Australia’s biggest bank charged dead people financial advice fees for a decade.

The nation’s biggest financial planning company admitted to ripping off its customers and lying to the corporate regulator about it.

Everyday Australians told of losing everything after receiving dodgy advice from so-called professionals they trusted.

The public shaming will continue as more senior executives answer questions before the royal commission and share their sins. Resignations have begun and tougher new laws announced.

Financial services industry insiders say customers have been getting ripped off for years, and hope this royal commission will finally bring change.

Deakin Business School associate professor Dr Adrian Raftery likened the hearings to a reality television show. “It’s been riveting TV watching them squirm,” he said.“I’m still sceptical that all has been revealed. The industry is disappointed but not overly shocked, which means a lot of people are not disclosing everything they should be.”

WHAT’S HAPPENED?

Public hearings for the royal commission began in March and first focused on consumer lending, but things heated up last week when two weeks of hearings about financial advice kicked off.

Australians have heard outrageous examples of money-grabbing, including:

• A Commonwealth Bank subsidiary revealed it had been charging ongoing financial advice fees to customers who had died years earlier — one had been dead at least a decade. The bank also agreed it was the “gold medallist” in charging customers for advice they never received.

• AMP also charged “fees for no service” and admitted to lying to corporate regulator ASIC many times and altering a so-called “independent report” into its behaviour.

• Nurse Jacqueline McDowall told how bad advice from a Westpac financial planner to borrow up to $2 million and start a self-managed super fund had cost her and her truck driver husband Hugh their home.

• Banks said they focused on profits instead of trying to fix systems that detected when financial advice customers were being ripped off.

• National Australia Bank staff falsified documents in return for cash bribes to get home loans approved.

• Westpac continued to pay commissions to car dealers for loans that ASIC had already moved to ban.

Given the uproar and scale of the findings so far, Finance Minister Matthias Cormann said he would extend the royal commission’s length beyond 12 months if required.

WHAT DOES IT MEAN?

Despite a pile of inquiries and reviews of financial services in the past decade, problems still persist and need to be fixed.

AMP chief executive Craig Meller fell on his sword on Friday, announcing he would quit immediately, after previously flagging he would be leaving later this year.

Treasurer Scott Morrison, announcing new rules that included huge fines and potential 10-year jail terms for badly-behaving executives, said the resignation “doesn’t surprise me”.

“It’s not just executives here. Boards at the end of the day are responsible for these organisations,” Mr Morrison said. “Equally ASIC has a job to do and I have no doubt that as this process unfolds there will be criticisms levelled at ASIC.”

Dr Raftery said the revelations showed there was “a big cultural issue at stake, from the top down” and also criticised ASIC’s role.

“To have a large organisation say under oath ‘I have lied to the regulator and that independent report wasn’t really independent because we designed questions’ … I’m really disappointed in the bite of our corporate watchdog,” he said.

Chris Brycki, who founded online investment firm Stockspot in 2013 after finding people were being charged high fees for bad advice, described some of the revelations as “unbelievable”.

“It’s all coming out now but it’s been clear for a long time to me that the typical advice people get when it comes to investing is terrible,” he said.

“It looks pretty bad for those politicians and business leaders who were advocating for there not to be a royal commission.”

WHAT HAPPENS NEXT

NAB, ANZ, ASIC and the Financial Planning Association are among those scheduled to appear before the commission in the week ahead.

The new laws unveiled on Friday include fines of up to $210 million or 10 per cent of a company’s turnover and stronger powers for ASIC.

The financial advice industry will go through a period of upheaval, with an estimated 8000 of its 24,000 planners set to retire by 2023, creating room for fresh blood that can perhaps restore trust in financial advisers.

There have been calls — including from former competition watchdog Allan Fels — to separate financial advice businesses from the banks because they can’t seem to manage conflicts of interest.

Mr Brycki said future changes should hopefully make people more comfortable about getting financial advice. He agreed with tough jail terms for rule breakers.

“Unless people in the high positions in the banks see there’s ramifications, this behaviour is likely to continue. These people only see the upside with their bonuses,” he said.

“They’re all blaming this headless person called culture. But culture doesn’t go to jail — it’s just an excuse.”

Original article published here on 21 April 2018 in The Mercury.