$5k advice with $500k price tag
A FINANCIAL planning firm impersonated a Fair Work Commissioner in six phone calls to her superannuation funds and later described her as "aggressive" and "nitpicking" after she lodged a formal complaint over dodgy advice that, if implemented, would have cost her more than half a million dollars.
The Banking Royal Commission on Tuesday heard from Fair Work Commissioner Donna McKenna, who approached financial planner Sam Henderson from Henderson Maxwell in 2016 for advice ahead of the government's 1 July 2017 superannuation changes.
Despite repeatedly saying she was not interested in setting up a self-managed superannuation fund (SMSF), Ms McKenna said the statement of advice she received recommended she roll her superannuation into an SMSF, sell her shares and investments and invest all of her money with Henderson Maxwell's managed fund product.
"I thought [the recommendations] were risible," she told the Commission. "I remember saying to my son, 'I can't believe this, I've been to see the Financial Planner of the Year and this is what you get.'
"I thought if I went to an independently owned financial planning firm that I wouldn't be subjected to the product flogging of the type associated with the big banks, and yet all I'm being flogged is Henderson Maxwell's own products and services. I all but threw the advice in the bin at that stage."
The most egregious error in the advice was the recommendation that she roll over her State Authorities Superannuation Scheme (SASS). Had she done so before the retirement age of 58, she would have immediately forfeited $500,000.
Mr Henderson told the Commission the error arose because he mistakenly believed Ms McKenna was on a defined benefit scheme, as opposed to a deferred benefit scheme - despite his employee phoning the super fund while pretending to be Ms McKenna and being given the correct information.
Audio recordings provided to Ms McKenna by her two funds - SASS and the Public Sector Superannuation Accumulation Plan (PSSap) - after she lodged a formal complaint with the Financial Planning Association, were played to the Commission.
In one call, the Henderson Maxwell employee can be heard speaking to a SASS representative identifying herself as "Donna McKenna".
"Hi, I was wondering if I could get some information, please, on my member number, I've been given some questions to ask and I know I hold a defined benefit," she says.
After providing Ms McKenna's personal details, she goes on to ask what her lump sum payout would be if she accessed her funds early, and is informed of the $500,000 difference.
"Right, so OK, and if I wait till the age of 58 ... all right, yes, okay, I think that's about it that I need, thank you," she says.
Senior counsel assisting Rowena Orr QC asked Mr Henderson whether it was "standard for your employees to impersonate your clients and seek information about their superannuation accounts".
"No, absolutely not," Mr Henderson said. "I was horrified. It was most definitely the wrong thing to do. I was bitterly disappointed that someone would do that under my responsibility."
He added that the decision was ultimately made not to sack the employee.
"Instead we gave her a warning. It was borderline. In hindsight I should have persisted with my gut reaction," he said.
Ms McKenna was refunded her $4950 upfront fee, but had she signed on with Henderson Maxwell would have paid more than $3000 in additional brokerage fees plus an ongoing investment management fee of $14,642 - compared with the roughly $2800 she was paying through her super fund.
The Commission heard that 84 per cent of Henderson Maxwell's funds under management were with its own managed fund product. "Do you consider that you conducted a reasonable investigation into the financial products that might best achieve Ms McKenna's objectives?" Ms Orr asked.
"Yes, I do actually," Mr Henderson said. "We do consider all options for clients. I felt that in the first meeting we discussed what those options were, and collectively came to the agreement that a SMSF was suitable for Ms McKenna."
In his official response to the FPA to Ms McKenna's complaint, Mr Henderson hit out at her "barrage of aggressive and presumptive accusations" and added "I feel I've made every effort to attempt to satisfy Ms McKenna in finding an amicable solution to her issues without financial or other return to myself or my business".
"You then refer to things you have read in the press about Ms McKenna's role as a Fair Work Commissioner, in a highly critical way," Ms Orr said.
Describing her as "aggressive and nitpicking", Mr Henderson's letter said Ms McKenna had "approached this situation with extreme hostility" and treated him with the "utmost disdain".
In a subsequent email to the FPA, he described the incident as "a storm in a teacup" and said his "response before I went on holidays was exclusively for the FPA's benefit and not Donna McKenna" and that he would "appreciate" if his comments were not shared with her.
"Is it really nitpicking for Ms McKenna to make a complaint after receiving advice that would have cost her half a million dollars?" Ms Orr asked.
"No," Mr Henderson said. "That was clearly not a professional email."