CBA vows to refund fees charged to dead people

CBA to refund fees charged to dead people as it called for a ban on grand­fathered kickbacks and trailing commissions.

Commonwealth Bank will refund fees charged to dead people as the bank launched a campaign calling on the government to ban grand­fathered kickbacks and trailing commissions.

The nation’s largest bank has followed in the footsteps of Westpac, ANZ and Macquarie in pledging to end lucrative grand­fathered commissions, which CBA said would return a total of 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 & Investments Commission.

The Australian Banking Association also announced late yesterday it would be lobbying for a legislative ban for grand­fathered kickbacks and trailing commissions.

On top of the fee rebate, CBA will also be ending a range of fees from its outdated legacy wealth management products, such as entry fees, exit fees and contribution fees.

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CBA’s move comes as the bank looks to put the nail in the coffin for one of the highest-profile scandals of the royal commission, by reviewing whether financial advice fees had been charged to any 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 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 across the wealth management sector to see if others had done the same thing.

The inquiry was told 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, CBA said ending the fees on legacy products 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 under way 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.”

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

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.” Mr Venter said.

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

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

On Monday, ANZ warned it would book a $374m charge in the current financial year for refunding customers and other remediation costs following product reviews and for inappropriate advice or services that were not provided. Last month Westpac said it expected a $235m charge for its own remediation programs.