ASIC update on compensation by institutions for poor financial advice

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Australia’s five largest banking and financial services institutions have paid a total of $119.7 million in compensation as at 30 June 2019 to customers who suffered loss or detriment because of non-compliant advice given by financial advisers.

This compensation has been paid under review and remediation programs initiated as a result of the ASIC review reported on in Report 515 Financial advice: Review of how large institutions oversee their advisers (REP 515). REP 515 outlined findings from ASIC’s review of how effectively the banks and financial services institutions supervised their financial advisers.

The review, which commenced in July 2015, focused on:

  • how AMP, ANZ, CBA, NAB and Westpac identified and dealt with non-compliant advice by their advisers between 1 January 2009 and 30 June 2015;
  • the development and implementation by these institutions of a framework for the large-scale review and remediation of customers who received non-compliant advice between 1 January 2009 and 30 June 2015; and
  • a review of Australian financial services (AFS) licensees, selected from within the institutions, to test their current processes for monitoring and supervising their advisers.

Since the publication of REP 515, ASIC has been monitoring the ongoing implementation and expert assurance of the institutions’ customer review and remediation programs.

The table below provides a breakdown of the compensation payments by institution.

Note 1: The data in this table has been compiled by ASIC from the information received from AMP, ANZ, CBA, NAB and Westpac.

Note 2: The compensation figures are rounded to the nearest dollar.

Note 3: Commonwealth Securities Limited reported 1.5 total FTE on the basis of the November 2019 estimated completion date. Commonwealth Private Limited, Commonwealth Financial Planning Limited, Financial Wisdom Limited and Count Financial Limited reported nil FTE.

Note 4: November 2019 is the estimated completion date for Commonwealth Securities Limited and Commonwealth Private Limited. Commonwealth Financial Planning Limited, Financial Wisdom Limited and Count Financial Limited have reported an estimated completion date of 31 August 2019.

Note 5: As at October 2018, IOOF Holdings Limited (IOOF) has taken ownership of ANZ’s Aligned Dealer Groups (ADGs) comprising of Millennium3, RI Advice and Financial Services Partners. IOOF will continue customer review and remediation for the ADGs using the same independently assured framework implemented by ANZ.

The following information is not included in this table:

Note 6: As part of its review and remediation work for this project, NAB also focused on an adviser whose non-compliant advice commenced before 1 January 2009. As at 30 June 2019, NAB paid $14,061,373 in compensation to customers affected by this conduct, and this amount is not included in this table.

Note 7: The figures recorded for CBA do not include compensation amounts paid under its other large-scale remediation programs as noted in 15-083MR16-415MR and CBA’s Open Advice Review Program.

Note 8: The figures recorded in this table do not include compensation amounts paid in relation to fees-for-no-service issues as noted in REP499 and 18-229MR.

ASIC expects further compensation to be paid as the institutions continue their review and remediation programs for non-compliant advice.

Background

Earlier this year ASIC released an update on the fees for no service (FFNS) further review programs undertaken by the institutions (Refer 19-051MR).

ASIC’s work on advice compliance is part of its broader Wealth Management Major Financial Institutions Portfolio (formerly known as the Wealth Management Project). This work covers several important areas in financial advice including:

  • working with the financial advice licensees to address the identification and remediation of non-compliant advice; and
  • seeking regulatory outcomes,where appropriate, against licensees and advisers.

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