National Australia Bank will provide aggrieved customers with access to a highly-respected law professor to shepherd their complaints through the bank, following revelations it had quietly paid $14.5 million over the past five years to more than 750 customers who got bad advice from its wealth division.
Dimity Kingsford Smith, from the University of NSW, has been named as NAB's "independent customer advocate". Customers who have already received compensation they consider unjust will be able to turn to her to review their treatment, while she will also be available to future complainants as NAB continues with its review of the files of 37 financial planners dismissed for misconduct or poor professional standing. NAB management is being advised by KPMG on whether additional compensation should be made to clients.
Professor Kingsford Smith is also a member of the external advisory panel of the Australian Securities and Investments Commission and was a co-author of a submission to Treasury on the financial system inquiry which supported the call for a new ASIC power to allow the regulator to intervene in the design of bank financial products. She is also an expert in the regulation of online investing.
The customer advocate role has been reviewed and verified by Cameron Ralph, the corporate governance adviser co-founded by former ASIC chairman Alan Cameron.
Professor Kingsford Smith will have authority to support customers through their complaint resolution process. She will also be involved in the bank's customer complaint decision-making panel and will have the power to appeal decisions of that panel to the lead independent director of the NAB Wealth board, Peeyush Gupta. Professor Kingsford Smith said she was "looking forward to a role where I am able to bring an independent voice to the fair and prompt resolution of disputes between NAB Wealth and its customers".
The creation of the position first announced by NAB chief executive Andrew Thorburn in February as the bank was recoiling from revelations made by a bank insider to Fairfax Media, which detailed instances of forgery of signatures, doctoring of files and repeated compliance breaches by advisers providing inappropriate advice.
The creation of a customer advocate by NAB is the latest example of the recent trend for banks to establish their own mechanisms to deal with complaints against financial advisers despite the Financial Ombudsman Service being available to represent consumers against financial institutions. At a Senate economics references committee hearing last month, Labor Senator Sam Dastyari expressed scepticism about the true independence of NAB's compensation process despite NAB's assurances that various layers of independence had been built in.
NAB has not gone as far as Commonwealth Bank of Australia, which in addition to providing customer advocates has also created an independent review panel chaired by former High Court judge Ian Callinan as well as an independent forensic expert who is advising clients on documentation for their claims, after Fairfax Media revealed CBA planners had put low-risk clients into high-risk investments that lost money and the bank attempted to cover up the conduct.
NAB Wealth boss Andrew Hagger said NAB has designed a process "that is right for our customers and our situation" and the bank "is pleased with the robustness of the process which we have, and we will continue to strengthen". Professor Kingsford Smith "has a first-class reputation and a very good history of advocating for customers and we look forward to her carrying out that role", he added.
NAB chief executive Andrew Thorburn said the customer advocate role "has been designed to challenge us in a meaningful way, to hold us to account, and to support our customers through the resolution of complaints in our financial advice complaints process".
Mr Thorburn told the Senate last month he was prepared to roll back "gag clauses" in agreements with NAB customers who had received compensation preventing them from speaking out. Mr Hagger said NAB is progressing all the commitments it has made since the compensation was revealed but did not provide additional detail on the gag clause review.
In her submission to Treasury on the financial system inquiry, Professor Kingsford Smith said "in a highly concentrated vertically integrated financial sector such as Australia's, product intervention powers will likely promote competition, market integrity and resilience as well as protect consumers." She said NAB has accepted that she will continue with her primary work "as an independent university researcher, teacher and public commentator on the law and policy of Australian financial consumers", support she considers as "an additional guarantee of the independence of the customer advocate's office and the determination of NAB to treat its customers fairly".
Author: James Eyers
Source: The Sydney Morning Herald