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Monday 24 August 2020

20-193MR ASIC update on compensation for financial advice related misconduct

Six of Australia's largest banking and financial services institutions have paid or offered a total of $1.05 billion in compensation, as at 30 June 2020, to customers who suffered loss or detriment because of fees for no service (FFNS) misconduct or non-compliant advice.

This is an additional $295.9m in compensation payments or offers by the institutions from 1 January to 30 June 2020 (Refer 20-028MR).

AMP, ANZ, CBA, Macquarie, NAB and Westpac (the institutions) undertook the review and remediation programs to compensate affected customers [i] as a result of two major ASIC reviews. ASIC commenced the reviews in 2015 to look into:

  • the extent of failure by the institutions to deliver ongoing advice services to financial advice customers who were paying fees to receive those services. See Report 499 Financial advice: Fees for no service (REP 499); and
  • how effectively the institutions supervised their financial advisers to identify and deal with ‘non-compliant advice’ – i.e. personal advice provided to a retail client by an adviser who did not comply with the relevant conduct obligations in the Corporations Act, such as the obligations to give appropriate advice or to act in the best interests of the clients, at the time the advice was given.  See Report 515 Financial advice: Review of how large institutions oversee their advisers (REP 515).

The table [ii] below provides a breakdown of the compensation payments made or offered by the institution as at 30 June 2020.

Institution

FFNS misconduct

Non-compliant advice [iii]

Compensation paid or offered

No. of customers paid or offered compensation

Compensation paid

 

No. of customers paid compensation

AMP

$145,719,911

199,425

$28,647,008

2,043

ANZ

$66,653,885

26,461

$39,182,569

1,920

CBA

$167,131,529

54,826

$9,354,027

626

Macquarie

$3,970,000

983

-

-

NAB

$368,075,052

626,863

$52,185,609

1,623

Westpac

$130,508,318

28,350

$34,197,446

1,647

Total

$882,058,695

936,908

$163,566,659

7,859

Background

REP 499

ASIC released REP 499 in October 2016 describing systemic 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 paid fees to receive those services, the failure of advisers to provide those services, and the failure of product issuers to switch off advice fees of customers who did not have a financial adviser.

REP 515

ASIC released REP 515 in March 2017 outlining findings from its review of:

  • how AMP, ANZ, CBA, NAB and Westpac identified and dealt with non-compliant advice by their advisers between 1 January 2009 and 30 June 2015; and
  • the development and implementation by these institutions of a framework for the large-scale review and remediation of customers who received non-compliant advice in the same period.

Since the publication of this report, ASIC has been monitoring the ongoing implementation of the institutions’ customer review and remediation programs.

ASIC updates on remediation

From time to time, ASIC provides updates on remediation by financial institutions through media releases. Updates on remediation payments made in 2020 for specific services or products as a result of ASIC’s work include:

Notes:

[i] The institutions do not all hold consistent data for the number of individuals remediated. The term ‘customers’ broadly refers to individuals, couples or in the case of a self-managed superannuation fund, all trustees of the fund. In some cases, an institution may remediate a customer under more than one remediation program, so the institution may count the customer more than once.

[ii] The data in this table has been compiled by ASIC from information received from AMP, ANZ, CBA, NAB, Macquarie and Westpac, or their current or former AFS licensees.

[iii] For non-compliant advice:

CBA: At 31 March 2020, CBA notified ASIC that all customers who received inappropriate advice between 1 January 2009 to 30 June 2015 have been remediated in accordance RG 256 Client review and remediation conducted by advice licensees.

Macquarie: Macquarie has not been included in this review because ASIC accepted an enforceable undertaking (EU) in January 2013 from Macquarie Equities Limited (MEL), a subsidiary of Macquarie Group. The effect of the EU was for MEL to undertake work that was largely consistent with the aims of ASIC’s review. Under the consequential remediation program, as at June 2017, MEL paid approximately $24.7 million in compensation to 263 clients (Refer 17-177MR).

IOOF: In October 2018, IOOF Holdings Limited (IOOF) took ownership of ANZ’s Aligned Dealer Groups (ADGs) comprising Millennium3 Financial Services, RI Advice and Financial Services Partners. IOOF will continue customer review and remediation for non-compliant advice in relation to the ADGs using the same independently assured framework implemented by ANZ.

Last updated: 24/08/2020 10:19