CBA to refund fees charged to dead

CBA will refund fees charged to deceased estates as it reforms wealth operations and ends grandfathered commissions.

CBA is the latest bank to act in response to the banking royal commission. Pic: Hollie Adams

Commonwealth Bank will refund fees imposed on deceased estates as it commits to reducing charges on dated wealth management products and calls for a legislative ban on grandfathered commissions.

CBA (CBA) has followed in the footsteps of Westpac, ANZ and Macquarie in pledging to end lucrative grandfathered commissions, which the nation’s largest bank said would return about $20 million to 50,000 customers a year.

While other wealth managers have axed the fees, which were banned under the Future of Financial Advice reforms in 2013, CBA will be rebating the commissions to customers of Commonwealth Financial Planning.

The bank has also now thrown its weight behind a legislative ban on grandfathered commissions, in recommendations mirrored by consumer groups and the Australian Securities and Investments Commission.

CBA also said it was reviewing any financial advice fees that had been charged to deceased estates across all its licensees and refunding the money along with any interest.

Over the course of the royal commission, CBA and National Australia Bank have both admitted charging advice fees to dead superannuation and wealth management customers. AMP had charged dead people both fees for wealth management and for life insurance premiums.

Revelations that some advisers at CBA subsidiary Count Financial continued charging clients fees after they died, in one case for more than a decade, sparked action to see if others had done the same thing.

The inquiry heard CBA’s superannuation fund trustee knew in 2015 it was charging advice fees to members after being told they had died, but continued to do so until this year.

In a statement today, CBA also said it would be removing certain fees on outdated “legacy” wealth products from the start of next year, which would save members close to $25m a year.

CBA wealth management chief operating officer Michael Venter said the changes were part of the company’s response to the royal commission.

“Charging unauthorised advice fees to deceased estates is unacceptable,” Mr Venter said.

“A broader review of deceased estates is underway across our advice licensees. It will go back seven years to ensure that any instances where unauthorised fees have been charged are identified and refunded with interest,” he said.

CBA said an initial check of 142,000 accounts identified 12 deceased estates being charged unauthorised advice fees between April and June 2018.

In a scathing submission to the financial services royal commission, ASIC said it was concerned that trailing commissions continued to form a “significant proportion of licensee/adviser remuneration” five years after charging new commissions was banned under Future of Financial Advice laws.

The regulator blasted advice licensees for charging an average of $2000 a year to clients who received little in return.

“We support the removal of grandfathered commissions from superannuation and investment products across the wider industry and believe a legislative approach should be considered.” said Mr Venter.

While CBA has now joined recent movers who are ending the commissions, Australian wealth management giant AMP has yet to commit to action over the damaging fees.

Analysts are split over how much of the group’s revenue comes from grandfathered commissions.

Yesterday, ANZ warned it would book a $374 million charge in the current financial year for refunding customers and other remediation costs following product reviews in Australia and for inappropriate advice or services that weren’t provided.

And late last month Westpac said it expected a $235 million sting to its full-year earnings from ongoing efforts to refund customers who were charged fees for advice that wasn’t delivered and the cost of recent lawsuits.