Top executive concedes CBA excelled at charging for services it never delivered

A COMMONWEALTH Bank executive has admitted the lender “had no idea what was going on” as it wrestled with a problem where customers were charged for services they didn’t receive.

A COMMONWEALTH Bank executive has admitted the lender “had no idea what was going on” as it wrestled with a problem where customers were charged for services they didn’t receive.

And, in a horror day for the nation’s biggest bank, another executive has conceded the CBA was the “gold medallist” in charging fees for financial advice it never delivered.

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The finance sector royal commission on Wednesday swung the spotlight back on to the bank, noting customers had paid fees for financial advice but never received the service. Counsel assisting the commission Michael Hodge, QC, said that after the problem was identified in 2012, it took two years for the bank to report it to the corporate watchdog.

Interrogating CBA executive general manager Marianne Perkovic, Mr Hodge asked whether this was because the bank’s systems “were so hopeless CBA had no idea what was going on in its business”.

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Commonwealth Bank chief executive Matt Comyn. Picture: Hollie Adams

After being pressed to answer the question, Ms Perkovic said: “Yes”. The issue was identified in April, 2012, and the bank finally brought it to the attention of the Australian Securities and Investments Commission in 2014.

The CBA has refunded $118.5 million to customers after charging fees for advice they did not receive.

That is more than half the $219 million compensation paid by the major banks and wealth manager AMP over the past decade to more than 310,000 financial advice customers.

Earlier on Wednesday, counsel assisting the commission Mark Costello drew attention to the scale of the problem at the CBA.

“It would be the gold medallist if ASIC was handing out medals for fees for no service, wouldn’t it?” he asked Linda Elkins, executive general manager at the bank’s wealth management arm, Colonial First State.

“Yes,” Ms Elkins replied.

Clients of the CBA’s Commonwealth Financial Planning, BW Financial Planning and Count Financial businesses were charged ongoing fees for financial advice where no advice services were provided, mainly between July 2007 and June 2015.

Asked how such failures had occurred, Ms Perkovic said they happened in various ways.

In some cases, advisers had quit and their customers became “orphan clients” as the bank had not detected they needed new advisers.

Linda Elkins, executive general manager at the bank’s wealth management arm, Colonial First State. Picture: AAP

In other cases, customers eligible for financial review services were charged even if the bank — because of its poor systems — were unable to determine if they had received those services.

Mr Hodge presented a Deloitte report into the issue, completed for the CBA in June, 2012, that warned of the significant regulatory and legal problems the bank could be facing. He asked her if she had doubted the significance of those warnings.

After Ms Perkovic equivocated, commissioner Ken Hayne intervened and asked directly if she doubted it.

She answered: “No”.

Ms Perkovic was also shown evidence the CBA now employed 25 per cent fewer advisers than it did 10 years ago, despite the fact it had double the number of clients.

Mr Hodges asked Ms Perkovic how the bank was able to ensure it met its obligations to address the needs of all clients.

She said the bank had found “efficiencies” to help meet those needs.

Shares in the CBA closed down 0.5 per cent, or 35c, Wednesday at $72.41, making it the worst performing of the major banks.

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