AMP, ANZ, CBA, Macquarie, NAB and Westpac have been named by ASIC for not having completed the review to identify systemic fees-for-no-service failures beyond those already identified and reported to ASIC since 2013.
The main reasons for the delays are poor record-keeping and systems within the institutions, which have meant banks are unable to access customer files to review.
There has also been a failure by some institutions to propose reasonable customer-centric methodologies to identify and compensate customers despite ASIC claiming it clearly articulated expectations.
ASIC said it rejected a few of the methodologies due to requirements for customers to opt-in to the review and remediation program and a proposal for customers to assess whether there had been a fair exchange of value.
Another reason for the delay was some institutions taking a legalistic approach to determine the services they were required to provide.
Since 2014, ASIC has supervised the fees-for-no-service compensation program of 32 licensees and as of this year the big four plus AMP have collectively paid or offered about $350 million in compensation.
While the reviews are incomplete, the institutions have provisions of more than $800 million towards potential compensation for further systemic fees failures.
ASIC commissioner Danielle Press said the institutions were taking too long to conduct the reviews and welcomed the government’s commitment to increasing ASIC’s powers.
“These reviews have been unreasonably delayed. ASIC acknowledges that they are large scale reviews – they relate to systemic failures over long periods with reviews going back six to 10 years and cover 36 licensees from the six institutions that currently authorise more than 7,000 advisers,” she said.
“However, we believe the institutions have failed to sufficiently prioritise and resource their reviews, particularly as ASIC advised them to commence the reviews in mid-2015 or early 2016.”
Ms Press said she was pleased the government wanted to give ASIC directions power, which would allow the commission to speed up remediation programs.
“We are pleased the government has agreed to adopt recommendations from the 2017 ASIC Enforcement Review Taskforce Report, which includes a directions power. This would allow ASIC to direct AFS licensees to establish suitable customer review and compensation programs,” she said.
In a report card released by ASIC, each of the six institutions were found to not be providing ASIC with enough information, particularly when it related to licensees owned by the big banks.
AMP has yet to propose a method to review the files of former advisers while CBA had proposed to only look back six years to determine whether victims of the Pathways division needed compensation, despite ASIC’s standard of seven years.
ASIC also strongly disagreed with the compensations approach proposed by CBA and with Macquarie’s proposed interest payment on compensation, which was a lower rate than the benchmark.
NAB-owned JBWere had yet to agree with the commission on a period of time over which customer files should be reviewed and Westpac had yet to provide a compensation methodology for two of its businesses.
Currently, most of the institutions have given ASIC a timeline for the review completion with Westpac, NAB and Macquarie advising that by mid to end of the year the review and remediation should be completed.
Only ANZ has yet to give ASIC an estimated completion for the review, with CBA announcing it had finished its review but said it would conduct another one to capture customers of its licensees like Count Financial, Financial Wisdom and the Pathways division of CFPL.
So here we are 3 + years on from when ASIC kindly asked the Banks & AMP to sort out the Fees for No Service. And guess what they still have NOT had time to work out how to do it. What an absolute farce ASIC are to allow the Big Banks and AMP to continue to extend this rort.
How on earth ASIC do they still have AFSL’s.
Oh that’s right ASIC is owned and run by the Banks & AMP.
The Big Four Banks and AMP see ASIC merely as a impediment to doing business and their penalties a cost of operating in the financial services industry. Whilst the rest of the industry see complying with the law as the ethical and right thing to do.
It’s a shame however that these firms have such a competitive advantage.
No one else is being asked to comply – and you are aware ASIC has NEVER investigated the industry Funds?
Please list all of the things ASIC should be investigating the Industry funds for? I just want to see how they stack up against the estimated $2b worth of fraudulent activity of the banks/AMP.
I would probably like to see a review done into how the industry funds value assets and also a reason behind why under best interest duty advisers are not doing comparisons not only with other funds but other options, why there is no need for them to do large needs analysis and talk about insurance, i understand it is because advisers do not have the time and are not expected to do anything that does not involve FUM for the industry fund. They’re sales men and the public should be told and the title should refelct this, no different to bank tellers who are made flogg a heap of product as part of their role. ANZ tried disguising this as advice by getting clients to fill in a fact find, but at the end of the day they are all going to be put into the same fund, it is not advice it is sales.
It’s called ARBITRAGE…
I agree, my biggest concern isn’t with how their advisers give advice (just as AMP advisers only recommend their own products, the super funds do the same), but rather the asset allocations. ASIC/APRA shouldn’t allow funds regardless of whether they are Industry or retail to have balanced funds with 90% growth assets. To ensure there is some degree of transparency, there needs to be tighter rules around the mix of growth/cons assets that can be called conservative/balanced/growth portfolios. However while this is a problem, I still don’t see how this is in any way comparable to the fraud of the majors.
Poor record keeping!! How were audits completed? I bet there are excellent records on in house adviser systems. That’s how advisers protect themselves against dealer groups that have poor records and thrown advisers to the wind in the past.