Mr Sam Henderson was once one of the most prominent figures in the financial planning industry as CEO of Henderson Maxwell, television show host, and an occasional columnist for the Australian Financial Review. However, in April 2018, Mr Henderson was subject to questioning by the Banking Royal Commission after reports of bad advice being issued by his firm, his staff impersonating clients, and attempting to silence the claim with the Financial Planning Association (FPA).
Allegations of flawed advice
In late 2016, Ms Donna McKenna sought financial planning advice from Henderson Maxwell. She was drawn to Mr Henderson because of the ‘Financial Adviser of the Year’ award he received from the Association of Financial Advisers (AFA) and his regular media appearances on Sky Business.
Despite her deferred benefit superannuation scheme, which would have incurred significant penalties if certain actions were taken prematurely, Mr Henderson advised her to make decisions detrimental to her financial interests. He advised her to roll over all her superannuation into a Henderson Maxwell managed self-managed super fund (SMSF), sell her shares and investments to his financial planning business, Henderson Maxwell, and give the firm all her cash.
Ms McKenna’s deferred benefit superannuation scheme meant if she had rolled over all her balance before the age of 58, she would have forfeited her right to $500,000. Mr Henderson’s statement of advice presented to Ms McKenna did not take this into account.
The recommendation to switch to all in-house products had various costs, including plan preparation, establishment, brokerage, and ongoing fees. This also meant that notwithstanding the $500,000 lost, if the advice had been taken, Ms McKenna would have also been paying significantly higher fees than she would have been paying on her existing superannuation account and other investments.
This advice not only contravened Section 961B of the Corporations Act (2001) (Cth), which provides that a financial advisor must act in the best interests of the client in relation to the advice, but it also breached the FPA Professional Code's "client first" provision, which mandates prioritising clients' interests over the personal gain of the financial advisor.
Impersonation of clients
Damning evidence was presented during the Banking Royal Commission, revealing instances where employees of Henderson Maxwell impersonated Ms McKenna in telephone conversations with her superfund.
During these telephone conversations, the employee was told that a half-a-million-dollar penalty would be applied if the fund was rolled over. Despite being aware of these actions, Mr Henderson failed to take appropriate disciplinary measures. He refused to terminate the employment of the customer service officer who impersonated Ms McKenna because the firm “was like family”. This violated the integrity principle within the FPA code, which demands honesty and good faith in professional dealings.
Communication with the FPA
Throughout the investigation, Mr Henderson maintained communication with the FPA, often requesting confidentiality and disparaging Ms McKenna. In the emails to the investigating officer, he personally criticised Ms McKenna’s career, labelled her as “aggressive” and “nitpicking”, and referred to the situation at hand as a “storm in a teacup”. He also emailed the CEO of the FPA, complaining about the process and investigating officer and described the matter as minor. Such conduct breached the professionalism principle outlined in the FPA Professional Code, which requires respect and courtesy towards clients and fellow professionals.
Additional findings and legal ramifications
In 2020, Mr Henderson was brought back into the spotlight for the wrong reasons after he pleaded guilty to charges of dishonest conduct and making false representations. These are offences pursuant to sections 1041G and 952D(2)(a)(ii) of the Corporations Act (2001) (Cth). This resulted in a monetary fine of $10,000 and a recognisance bond, further underscoring the seriousness of his misconduct for a period of two years.
As a consequence of these actions, Mr Henderson was banned from the finance sector for three years, and his reputation was irreparably damaged.
Takeaways
This matter serves as a cautionary tale, emphasising the legal and ethical obligations of financial advisers to act in the best interests of their clients. The case against Henderson Maxwell underscores the importance of adherence to both statutory laws and professional codes of conduct in the financial services industry.
The regulatory actions taken against Mr Henderson and Henderson Maxwell demonstrate the commitment of authorities to uphold integrity and accountability within the financial sector. They also serve as a reminder of the imperative for financial professionals to maintain the highest standards of ethics, honesty, and professionalism in their practice.
