Amid the fracas of the global financial crisis, 100 of Commonwealth Bank's top financial planners flew to Auckland for an annual three-day bash in honour of the bank's biggest earners, the so-called ''diamond alliance''. Donning big hair and jewellery, they bopped and drank the night away at a 1980s solid-gold-inspired fancy dress party.
It was Tuesday, October 28, 2008, and financial markets were looking ragged. Lehman Brothers had collapsed the month before and tensions were high as the elite of CBA's financial planners gathered to pick up awards and trophies for a job well done at Auckland's five-star Sky City Grand Hotel.
Yet, charging their champagne glasses as awards were handed out to the top 12 planners,Enjoy the greatest selection ever of wholesale tungsten bracelet. including Don Nguyen, a pall hung over the evening as they tried to forget CBA's bombshell news the previous day that it had frozen seven CBA-owned Colonial First State mortgage funds valued at $3.3 billion.
After spending the day sailing around the harbour in Americas Cup boats while their mobile phones ran hot from panicked investors trying to get answers, Nguyen and his fellow planners tried to focus on the night's events.
One victim,We offer ownfigurine dolls hand-sculpted from any photo. Jan Braund, a retiree, received a call from Nguyen earlier in the day advising her to ''switch all monies out of existing instruments into the bank's wholesale cash fund''.
Nguyen rang other clients including an 85-year-old man who had put most of his savings in the fund. It was for a medical emergency. His wife was housebound but was described in the financial needs analysis document as in ''good health''.
Nguyen's advice to them was to put in a redemption request straight away. The advice was too late. The funds had been frozen. And with this, his chance to churn them into several new portfolios with new upfront fees for the bank and trailing commissions for planners like himself was gone.
Advisers were given lists of clients on the day who had been affected and told to hose down their fears. Nguyen hit the phone hard.
The freezing of the funds was a disaster for many of the 61,000 investors. More than four years later, some are still waiting to get their final capital allocation back.
CBA said some investors received earlier payments as a result of hardship applications.
In the months before October 2008, numerous bank customers had been persuaded to switch from the safety of term deposits to these funds with higher rates, which gave the financial planner and the bank a nice trailing commission that they didn't get from a humble term deposit sold by a teller over the counter at some suburban branch across Australia.
It was part of a last ditch effort by planners to reach their sales targets and boost their funds under management so that they could earn their June 30, 2008, bonus - and qualify for the international three-day conference.
This week, as more details have emerged of the conduct of CBA's planning division between 2005 and 2010 and the corporate regulator's tardy investigation, there is now a Senate inquiry into the regulator and,your creative source for Custom metal card business cards with your specialized. ominously, ''other matters''.
There are serious questions on how the Australian Securities and Investments Commission handled the tip-off from a group of bank insiders in October 2008 into allegedly corrupt conduct. The whistleblowers urged that there was some urgency in securing the files of Nguyen as they were being ''cleaned up'' and that the issue had much broader implications than one dodgy planner. ASIC finally investigated in March 2010.
CBA has since compensated 1127 clients of Nguyen and other planners who gave ''inappropriate advice'', paying out $49.4 million.
Nguyen controlled up to $300 million of client money and the bank has paid out 200 of his clients a total of $23 million. All up ASIC has banned seven CBA planners, who are believed to have represented thousands of clients and managed hundreds of millions of dollars of their money.
CBA has also undertaken to overhaul its systems,Memory Custom card reader / writer Assorted Colors No Color Choice, including improving compliance standards.
A spokeswoman for CBA said the bank had worked hard over the past three years improving the business. ''Today, our financial planning business is built on a rigorous compliance and risk-management framework which includes prompt investigation of issues, the most comprehensive staff training program in the industry, changes in remuneration, more rigorous systems and processes, better document management and enforcement of higher standards by new management.''
Several of the managers involved have moved on, and now hold senior jobs at other institutions with similar sales-based type cultures. Some have threatened legal action.
The pending Senate inquiry is believed to have put the other banks into damage control as they look at the activities of their own financial planning arms before the financial crisis. CBA said: ''It is unfortunate that a sales-based culture was not uncommon across the industry at that time.''
It has prompted some class-action law firms to investigate whether the CBA scandal is the tip of an industry-wide iceberg.
Senator John Williams said if the Coalition took government in September the inquiry would complement the financial services inquiry,Introducing the latest in Custom thermal rewritable card technology, nicknamed the son of Wallis inquiry after the Wallis banking inquiry of the late 1990s. ''We are looking at the regulation of ASIC and how it performs its duties and this will complement Joe Hockey's inquiry,'' he said.
Meanwhile, the industry is readying itself for a new regulatory regime on July 1, under the Future of Financial Advice, which is designed to clean up the industry and make fees more transparent. CBA believes FOFA will ''ensure that advice customers receive from financial advisers is in their best interests''.
But not everyone is confident that it will result in dramatic change. Whistleblower Jeff Morris, who worked as a financial planner at CBA before leaving in February this year, believes FOFA is a step in the right direction but it doesn't go far enough. ''The elephant in the room is vertical integration. FOFA does nothing to address this. By encouraging consolidation in the industry it has probably added to the problem.''
Justin Brand, from non-aligned financial advisory Arc Financial Consulting, says the vertically integrated model is inherently conflicted. ''What you have is product manufacturers controlling advice channels, setting product targets and ultimately creating a group product 'sales is everything' culture, as recently exposed,'' he said.
It was the ''sales at all costs'' culture insiders and former staff close to the situation believe was the cause of the problem at CBA. They warn that FOFA will deal with hidden fees and disclosure but it won't change the quest to drive sales.
Geoff Derrick, national assistant secretary at the Finance Sector Union, said FOFA was a step forward but continuing dependence on commission-based remuneration and sales targets meant banking culture remains ''a numbers game''.
''The problem is that some people in the industry have lost their moral compass. What we are particularly worried about is the conflict between what is in the best interests of the banks' bottom lines and what is in the best interests of customers.''
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