Banks’ fees for no service bill continues to rise

National Australia Bank (NAB) and ANZ have seen their client compensation bills increase under the Australian Securities and Investments Commission’s (ASIC’s) so-called “fees for no service” program as further shortcomings have been identified.

What is more, NAB has had to pick up the compensation bill for shortcomings relating to its superannuation business even though it was the subject of the transaction which saw NAB divest 80 per cent of its MLC Life business to Nippon Life.

ASIC announced last week that AMP, ANZ, Commonwealth Bank, NAB and Westpac have so far repaid more than $60 million of an expected $200 million-plus total in refunds and interest for failing to provide general or personal financial advice to customers while charging them ongoing advice fees.

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According to the ASIC announcement, AMP's total compensation estimate decreased from $4.6 million to $4.4 million as AMP reviewed customer files and data to determine compensation required, and revised its previous estimates, while ANZ’s total compensation estimate increased from $49.7 million to $52.4 million due to the expansion of existing compensation programs “and the identification of further failures by authorised representatives of two ANZ-owned advice businesses – Financial Services Partners Pty Ltd; and RI Advice Group Pty Ltd”.

The regulator said the largest component of ANZ's compensation program related to fees customers were charged for the Prime Access service, where ANZ could not find evidence of a statement of advice or record of advice for each annual review period.

“In addition, ANZ found that further compensation of approximately $7.5 million is required to be paid to ANZ Prime Access customers for ANZ's failure to rebate commissions in line with its agreement with customers,” it said.

ASIC said that since its original report in April, NAB had reported the further erroneous deduction of adviser service fees for personal advice from more than 3,000 customers of its licenses, Apogee Financial Planning, GWM Adviser Services, MLC Investments Limited, NAB and its superannuation trustee, NULIS.

The ASIC announcement noted the expected compensation of approximately $34.7 million NULIS for two breaches involving failures in relation to the provision of general advice services to superannuation members who paid general advice fees, adding that “whilst on 1 July 2016 the superannuation assets governed by MLC Nominees were transferred by successor fund transfer to NULIS, and on 3 October 2016 NAB divested 80 per cent of its shareholding in the MLC Limited Life Insurance business, accountability for this remediation activity (including compensation) remains within the NAB Group.

The ASIC report also pointed out that while Westpac originally identified a systemic fees-for-no-service issue in relation to one adviser only, with compensation of $1.2 million paid in relation to those failures, “following further ASIC enquiries, Westpac subsequently clarified that it has paid further compensation of approximately $1.4 million to 161 customers of that adviser and 14 further advisers, in respect for fee-for-no-service failures in the period 1 July 2008 to 31 December 2015”.

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Here we go again - yet more evidence for a Royal Commission into our dearly beloved banks.

These advisers and the managers are just plain old stupid and or lazy. They offered the world to these clients, with masssive client bases they could never deliver these services as outlined in the CSAs they offered. Its the wording of the CSA that catches a lot of people out so be careful. If you OFFER a annual review as part of the service, you just need to note that you offered it. If you say in the CSA there IS an annual review, and there is no evidence you did it, you are gone. Its simple. Don't over promise, better to underpromise and over deliver. Not rocket science. I am also sure staff turnover contributed to this, oh these are Franks old clients ill just take the adviser fee and blame him if there are complaints....well no, if you didnt get the clients to sign a new CSA and didnt live up to what frank promised the clients you are gooooooone.

The bank managers should rightly be condemned. However this is so big and systemic that it needs further analysis. The process of delivering advice to clients has become so cumbersome, bureaucratic and inconvenient for clients, that it is not surprising that bank advisers weren't able to deliver an 'annual documented review'. Yes they were stupid to promise it, without adequately resourcing and monitoring the advisers. But there is clearly a bigger problem. It is not good enough for ASIC to beat financial planners with a big stick and to shift blame onto us endlessly. They know the cost of advice is too high and inaccessible to a large number of Australians. Giving favours to accountants and fintech is not the solution. It is time for our regulators to get out of their ivory tower and engage with financial planners. With increasing standards and education, together with restrictions on our remuneration, there is an opportunity to relax some of the red tape so we can improve the delivery of advice. The banks have done the right thing by refunding enormous sums of money, now ASIC it is over to you.

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