Commonwealth Bank’s Colonial First State hit with class action over dismal investment returns

Slater and Gordon has filed a class action against CBA’s wealth management arm over dismal investment returns.

A Commonwealth Bank branch in Sydney. Picture: AAP

Class action specialist law firm Slater and Gordon has filed its first superannuation law suit, targeting Commonwealth Bank’s wealth management arm Colonial First State over dismal investment returns for damages reaching up to $100 million.

It marks the first action against a super trustee over uncompetitive performance, after the royal commission revealed several for-profit superannuation funds either deliberately, or negligently, left member savings trapped in low-returning investments or sucked out any returns through crippling fees.

Slater and Gordon said it filed its class action against CBA (CBA) in the Federal Court on Wednesday morning, alleging the bank shunted the savings of its members into uncompetitive funds controlled by the parent bank.

This mean Colonial First State members could have been receiving returns as low as 1.25 per cent — below the record-low Reserve Bank cash rate of 1.5 per cent.

“We will allege that by dumping members’ super with its parent bank, the CBA, Colonial First State failed to obtain the most competitive interest rate available for its members invested in cash-only investment options and balanced options where there is a cash component,” said Slater and Gordon head of class actions Ben Hardwick.

“The class action will allege there is no excuse for Colonial First State to have accepted such a low rate from CBA when it could have easily obtained a higher rate — either from the CBA or from any other bank,” Mr Hardwick said.

The financial sector is preparing to be inundated with class action claims following a series of damaging revelations at Kenneth Hayne’s royal commission.

Last month Slater and Gordon filed a legal suit against National Australia Bank and its wealth management business MLC on behalf of customers sold “worthless” credit card insurance.

AMP was served with five separate class actions after it admitted charging customers fees where no service was given. The separate cases are expected to be wrapped into a single lawsuit.

Rival law firm Maurice Blackburn is also setting itself up for a string of lawsuits against the banks, having flagged investigations into interest-only lending, mortgage fraud and irresponsible lending based on problematic household income benchmarks.

This morning, Slater and Gordon said its class action against CBA was open to current and former members of a range of FirstChoice-branded funds and Commonwealth Essential Super who were invested in a cash instrument.

“We think hundreds of thousands of Australians are potentially eligible to get their money back from Colonial First State and the Commonwealth Bank,” Mr Hardwick said.

“In some circumstances, the amounts may seem relatively small. But this is money that was hard-earned by working Australians and it’s time they got it back,” he said.

The law firm’s campaign targeting super funds, launched last month, first targeted AMP and CBA over poor returns and high fees in cases it argued could reap up to $500 million in damages.