Fee for no service remediation could exceed $1 billion

11 October 2018

The Australian Banker’s Association (ABA) has confirmed it has approached the Australian Securities and Investments Commission (ASIC) seeking to change the Banking Code of practice on the basis of the critical interim findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Service Industry.

At the same time, the ABA has forecast that the total cost of remediating fee for no service could exceed $1 billion.

The ABA has this week sought to get on the front foot in addressing issues raised by the Royal Commission and just a day after the Commonwealth Bank declared it would be rebating grandfathered commissions, announced that the banks would also be ending fees for no service and grandfathered commissions.

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ABA chief executive, Anna Bligh said the banks had already begun the process of refunding and compensating customers and said the Banking Code would need to change.

She said that the ABA had written to ASIC seeking approval for such a change but, in the meantime, the banks could start the process and were already compensating customers who were affected.

“There is more work to be done in that compensation area, but banks will not be waiting until next year, and they won’t be waiting on the Royal Commission report on the consumer fees for no service. It is over, and banks have started the process of refunding customers,” Bligh said.

“ASIC has been looking at the issue of fees for no service for some time. What is clear is the Royal Commission has put beyond doubt that this practice is widespread, much more widespread than people understood, and affects thousands more customers than originally appreciated,” she said.

“What we now know is that banks are in the process of refunding customers who’ve paid these fees when they shouldn’t have, when they didn’t need to, and where services weren’t provided. We know that the amount that customers will see refunded to them is likely to escalate beyond a billion dollars.”

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Please. Insane applying current rules to previous historical practise without check. Some is warranted, but for a reasonable portion, the clients entered a contract to pay a fee without an articulated service and definitely not that an advice document would be produced yearly with no extra charge. The banks are rolling over and while they are at it, throwing planners under the bus in the same movement. The ISA are sitting on the sidelines watching with glee while we tear ourselves apart, and yet somehow they are completely exempt from ANY scrutiny?

The old school parameters for financial planners were an absolute wrought. When i started in 2007 i would reguarly see AMP clients paying 5% contribution fee and 2% management fees to an adviser they had never heard of. This was not limited to AMP, every adviser with every Retail Super provider did this.

I instantly thought, this is a complete wrought and needs to be stopped. However the AFA and FSC did nothing. I grew disgusted that all these old and uneducated advisers had grown rich by doing nothing and providing no benefit to the consumer. I could not however blame them. They were playing the game by the rules and their regulatory bodies were too self interested to do anything about it.

Now 10 years down the track these advisers are 60 years old and have 7 Ferraris each and dont care. Whilst these advisers ripped off clients to make their fortunes and are pretty much bad people, they cannot be blamed.

Its our industry bodies who allowed them to ruin our industry and these bodies must be held accountable. Finally.

James 5. Sounds like you started in AMP itself - is that right? In 2007 I am assuming you refer to AMP FLS (Commission Product).
Question 1) 4.95% was the max rate upfront from memory and was always negotiated with clients (remember the client could see the cost) so in our practice, was very rarely at 4.95%. It would have to be a small client. What amounts where the 5% charged on and what product?
Question 2) 2% management Fee (yearly) to adviser?????????? You need to explain as you are plain and simple wrong.

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