Financial advice institutions to refund over $800 million
Written on the 8 August 2018 by David Simmons
As the revelations from the Royal Commission continue to pour in, the Australian Securities and Investment Commission (ASIC) has revealed that, in total, Australian financial advice institutions will refund customers over $800 million in reparations over fees for no service (FFNS) programs.
The big four banks (ANZ, CBA, NAB, and Westpac) and embattled financial advice institution AMP, have already paid or offered customers $222.3 million in refunds for failing to provide advice to customers despite charging fees.
ASIC is also overseeing FFNS programs by other financial service institutions like Bendigo Financial Planning Ltd, BankVic, StatePlus, and Yellow Brick Road Wealth Management Pty Ltd.
The financial services watchdog also says it is aware of five other institutions that have provisioned for future remediation payments, with four of these providing to ASIC amounts for future remediation. If all of these provisions are paid in full, FFNS remediation may exceed $850 million.
Data reported by the AFS licensees to ASIC as at 30 June 2018.
AMP and CBA today released their half year and full year results respectively. Both have been hit hard by penalties and refunds.
AMP's half year profit took a 74 per cent dive on the back of a $290 million compensation payout to customers charged fees for no service.
The company's first-half net profit went down from $445 million in 1H17, to $115 at the end of June 2018.
Commonwealth Bank has also suffered, with profit down 5 per cent to $9.23 billion at the end of FY18.
The profit drop was primarily due to the history making $700 million penalty CBA paid to AUSTRAC after it admitted to 53,700 breaches of anti-money laundering and counter-terrorism funding laws.
The scandal led to ex-chief executive Ian Narev departing CBA, who was replaced by Matt Comyn.
CBA will pay a final dividend of $2.31 per share, taking the full year payout to $4.31 per share.
Rubbing salt in the banking and finance industry's wounded reputation, it was revealed at the Royal Commission on Wednesday that NAB has been charging advice fees to deceased customers.
The inquiry heard advice service fees continued to be deducted from a member's account after NAB had been advised the member had died.
Following CBA's full year results, the Greens have come out swinging with a push to "break up the banks".
Leader of the Australian Greens Richard Di Natale says the banking and financial sector needs to be restructured because it prioritises profits over customers.
"Simply put: it's time banks became banks again," says Di Natale.
"The Hayne Royal Commission has proven that the foundations of our banking and financial system are rotted through. It's past time we stopped letting these huge corporations get away with fraud, bribery and other systemic abuses of the customers they are supposed to serve."
"Our banks should be working for us, not operating in this toxic culture that encourages and rewards bad results for customers through complex vertical integrations and the cross-selling of inappropriate and risky financial product."
Business News Australia
Author: David Simmons