Banking ’poor advice’ customer compensation surges above $1bn

National Australia Bank leads the pack, with $368m paid for its fees-for-no-service misconduct to 54,826 customers.

The regulator’s updated list of compensation payments showed Westpac, Commonwealth Bank and AMP were all grouped around the $170m mark.

Compensation payments and offers made to customers for poor advice by six of the nation’s top financial institutions have surged to $1.05bn, up by $296m in the six months to June 30.

The total amount, which includes payments and offers made by the four major banks as well as AMP and Macquarie Group, take no account of the vast sums paid by the institutions to set up their remediation programs.

National Australia Bank leads the pack, with $368m paid for its fees-for-no-service misconduct to 54,826 customers.

The bank has also paid $52m for non-compliant advice.

The industry split between the two categories was $882m for fees-for-no-service, and $163.6m in non-compliant advice.

The Australian Securities & Investments Commission, which is updating the figures every six months, conducted two major reviews in 2015 which led to the review and remediation programs.

The first covered the extent of the failure by the six institutions to deliver ongoing financial advice services to customers who continued to pay fees.

ASIC’s second review probed how effectively the companies supervised their financial advisers to deal with so-called “non-compliant” advice, or advice falling short of the relevant conduct obligations in the Corporations Act.

The regulator found in 2016 that there had been systematic failures in the advice divisions of AMP, ANZ, CBA and NAB, as well as some of their product issuers.

These included the failure to ensure provision of ongoing advice services to customers who had paid fees to receive the services, failure by advisers to provide the services, and failure by product issuers to switch off the advice fees charged to customers who did not have a financial adviser.

As the remediation bill continues to rise, so does the number of court cases lodged by ASIC.

Last week, the regulator began Federal Court civil penalty proceedings against StatePlus, the financial advice unit of industry super fund First State Super, alleging it had charged 37,000 members fees for advice that was never received.

Proceedings were also taken against BT Funds Management and Asgard, which are part of the Westpac group.

Westpac acknowledged the allegations and said it would not defend the proceedings, adding the issue was self-reported to ASIC in July 2017 and customers had been contacted and remediated.

ASIC has also taken action against National Australia Bank over similar issues, in 2018 and again last year.

Four court cases have now been lodged after the Hayne financial services royal commission found there was an industry-wide fees-for-no-service scandal.

ASIC deputy chairman and head of enforcement Daniel Crennan said last week that all legal cases emerging from the royal commission would be before the courts by the end of 2020.

The regulator’s updated list of compensation payments showed Westpac, Commonwealth Bank and AMP were all grouped around the $170m mark.

CBA booked $167m in fees-for-no-service misconduct and $9m in non-compliant advice, followed by AMP ($146m and $28.6m), and Westpac ($131m and $34m).

Macquarie brought up the rear at $4m for fees-for-no-service.

ASIC noted that Macquarie had not been included in the review because the investment bank had accepted an enforceable undertaking in January 2013 from Macquarie Equities.

The effect of the EU was for Macquarie Equities to undertake work that was largely consistent with the aim of ASIC’s review.

As at June 2017, Macquarie Equities had paid almost $25m in compensation to 263 clients.