13.2.1 StatePlus
StatePlus is the RSE licensee for the StatePlus Fixed Term Pension Plan and the StatePlus Retirement Fund.[1] As at 30 June 2017, the funds had, respectively, $7.6 million under management in respect of 632 members and $17.228 billion under management in respect of 74,739 members.[2]
In June 2016, StatePlus was purchased by a subsidiary of FTC. After the purchase, FTC performed a review of StatePlus’s business practices and its provision of service to members.[3]
That review found that from April 2013, StatePlus told some members who had received written advice from a financial adviser that StatePlus would invite them to an annual review with a financial planner.[4] However, StatePlus’s advice procedures were not updated to ensure that all relevant members received the invitation. Some members with balances under $150,000 did not receive an invitation to receive an annual review. Others received an invitation, but only on a 14 month cycle (instead of a 12 month one). The cost of the annual review was included in the management fee paid by the member.[5]
StatePlus reported the breach to ASIC in May 2017.[6] Since then, in consultation with ASIC, StatePlus has started to compensate affected members.[7] At the time of Mr Lennon’s statement in August 2018, 12,269 members had been paid compensation.[8] StatePlus forecast that the total cost of project expenses and fee repayments will not exceed $92 million.[9]
13.2.2 OPC
OPC is the RSE licensee of the OnePath Master Fund, which has over $36 billion in funds under management and over 949,000 member accounts.[10]
In October 2014, an internal team noticed that money was accumulating in a ‘dummy’ account within OPC. ANZ logged an incident report and began an investigation.[11]
The investigation found that adviser service fees (ASFs) were being deducted from some members’ accounts after those accounts were no longer allocated to an adviser. This happened when staff did not properly follow a two-step process to stop adviser payments.[12] OPC eventually established that this problem had been occurring since 2003, and that 2,640 members were affected. It found that it had wrongly deducted $1,018,448 from those members’ accounts.[13]
In February 2015, OPC reported the breaches to ASIC and APRA.[14] Between March and September 2015, OPC communicated with ASIC and developed a remediation program.[15] In November 2015, ANZ engaged an independent consultant to review its proposed remediation program.[16] ANZ finished compensating all customers in August 2016.[17]
OPC engaged Ernst and Young to assess its processes, business rules and controls in respect of ASFs across OPC and ANZ’s Pensions & Investments operations more broadly.[18] With the exception of recommendations relating to the integration of the control environment of the ANZ Financial Planning and aligned dealer group businesses, which are being separated from ANZ’s systems as part of the IOOF transaction, all recommendations have been implemented.[19]
13.2.3 Westpac
This case study concerned some ‘investor–directed portfolio service’ products, and similar products, administered by Asgard, and some superannuation products of which BT was the RSE licensee.
After 1 July 2014, the fee structure of these products changed. Under the new structure, an advice fee was collected by Asgard or BT as a separate fee, rather than being included in an administration fee.[20] After this structure was introduced, some customers were charged advice-related fees even though they were no longer receiving advice. The wrongly charged fees were retained by Asgard or BT.[21]
In October 2016, a customer complained about being charged an advice fee after having asked to remove their financial adviser from their account. Westpac conducted an investigation into the issue, which finished in February 2017.[22] It found that the root causes of the error were insufficient procedures and inconsistent processing of the removal or reduction (as applicable) of the relevant fees either by relevant employees or by a third party service provider.[23]
Westpac notified ASIC of the issue on 17 July 2017.[24] A remediation process was agreed in December 2017[25] and completed in March 2018.[26] 767 customers were affected.[27] In total, $634,490 was paid to those customers, comprising reimbursement of the fees incorrectly charged and compensatory interest.[28]
[1] Exhibit 5.344, Witness statement of Mark Lennon, 17 August 2018, 5 [29]–[30].
[2] Exhibit 5.344, Witness statement of Mark Lennon, 17 August 2018, 17–18 [92].
[3] Exhibit 5.344, Witness statement of Mark Lennon, 17 August 2018, 135 [527].
[4] Exhibit 5.344, Witness statement of Mark Lennon, 17 August 2018, 135–6 [530]–[531].
[5] Exhibit 5.344, Witness statement of Mark Lennon, 17 August 2018, Exhibit ML-193 [STS.5003.0001.1284].
[6] Exhibit 5.344, Witness statement of Mark Lennon, 17 August 2018, 136 [532]; Exhibit ML-193 [STS.003.0001.1284].
[7] Exhibit 5.344, Witness statement of Mark Lennon, 17 August 2018, 156 [553], 157 [557].
[8] Exhibit 5.344, Witness statement of Mark Lennon, 17 August 2018, 155 [550].
[9] Exhibit 5.344, Witness statement of Mark Lennon, 17 August 2018, 157 [557].
[10] Exhibit 5.330, Witness statement of Peter Mullin, 25 July 2018, 10 [29].
[11] Exhibit 5.256, Witness statement of Mark Pankhurst, 1 August 2018, 103 [279].
[12] Exhibit 5.256, Witness statement of Mark Pankhurst, 1 August 2018, 98–9 [251]–[253].
[13] Exhibit 5.256, Witness statement of Mark Pankhurst, 1 August 2018, 99 [255].
[14] Exhibit 5.256, Witness statement of Mark Pankhurst, 1 August 2018, 101 [267].
[15] Exhibit 5.256, Witness statement of Mark Pankhurst, 1 August 2018, 102 [270].
[16] Exhibit 5.256, Witness statement of Mark Pankhurst, 1 August 2018, 102 [272].
[17] Exhibit 5.256, Witness statement of Mark Pankhurst, 1 August 2018, 102 [277].
[18] Exhibit 5.256, Witness statement of Mark Pankhurst, 1 August 2018, 103 [280].
[19] Exhibit 5.256, Witness statement of Mark Pankhurst, 1 August 2018, 103 [282].
[20] Exhibit 5.343, Witness statement of Melinda Howes, 18 July 2018, 4 [19].
[21] Exhibit 5.343, Witness statement of Melinda Howes, 18 July 2018, 4 [21].
[22] Exhibit 5.343, Witness statement of Melinda Howes, 18 July 2018, 5 [27].
[23] Exhibit 5.343, Witness statement of Melinda Howes, 18 July 2018, 5 [28].
[24] Exhibit 5.343, Witness statement of Melinda Howes, 18 July 2018, 7 [38], Exhibit MSH1-5 [WBC.529.001.0012].
[25] Exhibit 5.343, Witness statement of Melinda Howes, 18 July 2018, 8 [45].
[26] Exhibit 5.343, Witness statement of Melinda Howes, 18 July 2018, 9 [46].
[27] Exhibit 5.343, Witness statement of Melinda Howes, 18 July 2018, 4 [22].
[28] Exhibit 5.343, Witness statement of Melinda Howes, 18 July 2018, 4 [22].