Even with a day off for Anzac Day, this week at the banking royal commission saw more drama than you could poke a stick at. Along with the expected revelations about industry failures, we also saw a celebrity adviser (pictured) go down in flames and even a medical emergency, which halted proceedings as the head of one of the major licensee’s collapsed during sustained questioning.
Collapse in the Dock
Proceedings at the banking royal commission took a dramatic twist yesterday afternoon, when a witness collapsed during his testimony. As if there wasn’t enough spectacle in the continued disclosures of chicanery by sections of the finance industry, Terry McMaster, the head of Dover, a major unaligned player that licenses 400 financial planners, collapsed after being accused of lying by counsel assisting the commission Mark Costello.
Dover Financial was the only large-scale financial advice group to decline to assist the royal commission. McMaster was being questioned about Dover’s customer protection policy, which was described as Orwellian and also defended Dover’s hiring of Financial Advisers who were under investigation and later sanctioned for serious breaches.
Celebrity Adviser Proves “Value” Of Celebrity
Earlier in the week the commission heard that adviser Sam Henderson, head of the advice firm Henderson Maxwell, had one of his staff members impersonate a client to gain information about her super fund. Henderson is, or was, and active media personality, hosting a show on Sky News Business Channel, appearing as a finance expert on channel 10’s The Project as well as contributing to the Australian Financial Review and Money Management.
A client of Henderson’s, Donna McKenna, told the inquiry she went to firm Henderson Maxwell after seeing its chief executive Sam Henderson in the media.
McKenna, who is a Fair Work Commissioner, was advised against her wishes, to rollover all of her superannuation into a Henderson Maxwell-managed self-managed super fund - a move that would have cost Ms McKenna $500,000. Earlier, Ms McKenna gave evidence that she emphatically told Mr Henderson she was not interested in starting a self-managed superannuation fund during an initial meeting but he pressed the issue. Ms McKenna rejected the advice, described it as risible and was refunded nearly $5,000 in upfront advice fees she had paid.
Mr Henderson also admitted under questioning that 84 per cent of his company’s clients were tipped into funds his company looks after and he does not have a Master of Commerce degree, as stated in a 2016 financial services guide from the firm.
Membership Organisations Questioned
The two main adviser membership organisations, the Financial Planning Association of Australia (FPA) and the Association of Financial Advisers (AFA) also face the commission yesterday. They were asked questions about their place in the industry, in particular about what role their organisations have with regard to policing adverse behaviour by their members and the extent that the public would benefit from their actions.
What the commission exposed was the limited role the main member organisations have in terms of the actions they can take in dealing with their members who are subject to complaints or who are found guilty of misconduct. The role they play is important in promoting advice and offering assurances that their members abide by their respective codes of practice.
In a regulatory sense, the threat of expulsion from the organisations is the main “stick” they have to get their members to comply, the main “carrot” being that it’s members are able to leverage their membership in order articulate that they have voluntarily signed up to these organisations and comply with the publicised standards regarding professional and ethical behaviour.
Whilst expulsion from these organisations would carry a professional price, it would be greater if they were highly publicised. The fact that expulsion does not limit an adviser’s ability to practice, tempers the role that these member organisations can play in a strict regulatory function.
For more of our coverage and opinion on the royal commission, you can check out some of our other articles; on the FPA and AFA, the political fallout and the role of ASIC, on the resignation of AMP Chief Craig Meller and the potential impacts of the big players moving out of advice.