In a research note on ASX-listed fund manager Perpetual Limited, Morningstar analyst Chanaka Gunasekera explained how the reputation of financial advisers will impact the group and the industry in general.
“Perpetual Private has not faced any direct fallout from the royal commission, but we expect the egregious level of misconduct by financial advisers revealed by the royal commission will have a negative impact on the reputation of financial advisers more generally,” he said.
Two of the biggest issues to be unearthed by the Hayne inquiry over 2018 were fees for no service and the sale of life insurance to dead people. Conflicts of interest within wealth management were also highlighted, resulting in APRA taking action against IOOF and its senior leaders late last year.
IOOF managing director Christopher Kelaher and chairman George Venardos consequently agreed to step aside from their respective positions three days after APRA’s announcement.
Shine Lawyers has now taken a stance against IOOF and revealed it is currently proposing a claim against the company.
The law firm said it has undertaken a year-long investigation into alleged corporate misconduct within IOOF, with backing from ICP and Litigation Lending. The proposed claim will be subject to the finalisation of that investigation, as well as interest from IOOF shareholders.
Morningstar’s Mr Gunasekera said that “several” class action lawyers are now indicating an interest in commending proceedings.
“At this early stage, estimating the cost of a class action has a high degree of uncertainty. As a reference point, a few years ago QBE Insurance settled a class action for about $132.5 million and we have forecasts likely class actions costs to IOOF of $150 million spread over fiscal 2020 and 2021,” he said.
Morningstar also expects ASIC to investigate the company over potential breaches of directors’ duties and the FOFA legislations.
The analyst has forecasted costs of around $50 million over the next two fiscal years.
“Notably, this is significantly higher than the maximum exposure to the royal commission recently guided to by the company, which in current circumstances, we expect is overly optimistic,” Mr Gunasekera said.
The wealth management industry must now wait for the royal commission’s final report, which is due to be released next month.
Selling Life insurance to dead people??? This is rediculous and a beat up. Anyone that has a life insurance policy and passes away would have family or other that would lodge a claim as would want or need to funds. The RC should have asked if there was an executor appointed to act on behalf of the deceased and if so; why did they not request for the life insurance payout. Correcty me if I’m wrong but once a person passes away and they have a will someone should have called and protected the estate assets and dealt with life insurance proceeds not to mention letting all institutions that includes life insurer and super funds of the deceased passing. I find it an insult the RC did not look at the real facts but rather try to use this as a lie to the public. All the facts should be obtained via a RC and people allowed to speak rather that simply being attacked with one sided information.
That’s a unique perspective on the evidence before the Commission Devil. I mean IOOF only wanted to use members funds to reimburse members for their errors ….. a unique and interesting interpretation of fiduciary duty .. I make a mistake and you suffer and you can pay for fixing it …..
The banks and Insurance Companies were a law unto themselves and should suffer the consequences.They did not act in the best interests of their clients who apparently were just numbers and money making assets. This however should not act to effect the rest of the Industry which for the most part treasure their clients and always act in their best interests. The RC report should differentiate between these culpable institutions and the hard working rest of the Industry lest they are both tarred with the same brush !
Wait till ASIC attach licensees within IOOF, particularly those reflected in Royal Commission. More negativity for IOOF soon to come again.
How can you sell life insurance to dead people. Wasn’t it the charging of ongoing advice people to dead people?
What i want to know is did the life insurance company pay out to the dead people…..?????
It was the ongoing charging of premiums while the insurance company was still processing a death claim. Premiums which were subsequently refunded as part of the death claim payout.
To say the “sale of life insurance to dead people” is the sort of irresponsible exaggeration and distortion one would expect from Adele Ferguson.
How would a dead person complete a tele-interview?
This is merely an opinion article by a self interested party and this type of reporting I am so over. The Hayne Royal Commission has overstepped its boundaries which is affecting the overall mindset of the financial planning industry.. Shine Lawyers are a hopeless lot and will lose yet another class action.
IOOF is good organisation which has been demonised by certain quarters of the media for something that is so low impact. APRA decides to sink the boots in because it was arse kicked by the Royal Inquisition.
I agree that APRA only decided to do something after their poor performance at the RC. But, your comment of “[i]IOOF is good organisation which has been demonised by certain quarters of the media for something that is so low impact[/i]” shows how far the industry has to go.
It is not OK for organisations like IOOF to run super funds and take payments/commission/backhanders from fund managers for doing nothing. This is nothing more than stealing from the super fund members and while you might think it is low impact, over time this adds up.
You are so right on this!! I too am over some of this bullshit “reporting” by ifa….
I keep asking the question, ” Can someone please tell us how many advisers/numbers have ditched their FPA memberships?????????” thanks
I think people will ditch their FPA memberships only after they work out what FASEA and the CFP designation mean , ie get qualified under FASEA then dump the FPA .
fpa is finished now.
what adviser is going to do the post grad study which includes ethics (like cfp1 which is compulsory) – you can be exempt from 2 -4 of the cfp if you have post grad study which everyone will have- and a case study and soa (like cfp5) and then a 3.5 hours exam and then go to the fpa and do the same again.
that would be nuts.
“the egregious level of misconduct by financial advisers”….seriously…did your coffee get cold while you slept through the RC….
I suspect the IFA channel isn’t under the microscope here, but rather the in-house FA’s employee by banks
I found that comment to be quite insulting, as the misconduct was conducted at a corporate executive level. Chanaka Gunasekera CLEARLY does not have a clue about what he is talking about. Typical IFA nonsense and irresponsible reporting.