ANZ Financial Services across Asia for the 5-Year Period - Case Study Example

Title: ANZ Financial Services across Asia for the 5-year period 2017 – 2021 Name: Institution: Date: Introduction Build a better tomorrow, while still enjoying today. What are you looking forward to? The freedom to work less and travel more? A great start in life for your kids? Or a truly secure retirement? Your ANZ Financial Planner can help you start living the life you want. They’ll also help you discover new opportunities you may not have thought of — from clever ways to protect your lifestyle, to new investment ideas. Because it’s never too early or too late to start planning for a better tomorrow. The Australia and New Zealand Banking Group Limited, commonly called ANZ, is the fourth largest bank by market capitalisation in Australia, after the Commonwealth Bank, Westpac Banking Corporation and National Australia Bank.[2] Australian operations make up the largest part of ANZ's business, with commercial and retail banking dominating. ANZ is also the largest bank in New Zealand, where the legal entity became known as ANZ National Bank Limited in 2003 and changed to ANZ Bank New Zealand Limited in 2012. From 2003 to 2012 it operated two brands in New Zealand, ANZ and the National Bank of New Zealand. The National Bank brand was retired in 2012, with a number of branches closing and others converting to ANZ branches. In addition to operations throughout Australia and New Zealand, ANZ also operates in thirty other nations. ANZ is one of the leading Australian banks in the Asia-Pacific region. It has been aggressive in its expansion into the emerging markets of China, Vietnam and Indonesia. ANZ is also a leading bank in New Zealand as well as several Pacific Island Nation where it competes in many markets with fellow Australian bank Westpac. ANZ's arm in New Zealand is operated through a subsidiary company, ANZ National Bank, from 2003 to 2012, when it changed to ANZ Bank New Zealand upon merging the ANZ and National Bank brands. In March 2005, it formed a strategic alliance with Vietnam's Sacombank involving an acquisition of 10% of Sacombank’s share capital. As part of the strategic alliance, ANZ will provide technical assistance in the areas of risk management and retail and small business banking. ANZ has followed a similar strategy in China, where it acquired a 20% share in Tianjin City Commercial Bank in July 2006. It also negotiated a similar deal with Shanghai Rural Commercial Bank. In August, ANZ purchased RBS's retail units in Taiwan, Singapore, Indonesia and Hong Kong, as well as RBS'si banking businesses in Taiwan, the Philippines and Vietnam. It was purchased for the price of A$687 million. As of September 2012, the company had a total of 1,337 branches worldwide.[25] In 2016, ANZ adopted less aggressive approach to expansion in the Asia-Pacific region after low returns. ANZ was named the most sustainable bank globally in the 2008 Dow Jones Sustainability Index making it the 2nd year in a row ANZ has been granted the title. In 2007 the title was shared with another Australian bank, Westpac, which had held the title for the previous five years.[5] ANZ was established on 1 October 1951, when the Bank of Australia merged with the Union Bank of Australia Limited. Another day, another scandal. ANZ bank's bombshell that it misled clients by charging them for advice they didn't receive is appalling but not surprising. Main Body It is just the latest financial institution to become embroiled in the crisis of confidence engulfing the country's financial planning industry. For those who say it isn't systemic, how do they explain NAB, CBA, Macquarie and now ANZ, all of which have been found wanting in servicing some of their customers honestly and fairly? ANZ's announcement that it had short-changed thousands of clients came hours after the Australian Securities and Investments Commission gave an update on an investigation it began last October into the conduct of the big six financial institutions. The project was launched in response to a scathing senate inquiry that criticised ASIC and called for a royal commission into CBA's financial planning division. ASIC's Thursday update confirmed it was "investigating multiple instances of licensees charging clients for financial advice, including annual advice reviews, where the advice was not provided." ANZ is the first to go public, issuing a statement that it will pay 8500 customers who bought a bundled financial planning package, branded as Prime Access, about $30 million in compensation. ANZ launched Prime Access to 15,000 customers in 2003 as a fee-for-service package that included access to financial planners, investment monitoring alerts and an annual documented review of their financial situation. Thousands of clients placed their money with ANZ and were told they would get an annual review by a financial planner. They received some of the services but not all and were charged regardless of whether the annual review happened. ANZ head of wealth Joyce Phillips says since notifying ASIC of the breach last year, it has upgraded technology and "educated" its planners to better understand their obligations to customers. It has also boosted the number of people in supervision and compliance to better monitor its 1500 planners. It is a good start but it puts the spotlight firmly on the conflicts of interest inherent in vertically integrated businesses, where the emphasis is more on product sales than financial advice. CBA whistleblower Jeff Morris said the revelations at ANZ Financial Planning comes as no surprise. He contends that charging fees and not delivering a service is rife in the industry. "You can trace the sense of entitlement back to the practice of collecting trail commissions without giving anything in return," he says. "The cracks in the dam are opening up, however, and it is only a matter of time now before the whole rotten edifice comes crashing down." It also confirms the importance of preserving the future of financial advice (FOFA) reforms, including the opt-in requirements, which the Coalition tried to scrub out as part of an attempt to dilute the reforms. Thankfully, this fell apart when Labor senator Sam Dastyari and independent senator Nick Xenophon helped stitch together a "coalition of common sense" to bring together Labor, the Greens and crossbenchers including Senators Jacqui Lambie, John Madigan and Ricky Muir to vote down the Coalition's FOFA windback. If there were ever an indication the Coalition was on a hiding to nothing when it tried to water down financial reforms, it was in late September when the peak lobby group that represents more than $2.2 trillion in money, the Financial Services Council, put up the white flag and proposed an independent advisory body funded by the industry to be formed to try to rebuild the industry's battered reputation. The crisis in confidence springs from a series of exposes in the financial planning arms of some of the country's biggest banks, including allegations of forgery and fraud, a cover-up by management, advisers cheating on exams and excessive churning of insurance products. ANZ expands that to charging fees for no service. It has triggered a new round of calls for a royal commission into the sector. "We have scratched away a few layers of paint and look at what rottenness we have exposed," Greens Senator Peter Whish-Wilson says. "We need to find out whether the termite infestation within the big banks is localised or whether it has gotten into the foundations." CHOICE issued a statement saying ANZ's announcement was yet more damning evidence of fundamental flaws in Australia's financial advice industry. "The customers ANZ failed will welcome this $30 million fee refund but the industry at large needs to think about cleaning up the mess it has created by treating financial advice as a sales pipeline," says CHOICE chief executive Alan Kirkland. This latest debacle sets the scene for some fascinating discussions next Tuesday at a Senate hearing, to be chaired by Senator Dastyari, where the bosses of ANZ, CBA, NAB and Macquarie will be grilled over conduct in their wealth management divisions. For Jeff Morris and the whistleblower at NAB, the blowtorch needs to be put on the big institutions that have harvested their trusting customers. ANZ Bank has revealed it will pay $30 million in compensation to thousands of financial advice customers who paid for financial advice but did not receive all the services they were promised, re-igniting​ calls for a royal commission into the sector. Ahead of a high-stakes hearing at which big bank chiefs will be questioned next week, ANZ on Thursday said it expected to compensate about 8500 customers after the bank failed to provide a documented annual review for clients who had purchased a package of wealth services. It also revealed it had dismissed two advisors and reported them to the corporate watchdog. The ANZ wealth package, known as Prime Access, was meant to give customers priority access to financial planners, investment monitoring alerts, and a documented annual review. But ANZ did not provide the review to all customers between 2003 and 2013, and has started a compensation program led by external consultants from PwC and law firm Clayton Utz. While critics said it was further evidence of systemic problems in the financial advice sector, the chief executive officer of ANZ's global wealth division, Joyce Phillips, said the problems did not relate to quality of advice. "We're pretty comfortable, we did not find any systemic issues relating to advice quality," Ms Phillips said in an interview with Fairfax Media. Instead, she said the issue was the bank had not complied with its contractual obligations to customers. As part of its file review into the problems, ANZ has also dismissed two advisors and reported this to the corporate regulator, but Ms Phillips this did not relate to quality of advice, either. "In our review process we have reported just a couple of instances where we are further investigating individuals, but again, nothing systemic to do with quality of advice." It comes as the Australian Securities and Investments Commission is investigating some of the big four banks, Macquarie Group and AMP for charging clients for financial advice even when the advice was not provided. Aside from ANZ, the Commonwealth Bank of Australia has also been affected by the ASIC investigation. A CBA spokeswoman said the bank's financial planning division (CFPL​) had told ASIC about the issue last year and it was working to reimburse customers. "We acknowledge ASIC's announcement today that it is investigating financial advisers charging service fees where service was not provided," the spokeswoman said. CBA would not say how many customers had been affected or the amount of money involved. ANZ said it had also reported the issue to ASIC, and it had confirmed "irregularities" in customer files last year. National Australia Bank, Westpac, and Macquarie did not comment and AMP said it had not received formal notification of the ASIC investigation. The episode follows advice scandals at CBA and NAB, and was seized on by senators who want a royal commission into the industry. The Nationals' John Williams said the latest revelation at ANZ was disappointing and raised questions about how widespread the industry's problems were. "Each week we hear more and more evidence of wrong-doing. It's unbelievable," he said. "It adds weight to a royal commission." Labor senator Sam Dastyari​ said the statement by ANZ on Thursday was undoubtedly prompted by the work of the Senate economics committee which he is chairing. The committee is conducting public hearings in Canberra next Tuesday afternoon where senior bank bosses have been called in to answer questions on recent financial advice scandals. "This disclosure [by ANZ] is a result of the public scrutiny being put on the banks," Senator Dastyari​ said. The revelations that 8500 ANZ clients have been compensated may increase the pressure on ANZ chief executive Mike Smith to attend the hearing next Tuesday. Commonwealth Bank chief Ian Narev​, National Australia Bank chief Andrew Thorburn and Macquarie Group chief Nicholas Moore are all attending, however ANZ told the committee it would send deputy chief executive Graham Hodges, along with Joyce Phillips, the head of wealth. Greens Senator Peter Whish-Wilson also argued that it was only the pressure of public inquiries that the "systemic" problems in advice had been revealed. "Imagine what might be exposed if a Royal Commission was established and given powers to investigate the sector properly. ASIC deputy chairman Peter Kell said it would consider enforcement action as part of its review, and would make sure customers were properly compensated. "ASIC will consider all regulatory options, including enforcement action, where we find evidence of breaches of the law relating to fees being charged where no advice service has been provided," Mr Kell said in a statement. Mr Kell made the comments in an update on a project that has been investigating the wealth arms of the Commonwealth Bank, National Australia Bank, ANZ, Macquarie Group and AMP. With news of yet another bank scandal, you might be wondering if the financial advice you received from your bank is appropriate. Use the checklist below, for signs your bank’s financial planner has given you bad advice. But isn’t it too late, if I’ve already received advice? Possibly not. If you have received advice from CBA Financial Planning or Financial Wisdom in the last 12 years, you may have a right to claim for loss arising from poor advice. The Open Advice Review Program was established by CBA after a Senate Inquiry report on the CBA financial planning scandal forced the bank to review thousands of cases of advice it had given to customers. Given that after a year and 20,000 inquiries, CBA have only paid out 3 clients, many people are asking if they can trust the CBA to objectively review its own advice. CBA is not the only bank with serious issues in its financial planning business. Other banks are reviewing advice given by their financial planners. Bad advice given by financial planners at NAB and one of its advice businesses Meritum, have led to large financial losses for clients. While NAB have gotten rid of many of its rogue advisors, there are still questions over NAB’s review of its own advice and its decision not to payout many clients who were given bad advice by planners the bank sacked. ANZ have recently been caught short changing 8,500 clients by signing them up for ongoing advice under its Prime Access service, and then not providing the advice clients were charged for. And, 160,000 Macquarie Bank clients have been invited to seek compensation after clients suffered heavy losses from poor advice dating back to 2004. Based on my experience reviewing different bank’s financial advice, and through discussions with insiders at CBA, here are the issues I think you should look out for: Rolling over industry funds into a bank-owned product, without a reasonable basis. Each bank typically recommends products it owns, over all others. A CBA or Financial Wisdom advisor might be more likely to recommend you switch to a Colonial First State super fund or CommInsure insurance product. ANZ might recommend OnePath. NAB might recommend MLC. Westpac could recommend BT. And Macquarie will likely recommend Macquarie. This doesn’t mean you’re getting bad advice, however…. A financial planner is required to document a clear basis for moving your super from its current fund to one of the banks (and that basis must be linked to your objectives, and not general in nature). Such a basis might include: Additional features and benefits, relevant to your objectives Lower overall cost Many aligned advisors (who tend to recommend expensive super and insurance products) cry foul when you focus on costs, rather than the features of a super fund or insurance policy (when an advisor relies on commission, it’s not in their best interests to recommend the least expensive fund). So, if you’re not sure if you ended up with a better super fund based on the information presented to you, just look at the difference in ongoing costs (financial planners are required to document a cost comparison in the Statement of Advice – often titled Replacement Product Advice Record). If your new bank-owned super fund or insurance is more expensive than your previous, and you can’t see a clear benefit, you may have been given poor advice. Rolling over your super fund into a bank-owned fund, without replacing (or considering) the loss of insurance Recommending you rollover your super fund, causing you to lose insurance attached to that fund, can be one of most negligent pieces of advice a bank advisor can give. You could have lost inexpensive insurance cover that might be difficult, or impossible, to get back. If you have ongoing health concerns, then you may have lost insurance cover that you’re never able to acquire again. Check old statements from your previous super fund to see if you had insurance cover (your bank Statement of Advice might even refer to existing cover). If you lost this cover and the bank financial planner didn’t take this into account, then you may have grounds for a complaint. Recommending a portfolio that’s too aggressive Many CBA, Macquarie and NAB clients were placed into investments that were too aggressive, when taking into consideration their capital growth needs and capacity for capital loss. CBA financial planners allegedly manipulated some ‘Risk Profiles’, making it seem appropriate to invest their clients into more ‘aggressive’ investments than is suitable. These ‘aggressive’ investments pay the planner more commission. And, some planners forged their client’s signatures on investment applications to place clients into funds they never agreed to (see point 6 below). As part of its review, if CBA finds a client has been invested into a portfolio that’s too aggressive, when deciding the loss incurred, the bank is assuming that the client should have been placed in a ‘balanced’ portfolio, containing growth and defensive oriented investments. But, it’s possible you should have been invested in a more conservative portfolio, possibly made up of 100% cash and fixed interest. If you still have that portfolio, you will likely have made up any losses since 2008. However, if you cashed out your poorly performing investments during the GFC, you might have grounds for CBA paying out the money you lost, based on a more conservative portfolio than ‘balanced’. In deciding how you should have been invested, look at how you were invested previous to seeing your bank financial planner. Also, look at your needs at the time you received advice. If you had enough money to meet your ongoing objectives with a conservatively invested portfolio, then you might be able to make a case for being invested too aggressively. False statements in your insurance application If you received insurance advice, get a copy of your application from the insurer (likely to be CommInsure in CBA’s case) and check that all your answers given during the health and lifestyle questionnaire were recorded correctly by your advisor. If you later claim an insurance payout based on a pre-existing issue that was not disclosed in your application, the insurer can turn down your claim. And you may have to take the CBA to court to get a payout. Inappropriate gearing If your bank financial planner recommended you borrow to invest, ask the bank for a copy of their Gearing Policy from that period and check you fit the criteria for your planner to be allowed to recommend gearing: The following was not allowed at CBA: Double gearing: where you use borrowed funds to invest in a margin loan or internally geared managed fund Gearing advice to anyone whose investment risk tolerance is less than ‘Aggressive’. Gearing at a greater than 50% loan to value ratio, including your overall debt and investments Gearing to people without a stable income, savings history and investment experience NAB and Macquarie clients were also given advice to invest in complex products that were too risky for their situation. Conclusion Get your hands on as much of your file as possible and check all signatures on your file, making sure they are all yours. CBA and NAB advisors were caught forging signatures. If a signature has been faked, hopefully you’ll spot it. Either way, if there are any documents you don’t remember signing, check what you agreed to in that document and make sure it fits with your recollection of what you agreed to at that time. Lack of documentation Check you received a Statement of Advice and copies of all supporting documents, including: Financial Services Guide Product Disclosure Statements Application forms If anything is missing, the bank needs to prove it was provided to you before you invested, rolled over super or bought insurance. If they cannot do this, you may have more solid grounds for complaint and claim for a payout for any advice you feel is inappropriate. Read More