The financial sector inquiry into Australia’s pension fund charges started on Monday, as National Australia Bank (NAB) confirmed that it would be remunerating thousands of customers who ended up having to pay for advice that they did not receive.
In hearings that look to get to the bottom of the complicated world of pension funds worth AUD $2.6tn, evidence emerged confirming that a unit of NAB was responsible for charging “plan service fees” to a significant proportion of customers for a service that the bank failed to provide.
The NAB subsidiary has already agreed to shell out AUD $87m and has admitted to misconduct that ended up affecting some 220,000 customers across the five-year period from 2012 to 2017.
Under the spotlight in Monday’s inquiry was Paul Carter, formerly an executive general manager in charge of the wealth division for NAB. He said under questioning that in 2016, the bank had considered whether it was possible to retain the misappropriated money from consumers in any capacity.
Michael Hodge, the barrister assisting the inquiry, then asked Carter if he “looked at that time at various justifications for why NAB might not need to refund that money to customers?”
Carter replied that he wished to “rephrase” what he had just said and that the bank was, in fact, “conducting an investigation” with the aim of determining the issues involved and making the right decision for its customers.
The Royal Commission inquiry is already asking questions of the banking and funds management industries, with sights now set firmly on pension funds. The aim of the inquiry is to look deeper into allegations of misconduct and underperformance.
Hodge also mentioned in the inquiry that NAB was not the only major bank under the microscope and facing serious scrutiny, as AMP, Commonwealth Bank of Australia, IOOF, Westpac and the Australia and New Zealand Banking Group have all admitted to charging thousands under the same pretense of offering advice that their customers never received.
Current hearings into pension funds and allocated finance into retirement pots should last for two weeks, and Hodge used his opening as barrister to suggest that those in charge of these funds are “surrounded by temptation” to prioritize profits to the extent of neglecting their customers.
The inquiry will therefore focus on the charging of fees for no service at all, coming from the angle of the trustees who make these products a reality.
Similar strategies of accounting have already shown up in both the banking and fund management sectors, and reports have already begun to devalue many of the largest companies, which have seen billions taken off their market values as a result of their misconduct.
This should bring in tighter regulations of the market as well as stricter controls to meter out fees without a service.
Looking to stem any negative public reaction, NAB has already confirmed the stripping of these fees, and along with CAB, it has shed its wealth investment and pension arms to allow for greater accountability and trace and move away from past mistakes. The banks represent two of the largest pension funds in Australia, and as the inquiry from the Royal Commission continues, more casualties should occur.