ASIC targets big four over advice fee disclosure

ASIC plans to investigate the big four banks for failing to tell advice customers what fees they were being charged.

**RETRANSMISSION OF IMAGE ID 20151027001192752040 RESIZED** A composite image of signage of Australia's 'big four' banks ANZ, Westpac, the Commonwealth Bank (CBA) and the National Australia Bank (NAB) signage in Sydney, Friday, Oct. 23, 2015. (AAP Image/Joel Carrett) NO ARCHIVING

Australia’s big four banks — Commonwealth Bank, ANZ, NAB and Westpac — are among financial institutions the corporate watchdog plans to investigate as part of a large-scale inquiry into widespread failure to tell advice customers what fees they were being charged or give them a chance to stop paying them.

Spokesmen for the nation’s biggest bank, CBA, and third-largest, ANZ, said their institutions had confessed breaches of the requirements to the Australian Securities & Investments Commission.

The CBA reported breaches to ASIC in December but has yet to update its systems to stop them continuing to happen.

Australia’s second-largest bank, Westpac, said it had advised ASIC it was “working through” whether its procedures were good enough and it is believed NAB executives also expect to be targeted by the investigation.

Whether ASIC would also focus on large non-bank wealth industry player AMP was unclear last night, with a spokeswoman for the company refusing to tell The Australian whether it had filed breach reports with the regulator over the issue.

Late on Friday, ASIC said it would take enforcement action after receiving a “substantial” number of breach notices from across the industry confessing to failure to send financial advice customers either a fee disclosure statement, due every year, or a renewal notice, due every two years.

Financial advisers are required to give customers both notices under Future of Financial Advice laws introduced in 2013 as part of efforts to clean up the scandal-ridden industry.

However, it is believed some advisers have confessed breaches to ASIC dating as far back as 2015, raising the prospect that some industry players have never complied with the law.

On Friday, ASIC said it would launch an industry-wide probe because “the volume and range of breach reports indicates a significant risk of systemic noncompliance”.

It is believed banks and other institutions have been prompted to take a closer look at their past behaviour after revelations at the banking royal commission this year of misconduct such as charging fees for services that were never delivered to people, including the dead.

CBA has in the past enjoyed a strong position in the advice industry through its Commonwealth Financial Planning, Financial Wisdom and Count Financial, but it plans to shed its wealth business in a demerger next year following a series of scandals at the division, including dodgy advice given by bonus-hungry planners and allegations of misconduct at life insurance arm CommInsure.

A spokesman said the bank “advised ASIC in December last year that we had identified instances of some customers within some of our advice licensees receiving incorrect annual fee disclosure statements”.

He said the bank had been working to fix the issue and expected to “have completed the system changes required to prevent the issue from occurring again by 1 November”.

ANZ is also in the process of getting rid of its wealth business in a controversial $1 billion sale to another royal commission target, IOOF.

As part of the deal, a fortnight ago ANZ transferred two adviser networks, RI Advice and Millennium3, to IOOF. It is keeping its in-house outlet, ANZ Financial Planning.

It also plans to sell its 700,000-strong super business to IOOF in a transaction that has become a political hot potato after allegations of fund member rip-offs and governance problems during the royal commission that led the prudential regulator to slam chief executive Chris Kelaher for not understanding his responsibilities under superannuation law. IOOF has denied the allegations and defended Mr Kelaher’s competence.

An ANZ spokesman said the bank “has reported to ASIC on a number of occasions where aligned financial advisers had ­failed to issue fee disclosure statements or renewal notices to ­clients”.

A Westpac spokesman said the bank told ASIC it may not have sent out renewal notices. “We take seriously our obligations.”