CFS pocketed commission on ‘commission-free’ products
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has been told Colonial First State described superannuation accounts as being “commission free” when the company was, in fact, retaining the commissions for itself.
Under examination from counsel assisting the Royal Commission, Michael Hodge QC, Colonial First State executive general manager, Linda Elkins was asked whether the company’s decision to retain the commissions for itself created problems for advisers seeking to rebate commissions to their clients.
Hodge pointed to e-mails from a former Dover Financial Services adviser seeking an explanation of the situation in circumstances where the adviser wanted to rebate the commission to clients.
Later, Elkins said Colonial was looking to develop a mechanism to ensure the commissions were rebated to clients and was in the process of considering whether it reduced the sum of the commissions.
Hodge suggested that one of the challenges for Colonial was that was the trustee of a superannuation fund and also the Responsible Entity for a managed investment scheme and it had the DRE structure where the contributions were invested in a managed investment scheme where it is the RE and had a relationship with advisers and advice licensees.
He said that while CFS was not a licensee it had a relationship with entities that were advice licensees and so there were many competing interests all around it – “so when its management comes to making a decision to give up commissions, how does it do that?”
Elkins responded that that would company in the company’s corporate capacity.
“We’re undergoing that process now and [it] could arise in more than one way,” she said.
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