What it uncovered was gob-smacking. A trove of confidential internal documents leaked to Fairfax Media reveal that Suncorp’s Guardian financial advice arm was a mess. The trove includes dozens of client remediation files, detailing serious flaws in internal processes, as well as breach reports filed to the corporate regulator and a series of reviews of financial planners. Suncorp closed its financial advice business Guardian after it drew the attention of regulator ASIC. Credit:Fairfax ASIC imposed licence conditions on Guardian in January 2015. Less than a year later, Suncorp would suddenly shutter the business, citing a "decision to simplify the distribution model". The move, it says, was "in the interests of customers". Until now, the story of the extent of the problems at Guardian has not been told, as advice scandals at other, bigger institutions have hit the headlines. The most ASIC said at the time was that it had “uncovered deficiencies” in the advice Guardian provided to retail clients and that it was “concerned” Guardian was failing to properly supervise its advisers, and that it had found instances where advice was not in the best interests of clients. It would go on to ban two Guardian financial planners.

But the leaked documents show the full picture was far worse than that. The documents paint a picture of a financial planning arm without proper systems and controls, that didn't train its advisers properly and had a culture that buried bad news. Indeed its planners had created a culture of churning and burning life insurance products, to pocket piles of commissions - no matter the cost to customers. APRA's Geoff Summerhayes faces questions over his conduct when running Guardian. Credit:Jessica Hromas The revelations that Suncorp’s Guardian subsidiary has been infected with some of the same diseases afflicting Commonwealth Bank, NAB, Macquarie and AMP underscores the problems festering in the financial advice industry.

With the industry-wide "fees-for-no-service" scandal in the headlines, the compensation for which may exceed $1 billion, it is easy to forget that there are many more issues bubbling away under the surface in Australia's troubled financial advice sector - with the full impact still to play out. The Guardian revelations are likely to reignite calls for an extension to the Hayne royal commission, which is about to enter its sixth round of hearings on insurance, and is due to publish an interim report later this month. So far the royal commission has exposed a litany of misconduct in the financial services sector, including dead people being charged fees, firms lying to regulators and more details of the snowballing "fee-for-no-service" scandal. It has exposed deep-seated conflicts of interest, especially in superannuation retail funds, and dissected how consumers have been gouged in myriad ways, in products from superannuation to mortgages to financial advice. Life and times

Summerhayes joined Suncorp in 2008 and left in September 2015; two months before Suncorp announced it was shutting Guardian down. Three days later, on November 27, 2015, Summerhayes' new job was announced; a powerful and high profile commissioner role at the Australian Prudential Regulation Authority (APRA), which overseas superannuation, life insurance and the banking industry. While at Suncorp, Summerhayes ran its Life division, which housed life insurance, superannuation and financial advice. One of his multiple internal roles including chairman of Guardian. The extent of Guardian's issues was laid bare in a PwC report, commissioned at ASIC's behest as part of the extra licence conditions imposed in January 2015. A draft copy obtained by Fairfax runs to more than 110 pages. The report was addressed to Summerhayes. The PwC report reveals that ASIC believed Guardian “[did] not ensure its representatives have the necessary knowledge, skills and competence to provide financial advice to retail clients".

The draft of PwC's report on Guardian's issues, which has been obtained by Fairfax. ASIC's long list of concerns included that Guardian hired financial advisers who had not met the required training standard, known as RG146; remediation for clients who had been burned wasn’t being properly handled; client files were defective; clients were not being pre-vetted and advisers weren’t regularly audited. Loading The RG146 qualification requires completion of an eight-day diploma, but some Guardian advisers couldn’t even be bothered to do that. (Education standards are in the process of being lifted but won’t come into effect until 2024). As it currently stands, hairdressers and tyre fitters require much more onerous standards of education and work experience than a financial planner.

And there were issues with governance. On the Guardian board, the PwC report said directors received 200 pages of documents, spent just an hour at quarterly meetings and noted that “most agenda items were for noting or discussing, rather than approving or actioning”. The implication of this was that management and the Guardian board “may not be able to effectively discharge their responsibilities as set out in their charters without insightful and meaningful board reporting". The report, addressed to Summerhayes in a letter dated April 16, 2015, also warned of a "‘tick the box’ approach to compliance' and a "desire to share ‘good news’ but deal with bad news without necessarily escalating that”. If the PwC report was shocking, documents relating to investigations into the activities of individual advisers were even more so. Some advisers were breach-reported to ASIC, including Andrew Moroney, who was reported to ASIC on January 16, 2014 then banned for life in February 2016, more than two years after the breach report was filed. Churn

Documents obtained by Fairfax show that most of Moroney’s files had no basis for advice, and that he churned customers to get the high upfront commissions for each new insurance policy he flogged. This exposed his clients to potential health condition exclusions or revised terms - a potential disaster for the clients if they got unexpectedly sick. A client file review of Moroney’s clients identified “privacy concerns” in a number of cases for individual client information. “In this case both sensitive and personal information was shared without the client’s knowledge,” the report said. It pointed to a “one size fits all” approach, with "inadequate consideration of the client’s needs and circumstances", there was no consideration of alternative strategies, he ignored personal situations and risk profiles, and did not consider whether they could actually afford the life insurance he was flogging them. The review into Moroney highlighted his use of generic “boilerplate” advice. Moroney, it found, did not disclose the commissions he was pocketing, handing over "defective" statements of advice, and dealing without express client approval. Loading Replay Replay video Play video Play video

There was a “definite possibility of over insuring/under-insuring due to a lack of careful analysis,” it said. The documents show there were multiple advisers on a par with Moroney. The documents include reviews of dozens of advisers, with a significant number identified as putting customers into wrong policies or charging huge commissions for products their customers didn’t need and churning them into new life insurance policies that weren't in their best interests. Fairfax Media was unable to reach Moroney for comment. Suncorp suspended one adviser from giving advice in late 2014, then a few days later allowed him to resign while under investigation, the documents show. We expect the number to increase as we continue to review client files and we remain fully committed to remediation. Suncorp

He was reported to ASIC, with the breach notice stating the adviser had 80 clients. Of a sample of 14 files reviewed, 10 showed “inappropriate advice, advice which lacked a reasonable basis, and failed to act in the client’s best interests". It said excessive levels of insurance were offered to clients in 50 per cent of cases, which was later reduced or cancelled by the client within 12 months due to lack of affordability. A source with in-depth knowledge of the Guardian financial planning scandal and the ensuing remediation program says its advisers were "mis-selling" life insurance policies. "It wasn't inappropriate advice - it was mis-selling," he says. "There wasn't proper record keeping and so it may not have been suitable for the customer. So in good faith, Suncorp should refund the upfront commissions over the past decade.

"They took a different approach." Microcosm The documents show how Guardian was a microcosm of the advice industry, which continues to be accused of slow and inadequate client compensation programs and an apparent willingness to allow "bad apples" to move from firm to firm without being reported or punished. Some of the documents rake over Suncorp's initial attempts at remediating burned customers, following ASIC's surveillance of Guardian. One such document, titled "incident review program" and dated November 2015 - around the time Suncorp closed Guardian down - set a deadline of May 2016 for clients files to be reviewed. The reviews would lead to a "fair, consistent and transparent remediation program (including any required compensation) to affected clients and advisore", it pledged.

It also proposed that any adviser who resigned from the business would be allocated "the highest priority to enable them to transition to another [advice firm] in a timely manner". Suncorp's remediation program "for clients who have been impacted by inappropriate advice" is still continuing, Suncorp said in response to a series of questions sent by Fairfax Media. "We expect the review of files to be completed by the end of the first quarter next year," it said. Its review, it said, had identified the main issues within Guardian as "poor documentation, monitoring and process failure". So far, 89 customers have been paid a total of $150,000 and another 412 customers have been contacted with an offer. "We expect the number to increase as we continue to review client files and we remain fully committed to remediation," Suncorp said. The source criticised the length of time Suncorp had taken to remediate customers, along with the median amount paid. "What have they been doing for the past few years?" he asked.

"To have only remediated 89 customers is appalling," he said. "And to have a median remediation of such a small amount when upfront commissions can be in excess of $4000 is not right, it isn't in good faith." Father fleeced Several of the documents contain shocking case studies of victims of poor advice. One shows how a Guardian financial adviser had told a 35 year-old divorced father with two children earning $90,000 a year, with an annual deficit cashflow of $16,000, to sign up for Suncorp’s Asteron life, trauma and income protection insurance policy at a cost of almost $4000 a year. The client had suggested increasing his existing insurance inside super, which the adviser ignored in favour of Suncorp’s more expensive and higher fee-paying insurance outside of super.

It would be a recurring theme in hundreds of files reviewed. Indeed, a damning report by ASIC into the $44 billion life insurance industry released in late 2014 found that more than 37 per cent of financial advice reviewed was in breach of the law. It found that 45 per cent of advice failed when high upfront commissions were taken, compared with a 93 per cent pass rate when other forms of commissions were taken. Given that 82 per cent of the industry uses upfront commission arrangements, and the Future of Financial Advice legislation didn't address commissions in life insurance, this is a huge problem. Last month Suncorp announced the sale of its life business to TAL Dai-ichi Life Australia for $725 million. Horror hearings

Insurance, including life insurance, will be the focus of the next round of Hayne royal commission hearings starting on Monday. Some financial services outfits are already expressing fears it will be a horror fortnight. Loading The regulators, too, will again be in the spotlight. APRA was castigated in last month’s royal commission hearings for lacking transparency and operating “behind closed doors” and has been referred to as a “hear no evil see no evil” regulator. The prudential regulator has been accused of being missing in action in dealing with companies and for failing to act on the “fees-for-no-service” scandal, and for lacking an enforcement culture. It has faced criticisms for allowing the super system to operate with little transparency and accountability, to the detriment of millions of Australians and their retirement savings.

The royal commission has been illuminating in its scrutiny of the fees-for-no-services scandal but it has failed to put the blowtorch on Suncorp’s financial planning business or the role of senior executives and board members. But it has examined Suncorp's retail super fund operation, and has been scathing, making open findings its trustee may have breached the Superannuation Industry (Supervision) SIS Act, including by failing to place the financial interests of members ahead of those of Suncorp, failing to exercise due care, skill and diligence and failing to perform its duties in the best interests of members. Suncorp has rejected all open findings against it, saying there was “insufficient evidence” to support them and some were "directly contradicted" by other evidence before the commission. Fairfax Media revealed on Friday that Summerhayes was a director of the trustee Suncorp Portfolio Services during his time at Suncorp, a period in which much of the conduct that was the subject of the royal commission findings took place. This week, Fairfax Media sent Summerhayes a series of detailed questions about his role at Suncorp, the issues raised by the royal commission and the questionable culture, governance and compliance practices at Guardian.

An APRA spokeswoman said he would not be commenting and sent a statement from the regulator, which said it took seriously matters that related to the integrity and probity of its staff, particularly its senior executives. Words of warning APRA said there were strict rules around handling conflicts of interest and that Summerhayes had not, and would not, be involved in any review of matters raised about Suncorp in the royal commission. Since joining APRA, Summerhayes has delivered speeches emphasising the importance of financial institutions to maintain the trust of consumers. In one given in October 2016, which is no longer available on the APRA website, Summerhayes talked about consumer sentiment and trust in the financial sector, saying as a whole trust had arguably diminished.