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Australia could have avoided the Royal Commission by learning lessons from the UK and USA

by Lewis Panther | 30 Aug 2018
Australia could have avoided the awful events in financial services that led to the Royal Commission - by learning lessons from the UK and USA banking collapses.
 
That’s the blunt assessment of John Van Der Wielen, CEO of iconic Western Australia health insurer HBF, who is lined up to speak at FINSIA’s Business Leaders Series later this spring.
 
And he should know. 

He worked through the worst of the financial crisis in London at HBOS/Lloyds when it had to be bailed out by the government. By the end of the cut backs over 30,000 people lost their jobs.
 
Now he is back in Perth after a stellar career in insurance, culminating in acquisitions and sales of several of the biggest names in the business that has left him “financially independent” and able to speak his mind.
 
That’s great news for those in the audience as views on everything from business in Western Australia to the Royal Commission as well as stories from more than 25 years in the financial services will certainly make salutary listening. 
 
Recalling, the events that unfolded after the collapse of Lehman brothers a decade ago, he said: “I was with Lloyds during the government takeover and saw what happened. I was in insurance and wealth management, I was also Australian and not in banking, so I was one of the few who weren’t tarnished. But I went through the FSA interviews and saw what brought HBOS down and witnessed inappropriate behaviours.
 
“I saw the good, the bad and the ugly.”
 
“My most bleak memories were those associated with the closing of a large regional customer service centre Clevedon, Bristol and seeing Leeman Brothers Staff with their cardboard boxes of personal belongings.
 
It was around 10pm as he on his way home to Wimbledon.
 
“I remember getting on the Tube and there were a whole lot of ‘alpha males’, execs in suits, and two of them were crying," he says of the day the bank collapsed.
 
“They had been at the pub since 11 o’clock in the morning.
 
“They explained how they had got a loud hailer in front of Lehman Brothers and announced they had 45 minutes to clean their offices. And then they padlocked all the doors. These guys were big earners, two of them crying, with a cardboard box on the Tube going home to Wimbledon.”
 
The fact that Australia escaped there worst of the following global financial downturn, buoyed by the mining industry, has meant that it failed to learn lessons, he says.
 
He said: “There are similarities. Warning signs that have not been heeded.
 
“If you read what came out of the UK and USA and then look at ourselves and look to see if we could have done anything, the answer is yes.
 
“We could have fixed our own industry and not needed the Royal Commission.
 
“We saw it. We heard it and we read about it. But there was an arrogance that has led us to where we are. I am not talking about credit management as our banks are very strong. However, the lack of transparency on product charges, the equivalent issues on payment protection where the UK had to reimburse consumers over 5 billion pound were all well known.
 
“We sailed through the financial crisis because of our proximity to China, the mining industry boom and buoyant property market and we said, gee, we don’t need to fix things.
 
“Yet there are so many points you could have read about to what was happening there was happening here, and that should have raised red flags and been addressed.”
 
Van Der Wielen says the same warning signals about behaviour are there to be seen in the health insurance industry.
 
He said: “People are paying up to 30 per cent commission to brokers, who are not accrediting and training their staff well enough and commission percentages are not fully disclosed. We know it’s happening. But what’s the health industry doing about it.”
 
Though HBF has stopped itself from price comparison sites as a result of the costs paid.
 
He has returned to his roots in Western Australia to not for profit HBF after 10 years in the UK and a lifetime as a “capitalist” because he wanted to do something different and to share his experiences from round the world.
 
As an Approved and Regulated Person in 12 different countries across the globe and one of a small number of Western-educated executives to serve on an Islamic Takaful Board in Malaysia, he certainly has an an incredible wealth of experience that he will be sharing with FINSIA members.
 
And while he is forthright in his assessment of the current state of Australian business, he is insistent that the vast majority want to do the right thing.
 
He added: “Ninety-nine per cent of the people I have worked with have been entirely good, but I too have worked with people who have got it wrong. 
 
“I don’t blame other people. The point is to address any problems. But people have been too afraid to speak out or there is a nervousness. Or they are complacent.”
 
While the long-term impact of the Royal Commission is still to be seen, Van Der Wielen says it should not stop people from acting now.
 
The devastation he witnessed in the UK where he recalls having to make 1,300 people redundant in one go has clearly left an indelible mark. 
 
He said: “None of us know exactly what is going to happen. What we shouldn’t do is bury our head.
 
“We all make mistakes. There is enough evidence and education there to apply it to your own organisation. Too much of what is happening could have been avoided.”

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