WIT.0001.0025.0001

WITNESS STATEMENT

Name: Donna McKenna

Address:

Occupation: Fair Work Commissioner

Date: 16 April 2018

1. On 14 February 2018 I contacted the Financial Services Royal Commission to draw to its attention the concerns I had about financial advice I had received in late 2016 from Sam Henderson, Chief Executive Officer and Senior Financial Adviser with Henderson Maxwell.

Contacting Sam Henderson from Henderson Maxwell

2. In late 2016 I decided that I needed to obtain professional financial advice. I decided to contact Henderson Maxwell.

3. r chose to contact that firm for advice after seeing Mr Henderson on Foxtel's Sky News business channel and seeing pieces that he had written in the Australian Financial Review. Mr Henderson had a high profile as a trusted finandal planner with self-promoted expertise in superannuation and retirement planning. I also did some research about him online and found that his firm, Henderson Maxwell, had won the 2016 AFA (Association of Financial Advisers) Practice of the Year award.

4. On 3 November 2016, I telephoned Henderson Maxwell to make an appointment. I spoke with a female employee, who asked some questions about my finances, remuneration, superannuation, home ownership and investments. I provided answers to these questions.

5. Later on 3 November 2016 Mr Henderson telephoned me and asked me more questions. I told him more about my circumstances and said I was seeking financial planning advice because of the changes from 1 July 2017 to taxation on superannuation and because I was thinking about buying a property in which to live when I retire.

The initial electronic questionnaire

6. During the 3 November 2016 telephone conversation with Mr Henderson, he said that an electronic questionnaire would be sent to me seeking further information about my financial position. I explained that I preferred not to complete documents electronically and was not in a position to set out my regular expenditure or my current balances. Mr Henderson said I should just enter 'anything' for the question about expenditure. He id that I 'put in a

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thousand dollars a week'. He also told me to put in rough estimates of the current balances of my finances, as the questionnaire was to get preliminary information and everything would be checked later.

7. During this telephone conversation, I arranged to meet with Mr Henderson at his offices on 7 November 2016.

8. r received an email with a link to a Client Questionnaire and Risk Profile later on 3 November 2016. 1 completed parts of the form, using approximations for some parts, including the suggested $1,000 per week for living expenses.

9. In the 'Goals & Objectives' section in the questionnaire, I answered that my goals and objectives in seeking professional advice were to: first, maximise the use of assets (equity in my home, superannuation, savings and income) through investments, and in a tax-effective way pending retirement in approximately nine years at age 65; and second, to assist my two adult children financially, for example, in property and investments.

10. On 4 November 2016, I received an email from Henderson Maxwell, enclOSing a copy of my completed questionnaire. A copy of this document is produced and shown to me marked FPA.00ll.002.0077 at DMcK-1. The document included a conclusion about my risk profile, which recorded that my risk profile score was 28 and my risk profile was considered 'Conservative'.

First meeting with Mr Henderson - 7 November 2016

11. On 7 November 2016, I attended a meeting with Mr Henderson at Henderson Maxwell's Sydney office, along with my son. The meeting went for about one hour. At the meeting. we had a further discussion about why I was seeking financial advice and I explained my personal circumstances. I explained that I was seeking advice in relation to:

a. the potential purchase of property with a pre-approved loan. I was considering two possible strategies. The fi rst was the purchase of an apartment in metropolitan Sydney, in which I would ultimately reside. The second was the purchase of two cheaper properties outside metropolitan Sydney for investment purposes;

b. what, if anything, should be done in relation to my superannuation before changes in taxation laws took effect from 1 July 2017.1 told Mr Henderson that my superannuation was subject to contributions tax and tax under Division 293 of the taxation legislation. I also told him that I intended to retire in approximately nine years, and therefore felt it important to obtain professional advice about the then-pending, time-sensitive superannuation changes that had been well publicised after the Federal Budget that year;

c. transition to retirement arrangements, including the possible deposit of funds held into superannuation prior to 1 July 2017; and

d. how best to assist my children financially.

12. During this meeting, I provided Mr Henderson with the following information:

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a. my total remuneration package;

b. the total from my remuneration package that was directed to a scheme named Public Sector Superannuation Accumulation Plan (PSSap);

c. the approximate balance of my PSSap fund;

d. the approximate balance in an older superannuation fund, the State Authorities Superannuation Scheme (SASS);

e. the approximate balance of an investment in a a fund that could not be accessed until the latter part of 2017;

f. the approximate value of shares I held in _

g. the recent valuation of my home, which was unencumbered by any loan;

h. the value of a loan that I had pre-approved from _

i. the approximate balances of my bank accounts; and

j. that I had insurance coverage, including home and contents, private medicaL and (through PSSap) life, total and permanent disability, and income protection.

13. I took a folder of documents with me to the meeting that contained my most recent records, including records relating to the information outlined at paragraph 12 above. I offered to leave this folder with Mr Henderson, but he declined. However, he did take photocopies of my 2016 member statements for my SASS fund, a copy of which is produced and shown to me marked WIT.0900.0002.0001 at DMcK-2, and for my PSSap fund, a copy of which is produced and shown to me marked WIT.0900.0002.0013 at DMcK-3.

14. I also reiterated to Mr Henderson that I was not in a position to reliably estimate my living expenses given some atypical expenses I had incurred.

15. At the meeting, Mr Henderson asked if I was interested in acquiring shares. I said that I had been thinking about purchasing shares and that I thought it would be good not to have all my money tied-up in superannuation and property. I asked him to recommend a few 'blue-chip' shares and said I would be happy to consider his recommendations. r also said that I would discuss any share recommendations with my brother, who is knowledgeable about those matters.

16. Mr Henderson also asked if I was interested in managed investments through Henderson Maxwell funds. I said that I would potentially be interested in a managed investment portfolio, but that I would first want to see some comparative information about different funds before I made any decision.

17. Mr Henderson also asked if I would consider establishing a self-managed superannuation fund. I told him that I had no interest in doing so. I explained that I liked having my superannuation in large, government-related superannuation funds, particularly given their very low costs to me as a member.

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18. Mr Henderson continued to promote reasons why I should establish a self-managed superannuation fund, with Henderson Maxwell involvement. I recall that one of the first matters Mr Henderson referred to was 'control'; he also re~erred, among other matters, to 'openness', 'transparency', 'visibility', 'one-on-one meetings', 'online access' and an em ailed newsletter I would regularly receive.

19. I told him, in firm terms, that I had no interest in a self-managed superannuation fund and said that I had all the openness and transparency I wanted from my existing schemes. I said I could not make any better investment decisions than would be made by my existing government-related funds, which had whole departments devoting their time to analysing the markets. I also explained that I had no interest in self-managing my own fund, to which Mr Henderson replied with words to the effect of 'but we'd look after it for you'.

20. Mr Henderson then asked if I would at least consider a self-managed superannuation fund. As I wanted to bring this part of the discussion to an end, I agreed that he could include any recommendations about a self-managed superannuation fund as one of the options to be induded in his advice.

21. I did not ask Mr Henderson for any advice about insurance.

22 . At the conclusion of the meeting, Mr Henderson said words to the effect: 'It'll take a lot of time to do all the research necessary for the advice. It might be that the advice will not be available until the New Year' . I recall that I was quite pleased to hear Mr Henderson say this, as his comments suggested to me that my situation was going to be closely examined. While I wished to make any necessary changes, the new arrangements concerning superannuation were then not coming into effect for several months and I wanted to be confident that any step I took was taken with the benefit of proper, professional advice.

23. Mr Henderson gave me a letter of engagement that I signed in this meeting, a copy of which is produced and shown to me marked FPAOOll.0002.0118 at DMcK-4 . Under the letter of engagement, I agreed to pay Henderson Maxwell $4,950 to prepare my financial planning advice. At Mr Henderson's request, I also signed a document which I understood to be a third party authority to release my information to Henderson Maxwell.

24. I have been shown a document coded HEN.0002.0001.0016 which is a copy of a one page excerpt of the questionnaire I completed at DMcK-l, containing handwritten annotations. I have been told that Mr Henderson will give evidence that he made the handwritten annotations during this meeting. I have reviewed those annotations. In various respects, they are inaccurate. For example, I did not tell Mr Henderson:

a. that I had completed renovations;

b. that I was paying too much tax;

c. that I was divorced four years previously; or

d. that I had a testamentary trust.

Signature:

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Second meeting with Mr Henderson - 14 December 2016

25. Although Mr Henderson had told me that the advice would not be available until the (2017) New Year, I received an electronic calendar invitation concerning a meeting on 12 December 2016. The subject of the email request was 'McKENNA, Donna - SOA Presentation'. I accepted this meeting request by email on 17 November 2016, a copy of which is produced and shown to me marked FPA.0011.0002.0123 at DMcK-5. The meeting date was later changed to 14 December 2016.

26. I met with Mr Henderson on 14 December 2016, together with my son.

27. The meeting went for about 10 to 15 minutes. Mr Henderson projected a copy of a Statement of Advice, dated 14 December 2016, on to a screen.

28. Mr Henderson scrolled very quickly through the Statement of Advice on the screen. He stopped at a page that, as best I recall, contained the conclusion that the 'Henderson Maxwell Managed Account Service is suitable for you' and said words to the following effect:

'We've had a good look at this and we've recommended that you establish a self­managed superannuation fund and use a limited recourse loan to buy a property, and that you have a Henderson Maxwell investment portfolio. Henderson Maxwell will be looking after matters for you'.

29. I was most surprised by this advice. I had made clear in the first meeting that I was not interested in a self-managed superannuation fund. Although' had agreed that Mr Henderson could include any recommendation on a self-managed superannuation fund as one option for my consideration, the advice he presented to me on 14 December 2016 relevantly (I was later to read in the Statement of Advice) included only one option, being that I roll-over my SASS superannuation into a self-managed superannuation fund to be managed by Henderson Maxwell.

30. I was also surprised that Mr Henderson was recommending a Henderson Maxwell investment portfolio, as I had told him that I wanted comparative information before considering any Henderson Maxwell investment portfolio and that I liked big, institutional investors.

31. I then questioned Mr Henderson's advice in words to the following effect:

'Putting aside everything else, I would be most concerned about the costs associated with running a self-managed super fund using Henderson Maxwell. Why would I do that when I am in secure, low-cost, industry-type schemes? A Henderson Maxwell-run self­managed super fund would have to not only do better than my existing superannuation schemes' returns but also have to do better after factoring in all the other associated costs that Henderson Maxwell would charge'.

32. Mr Henderson replied in words to the following effect:

'Yes, I can see what you mean, but, anyway, that's what we've recommended. Look, I'm sorry about this but I don't have much time and I have to go. I've got a Christmas cocktail reception for about 100 clients'.

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33. Mr Henderson passed me a ring-binder of materials containing a signed covering letter, the Statement of Advice dated 14 December 2016 and supporting documentation, a copy of which is produced and shown to me marked at DMcK-61. The ring-binder also contained a copy of a Henderson Maxwell newsletter which included an investment report for the month ended 30 November 2016. I no longer have a copy of this newsletter as I provided the original ring­binder to the Financial Planning Association (FPA). On passing me the folder, Mr Henderson said words to the following effect:

"Take this away and read it and then we'll get you back in for signing after you've had a good look at it. We'd normally get a client back-in within a few days for signing, but I am going overseas on holidays and so this will have to wait until January, the week commencing 9 January if you're around then. I'm sorry, but I do have to go to look after the function. The clients, you know. Right then, any questions before I go?'

34. I had no further questions but my son told Mr Henderson that the amount included in the Statement of Advice relating to my superannuation appeared to be understated. He had noticed the figure as Mr Henderson quickly scrolled through the advice on the screen. Mr Henderson then said words to the following effect:

'Yeah that doesn't look right to me either .... The girls might have typed-in the wrong figure there. We can get this typo' fixed-up. But look, I'll personally check the superannuation. I'll personally check it. This is, like, a draft, but it won't make any difference to the recommendations if they've typed in the wrong figure there. The recommendations will still be the same'.

35. The meeting concluded shortly thereafter, once arrangements had been made for a further meeting on 10 January 2017.

My review ofMr Henderson's Statement of Advice

36. ] reviewed the Statement of Advice on 9/10 January, prior to that meeting on 10 January 2017. In the early hours of the morning of 10 January 2017, I sent an email to an employee of Henderson Maxwell, a copy of which is produced and shown to me marked FPAOOll.0002.0132 at DMcK- 7. My email enclosed a copy of the Statement of Advice that I had annotated with my comments, a copy of which is produced and shown to me marked FPA0012.0001.0084 at DMcK-8. In my email, I asked the employee to draw the annotated

1 FPA0011.0003.0003; FPAOOll.0003.0005; FPA.OOll.0003.0007; FPAOOll.0003.0055; FPA0011.0003.0057; FPAOOll.0003.0059; FPAOOll.0003.0061; FPA0011.0003.0063; FPAOOll.0003.0065; FPA.OOll.0003.0067; FPA.OOll.0003.0069; FPAOOll.0003.0071; FPAOOll.0003.0073; FPA.0011.0003.007S; FPAOOll.0003.0077; FPAOOll.0003.0079; FPA.0011.0003.0081; FPAOOll.0003.0087; FPAOOll .0003.0093; FPA0011.0003.0095; FPA0011.0003.0097; FPA.OOll.0003.0099; FPA.0011.0003.0101; FPA.OOll.0003.0107; FPAOOll .0003.0113; FPA.OOll.0003.0135; FPA.0011.0003.0157; FPA.OOll.0003.0163; FPA.0011.0003.0198; FPA.0011.0003.0211

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document to Mr Henderson's attention prior to our meeting scheduled for 4.00pm later that day.

37. The comments I annotated at DMcK-8 included or effectively indicated the following:

a. The balance of my superannuation funds was understated, many other figures relating to my financial position were incorrect and the source of other figures unclear. Other figures were internally inconsistent

b. If I rolled-over my SASS benefit before a certain age, I would immediately forfeit approximately $500,000 in superannuation benefits.

c. My most recent SASS member statement indicated that the total annual fees had been '$2,768.28' for the last financial year. Section 11.2 ofMr Henderson's Statement of Advice as to "Ongoing Financial Planning Advice Fees", by comparison, indicated a significantly higher amount of '$14,642.97' as the annual ongoing costs, not including all other costs associated with establishing and maintaining a self-managed superannuation fund through Henderson Maxwell.

d. The estimated Henderson Maxwell annual ongoing costs were significantly understated, given that the fees were based upon the amount to be invested. This was because the advice proceeded upon an understated superannuation balance and did not take into account the other funds or assets that were recommended to be effectively brought into the Henderson Maxwell investment portfolio.

e. The advice incorrectly assumed that I was making ongoing contributions to the SASS fund.

f. The advice proceeded on the basis that my risk profile was 'balanced' rather than , conservative'.

g. The advice recommended cancellation of my PSSap income protection insurance, and did not recommend any alternative income protection insurance. I consider income protection insurance to be important and I did not consider this advice was in my best interests.

38. The Statement of Advice appeared to me to be a template that gave no attention to, or advice concerning, matters about which I had specifically sought advice including my PSSap superannuation and property.

Third meeting with Mr Henderson -10 January 2017

39. On 10 January 2017, I again met with Mr Henderson. The meeting went for less than 10 minutes.

40. At the start of the meeting Mr Henderson indicated that he had read and considered my comments annotated on the Statement of Advice, and acknowledged that most of my criticisms of the advice were correct (induding the fact that if I had accepted his advice and rolled over my SASS benefit, I would have immediately forfeited approximately $500,000).

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41. Mr Henderson said that the advice was only a draft and blamed his paraplanners fo r the Statement of Advice. He apologised for not checking the SASS superannuation himself, as he had said he would at the meeting where he had presented the Statement of Advice, after my son had queried the amount shown for superannuation.

42. I told Mr Henderson that he had not presented the advice to me as a draft, and that he had presented it to me with 'sign here' tags affixed to the pages for my signature.

43. Among other things, Mr Henderson also said words to the following effect:

'Well anyway, Donna, what do you want to do?

We can do it all when you turn 58. We've checked. I personally checked today. I personally spoke to your super people'.

44. I told Mr Henderson that if I had followed his advice, I would have, immediately, lost half a million dollars.

45. Mr Henderson then offered me a full refund of the fees charged for his advice, which I said I would consider if put in writing. Mr Henderson sent an email confirming such an offer shortly after the meeting concluded, a copy of which is produced and shown to me marked WIT.0900.0002.0021 at DMcK-9.

Complaint to Henderson Maxwell

46. On 17 January 2017, 1 emailed a letter of complaint to Henderson Maxwell, addressed to Mr Henderson, a copy of which is produced and shown to me marked FPA.0011.0002.0193 and FPAOOll.0002.0194 at DMcK-I0. In that complaint, I indicated that the refund he had offered previously in the final meeting could be directed to a particular bank account. While I accepted the refund, I remained very concerned about the bad advice I had received and that Mr Henderson might be providing inappropriate advice to other people, who might follow that advice and suffer financial detriment.

47. When I sent my complaint of 17 January 2017, I had been unaware that Mr Henderson had sent me an email on 16 January 2017, a copy of which is produced and shown to me marked FPA.0011.0002.0 191 at DMcK-l1. In this email, Mr Henderson offered to provide me further financial advice without charge as he had also offered in a vokemail message.

48. On 7 February 2017 I received a response from Mr Henderson in relation to my complaint, a copy of which is produced and shown to me marked FPAOOll.0002.0212, FPAOOll.0002.0213 and FPA0012.0001.0071 at DMcK-12.

Contact with ASIC

49. On 30 January 2017 I attended in person at ASIC's Sydney offices to speak to someone about my concerns relating to Henderson Maxwell. I remained very concerned about the risk that others were, for example, being encouraged by Henderson Maxwell out of low-cost, secure APRA-regulated industry aT retail superannuation arrangements, or other financial arrangements which were entirely suitable for them, and, instead, into arrangements which

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potentially would not be in their best interests but which certainly appeared would serve the financial interests of Henderson Maxwell and related parties. I was also concerned that others might be given advice by Henderson Maxwell which may result in them being left uninsured or underinsured. Given that the Statement of Advice appeared largely templated, I was concerned that Henderson Maxwell clients or potential clients would be given financial planning advice which was not in their best interests; being advice that was not only bad but also involving conflicts of interests.

so. I was informed by employees at the ASIC reception desk that I could make an online complaint. I said I knew I could make an online complaint, but I would very much like to speak to someone in person. I was told there was also a telephone down the corridor.

51. I spoke to an ASIC employee by telephone while at the ASIC offices. I explained matters in short form. The ASIC employee suggested to me that I could contact the Financial Services Ombudsman. I said I had nothing to mediate with Henderson Maxwell as I personally had not lost any money, but that I was concerned other people might be financially hurt as a result of obtaining advice from that firm. I told the ASIC employee I was unsure what I should do, because I had not actually lost any money. The employee mentioned something about referring matters to a fraud and misconduct branch if I made an online complaint.

52. I did not make an online complaint or otherwise pursue matters any further with ASIC at that time. I considered, but discounted, contacting the Financial Services Ombudsman, as I had not acted upon Mr Henderson's advice and was not in need offinanciaI redress. I also considered contacting the AFA or the FPA.

Complaint to the FPA

53. I contacted the FPA by telephone on 2 March 2017 to inquire about making a complaint about the advice I had received from Mr Henderson.

54. On 6 March 2017 I made a written complaint to the FPA about Mr Henderson, a copy of which is produced and shown to me marked FPA.0012.0001.1028 at DMcK-13.

55. On 21 March 2017 I received a letter from the FPA advising that my complaint had been allocated to an investigating officer, a copy of which is produced and shown to me marked FP A.0012.0001.02 21 at DMcK-14.

56. On 18 May 2017 I provided the investigating officer with a draft briefing note, a copy of which is produced and shown to me marked FPA.0012.0001.0001 and FPA.0012.0001.0002 at DMcK-15. I had further communications with the investigating officer between May and September 2017 about my statement.

57. On 29 September 20171 provideda witness statement to the FPA, a copyofwhich is produced and shown to me marked FPA.0012.0001.0375 at DMcK-16.

58. On 10 November 2017 the investigating officer sent me an email to advise that he had su bmitted his report to the Chair of the Conduct Review Commission (eRe), a copy of which is produced and shown to me marked FPA.OOI2.0001.0893 at DMcK-17. He advised that the

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Chair of the CRC was in the process of considering the material before him to determine whether Mr Henderson had a case to answer of one or more breaches.

59. On 20 December 2017 I was advised by the investigating officer that disciplinary proceedings stemming from my complaint against Mr Henderson had been set down for hearing, a copy of which is produced and shown to me marked FPA.0006.0001.0749 atDMcK-18.

60. At no stage was I given a copy of, or any opportunity to comment upon, Mr Henderson's response to my complaint to the FPA, despite requesting such an opportunity.

61. Nor was I given any opportunity to participate in the CRe process, despite requesting such an opportunity.

62 . In February 20181 had email correspondence with the Head of Professionalism at the FPA in relation to the status of the CRe proceedings relating to my complaint. A copy of the email correspondence on 5, 6 and 7 February 2018 is produced and shown to me marked WIT.0900.0002.0022 atDMcK-19.

Impersonation of me by a Henderson Maxwell employee

63. In connection with my complaint to the FP A, I sought audio recordings of conversations I had understood to have taken place betvveen my superannuation funds and Henderson Maxwell.

64. On 31 March 2017 State Super (SAS Trustee Corporation) sent correspondence to me enclosing audio recordings of inbound telephone calls to SASS and PSSap in relation to my superannuation balances and other matters, a copy of which is produced and shown to me marked FPAOOll.0002.0230 at DMcK-20. I have been sbown two discs which I understand were produced compulsorily by the FPA and I recognise them as being the discs that were enclosed with DMcK-20.

65. The audio recordings related to calls on the following dates to the following representatives of the funds:

a. 7 November 2016 with 'Jason' in relation to my PSSap fund;

b. 7 November 2016 with 'Kristina' in relation to my SASS fund;

c. 8 December 2016 with 'Gayle' in relation to my SASS fund;

d. 10 January 2017 with 'Svetlana' in relation to my SASS fund;

e. 10 January 2017 with 'Gayle' in relation to my SASS fund; and

f. 10 January 2017 with 'Lydia' in relation to my SASS fund.

66. I listened to each of the audio recordings.

67. On each of the calls identified at paragraph 65( aJ to (e) above, the person making the inbound call to my funds represented herself to be me. I did not make any of the inbound calls identified at paragraph 65(a) to (e) above. I recognise the voice on each of the recordings of the calls identified at paragraph 65(a) to (e) above to be a female employee of Henderson Maxwell.

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68. I also recognise the voice of Mr Henderson on the audio recording of the call identified at paragraph 65(f) above. In this conversation with 'Lydia', Mr Henderson sought information about my account. Mr Henderson told 'Lydia' that my signed authority to release information had been submitted in November 2016. 'Lydia' declined to provide any information to Mr Henderson about me or about my account, because SASS had no record of any third party authority to release information to Henderson Maxwell. She provided him only wjth general information relating to the operations of the fund in response to a number of questions he then asked. By the letter dated 31 March 2017 at DMcK-20, State Super (SAS Trustee Corporation) informed me that no third party authority signed by me was found on my me, and nor was there any written communication from Mr Henderson on my file.

Signature:

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