Hockey relative loses life savings

Patricia Babbage: ‘It was a trust factor letting them invest my money. What a mistake.’ Photo: Wolter PeetersPatricia Babbage still gets emotional when she thinks about her horrific experience at the hands of a financial planner employed with the Commonwealth Bank. The 77-year-old mother-in-law of shadow treasurer Joe Hockey, Mrs Babbage says the planner, Chris Baker, put her life savings into high risk products and wiped out much of her wealth.
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”I thought I had been placed into conservative investments but when I saw my money falling from $200,000 to $184,000 in a week and then kept falling, I would call him and he would say ‘it’s the GFC, don’t change anything, it will come back’,” she recalls.

By June 2009 her retirement savings had fallen to $92,000 and Mrs Babbage was in a panic. She said her husband Terry had died in 2004, and in 2005 she had been diagnosed with bowel cancer and underwent chemotherapy. ”I was sorting out my finances, and spoke to the Commonwealth Bank, and they suggested I speak to their financial planners. I was told to contact them at Martin Place and I then met Chris Baker,” she said.

She said she was told that since she had turned 70, she needed to pull her money together and roll it over into products that Mr Baker had suggested. ”I had put my life savings in with the bank since I was a kid at school with the little envelopes and so it was a trust factor letting them invest my money. What a mistake.”

In April 2012, Mr Baker was banned for five years by the corporate regulator, the Australian Securities and Investments Commission, following an investigation into seven planners in the bank’s Commonwealth Financial Planning division.

Mr Baker wasn’t the only planner who was banned. An investigation by Fairfax Media revealed that six others, including Don Nguyen, were banned and the bank initially tried to cover up his misconduct. A group of whistleblowers tipped off ASIC in October 2008 and in March 2010 the regulator finally acted.

ASIC slapped an enforceable undertaking on the bank’s financial planning arm in October 2011, which expires in four months. The investigation by the bank into Mr Baker found that between March 1, 2005 and February 27, 2007 he committed various breaches including failing to ”determine the relevant personal circumstances and failing to make reasonable inquiries in relation to the personal circumstances of clients before implementing advice”. It found that many of his clients were profiled with aggressive risk profiles and that he failed to provide a Statement of Advice to clients when he was required to do so.

On May 15, 2009 the bank wrote to Mrs Babbage telling her she had been given a new planner to replace Mr Baker. ”If your financial or lifestyle circumstances have changed since you last spoke to Chris, or you would like to review your financial strategy, please call me to make an appointment.”

In another letter she was told that ASIC had accepted an ”enforceable undertaking from Chris Baker which precludes him providing financial services for a minimum period of five years”.

In August she was offered $43,286 in compensation, which included $8213 in interest, an offer that was valid for 60 days. She refused. Last November the bank increased the offer to $67,092, which included $5131 in interest. Mrs Babbage said she never mentioned her relationship with Mr Hockey in her dealings with the bank. She also never mentioned her relationship in her discussion with Fairfax Media.

Mrs Babbage took the offer. ”It was too hard to keep fighting,” she said. ”I had been in hospital again and I needed the money,” she said. ”There must be a lot of people inside CBA that knew what was going on. Don Nguyen was not the only person involved in these sorts of activities.”

Mrs Babbage said she didn’t follow up with a formal complaint because she had to deal with cancer and was overwhelmed with what was going on. ”But when I look at the miserable compensation I got and the huge profits the CBA makes each year I ask, ‘How can this be?’ I still get emotional when I think about what I had to go through,” she says.

A spokesman for the bank said: ”We confirm Mrs Babbage was a client of Chris Baker and her case was investigated by the bank. The bank used a remediation framework approved by ASIC, and was signed off by an independent consultant. Following an initial offer, Mrs Babbage provided further information and her remediation was adjusted and accepted.”

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