Big banks pay billions to customers burnt in advice scandal

Six of Australia’s financial giants have paid or offered $4.7 billion to compensate customers who suffered loss or detriment after being charged fees for no service or receiving non-compliant advice.

In a statement on Friday, the Australian Securities and Investments Commission said institutions, including AMP, ANZ, Commonwealth Bank, Macquarie, NAB and Westpac, had undertaken review and remediation programs following two major ASIC reviews.

The country’s biggest banks have paid or offered billions in compensation to customers over misconduct around financial advice.Credit: Paul Rovere

ASIC commissioner Danielle Press said a project looking at compensation for misconduct relating to financial advice has shone a light on the fees that customers are paying and the services they should be receiving in return.

“The subsequent programs have resulted in very significant remediation payments to affected consumers,” Press said.

About $1.1 billion of the total amount was paid or offered by banking and financial services institutions in the six months to December, the remainder of $4.7 billion was paid or offered before that time.

The update – which ASIC anticipates will be the final one – comes after eight years of the watchdog’s work addressing the failure of financial institutions and advisers to provide ongoing services to fee-paying customers.

In 2016, ASIC released a report revealing systemic failures in the advice divisions of AMP, ANZ, CBA and NAB, as well as some of their product issuers. These included the institutions’ failures to provide ongoing advice services to customers who had paid for them, advisers’ failure to provide these services, and product issuers failing to switch off advice fees for customers who did not have a financial adviser.

Another report published in 2017 outlined how AMP, ANZ, CBA, NAB and Westpac identified and dealt with non-compliant advice provided by their advisers between 2009 and 2015, and how they developed and implemented a framework for the large-scale review and remediation of affected customers during that period.

CBA, ANZ and Westpac have notified ASIC that all customers identified as having received inappropriate advice between January 2009 and June 2015 had been remediated.

IOOF Holdings, which took ownership of some of ANZ’s financial services groups in 2018 and is now known as Insignia Financial, is continuing its customer review and remediation.

Macquarie was not included in the latest review because ASIC accepted a separate enforceable undertaking.

Financial advice has been one of the most scandal-ridden parts of the financial services industry in recent years. Commissioner Kenneth Hayne slammed banks and financial advice businesses in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry finalised in 2019, saying they had acted with “inexcusable” greed and dishonesty. Most banks have since let go of their financial advice businesses.

ASIC will continue to monitor the implementation and finalisation of the remaining programs, but it said most were substantially complete.

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