AMP, ANZ, CBA, Macquarie, NAB and Westpac have paid or offered a total of $749.7 million in compensation as at 31 December 2019 to customers who suffered loss or detriment because of non-compliant advice or fees-for-no-service misconduct.
NAB has paid or offered $163,862,768 compensation in total, while CBA has paid or offered $164,846,374. AMP came in third, with $140,459,870 paid or offered.
(source: ASIC)
The reports were released in 2017 and 2016, respectively.
The remediation programs began as a result of two major ASIC reviews in 2015 that examined how effectively institutions supervised their financial advisers and the extent of failure by the institutions to deliver ongoing advice services to customers who were paying fees for no service.
AMP has done over the clients and now they are doing over the advisers. Staff are next I’d say then its back to business, as usual, ripping off clients again
Yep, well they can afford it. Those of us in smaller financial planning practices are having to try and adapt and foot the expense of the increased compliance costs that are free flowing thanks to their actions! Despite some saying “put your client fees up”, its not as straight forward as that and the next year or two will see many casualties as result of collateral damage!
One client was to receive a FFNS refund but it changed at the last minute to ‘over-charging’ (large advice fee to move from a fund with entry fees) even though it was a no-service situation. Seemed to me the bank preferred it under that column or creative reporting? Either way it was another ‘gift’.
You mean fees for no RoA or SoA. You could provide a “service” such as driving to the Hospital to get a binding death forms implemented/witnessed or save them $50,000 in Age pension back payments by sitting on the phone to Centrelink for 5 days dispute sections of the Social Security Act, but ASIC have defined that as not a service. Selling $1,000 of BHP shares and buying RIO and giving a RoA is however a “service”. This sad state of the advice industry reflect poorly on all advisers and bodies like the FPA whom we pay good money to represent us. Oh wait there getting payments from these guys so very unlikely to be listened to by ASIC are they.
I understood the definition of “service” is dependent on what is listed in your ongoing service agreements that are signed by the client. If your agreement states that you will provide an ROA or SOA on an annual basis, and you dont deliver this, then you are not providing the services you promised. If your agreement states you will provide ongoing ad hoc support, then meeting your clients at the hospital or spending hours on the phone with Centrelink should mean you provided the services promised. If you have provided all the services listed in your agreements within the specified time frame, and your Licensee is still refunding your clients, then perhaps legal action is required.
Can someone explain the stats better than my effort please:
the average of the 2 LH columns is $20,120 – assuming this reflects some “loss” or other “detriment” incurred by the client.
The average of the two RH columns is $697 – representing fees reimbursed for no service. even at 0.5% adviser fee and assuming that no service period was say 2 years that means the average advised client who did not receive service had an average balance of $69,700 …. very hard to deliver any meaningful service for $350 pa… which in part (I said in part) explains why so many received nothing (or as others have pointed out the individual sums were so small the remediation teams just said reimburse it will cost more to look for evidence of service)
And I gather industry union super funds are squeaky clean? Hahahhahaha, yeah right
But you can still keep your licenses…there’s not much money involved
AMP is standing there saying aren’t we good remunerating our clients; however AMP’s figure is coming out of the adviser’s pockets.
AMP have been very quick to write cheques with the adviser’s monies.
Furthermore AMP have already charged their advisers for these monies, but have not passed it on to the clients.
That’s one way De Ferrari can get the balance sheet back in the black – Corporate theft
Ultimately the adviser needs to take responsibility for accepting money and not providing service. So bad luck really
Um no actually.
The AFSL is responsible for the advice, all the arrangements and for overseeing the Adviser/s.
That’s the law.
That is the law. But every adviser involved had an ethical choice to make. They cannot entirely absolve themselves of all responsibility by blaming the big bad banks…The banks might have created a culture that allowed it to happen (or didn’t do enough to stop it), but that money, that advisers took that bought a lot of advisers BMW’s and paid for a lot of private school fees around the country.
If only you knew. Most of the money went to overpaid, under qualified, inept and egotistic, AFSL employees who earned far more than any Adviser ever did – and furthermore that money mostly bought them very expensive Sydney real estate. Brad Cooper of Westpac got paid more than $20m to run loss making and worthless advice businesses.
[quote=Paul]As a formal adviser with one of the big banks, it is interesting to note that so much of the refunds were not actually due to fee for no service, but the banks antiquated systems not being able to show ASIC proof of the service being delivered. So many of my clients who received refunds were shocked to receive them, accepted them with gratitude but shook their heads knowing that they actually did get the services they paid for.[/quote][quote=Paul]As a formal adviser with one of the big banks, it is interesting to note that so much of the refunds were not actually due to fee for no service, but the banks antiquated systems not being able to show ASIC proof of the service being delivered. So many of my clients who received refunds were shocked to receive them, accepted them with gratitude but shook their heads knowing that they actually did get the services they paid for.[/quote]
Yep, I’ve had clients coming in for reviews telling me they got refunds. When they asked why they got them, the simple answer was the banks were too lazy to actually audit files. Free win for the clients. You just hope they don’t think it’s because you over charged them or didn’t do something.
From what I’ve been told, the cost the audit (Especially smaller clients), was actually higher than just refunding them in the first instance.
Another example of a stuffed up process.
great work banks.. now my small business has to carry the can for your greedy, corrupt, conflicted business model. Ironically, I will probably go out of business because of these relentless reforms!
IOOF must be squeaky clean – yeh right !!
Interesting that the union super funds aren’t paying back the millions in intra-fund admin fees to most of their members (that have never received that advice, and fees those members cannot opt out of). Even ASIC admits these intra-fund fees for no service needs fixing in legislation.
Has NAB group really got the highest FFNS count, or are they just being disproportionately harsh on the definition of FFNS?
sort of ironic that a BT pop up ad made it hard for me to view the contents of this story…
Whilst many of the big end of town exit Advice stage door left, the rest of us are left to pick up the pieces and navigate through a myriad of new compliance, further administration and further scrutiny. Advisers were worried about the education piece confronting them. There appears to be greater headwinds coming than the education piece. My concern is that this is going to get really ugly.
These people have large balance sheets. Those with small balance sheets, probably look after their customers better.
As a formal adviser with one of the big banks, it is interesting to note that so much of the refunds were not actually due to fee for no service, but the banks antiquated systems not being able to show ASIC proof of the service being delivered. So many of my clients who received refunds were shocked to receive them, accepted them with gratitude but shook their heads knowing that they actually did get the services they paid for.
Spot on Paul. Unfortunately, the customers that received a refund without justification and kept the money are as low as the inept organisations that created the mess. Shocked, yes. Greedy, yes.
The banks caved in to ASIC simply because they could take the hit to their balance sheet and they want to move on.
Advisers know the value placed on their service by clients is based on the trusted relationship. The fact that ASIC believe that value can only be measured by activity highlights the enormous gap with client reality. The banks in turn allocate you an account number and report to you according to your account number. Neither have any understanding of the value clients have in being treated with a caring, personal service. The banks caving in reinforced the ASIC view and the banks have learned nothing and moved on. What a pathetic outcome.
In a past life I was probably as much a part of this problem as anybody else. But with the benefit of hindsight, it is starkly apparent to me that many in this industry are still deluding themselves. We need to move past this. I have a ‘trusted relationship’ with my accountant, doctor, solicitor and even my cleaner, that is why I keep working with them, but I don’t pay them a cent unless they are actually providing me a service.
That old chestnut, trying to argue a per transaction pricing structure for a business where the value clients receive is both tangible and intangible.
If I can draw an analogy to the fitness industry. When you sign up for a gym membership, they typically take an upfront fee (really a commission) and a monthly debit from your bank account. Imagine how many gyms would disappear if every month their member base had to opt-in to paying this fee.
Imagine, if government in this new world of protecting everyone from everything, decide that a service has only been provided if the member visited their gym – if they didn’t the gym must refund their fees. Regardless of your moral compass on this question, Gym’s today only exist because of this pricing structure.
All businesses and professions exist because historical pricing and service structures have value (profit) for both the consumer and provider. It will be interesting to see how advisers who chose or have no option but to stay navigate in an environment where “value” is legislated and defined not conceived and perceived.
I went to sleep in an Australian free market and woke up in communist China.
Anonymous, I’m the first to admit that you do have a point about the role of government in regulating (stifling?) free market forces. However, leaving aside whether this interference is warranted, I would personally prefer that my business (and my chosen occupation) be benchmarked against other recognised professions, rather than gym operators or a mobile phone salesman.
Hang on, so are you saying Paul, that its your Licensee’s fault that YOUR client files did not show clear evidence of services being delivered because of the banks antiquated systems? Or are you saying that the Banks refunded fees without checking for proof that the service has been delivered?
The bank owned Licensee’s certainly have a lot to answer for, but I don’t see how it is the banks fault when an adviser either a) is not maintaining their client files well; or b) is not providing the services their clients paid for.
The banks are absolutely in the wrong if they are refunding client fees and forcing advisers to pay the funds back when the clients have received the services they paid for.
But honestly, if you have not been maintaining your client files well (its not hard to write a file note or an ROA detailing a client appointment ) or haven’t been providing the services you are being paid for, you should be relieved that you are licensed through an organisation that can afford to refund your clients…. Many cant, and opt to close.
I am not saying Banks are innocent or are making good decisions (even now). I have certainly heard of situations where a bank has refunded client fees when they should not have done so, and I am not defending them. But seriously… I would love someone to explain to me why their clients are not entitled to a refund if they haven’t received services they have paid for; or why ASIC (or the banks) should just ‘believe you’ that you have provided the services you promised but didn’t keep any kind of record of it.
The banks made the decision NOT to audit ALL files, so clients that paid for an SOA that was provided, implemented and didn’t even sign up to ongoing service had thier fees refunded… all services provided and recorded in Xplan, it was a case of throw ALL advisers under the bus and tarnish in most cases thier good names. Definitely NOT defending dodgy dealings… Banks don’t care, just interested in getting ASIC out of the building!!