CBA faces further advice compensation

The Commonwealth Bank (CBA) is facing further financial advice compensation issues, undertaking to review all advice given to customers by five former advisers.

In an update released today, the Australian Securities and Investments Commission (ASIC) said that under additional licence conditions imposed on Commonwealth Financial Planning Ltd and Financial Wisdom Ltd, CBA would review all advice given to customers by the former representatives.

It said CBA would pay compensation where customers had suffered loss.

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The ASIC announcement said that as at 10 January 2018, CBA had reported to ASIC that approximately $1.9 million of compensation was due to customers of the five advisers.

It said compensation was likely to increase as CBA reviewed further customer files.

The regulator said that the bank had recently written to over 3,500 customers of the five advisers informing them their advice was being reviewed.

“Following completed reviews CBA had issued assessment outcome letters to over 1,000 customers. CBA will continue to issue assessment outcome letters and compensation offers to affected customers between now and 31 March 2018,” the ASIC announcement said.

It said ASIC had appointed KordaMentha Forensic to complete a compliance review under the additional licence conditions with the result that it had been determined that CBA should review advice given by 16 potentially high-risk advisers, and has now reviewed and is satisfied with the processes that CBA used to:

  • select samples of advice given by the 16 advisers for review
  • review the appropriateness of advice given by the 16 advisers
  • calculate whether any inappropriate advice given by the 16 advisers resulted in customers losing money of suffering loss, and
  • conclude that all of the customers of five of the advisers should be reviewed in the compensation program and that no further review is required for 11 advisers.

ASIC said the current round of compensation was in addition to $4.97 million including interest already offered to customers of different advisers under the additional licence conditions compensation scheme, as reported on in KordaMentha's December 2016 compliance report.

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The day that ASIC undertake reviews on ISA representatives and begin 'forensically' scrutinising their advice, is the day I will take that farcical bureaucratic group of noobs seriously.

How could any AFSL employer think that 5 advisers could adequately look after 3500 clients?

yep, I'm of the understanding that ASIC is also looking to force dealers to get their AR's to turn off any fees associated with what they call 'apathy' clients, i.e. clients where no service has been provided for 2 years, fees must be turned off. That is the next hit to industry revenue coming, but I must say I have no problem with that. But it will change dramatically valuations for businesses.

What about even Dealer Groups that have Orphan client bases. I can COUNT a few AFSL licensee's that do this. i.e upon the adviser retiring and selling there client base, or even changing licensees, they required positive consent from the clients to change advisers or move dealer groups. Clients have not returned forms to move to the new adviser and the dealer group retained ownership of clients and the trailing commissions. I can COUNT the number of days that this unethical behaviour will last and we should put a stop to it.

agree, and they have further problems with many BOLR's being triggered. If they don't have the new advisers buy them or internal adviser numbers to service them, they will be faced with turning off the revenue after paying for it - a double whammy. And I'm not sure it's accounted for well in publicly listed companies.

@yogi, I can also COUNT the number of clients recommended a SMSF for 'control and flexibility' or whatever, only to be recommended an exey wrap to buy managed funds while they COUNT the policy disallowing direct wholesale investment fairr. Talk about double charging.. Biggest rort ever..

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