The major bank has downplayed the impact to its bottom line of a super fund that was sold through branches before ASIC intervened.
ANZ’s Smart Choice super product was sold through its branch network until the group agreed to an enforceable undertaking with ASIC in July last year. The regulator expressed concern that the sale of the product was not taking into account the personal circumstances of the customer.
The product was examined by the royal commission and was brought up again this week when ANZ chief executive Shayne Elliott and deputy CEO Alexis George appeared before a parliamentary committee.
Asked by committee chair Tim Wilson MP to describe the risk profile of the product, Ms George said that it was ‘extreme’, but that processes were put in place to bring the risk down to a more acceptable level of ‘high’.
Mr Wilson noted that the bank’s chief risk officer suggested the risk so great that it could threaten ANZ’s banking licence.
“The product itself is a very simple solution. It’s digital and very transparent,” Ms George said.
“We put in processes at the branch level that the particular branch people had to follow in order to insure they didn’t step over the boundaries of what was acceptable to that customer, including putting in statements that personal circumstances of the customer weren’t taken into account. We also did audits of branch staff to make sure they were adhering to those particular standards.”
The Smart Choice solution had approximately $3.6 billion in funds under management (FUM) up until July last year.
Mr Wilson asked what sort of profit the bank would have made on the product.
“The profit would be around zero,” Ms George said. “The reality is that solution is very low-priced, it’s a completely digital solution. The profit on that, and I’m not trying to be funny, would be around zero.
“We spent an enormous amount of money to put a new solution out there that was competitively priced. The profitability was very long-term thinking.”
When asked why the ‘extreme’ riskiness of the product and its sale through branches wasn’t reported to the board, ANZ chief executive Shayne Elliott explained that the product was a very small part of the organisation.
“This is a relatively small product in the wealth division” he said.
“The wealth division at its peak was about 5 per cent of ANZ group and of that 5 per cent, this is one of many many products and a relatively small one. I’m not sure it is reasonable to expect that that would be overseen by the group board. What the group board need to do is make sure there are governance processes and procedures and policies in place to manage governance risk. What the group board and group risk committee do get are the minutes of subsidiary committee reports.”
ANZ stopped offering its Smart Choice super product through branches in August 2018.
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