In a statement, ASIC alleged that from December 2013 to February 2019, NAB:
- engaged in fees for no service conduct by failing to provide ongoing financial planning services to a large number of customers while charging fees to those customers;
- failed to issue, or issued defective, fee disclosure statements (FDSs). ASIC alleges that the defective FDSs contained false or misleading representations in that they did not accurately describe the fees the customer paid and/or the services the customer actually received. The provision of the defective or out-of-time FDSs terminated the ongoing fee arrangements between NAB and its customers and it is ASIC’s case that consequently NAB was not lawfully entitled to continue to charge the fees;
- failed to establish and maintain compliance systems and processes to detect and prevent these failures; and
- contravened its overarching obligations as an Australian Financial Services Licence holder to act efficiently, honestly and fairly.
ASIC noted that the maximum civil penalty for contraventions alleged against NAB are:
- $250,000 per contravention for breaches of s962P (charging ongoing fees after the termination of an ongoing fee arrangement) and s962S (failing to provide a timely FDS);
- $1.7 million to $2.1 million maximum penalty (depending on the time period) per contravention for breaches of s12CB (unconscionable conduct) and s12DB (false or misleading representations).
NAB received more than $650 million in ongoing service fees from 2009 to 2018. NAB has stated that it has provisioned more than $2 billion for fee for no service remediation across all of its advice licensees.
ASIC also alleged that NAB engaged in unconscionable conduct from at least May 2018 by continuing to charge ongoing service fees to certain customers when it knew that it had not delivered the services and had issued defective FDSs or at least knew that there was a real risk that it had engaged in this conduct. However, NAB did not stop charging fees to its customers until 4 February 2019.
The corporate regulator is seeking declarations, pecuniary penalties and compliance orders from the Federal Court to prevent similar contraventions occurring in the future.
“Fees for no service misconduct has been widespread and is subject to ongoing ASIC regulatory responses including investigations and enforcement actions. This widespread misconduct was examined in some detail by the financial services royal commission,” said ASIC deputy chair Daniel Crennan QC.
“ASIC views these instances of misconduct as systematic failures, unfair to customers including those that are more vulnerable.
“When the fees for no service misconduct is coupled with fees disclosure statements inadequacies or failings, customers are potentially placed in a more disadvantageous position.
“The customer may not therefore have been provided with the opportunity to know whether they have received the services for which they have paid or the amount of fees charged to them.”
[quote=Anonymous]”Given the Industry funds generally” …… then insert whatever statement you like ….. [/quote]
What a silly statement. The fact is, most Industry funds have lower admin fees than most retail funds. If they choose to use their admin fees to help their customers (and attract new ones) them good on them. Surely this is not worse than what the executives of the retail funds use their admin fees for.
And NAB still have their AFSLs.
Can ASIC or Terry or anyone please confirm what financial impact Dover ripped clients off or caused such financial damage as the Big 4 Banks and AMP?
Seems the big insto’s are just to powerful lobbying to be shut down.
ASIC where the level legal playing field ?
For my education, can those that criticise the Industry super funds explain to me how they charge a flat fee and don’t provide advice. The only fees I see Industry funds charging are the admin fee (which the retail funds also charge) and the investment fees (which the retail funds also charge).
As far as I can see, and happy to stand corrected, they don’t charge fees for advice that is not provided.
Ask yourself how they pay for all their advisers.
Clearly they pay them from their admin fees. How about asking yourself why Retail funds generally have higher admin fees than Industry funds….
Read their PDS – how do you think they pay for their Financial Planners? Do you think these “Financial Planners” and sales/phone staff being paid by the fund itself are conflicted?
This type of Advise is apparently what the community wants.
I worked in NAB. A copy of the review letter was dutifully filed in the client’s file without a single phone call to the client. This was carried on by quite a few Planners (especially the ones that had been around a while with BIG books) and somehow tolerated by their PDM’s.
Ahhh but NAB will argue we only needed to offer a review to meet our obligations. Welcome to financial planning…we can charge you tens of thousands of dollars and in return we will offer you an appointment.
You seem a little misinformed. When you mention ten of thousands, are you referring to Industry Super where tens of thousands of members are charged a fee but an offer is not required? In retail land, any Adviser charging a Fee of tens of thousands services their client – just ASIC has redefined the meaning of service.
I don’t think so. I’ve worked on 4 bank remediation programs and also represented advisers at AFCA.
Do members of Industry funds get charged thousands without getting service? You are confusing adviser fees as charged by retail funds and their advisers with the admin fee charged by Industry super funds.
Sorry, I understand it now. Let the trustee charge for the service in the “admin fee” that way no service is required and I simply become an employee of the trustee on salary – that way I can sell product under general advice with no BID, I’m not conflicted and I’m not receiving a commission – just a salary. Is that the model?
Given the Industry funds generally have lower admin fees than the retail funds, then it begs the question what do the retail funds do with theirs? It can’t help but laugh about all these retail fund linked advisers who can’t see the forest for the trees.
“Given the Industry funds generally” …… then insert whatever statement you like …..
Perhaps the Industry Fund model or using unions to get members and entertain employers is cheaper than actually providing Advice and Service to clients as they do in retail?
Additionally, when a client calls an Industry Fund for Advice, I am lead to believe that the in-house product is recommended/sold/wins every time. I would hope so, employed staff tend to do what they are paid to do – work for the hand that feeds them.
Good on you ASIC… where the hell were you when the incidents first occurred… asleep at the wheel
Imagine if dover had done all this they wouldve closes em down oh wait
“FDS inadequacies” ??????And yet the compare the pair adverts have ASIC’s blessing. Go figure.
Mind you, those same ‘disadvantaged’ clients are probably in a product they otherwise wouldn’t have been in, it has probably averaged 8 – 18% returns over that same period, they’re probably pretty damn happy and not at all concerned with the fees and yet ASIC is making it a major issue. Seems like if you’re a planner or bank ASIC are intent on running you out of planning but if you are a Union based industry super fund, they will never ever investigate you or ever penalise you to any degree!! Definitely not a level playing field!!
Industry Funds..lots of fees for no service…
What a load of BS. Everyone claims they take it out of the admin fees. What do the retail funds do with their higher admin fees?
Pay dividends. Not unions
“The customer may not therefore have been provided with the opportunity to know whether they have received the services for which they have paid or the amount of fees charged to them.”
Best practice seem to be – charge ever member a fee and only provide a service to a fee with no ability to opt out – as per Industry Super.
Seems too good to be true….
However, when you read the fineprint, it is….”The corporate regulator is seeking declarations, pecuniary penalties and compliance orders from the Federal Court to prevent similar contraventions occurring in the future.”
If I or other smaller advisers did this (or much less than this) we would also have our licence cancelled and we would need to find another career. Cmon ASIC, get real and cancel their licence and make sure none of the exec can ever work for a financial institution again.
So you have provided an actual in person review to 100% of all ‘ongoing’ clients, EVERY year they have been paying you?
I have, and I work for a bank. 100% of clients get an in person full review every year. Yet some occasions where that took place 13 months after the prior review due to client travel, etc have been flagged as ‘fee for no service’. It’s a witch hunt mate.
Notwithstanding that, I TOTALLY agree its been unacceptable practice by most banks for many years to simply collect fees and just ‘offer’ clients a review, but the banks, at least mine, as now made good on that and gone back and refunded the service fee for every client for every year where no in person full review was actually provided.
Could you say the same?
“So you have provided an actual in person review to 100% of all ‘ongoing’ clients, EVERY year they have been paying you?”
Yes, I meet with my ongoing clients at least twice a year, every year. We agree each year what each of us will do over the next 12 months, and needless to say it is more than come in and I will tell you how much your investments are worth. To say it is a witch hunt is laughable, especially when you also say that most banks have been happy to simply collect fees and just “offer” a review. You and I both know the banks are only offering a refund because they got caught doing the wrong thing.
yes, I meet with clients twice a year, and it is not just to satisfy the regulators.
meetings aren’t good enough champ. Happy clients aren’t good enough. Great results for clients aren’t good enough. You need an SoA or RoA every year.Even when the advice was to do nothing!
Hey Bank planner, the NAB has refunded more than that. As an ex-bank planner whose clients fell under this time period. I can verify that clients are getting refunded even when service was provided. The bank has realised this is a BS witch hunt and has rolled over. I can verify regular service to a heap of clients the bank refunded – yet they never asked me if I was able to confirm the service. They never even checked the files. ASIC is to blame here – for their shoddy management when FOFA came in. Now every single person with a super fund is paying because the refunds only come from one place – shareholders. That means every one with a super fund is likely paying for it. Sure the bank is paying but the funds don’t come out of thin air – they come from the Profit & Loss, this means less profit which means less dividend and less share price.
We’re all paying and ASIC is to blame.
God I hate seeing planners trying to climb to the top of the ethical mountain by bashing other planners. This lack of professional respect and solidarity is a cancer within our ranks and needs to stop.
Hear hear, ASIC is just as culpable for the sins of the past of as the big 4. Perhaps more so because ASIC should be held to a higher standard.
If ASIC is successful in this, it will be the legal precedent for them to go after all other advice firms. I have anecdotal evidence from small FP boutiques that still don’t have the concept of what an FDS is. If NAB stuffed up, then there is a very high chance that everyone has stuffed up. A defective FDS could also mean that the fee shown in the document is $1 off, even if it’s a rounding error.
Correct. I had about 50 ‘defective’ FDS’s and all were provided and within a few bucks because client fees indexed through teh year and our initial understanding was to round the fee up so we had over disclosed and not under disclosed. So a client may have paid $3333 for the year, our FDS said $3400, full services provided, full FDS, everything done, but OVER disclosed and its a defective FDS. Joke. Hence the whole industry will go to 12 month contracts, not for the client, but because the FDS compliance is too onerous and risky. Can you imagine being fined $250,000 for over disclosing fees… c’mon. the legislation is crap.