ASIC accepts enforceable undertaking from CBA subsidiaries

The Australian Securities and Investments Commission (ASIC) said it has accepted an enforceable undertaking (EU) from subsidiaries of the Commonwealth Bank of Australia (CBA) for charging fees where no service was provided.

The regulator found Commonwealth Financial Planning Limited (CFPL) and BW Financial Advice Limited (BWFA) failed to provide, or failed to locate evidence regarding the provision of, annual reviews to approximately 31,500 ‘ongoing service’ customers in the period from July 2007 to June 2015 (for CFPL) and from November 2010 to June 2015 (for BWFA).

As BWFA ceased trading in October 2016, CFPL is the focus of the compliance improvements required under the EU, ASIC said.

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The EU required, among other things, that CFPL and BWFA pay a community benefit payment of $3 million in total, and that that CFPL provide an attestation from senior management setting out the material changes that have been made to CFPL's compliance systems.

It also requires that CFPL provide further attestations from senior management that CFPL's compliance systems and processes are now reasonably adequate to track CFPL's contractual obligations to its ongoing service clients, ASIC said.

“Our report into Fees For No Service in October 2016 identified the major financial institutions' systemic failures in this area, and called for fair compensation to be paid to customers who did not receive the advice reviews that they were promised and paid for,” ASIC deputy chair Peter Kell said.

“This enforceable undertaking follows on from the earlier enforceable undertaking accepted by ASIC in relation to ANZ's fees for no service conduct.

“These failures show that all too often the financial institutions prioritised revenue and fee generation over the delivery of advice and services paid for by their customers.”

In addition to the EU, CFPL and BWFA have also agreed to compensate approximately 31,500 affected customers in the period from July 2007 to June 2015 (for CFPL) and from November 2010 to June 2015 (for BWFA), the regulator said.

 




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CBA Financial Planning is an FPA member and a member of the Professional Partner Program. A program that allows firms like CFP to shape the future of advice in Australia. What will be the reaction of the FPA as a result of this fine? Very important given we're going through FASEA and a key business partner is before a Royal Commission. If we want FASEA to recognise firms like the FPA as being professional and independant than these relationships must be scraped. If I was running the FPA I would impose a fine on CBA .

it's a very good point.

As a member of the FPA I'd like to offer apologies that one of own members have let the public down. I'm deeply sorry that OUR MEMBER being Commonwealth Financial Planning has behaved in this manner. When one of our members behaves like this it impacts on ALL FPA members. Unfortunately the FPA will remain silent on this issue and we'll have FASEA mark 11.

Let's hope the Royal Commission asks the FPA the question shortly.

It wouldn't surprise me if it was also discovered that some employees within Commonwealth Financial Planning tried to alert management about the issue of fees. And no surprise if it was revealed that senior management had totally ignored such warnings. In fact, it certainly wouldn't surprise me to find that senior management, rather than welcome such revelations actually might have ostracised those trying to help. And it certainly would come as no surprise to find that a great deal of the trouble CFP is currently in could have been avoided just by acting honestly and actually developing a genuine financial planning culture. But I guess the caliber of the executives within the Financial Planning industry must be on the lower scale if we are to judge them against AMP's Mr Anthony Regan today at the Royal Commission, who included a most "sincere" apology in his witness statement for all and sundry wrongdoing on behalf of AMP, which resulted in the following exchange,
"
After lengthy pauses and an intervention from AMP's counsel, Mr Hodge again pressed, "Do you know what it is you're apologising for?"

"I'm uncertain," said Mr Regan.

Wow, is the whole industry like him?

It just reinforces as I think this whole process will, that institutions are not the natural owners of advice businesses. The natural owners are individuals or groups of individuals, much like accounting or legal practices. You can't have product and advice sitting together and hope for ethics to ensure quality.

My thoughts exactly.

Yes, it maybe the planner in some cases, but it is the environment that is encouraged within the large corporate. Boards and Management do get rewards based on assets and profitability, let there be no question. They will push and break barriers to meet the bonus target and then move on. I am not surprised many senior management and boards are resigning to leave the planner or junior staff to take the wrap for the errors and breaking the boundaries by senior management and boards. The Board is the group to be ultimately be held responsible. Cannot wait to see how the Directors and Officers insurance policies hold up, professional indemnity will be stretched and the class actions will just keep coming.

Between AMP and CFP, it will be interesting to see if the Royal Commission actually calls the Responsible Managers and Directors of the AFSL and holds them to account. The bottom line is clearly that these large, vertically integrated businesses should NOT be entitled to keep their AFSLs. Industry funds need the same scrutiny too, for similar reasons (insurance commissions vs Director/Management bonuses).

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