The Australian Banking Association today announced that it will seek new legislation to end grandfathered payments and trail commissions for financial advisers.
These reforms are the first of several key changes in response to the royal commission and include:
• Ending ‘fees for no service’ – Banks will change the way they manage ongoing financial advice, proactively contacting customers to confirm what advice is required and only charging for what is provided.
• Changing the Banking Code of Practice to improve the way banks manage a deceased estate – Once notified of a customer’s death, banks will proactively identify fees that are for products and services that can no longer be provided in the circumstances, stop charging those fees and refund any paid.
• Seeking new legislative changes to the Future of Financial Advice (FOFA) reforms to remove all legislative provisions that allow grandfathered payments and trail commissions in financial advice.
ABA chief executive Anna Bligh said these initiatives addressed two of the strongest concerns raised by the royal commission’s Interim Report.
“It has always been unacceptable for any organisations to charge fees without providing a service,” Ms Bligh said.
“This announcement will put beyond the shadow of a doubt that this practice has no place in Australia’s banking industry.
“Banks will change the way they manage a customer’s account, proactively contacting them to confirm what services are required for their investments and only charging for those provided.
“This issue of charging fees without service, particularly when customers have recently died, was raised during the royal commission and identified as unacceptable.
“When someone loses a loved one, they need support and compassion as they finalise their loved one’s financial affairs. Charging ongoing advice fees to dead people is clearly unacceptable.”
The ABA said banks are currently working with customers to refund those charged a fee where no service was provided. Latest ASIC data indicates customers will receive more than $1 billion in refunds.
“In addition to these changes, the industry is supporting legislation to remove grandfathering provisions in relation to financial advice,” Ms Bligh said.
“This is another important piece in the puzzle of ensuring there are no conflicts for advisers.”
Banks wont refund the fees of any dead clients or “no fee for no service” clients. The banks will instruct the associated advice businesses under each licensee to do so. It wont cost the banks much at all in $ and they will claim to be the hero.
There is never one comment from the media that identifies the tremendous advice, work and assistance that the vast majority of advisers provide to their clients day in day out…sometimes being remunerated via grandfathered fees, sometimes for for service and sometimes for nothing at all…pro bono.
It is incredibly disheartening to hear the relentless negative perception and reputational damage being imposed upon good people who do good things for others.
The layered effect of this soul destroying and targeted attack will result in significantly impacted advisers which will have no benefit to their clients or the consumer in general.
The advisers who do the right thing and provide advice and service are being constantly hammered and being used as a scapegoat by ruthless institutions who can absorb the cost whilst content in destroying advisers businesses.
It is an absolute disgrace.
Does the accountant do the deceased tax return for free? Does their energy provider stop charging? Phone company halt fees? Lawyer process estate pro-bono?
Sop making it sound like an adviser receiving a fee from an estate is not delivering a service.
Had a client pass away 2 years ago. I contacted First State Super and asked if they paid anti detriment payments. The answer was YES. I asked so what’s the process of applying. The answer was the estate needs to approach us and apply. I asked… so how do the estate know they could claim it. The answer was we don’t tell them, but if they know what one is, and they do ask then we’ll pay it. So I immediately intervened and stopped the solicitors request to cash out the payment and got the client an extra $30K and was able to keep the funds in super therefore retaining a partners Health Care Card.
Clubplus took 6 months to transfer funds from the dead wife to the husband. I spent considerable time fixing solictors mistakes and getting it corrected.
Under this new code seems like I’ll just say our relationship has ceased at death and say Goodbye and move onto the next fee paying client.
My point is…I’m now expected to be chasing the funeral possession down the street, just because a Bank charged their clients advice fees for 10 years and so now I’m expected to immediately turn off fees whilst the dead body is still warm.
OF course this what the banks want…good bye self employed planners…except for the bad debt they may leave behind on businesses they purchased…but who cares..we are all ruthless, moraless, blood sucking leaches according to ASIC and the banks. Good luck customers negotiating your claims with the insurers, we have had 5 claims in the last 3 years changed from declined to paid for our clients. RIP Self Employed Planners
But will there be a reduction in Bank products. To date nothing has changed with reduced commission in fact pricing has gone up.
Is there any indication of when they plan to implement the changes? Will we see more banks follow CBA and end grandfathered and trail commissions before it’s legislated?
So the banks are now saying they will meet the FOFA’s laws – they should ALL be in criminal court for totally thumbing their noses as the existing laws.
Why are ASIC not charging them for blatant criminal conduct ????
And the banks will stop paying financial advisers grandfathered commissions – for those advisers who don’t work for the banks actually do provide ongoing service to their clients. But now the banks will not pay the advisers and simply pocket the commission themselves.
The banks need to be forcefully DIVESTED of Vertical Integration Advice Businesses – they will never provide a proper Advice service and have helped create myriads of red tape rubbish regulation to control their [b]uncontrollable conflicts of interest[/b].
Get the banks out of Financial Advice and the whole industry will be far better for it.
Nice headline James…very classy indeed.
Why don’t you do a stint at The Herald Sun or the NT News instead.
Charging clients for no service provided is not in the clients best interest. Just enforce the bloody laws that came in 5 years ago and get on with it.
ABA introducing a Code of Conduct to ensure banks adhere to the already existing laws that they have been thumbing their noses at for years….hilarious
The headline is completely misleading. What the banks are doing is they turn off the advice fee for advisers. However the banks they will continue to charge their administration and investment manager fees on accounts. What this means is the adviser, who is many cases is working with the clients spouse or family during the death claim is paid nothing. The bank continues to receive their fees like nothing has happened. Yet again the wool is being pooled over the eyes of ASIC, clients and the press. Yet again the banks create the problem and the advisers are the only ones who feel any consequences.