Oz regulator cites 21 firms for ‘failures’ in providing ongoing advice

The Australian Securities & Investment Commission today has published the names and details of some 21 regulated financial advisory institutions that it said have systematically failed to provide “ongoing advice” to clients, even though they billed these clients for it.

The 48-page report, entitled entitled Financial advice: Fees for no service, covers holders of the Australian financial services license that are “product issuers or provide personal advice to retail clients, and that are part of AMP Ltd,  Australia and New Zealand Banking Group [ANZ], Commonwealth Bank of Australia [CBA],  Macquarie Group Ltd, National Australia Bank [NAB] and Westpac  Banking Corp”, the report says, in its introduction.

Importantly, most of the transgressions covered in the report occurred before the introduction of Australia’s Future of Financial Advice (FOFA) reforms, which came into effect in July, 2013, ASIC noted. It said it expected the introduction of the FOFA reforms, coupled with the “system changes they have required, [to] substantially reduce the likelihood
that the type of  systemic failures described in this report will recur”.

In an outline of the report, which is posted on the ASIC website,  the regulator said that it found the service hadn’t been provided by these entities even though they were charging customers a fee either because “the customer did not have an adviser allocated to them” yet still had the ongoing advice fee typically deducted from their investment products, or else “the adviser allocated to the customer failed to deliver on their obligation to provide the ongoing advice service, and the licensee failed to ensure that the service was provided”.

ASIC said the report was part of its so-called Wealth Management Project, which, as was announced in April 2015, was tasked with investigating “multiple instances of Australian financial services (AFS) licensees charging customers fees for financial advice, including annual advice reviews, where that advice was not provided”.

Today’s report “provides an update on the outcomes to date,” ASIC added. “We expect to issue a further update in the first half of 2017.”

According to ASIC, around A$23.7m of fee refunds and compensation has thus far been paid, or agreed to be paid, to more than 27,000 customers of the businesses reviewed in the report.  Additional refunds and compensation are expected, ASIC added, and could run as high as A$178m, plus interest.

Peter Kell, deputy chairman of ASIC, noted in a statement that the FOFA reforms had introduced changes into the Australian marketplace that had “shone a light on the advice fees that customers are paying, and the services they should be receiving in return”.

The report published today, he added, “identifies the institutions’ systemic failures in this area, which we are putting right by ensuring that customers are fairly compensated.”

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