CBA to make biggest compensation payout for latest financial advice failure
The four big banks plus AMP will pay compensation of A$178 million to customers after it was found that they charged customers fees for annual financial advice reviews that were not provided.Commonwealth Bank will make the biggest payout, compensating its customers $105.7 million. This is a separate amount to the payments it is making under its ongoing Open Advice Review program, which is remediating poor financial advice its customers received.There were more than 40,000 customers of just one of CBA's financial planning groups, Commonwealth Financial Planning, affected.CBA issued a statement yesterday saying it has started paying compensation to customers who were charged for advice they did not receive and had undertaken action to avoid any recurrence of the problem.Among the other financial institutions, ANZ's estimated total payout will be $49.7 million, National Australia Bank's $16.9 million, AMP's $4.6 million and Westpac's $1.2 million.The Australian Securities and Investments Commission started investigating this matter last year. It issued a report on its investigation yesterday, saying it had asked the five institutions plus Macquarie Group to determine whether they had further advice service failures.It said it would monitor the changes made by the group to their systems.ASIC deputy chair Peter Kell said most of the advice failures identified were made before the Future of Financial Advice reforms, which took effect in July 2013. Kell said he was confident that changes made under FOFA, particularly the annual fee disclosure statement, would reduce the risk of such failures in future.ASIC's report said that while all the institution's identified systemic failures in relation to the charging of ongoing advice fees, Westpac's was in relation to one adviser only.ASIC: "To date we have no evidence of fee-for-service failures on a similar scale occurring in advice licensees outside of the banking and financial services institutions covered in this report."The failures ASIC identified took two forms. In some cases the customer's adviser failed to provide the advice and in others the customer did not have an adviser allocated to them but ongoing fees were charged anyway. Fees were charged even in cases where the customer had asked for a no-advice service package.