ANZ under fire over ‘conflicted’ IOOF deal

During a parliamentary committee hearing on Friday (12 October), Victorian Labor MP Clare O’Neil was eager to find out where ANZ was up to in the sale of its wealth businesses to IOOF.

“I think IOOF has not come out very well from the royal commission. I don't think I’m editorialising too much to say that,” Ms O’Neil said.

The MP highlighted APRA’s concern about IOOF’s structure and governance and noted that there has been evidence presented that half of the members of IOOF’s Super Choice fund would be better off in another account and that IOOF is making an additional $8 million a year through what they call ‘low-arbitrage risk’.

“That’s their term for customers not understanding that they could be in an account that’s going to earn them more money,” she said.

“The royal commission has said it’s open to the commissioner to find that IOOF has failed to understand the duties to super members and failed to manage conflicts of interest. The board minutes have been inaccurate and lack detail, because the chairman has said that, if they do them accurately, they may ‘get an organisation into trouble should litigation later arise’.”

Ms O’Neil also flagged cheating on compliance exams, misrepresentation of performance, and the fact that IOOF had to back down from a big fee hike earlier this year, because its advisers said they didn’t think that was right for their customers.

ANZ’s deputy chief executive and the head of the group’s wealth unit, Alexis George, acknowledged that she is responsible for ANZ’s superannuation customers but insisted that there is an “independent” trustee board overseeing the transaction.

“I have to act in the best interests of the members of the super fund. I also have to act in the best interests, I believe, of the people who will support the members of those super funds. Clearly, I take that responsibility seriously,” Ms George said.

“When those things came out during the royal commission – which I wasn't aware of beforehand – we’ve had multiple contacts, formally and informally, with the management and with the board of IOOF to inquire about the issues that arose and what they were doing to address those, what they had done to address those in the past.

“As a manager, that’s what I’ve done.”

Ms George said the independent trustee board has written formally to IOOF asking for explanations.

However, Ms O’Neil pointed out that there “seems to me to be a conflict inherent in this transaction”, in that ANZ owes a duty to its shareholders and a duty to the members of the superannuation fund, and that these duties “seem to be divergent”

“Do you agree, and how are you resolving that within the bank?” the MP asked.

Ms George accepted that “there are always conflicts, as there are with any business”.

“That is why we have an independent trustee board there. They are an independent trustee board. All of the external members of that board are experienced, qualified and pride themselves on their own reputation. I think having them there is a constant check and balance on the role of executives,” she said.

Ms O’Neil asked the ANZ deputy CEO if this is the same trustee board that allowed almost a million members of the fund to be paid below the cash rate over a 10-year period of time. The MP explained that she was referring to the OnePath MasterFund. She asserted that, at 30 June, almost a million members of the fund were being charged a range of fees, including 4 per cent on all contributions and up to 2.9 per cent on top of that 4 per cent entry fee, “leading them to get below the cash rate over 10 years”.

Ms George explained that ANZ has “a range of funds” on its platforms.

“You’ve pulled out one there. There are hundreds. Most of the options – nearly 95 per cent of our cash options – don’t have a fee on them. We’ve been closing many cash options. You can have a look over the last years at whether there have been fees. If there is a fee being charged with a cash option, there is always one on the platform where there isn’t a fee-charging option. I accept you’ve pulled out one there that is. I’m telling you that nearly 95 per cent do not have fees being charged with a cash option or have another option available for the customer and the adviser to choose,” she said.