Yesterday, the corporate regulator announced it found thousands of instances at AMP, ANZ, CBA, NAB and Westpac advice groups where customers were being charged a fee for ongoing financial advice services they did not receive.
According to ASIC’s report, CBA is estimated to pay back the most at $105.7 million. ANZ will compensate clients $49 million, while NAB is expected to pay $16.9 million.
AMP and Westpac are expected to pay $4.6 million and $1.2 million, respectively. A total of $23.7 million has already been paid, or agreed to be paid, to over 27,000 customers by the banks, ASIC said.
Speaking to the media yesterday, ASIC deputy chair Peter Kell noted that different entities are at “slightly different stages” in terms of their work on estimating how much will be have to be repaid.
He said it is possible that the compensation total will rise.
“Several of the institutions are still halfway through some of their reviews and some of their checks that they’re undergoing,” Mr Kell said.
The report also found some licensees had considered their ongoing service obligation was satisfied if an adviser had attempted to offer an annual review by making three unanswered phone calls.
Another licensee had charged customers ongoing fees for record-keeping, despite advisers already being required to do so, ASIC said.
Mr Kell said while the majority of these “failures” occurred before the FOFA reforms were implemented, it does not reduce the severity.
“Our objective is to get this money back into the pockets of customers as fast as practicable,” he said.
“We are emphasising to all of the licensees that they need to give this very high priority and we will be providing an update on how the compensation within different entities is progressing by the middle of next year.”
Responding to the report, the Australian Bankers’ Association (ABA) said the issue related to “problems with legacy manual systems and processes”.
“It is disappointing that the administrative errors responsible for this problem were allowed to occur. The banks involved acknowledge that their compliance systems and record keeping were inadequate,” said ABA executive director for retail policy Diane Tate.
CBA has also responded to the report, saying it has been working to identify and remediate customers since 2014 and has already commenced refunding customer fees.
Group executive, wealth management Annabel Spring said, “We apologise to our customers who did not receive their annual review.
“We are working hard to complete our review of customers and have commenced contacting customers to refund fees, wherever our records do not show that an annual review was provided.
“We will continue to look across our business for areas where we may have made mistakes and put things right for customers.”
Industry Super Australia (ISA) released a statement that claimed the “shocking sham advice figures” point to the poor governance of Australia’s major banks.
ISA chief executive David Whiteley dismissed the ABA’s claim that the compensation is the “mere result of ‘technical’ issues”. Rather, he said, they reveal “systemic failures which span a number of years”.
“The ASIC findings are another shocking insight into the governance of Australia’s major banks. It is instructive that the banks vigorously lobbied against laws that prohibited this type of misconduct,” Mr Whiteley said.
It will be interesting times if this gets extended into IFA practices. One firm I worked for also had a policy of still charging for ongoing service even if a client didn’t respond to attempts to book the annual review. Another charged ongoing advice fees for ‘record keeping’. A mate at a different firm tells me that all they do is send out a letter and statement and out the onus on the client to call and book a meeting if they want one, all the while charging for ‘ongoing advice’. This is likely to be much more widespread than just the banks, but as an ASIC report concluded a few days ago, little firms don’t have deep enough pockets to compensate clients – so why would ASIC bother to pursue them?
That’s right… Pretty common unfortunately. I would be very, very surprised if many firms would ever cancel a fee (excluding those under opt in) if a client didn’t get back to them. Its the reason people used to buy books in the first place… Easy money for very little.
I hate to say it but you can see why the industry is perceived how it is… So many planners/advisers doing the right thing but legislation still allows these archaic operators to drag us through the mud….
Whitely makes a good point, that this is precisely the conduct the banks lobbied to continue to get away with. The trouble is, Mr Whiteley is head of an organisation with its own grubby conduct, having run a series of advertisements for the better part of a decade that were once found to be wholly misleading but have since been allowed to be continued. And here we see him appealing to the market regulator who in a recent Senate hearing was found to have a secret policy of allowing bank employees and bank lobbyists to sit at desks within the ASIC, to work on ASIC projects, to read ASIC emails and sensitive internal correspondence, to supervise the work of ASIC lawyers, and to report back to their employers – the banks – about what they observe. Truly…if anyone actually thinks this industry can be reformed in the hearts and minds of consumers so long as this axis of evil exists, they are kidding themselves.
I also look forward to ASIC investigating the ISA and attaining repayment back to members for the $hundreds of millions of undisclosed fees that have come out without member’s knowledge, consent or any ‘service’ or return on their money…
But then again who am I kidding? The head ASIC lackeys are Labor lap dog appointees, so most likely the one eyed biased blind refereeing and adjudicating will continue, despite whistle blower accusations of corruption.
Unfortunately, Turnbull, Morrissey and Dwyer lack the balls, intelligence or intestinal fortitude to turn the white heat of scrutiny on this most opaque, hypocritical, and downright festy organisation
And David, what about the Intra Fund advice fees charged for advice whether or not it is provided …. It is a flat fee charged by the Intra Fund type super funds whether or not advice is used by members.