The Commonwealth Bank of Australia (CBA), the institution at the centre of a financial advice scandal that led to massive reform of the sector in Australia, has paid almost AU$3m (£1.47m) to customers who received poor advice.
However, in a report released on Tuesday, the bank said that the majority of consumer complaints about the quality of its advice were unfounded, with 87% receiving “appropriate” advice.
Following the scandal, CBA – which as well as being the nation’s biggest bank is also one of its biggest financial advice providers – set up its own investigation, in which it invited customers who felt they had received poor advice to apply for compensation.
Since launching the program in 2014, CBA has received almost 10,000 applications from disgruntled customers, the bank revealed on Tuesday. However, only 1,937 – or around a fifth – have had their applications processed. The vast majority have received no compensation, with just 171 receiving payments worth $2.9m.
CBA said, of the cases so far assessed, 9% received poor advice, with 6% losing money as a result. The bank found that during the period (2003-2012) 87% received appropriate advice.
The manager of the advice review, Leif Gamertsfelder, said the latest report shows the review is being conducted in a “thorough, fair and consistent way”, adding: “The report shows that our investment in building the program’s infrastructure has increased our capacity to assess advice, and deliver on our commitment to do the right thing by customers.”
News of the CBA advice scandal broke in 2010, and led to the banning of eight planners who had allegedly knowingly given poor advice for the sake of high commissions. It led to the Future of Financial Advice (FoFA) reforms, which transformed the financial advice industry in Australia from a commission-driven to a fee-for-service one.
When the Liberal government tried to wind back the previous Labor government’s reforms in 2014, there was a massive public backlash, and the government was forced to drop its commission-friendly policy.