- A couple planning for retirement went to Westpac for financial advice on buying a bed and breakfast business.
- First they were sold expensive life insurance, and charged fees for a financial plan and for setting up a self-managed super fund.
- They ended up with no loan, no home and a super fund eaten into by fees.
A nurse and her husband say they were told by a Westpac banker: “You’re in the right place. I’m the money man who can lend you $2 million.”
That didn’t happen and it didn’t take long for Westpac to sell the couple expensive life insurance and charge a string of fees for financial advice that eventually left them without a family home and with a reduced superannuation balance.
Jacqueline McDowall told the Financial Services Royal Commission that she and her husband now live in the Northern Territory. She’s a registered nurse and her husband, a truck driver working in a mine, as they try to rebuild their savings to buy a home.
Their financial adviser, Krish Mahadevan, is still employed by BT Financial, Westpac confirmed to the Royal Commission, and still provides advice to existing customers.
He was to get a $16,690 commission for the advice to the McDowalls.
McDowall, who had banked with Westpac for 16 years, had planned to retire at 60 but says that will now probably be about 80.
“I wouldn’t wish this to happen to anyone again,” she told the Royal Commission.
“I want people out there to be very, very careful.
“We are all just normal people trying to earn a living.
“For them to do that to their customers is absolutely and utterly disgusting and I hope no one ever has to go through it again.”
She and her husband had contacted the bank in 2015 seeking advice about whether they could buy a bed and breakfast business as a strategy for retirement.
Between them they had $200,000 in superannuation, a house with a mortgage, some credit card debt and a car loan.
McDowall says the financial adviser said they should put the house on the market and pay off debt which would put them in better position to borrow.
He asked them to get a valuation for their family home, which came in at $550,000.
She says the adviser recommended a self-managed super fund and told them $200,000 was sufficient to go ahead with buying a bed and breakfast.
The properties they looked at would cost $1 million or more.
Million dollar insurance policies
The bank, she says, then insisted they take out million dollar insurance policies so the loans could be paid out if anything happened to them. These cost a combined $27,000 a year.
They sold their house, getting $485,000 which was enough to pay off the mortgage but not enough to pay off credit card debt.
Then the fees started building, including $3850 for preparation of a plan and $1034 for implementation. The total was $5280. On top of that the whole deal was going to cost an additional $3000 a year.
Then there were establishment fees of $3905 for the self-managed fund into which the couple’s $200,000 in industry super funds was moved.
“I felt going through a big bank like this they would look after you, they would look after you and be truthful,” McDowall said.
All looked on track to get a loan, buy the bed and breakfast and start planning for retirement.
“We were really excited and we told our kids and close friends,” she said.
Then they were told they could only borrow $200,000 and not the $2 million they were told.
She says they were told they could not buy an investment property through their super fund and then live in it and run a business.
“We (had) sold the family home … we don’t have a property to live. I got very upset and walked out of the meeting.”
They sent an email of complaint to Westpac, setting off a train of paperwork which continues to this day.
“I never thought we would be lied to,” she said.
Westpac offered $17,000, or about what the couple paid for the advice.
“That wasn’t going to put us back in a home,” she said.
Then Westpac offered $50,988 but that represented what they had paid already in insurance.
The couple went to the the financial ombudsman in March 2016 and got $47,000 plus $60,000 in super.
But the couple are still trying to get that $60,000 back into their industry super accounts. Westpac had put it into the self-managed fund.
“In was too embarrassed to tell anyone (that they wouldn’t be buying a bed and breakfast),” McDowall said.
“I felt humiliated. I couldn’t tell my family or friends, I just told them we had changed our minds.”
Michael Wright, head of Westpac’s BT Financial, told the royal commission the couple’s financial plan was not viable.
“It was poor advice,” he said. “This strategy was not right. There shouldn’t have been a need to set up the self-managed super fund.”
He also said there was no need for the life insurance until a property was purchased.
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