On Thursday (17 February) ASIC confirmed that Aware, then StatePlu, has been fined $20 million for charging over 25,000 customers fees for financial services it did not provide.
It was found that between 21 August 2014 and 30 June 2018, Aware Financial Services Australia (Aware FS) charged 25,300 customers $50 million in total in fees for advice services. At least 17,500 customers were provided written disclosure documents advising that they would receive an annual financial planning review, while another 7,800 customers entered into ongoing advice service arrangements.
However, Aware FS did not provide the promised services.
“Aware FS charged fees to tens of thousands of customers for financial services it had grounds to believe it would not be able to provide. As a result, over $50 million in fees was charged to customers who have nothing to show for it,” ASIC deputy chair Sarah Court said.
“Financial services providers should treat the penalty imposed today as an important reminder to maintain robust internal controls and compliance systems. Firms are responsible for ensuring they only charge consumers for services they provide. If they fail in this obligation, they face significant penalties.”
The court ruled that Aware FS breached its obligations to act efficiently, honestly and fairly and that Aware publish an “adverse publicity notice” on its website for one year.
Justice Moshinsky added that Aware’s conduct was “serious and systematic”.
Aware has admitted liability and submitted that the $20 million penalty was appropriate.
Let’s not forget Aware bought StatePlus from the State Government for $1 Billion odd, and since written it down by 65%!
Oh but they’re an industry fund and all profits go back to members! *mind blown*
New slogan should be “We’re an industry fund and all fines are paid for by the members…”
They’re not an industry fund. They are a profit for members fund. Aware is not part of the ISN.
So let me get this straight. The members of the fund, who largely don’t use the service, are paying the members of the fund that were promised a service and didn’t receive it??? Crazy!! The only winners here are ASIC and the lawyers…..great way to transfer wealth from everyday members who I think are largely public servants on average wages.
How many “advisers” in the Fund lost their licences?
It had nothing to do with the advisers. The scheme was constructed at the fund level where there was an advice fee bundled with the product fees in the old State Plus accounts.
Who pays the fine, the members?
Yes, and then asic are fined for charging a fee to the members for no serivces. Which in turn, will open a portal to an alternative universe where we give advice based on a clients needs, rather than compliance standards.
they spent 20m for a brand name change i dont think they will care
The outcome of this should shine a light on the fact that Industry funds are not a suitable place to run financial advice out of. When things go wrong all the funds other members must foot the bill as there is nowhere else to get money for compensation and fines from. This is not in the interests of the other members who are not using the advice service. Its beyond time to separate advice and product completely. Give vertically integrated businesses 5 years or so to sort themselves out. This include advice firms running inhouse manged accounts, SMSF administrators who are providing investment advice, Industry funds etc. Then trust the qualified, unconflicted licensed advisers to give the advice without all the red tape and let the product manufacturers do what they do best and compete for business based solely on the merits of their product.
If only!! This would solve so many problems, but the reality is the bureaucrats would never go for it as their whole being depends on making it all as complicated as possible.
haha…more of this to come out and members pay…
Members best financial interests duty? How does the board of aware justify paying the $20m fine from members money?? Reading the ASIC website it appears that State Plus (owned by Aware super members) is making huge losses and has been for some time. Why are the members paying for this? Isn’t this potentially a breach of the law and effectively another fee for no service issue?
Did advisers pay the ASICs legal fees?
How are they repaying the $20m?
How will they remediate $50m to customers?
Why would employee advisers have to pay the legal fees for a system that was set up by the higher ups of State Super back in the day?
Are you familiar with the levy all financial advisers have to pay to ASIC, whom use it for their legal costs.
Ahh, the licensee has to pay that not the advisers directly. Employee advisers (i.e. those that would have worked for State Plus and now work for Aware) don’t have to pay the levy directly.
Yes but all other self-employed advisers also pay the ASIC levy.
When did I say they didn’t? My point is any adviser who works for State Plus/Aware Super would be employed by the fund and as such wouldn’t have to pay the ASIC levy. I am well aware that others have to pay the levy.
plus a refund ASIC? statewide super got a tickle $4m penalty for lying about members insurance cover, these judicial penalties do look like a slap on the wrist, not wanting to harm members when trustee governance is visually very sloppy.
Okay – so where does that $20 million come from. Out of member funds?. Out of reserves? Increasing member monthly fees? To restore any credibility, aware super must tell us where exactly that $20 million, plus legal costs will be found
bloody ridiculous – i have a better idea. Start a Sovereign fund, get rid of the private sector. No hassle for the Government or ASIC. simple.
Maybe they should be known as Unaware from now on…
Who pays the $20m plus legal costs?
Where does the money to pay the fine come from – clients invested through AWARE?
So Aware pocket $50mil for doing nothing and then agree to pay back $20mil. Nice. How do I get myself one of those deals?
Hmmm….. So are they also repaying the $50,000,000 back to the members who were out of pocket?
There is a statement of agreed facts on the ASIC website. They paid $104m to clients and $20m plus costs as a fine. Still not sure who pays that though….most likely reduced returns for Aware members of increased fees. Either way it is the member that pays I assume. Can’t imagine PI would cover something like this.
As per the statement of agreed facts: $60M was via an equity raising from it’s shareholder and $45M from retained earnings. All of which, ultimately, comes from members retirement savings.
Yes I saw that – 60m equity raising is interesting. State Plus is 100% wholly owned subsidiary. So in real terms the equity raised has come from members pockets to pay remediation to members. Now I imagine given State Plus is making losses the 20m fine plus costs plus covering the ongoing losses is continuing to come from members……where does it end?
There can only be one place from where they pay the fine – member fees will have to be higher to fund remediation and either the fine direct or the PI insurance premiums next year. Members stung twice.
So they illegally made $50 Million and were only fined $20 Million. Great solution. That will teach them.
What, no comments about AMP here!!
This is just the tip of the ice berg for these funds being non compliant
So where does the $20m come from?
Are they going back over 10+ years and remediating their customers for fees for no service?
And who is going to pay for that?