Approximately 92 per cent of the remediation charges are for wealth and insurance-related matters, with the remainder for banking-related matters.
Charges of $832 million after tax for additional customer-related remediation will be included in NAB’s 2H19 result, according to a statement to the ASX.
NAB said the key driver of these additional charges is inclusion of a provision for potential customer refunds of adviser service fees paid to self-employed advisers.
The details behind NAB’s increased remediation costs include:
- Adviser service fees charged by NAB Advice Partnerships. Provisions have been increased to include allowance for customer refunds based on total ongoing advice fees received between 2009 and 2018 of approximately $1.3 billion, with an assumed refund rate of 36 per cent (or approximately 55 per cent including interest costs). Key considerations in estimating a refund rate include assumptions about circumstances where documents are not available or readily accessible, including where advisers are no longer working in the industry;
- Non-compliant advice provided to wealth customers, which is being addressed as part of NAB’s ongoing wealth advice review. Provisions have been increased mainly to cover higher expected costs to undertake the program;
- Adviser service fees charged by NAB Financial Planning. Provisions have been increased to reflect higher expected costs and a higher assumed refund rate of 28 per cent (or approximately 39 per cent including interest costs); and
- Consumer credit insurance sales through certain NAB channels. This relates to a previously disclosed remediation program that arose from an ASIC industry-wide review. Provisions have been increased mainly to reflect higher refund rates based on experience to date.
However, NAB also noted that until all customer payments have been completed, the final cost of the remediation remains uncertain.
“We understand that shareholders will be rightly disappointed. However, we also recognise the need to prioritise dealing with these past issues and fixing them for customers,” said NAB chief executive Philip Chronican.
“We have undertaken to significantly uplift customer remediation practices, as part of a broad program of reform to change the way we operate and ensure NAB meets customer and community expectations.
“We have made approximately 450,000 payments to customer with a total value of $202 million between June 2018 and August 2019, and have a dedicated remediation team of about 400 people helping to bring greater discipline and focus to remediating customers.”
The remediation expected to reduce 2H19 cash earnings by an estimated $1.12 billion after tax, and earnings from discontinued operation by an estimated $57 million after tax.
In combination with provisions raised in 2H18 and 1H19, NAB said this brings total provisions for customer-related remediation at 30 September 2019 to $2.09 billion.
What a farce. Not a fan on NAB but the ASIC corruption and a misled or intentionally happily uninformed Royal Commissioner went unchallenged by banking CEO’s with no balls and no appreciation of how financial planning works.
Imagine if the big 4 + AMP + IOOF had held a war council and each put $500mill in a war chest to fight the RC, Hayne and even ASIC’s insanity from the outset? Cheaper for them obviously and likely a better more realistic outcome after staring down the schoolyard bully.
Yes there was malfeasance uncovered, but you cannot tell me that in aggregate the amounts now being refunded are all well deserved from bad or crooked advice or from clients getting no value for the fees paid.
What happened to the litmus test of assessing whether a client is better or worse off from the advice? I am pretty certain that given the increase in market returns over the last 10 years, the peace of mind provided for clients being able to tick off a box that they have taken some action and sought advice in the financial aspect of their life, and the fact that there was an organisation there that they could walk into anytime they wanted to talk with someone, the vast majority of clients would themselves state that they are much better off overall.
ASIC is corrupt and internalised by self serving couldn’t make it in the real world ex-lawyers with no intention of serving the public interests, but rather on destroying a profession and industry with their own bastardised version of financial services law that bears no ties with reality. They have travestied not only our profession, businesses and lives of all employed in this sector (except compliance and legal areas of course, they’re booming), but also the impacts of this current hell bent insane eradication of FP’s is now being felt throughout the entire economy.
Bravo dickheads, take a bow.
I know first hand of a NAB aligned adviser who never issued a FDS but was collecting several $000’s in ongoing adviser fees p.a. (in addition to commissions) and the portfolio hadnt been modified/reviewed for 10 years. They are now out of the industry, thank goodness. Yes, clients didnt complain or know what to expect for their fees but does that make it right??
Yes I explained to my wife & what I’ve been through & about to go through with AFCA feeling like a second class citizen & she responded so if you had to work for 10 years for nothing. Isn’t that slavery?
Chris you are very much uninformed but don’t let that worry you. The cost to review a file, the fact that it is looking back to 2008 and record are only required to be maintained for 7 years (check The ASIC website and ASIC’s evidence at the Royal Commission when under oath and being questioned by Mr Hodge) and the simple fact that ASIC is still changing evidence rules and you might understand this is just a big execution of an industry. And by the way, service delivered to a client has been excluded in the definition of “fee for no service” being applied by ASIC. DID YOU KNOW THIS?
No wonder the banks are holding out on rate cuts.
I worked for NAB FP and had nothing to do with thier fee for no service issues yet they refunded upfront advice fees to clients that weren’t even enrolled on an ongoing service model, clients that paid for an upfront service and very much received that service yet because thier systems couldn’t identify if it was an upfront or an ongoing fee they made decision to refund, in doing so sullying my good name and work done… it’s an absolute farce…. very quick to throw all thier advisers under the bus… glad to be out of there!
Chris Tobin, you seem to assume that all remediation payments are refunds to clients who have been stolen from. That is not the case at all. In many cases clients are being refunded fees they were happy to pay, for a service they thought was good value. However when a compliance bureaucrat can’t find detailed evidence of service delivery in a historical written file, or if the cost of reviewing a file is greater than the fee paid by the client, then the client gets their money back. For many clients these are actually windfall gains.
$2.092M and ASIC’s estimate of $8B+ in total across the industry. That’s $8,000 million stolen from clients folks. Unbelievable. Unbelievable also that the systematic theft continued under the nose of regulators, successive governments and clients despite a myriad of enquiries and of course, FOFA.
It costs more than 3k to review each file. So any fee under that is auto-refunded without even checking the file.
Good luck to the smaller AFSLs who don’t have deep pockets. ASIC is expecting similar refund ratios.
The destruction of this industry is almost complete.
So fragmented that ASIC won’t know how to regulate once NAB is gone.
Yes, quite right. The advice model is broken.
Annony…this was my exact thought when I read the headline…just hand back everything and work for free…can I back date Centrelink???
[quote=anonny]gotta laugh.. why don’t we just refund everything to everyone[/quote][quote=anonny]gotta laugh.. why don’t we just refund everything to everyone[/quote] ….that’s AFCAs job! 😉
gotta laugh.. why don’t we just refund everything to everyone