CBA, ANZ to fork out $2.5m over super sales as part of enforceable undertaking with ASIC

CBA and ANZ will alter how they sell super to customers after reaching an ‘enforceable undertaking’ with ASIC.

The corporate regulator has found Commonwealth Bank and ANZ have been coaxing customers, including elderly retirees, to shift their superannuation balances under the guise of providing a “financial health check” and it has asked them to stop.

The Australian Securities & Investments Commission said under the scheme branch staff were offering an “A to Z review” before pushing their own complex super products to customers and that the practice appeared to be in breach of the law because those employees were not licensed to do so.

Key to ASIC’s claim were consumer protection laws preventing unlicensed advisers from giving personal advice about complex financial products such as superannuation compared to general advice about those products.

“ASIC was concerned that customers may have thought, due to the proximity of the fact-finding process to the offer of Essential Super or Smart Choice Super, that the CBA branch staff or the ANZ branch staff were considering risks specific to the customer when this was not the case,” ASIC said yesterday.

ASIC did not take action against any employee or manager of the banks but has instead asked CBA and ANZ stop the practice, with those banks agreeing to a court-backed “enforceable undertaking”.

This is a court-enforced promise by the banks not to do the same thing again with the threat that they if they do they may face a penalty the next time around.

The regulator has required the banks to each make a $1.25m payment to an unspecified “community benefit program”, with those fines to be borne by the shareholders of the banks.

“ASIC has accepted court enforceable undertakings from the Commonwealth Bank of Australia and Australia and New Zealand Banking Group under which the banks have agreed to change the way they distribute superannuation products to their customers,” ASIC said yesterday.

The allegations of improper selling of super by CBA and ANZ highlights how the banks are seeking to extricate themselves from their financial adviser model amid ongoing scandals and to sidestep consumer protection laws, to using branch staff to directly sell financial products.

Last year, the big banks, including CBA and ANZ, committed to stamping out sales-linked commissions and bonus payments for branch staff by 2020.

The regulator said it had examined the spruiking of CBA’s Essential Super product and both ANZ’s Smart Choice Super and Smart Choice Pension products, suggesting the bank was also actively targeting retirees.

CBA acknowledged that as part of the undertaking its staff would not “recommend Essential Super or another super product immediately before, during, or immediately after, or in conjunction with, a Financial Health Check.”

The bank acknowledged some “customers may have opened an Essential Super account immediately before, during, or immediately after a Financial Health Check”. “There is a possibility that some customers may have received personal advice in this context,” the bank added.

CBA also said it had halted all new Essential Super account openings and would undertake a review of how Essential Super was offered and develop new methods.

ANZ said its staff members would no longer discuss the super product with customers before, during, after or in conjunction with a needs-based conversation from August 18.

“ANZ has co-operated with ASIC on this matter and we have agreed to change the way Smart Choice Super is sold,” said ANZ Wealth group executive Alexis George. “While we are confident our staff members have been following a robust compliance process, which has been confirmed through random customer surveys, we acknowledge ASIC’s concerns that customers may have regarded this as personal advice, and have agreed to change our distribution process.”

ASIC said ANZ and CBA staff had been selling the complex super products under “general advice” provisions despite the law requiring those complex products be sold by registered financial advisers who were legally permitted to only provide “personal advice”.

That practice is attractive to the banks because they can charge fees — and pay branch staff commissions — on general advice products but cannot when providing personal advice.

Finance Minister Mathias Cormann watered down Future of Financial Advice laws in 2013, with those changes allowing banks to charge fees and pay advice on “general advice” products such as general insurance. The government had sought further changes, such as scrapping the requirement for advisers to provide an annual fee disclosure statement to clients.