NAB to refund $67m in fees charged by wealth arm MLC

More than 300,000 customers will be refunded after a fees-for-no-service admission by NAB’s wealth arm MLC.

National Australia Bank has been forced to refund $67 million to customers who were charged hundreds of dollars in fees for the opportunity to access a financial adviser — even if they didn’t use the adviser’s services.

NAB today said it would be refunding customers for the so-called “plan service fee” after the Australian Securities and Investments Commission raised concerns the bank’s wealth arm, MLC, did not tell customers they could opt out of the automatic fee once they left the “business super” product to a “personal super” account after they left their job.

More than 300,000 customers will be refunded an average of $220 per person, with the bank repaying people wrongly charged fees back to 2012. That totals more than $67 million.

The issue affected customers of MLC’s masterkey personal super (MKPS) product, which is steered by NAB’s trustee NULIS. NULIS will be appearing at the royal commission’s upcoming round of hearings into the $2.6 trillion superannuation industry. Fees charged to customers for no service is expected to be one of the areas the royal commission will examine during the proceedings.

“We introduced the plan service fee in 2012 at a time of huge change in the industry, and absolutely intended it to be the right fee for MKPS members to access general financial advice to help them manage their super,” MLC chief executive Matthew Lawrance said.

“MKPS members regularly received the contact details of their financial adviser through communications such as their annual statements, but where we let our members down is that we did not clearly explain that they could elect to not have this service and they could turn off the fee. This is why we will fully refund MKPS members for any plan service fees paid while in the product,” he said.

MLC’s Matthew Lawrance.

ASIC has been targeting the wealth management sector over its habit of charging fees to customers where no service was given. As of the end of last year, the Big Four banks and AMP were preparing to repay $220m to customers for charging them for advice that was never given.

NAB already had a bill of $7m, while Commonwealth Bank is expected to repay $120m. ANZ is due to repay $50m while AMP charged $5m for fees for no service, which it then misled the regulator about.

NAB said in May it planned to demerge or float MLC, but would also consider a trade sale as it returns its focus to traditional retail banking.

Some estimate the MLC business could be worth between $3 billion and $4bn.

Among the for-profit funds to be grilled at the royal commission on governance arrangements and dealings between trustees and financial advisers will be AMP, which manages about $120 billion in funds, and other major retail giants National Australia Bank’s MLC, Commonwealth Bank’s Colonial First State and ANZ’s OnePath businesses and IOOF.

The competence of Australia’s financial regulators will also be probed, with the Australian Prudential Regulation Authority to be put on the stand for the first time during the royal commission amid criticism over its failures to safeguard the country’s nest eggs from fee-gouging and dismal ­returns.

The Productivity Commission’s report made special mention of the failings of APRA and ASIC, which it said focused “too much on funds rather than members” and didn’t police poor conduct. Under the law, superannuation trustees in charge of managing the retirement savings of members must act in the best interests of their members. However, for-profit companies listed on the stockmarket, such as AMP and the Big Four banks, also have a fiduciary duty to act in their shareholders’ best interests. The latest data from SuperRatings shows super funds run by CBA, ANZ, NAB, Westpac, AMP and IOOF — another large retail super manager — were consistently among the worst performers over the past 15 years.

Retail fund fees have been twice as high as non-profit industry fund fees. Meanwhile, retail super providers have grossly underperformed in investment returns.