National Australia Bank’s spin-doctors went into overdrive in a bid to rectify significant damage done to the bank’s pubic profile last week.
Making headlines for all the wrong reasons, top NAB executives have come under scrutiny as serious misconduct allegations were leveled at the organisation’s on-staff financial planners, 37 of whom have been sacked.
NAB chief executive Andrew Thorburn will face tough questions before a Senate Economics Reference Committee (SERC) inquiry, following media reports that the bank tried to buy back favour with hundreds of disgruntled clients over the past five years.
It’s alleged between $10 to $15million in compensation was paid to around 750 customers who received ‘inappropriate advice’ from some of the NAB’s 1700 financial planners.
NAB employees have been provided with a list of questions and answers to be used when fielding the anticipated backlash from thousands of customers who’ve sought financial advice from the bank in recent times.
The internal email accompanying the Q & A document stated, “It’s important to stress that one of the key findings of our report is that we don’t have the systemic issues others in the advice industry have experienced, and more importantly, when we do find a problem we will fix it for our customers.”
Is it all a bit too little too late?
As SERC Chairman and Labor Senator Sam Dastyari pointed out, a major issue has been the bank’s apparent reluctance to address ongoing questions around its internal financial planning dealings.
“The NAB have had a slogan of more give and less take – well we want to see them give a little more transparency around these issues,” he said.
“There are too many unanswered questions from NAB and the Senate inquiry will be an opportunity for them to come clean and put their case out there.”
Some of the misconduct accusations include instances of forgery and the doctoring of customer files.
A timely warning
This isn’t the first time we’ve heard of shady dealings within Australia’s poorly regulated financial planning landscape, and it most definitely won’t be the last.
Of course this latest scandal encouraged further rhetoric from government officials around the need for tighter checks and balances throughout the sector. But many experts fear this is one runaway horse that can’t be reined in.
As far as I’m concerned, when you seek investment advice from someone claiming to be an expert, you must first qualify them and understand how, why and what they suggest to be the right type of strategy, structure and asset class for your needs.
This is particularly true when it comes to property investment, with a notable growth in the number of ‘advisors’ selling product and raking in large profits, in the guise of providing independent and considered guidance.
All you need to do is look at the exponential growth in ‘SMSF experts’, aligned with frenzied off the plan apartment construction across our major cities, to see that real estate is big business right now and everyone wants a piece of the pie.
Here at Trilogy, we’ve heard of commissions being offered to financial advisors by large construction consortiums in the region of $30,000 to refer unsuspecting clients.
These glorified real estate agents are generally the only ones who profit from the ‘advice’ given however, with little or no thought to the actual financial needs of the people sitting on the other side of the desk.
How to recognise real advice
Remember, not all financial advisers are rogues and at some stage, it’s likely you’ll need the wise counsel of a professional who has a more intimate understanding of different investment vehicles than you possess.
But it’s advisable that you approach with care and do your homework before handing over any money or making a contractual commitment that might be more beneficial for them than you.
To help you out, here are six questions you should ask to qualify a financial planning expert:
Do you get paid a commission and if so, from whom?
- What are your qualifications and how long have you been in the industry?
- Can you please provide me with referrals from past clients?
- Do you sell any products and if so, why and what are they?
- Are you aligned with any companies or organisations that profit from the investments you suggest?
- Do you have your own successful investment portfolio?
Finally, only put your trust in the advisor who bases the information they give you on a careful analysis of your personal circumstances, objectives and needs.
If they’re trying to sell you something without even understanding what it is you require, run in the opposite direction! I’m sure a few NAB customers are wishing they’d done so right about now.