Today NAB volunteered to appear before the Senate Economics References Committee to discuss matters relating to the financial advice sector.
Below is Andrew Hagger’s opening statement made to the Committee.
Opening Statement, Senate Economics References Committee, Fri 6 March 2015
Mr. Andrew Hagger, Group Executive, NAB Wealth, Chief Executive Officer, MLC Ltd
Chair and member Senators,
My name is Andrew Hagger and I am the CEO of MLC and the Group Executive of NAB Wealth.
I would like to start by thanking the Committee for the opportunity to appear this afternoon. I am joined by two senior officers of the bank: Mr. Greg Miller (to my right), acting Executive General Manager, Advice and Mr. Dick Morath (to my left), non-executive Director and Chair of the MLC Advice Board.
Together we are available to take your questions and address any concerns you might have arising from the recent reports.
I’d like to begin today’s committee hearing by acknowledging that the NAB Wealth Advice Review, the report that will be discussed today, was actually commissioned by me as a result of the work of this committee.
The Senate Economics Committee delivered a report in June 2014. We listened to you, we heard you and we acted.
And we have done so in a way that is transparent. We shared this report with our Principle Board, the NAB Management Committee and the Wealth Leadership team. We’ve not cloaked the document in professional privilege, and to an extent, this is the reason why these documents have found their way into the media.
I think that it is important to recognise that this report found that we do not have systemic issues.
We have a proud track record. We broke ranks with industry views and publicly called for a move away from commission based remuneration models and for improved governance and oversight frameworks for advisory groups. Much of this advocacy formed the basis for the previous Government’s original FoFA reforms pioneered by Minister Chris Bowen.
In 2006 our advisory group Godfrey Pembroke Limited (GPL) was the first major dealer group in Australia to move to a ‘fee for service’ remuneration model. This was followed by our other businesses, advice solutions Apogee, Garvin and MLC FP in 2010.
Today all of NAB Wealth’s investment business is written on a fee for service basis.
But, we know that there are areas that we need to fix.
I would like to take the opportunity to acknowledge this today, particularly to Ms. Coulston, who addressed the Committee a short time ago.
Chair, I didn’t hear all of Ms. Coulston’s testimony, but I did hear her summary at the end while I was waiting to come in. She said to the committee that no one should be treated this way, and this wasn’t fair.
And I agree with her.
Her treatment by NAB was not fair, and she should not have been treated that way. And I apologised to her. On behalf of NAB, I apologised to her personally a moment ago.
Clearly we should have done more.
We take seriously our responsibility to provide our customers with the best advice. We know our customers hold us to a high standard, as they should. We have worked to strengthen our business, and while we don’t always get it right – we believe that our business is stronger today than it was two years ago, and that it will be stronger again in two years’ time.
We are focused on improving the customer experience which is why:
– Where there is professional misconduct we will move to write to all customers, where misconduct has occurred in the last five years
– We are improving our complaints process, providing our customers with support to resolve complaints within 45 days
– We believe that we need more independence. We are going to add independence into our whisteblower process and our complaints process; and
– We will advise ASIC of all advisers who leave, with the categorisations and reasons of their departure.
We are proud, but not perfect.
We stand behind the advice that we give. We have around 4,000 NAB Wealth staff; 1,662 advisers (aligned and FP); 1.7 million customers; 8.5 million operational processes per annum; Total Funds Under Management is $150bm+; and we have a complaints rate of less than 1%.
When we’ve needed to pay compensation, we have. From 1 January 2010 to 30 September 2014, we have paid compensation to more than 750 customers, which has equated to $14.5 million. And that covers advice issues and service issues relating to the advice.
Now, clearly we would prefer to be in a position where we are not paying compensation, because we’d rather our customers get the right advice – and good advice – every time.
But, where we have problems, we will face into them and fix them.
Now to some specifics.
While there has been a media focus on 37 advisers in our report, I can inform the Committee that 43 advisers are covered in our report. Two of that number are from more than 10 years ago, which means there are 41.
We make no apologies for the fact that these advisers have departed or were dismissed from their roles as the health of our advice network is paramount for our customers.
Of the 41, there are a range of factors which form the basis for dismissal, including not meeting our compliance standards to serious offences like fraud.
Of the 41, we reported 8 to ASIC as required by the law of the day.
The 8 advisers are all situations where we have been working under ASIC supervision, and they represent over 90% of the compensation payments we have made in relation to the 41 advisers.
Let me just repeat that. That for the 8 advisers, they represent over 90% of the compensation in relation to the 41 advisers. Recently we have given all 41 names to ASIC.
I want to re-iterate my opening statement that together we are available to take your questions and address any concerns you might have from the recent reports.
We look forward to answering your questions.
Senators, I’ve made a commitment that our customers, advisers and employees will be given access through the NAB website to a transcript of today’s discussions.