A long-standing member of the financial advice industry has called on the Commonwealth Bank to improve its system for compensating victims of poor advice, off the back of last week's release of an update to the bank’s ‘Open Advice Review'.
In an open letter to CBA chief executive Ian Narev, Bluepoint Consulting director Tony Bates called on the bank to establish "a trust fund”, similar to the James Hardie compensation system.
“You are the CEO of Australia’s biggest bank, Australia’s most substantial wealth manager and adviser,” he said.
"You have a responsibility to Australians who look to us in the financial services industry to provide for their security and comfort in retirement.
“Come on. Establish a trust fund today for victims, like James Hardie did. Why not establish it by setting aside one month’s profit or $750m?” he asked.
Mr Bates’ letter follows the release by Promontory Financial Group – appointed by CBA to oversee the ‘Open Advice Review’ program in August 2014 – of the second report outlining the program's progress.
According to the report – which reviewed a sample of 208 client cases – as of 30 April 2015 the bank has made a total compensation offer of $562,513 to clients affected by poor advice, but has only paid $79,702 to five clients.
Of the remaining $482,811 the bank has offered, a total $248,307 is still under review by the customers and the bank.
The remaining $234,504 has been accepted although it is still yet to be processed by the bank.
Promontory’s report also stated that six of the 208 client files reviewed, despite their being found to be poor, were not offered compensation because no financial loss was suffered.
The report also stated that 174 client files reviewed were found to be offered “appropriate advice”.
CBA said since the initial report released by Promontory in December 2014, the bank has received an additional 17,774 customers expressing interest in the program, with approximately 7,000 confirming they want their advice reviewed.
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