The corporate regulator has announced it found several instances at major financial institutions where customers were wrongfully being charged for financial advice.
ASIC released today the Financial advice: Fees for no service report on its work to address financial institutions’ and advisers’ systemic failures.
As part of its Wealth Management Project – which focuses on the conduct of the largest financial advice firms, including the advice arms of AMP, ANZ, CBA, NAB and Westpac groups – the regulator said it found instances where customers were being charged a fee for ongoing advice services, but had not actually received the services.
Approximately $23.7 million of fee refunds and compensation has been paid, or agreed to be paid, to over 27,000 customers of ANZ, NAB, CBA, Westpac and AMP under various licensees that are owned by these businesses, the statement said.
“Further reviews are being conducted by the licensees to determine the extent of their ongoing service fee failures. Refunds and compensation are expected to increase substantially as the licensees' investigations and reviews continue,” ASIC said.
“Based on estimates provided by the licensees to ASIC, compensation may increase by approximately $154 million, plus interest, to over 175,000 further customers, meaning that total compensation for related failures could be over $178 million, plus interest.”
ASIC said most of the failures outlined this report occurred before the FOFA reforms commenced.
One of the reasons why customers were being wrongfully charged was because he or she did not have an adviser allocated to them, but had an advice fee deducted from investment products.
In other instances, the adviser allocated to the customer failed to deliver on their obligation to provide the ongoing advice service and the licensee failed to ensure that the service was provided.
ASIC deputy chair Peter Kell said, “Changes introduced through the FOFA reforms have shone a light on the advice fees that customers are paying and the services they should be receiving in return.
“Our report identifies the institutions' systemic failures in this area, which we are putting right by ensuring that customers are fairly compensated.”
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