CBA pays $5m more for poor advice
The Australian 12:00am December 6, 2016
Michael Roddan
Commonwealth Bank of Australia has shelled out a further $5 million in compensation to victims of poor financial advice, as a forensic review of the redress scheme found instances where the bank’s Financial Planning and Financial Wisdom businesses failed to act within required timeframes.
KordaMentha Forensic said the licensees, Commonwealth Financial Planning and Financial Wisdom, in most instances met their obligations and consistently remediated customers who were subjected to poor advice from high-risk and problematic advisers.
However, in some instances, the licensees did not meet timeframes specified by licence conditions to communicate with customers and provide them with information to assess their advice or compensation.
KordaMentha found the licensees wrote to 99.95 per cent of the more than 4000 cases being reviewed. But the forensic accounting firm’s third report found the licensees only complied 98.1 per cent of the time with the requirement to give information to an independent adviser, where requested, within a two-week period.
A further licensee review, to be completed within three months of request, was complied with 92.5 per cent of the time. Letters regarding the outcome of these reviews, stipulated to be completed within 30 days of the review, complied with the timeframe more than 97 per cent of the time.
The Australian Securities & Investments Commission said CBA’s licensees rectified the shortfalls, and did not propose taking any extra action against the group.
“This report shows we have continued to deliver on our commitment to customers and demonstrates the thorough approach we have taken to identify any past issues and put things right for customers,” Commonwealth Bank head of advice review Leif Gamertsfelder said.
The review, which is separate to the bank’s Open Advice Review Program, is trawling over the clients of 15 former advisers for advice they provided between 2003 and 2012. It came after ASIC slapped licence conditions on Financial Planning and Financial Wisdom in the wake of revelations of poor financial advice within the businesses.
ASIC licensing conditions have resulted in about $4.96m in compensation to 185 customers of the group of former advisers. KordaMentha is reviewing 17 further potentially high-risk advisers and will report next year.
At the last update, CBA’s OARP had separately offered about $11m in compensation so far. That review program was announced a little over two years ago following an explosive Senate Economics References Committee report that had called for a royal commission into CBA’s financial planning arm.
The bank’s previous remediation program had led to $52m in compensation to more than 1100 customers who were victims of suspect advisers that CBA had already identified. A separate investigation by ASIC into customers being charged fees for advice they had not received estimated CBA had a future compensation bill worth over $105m.