wasn't sky high to begin with – but now risks metastasizing into the heart and lungs of the host. That's something the invisible man cannot let happen, which explains his sudden appearance.
The handling of events thus far is straight from the Corporate Propaganda HQ 1973 training handbook: make the public think you care without it costing too much or changing anything, and lobby hard to retain control of the process and preserve the business model.
Key Points
- New compensations scheme announced
- Better than the last one but not by much
- Get independent advice before registering for it
The lobbying has worked a treat. The Government is pushing ahead, probably unsuccessfully, with its reform of the Future of Financial Advice legislation, ensuring the source of the scandal – the conflation of advice and sales – remains unaddressed. And bank lobbyists are doing sterling work heading off a Royal Commission, which would be to a financial planning business what a plane crash is to an airline.
PR failure
The public bit hasn't gone so well, hence Narev being wheeled out to announce a new compensation scheme. The last one, designed by Commonwealth Bank no less, was – how to put it? – as dodgy as the advice that caused the need for it. No, not predictable at all.
Anyway, Jeff Morris, the whistleblower working valiantly for victims whilst facing the joined-at-the-hip might of ASIC and Commonwealth Bank, believes that up to 400,000 people might be affected. Others put the figure up to 10 times that.
You may be one of them, or you may know someone that could be. If so, there are a few things to be aware of before picking up the blower.
The first is a subtle but revealing linguistic sleight-of-hand. The bank's website states that 'if you received advice from Commonwealth Financial Planning or Financial Wisdom between 1 September 2003 and 1 July 2012 and have any concerns' you can join the Open Advice Review Program for possible compensation.
But clients weren't being 'advised', they were being sold. That was (and remains) the problem. And yet the bank wants to carry on with the fiction that advice and sales can somehow be combined without one infecting the other. For an organisation that believes 'trust goes to the heart of a relationship between a financial institution and its customers' it's not a cracking start.
Problems remain
Second, nine years is quite a while to ignore systemic problems including fraud, which is maybe why it takes these guys three days to clear a cheque. Don't for a moment think these flaws have suddenly been fixed over the last two years.
The third issue is that whilst many victims are old or infirm and some are dead, it's nevertheless their responsibility to contact the bank and register for the scheme.
Weird, eh? Clearly the bank knows who they are. How else could it pay the trailing commissions? So why not write to each and every one and invite them to apply? Surely that would ensure more participation? Oh, right. I think I get it.
Now comes the devilish detail. The original compensation scheme was, surprise-surprise, an epic fail for victims. This one is better, but barely.
Bank staff will conduct your case review and, although it's not explicit, they will determine what information to share with you. As for the 'independent assessors', they're paid by the bank, which really makes them dependent assessors. Finally, if you don't like the compensation offer you can take it to an independent panel of people we know nothing about except for the fact the bank will choose them.
You'd imagine ASIC, so easily gulled by the first scheme, would be up in arms about this but no – its press release 'noted' the expanded program and that was it. Once you're in a hole, you may was well stop digging I guess.
'Independent' joke
The scheme is independent in nothing but name and ASIC is hiding in the corner. So you're swimming with the sharks again folks, which is why you'd be mad to enter the process without proper advice and representation.
Find an experienced lawyer that can assist you through this one-sided, public relations-driven charade because, if history is any guide, they'll pay for themselves many times over.
Finally, instead of calling your travel agent after a reasonable offer rolls up, phone your local MP and tell them how outraged you are by the fact that after a decade of misdeeds and inaction, the Commonwealth Bank is still in control of its own compensation scheme. You may also think to put in a good word for an industry-wide Royal Commission that includes ASIC. It may well be the only way of cleaning up this rotten mess and learning something from it.
Good luck.