The Commonwealth Bank of Australia will shortly make contact with more than 4,000 clients who may have been victims of poor advice, to make up for its original compensation efforts.
The action follows the release of the first report from the independent expert appointed to review CBA’s advice compensation activities, which confirmed that there were inconsistencies and deficiencies in CBA’s processes.
In May 2014, the Australian Securities and Investments Commission (ASIC) announced that errors had been identified within CBA’s advice compensation program, put in place for victims of advisers operating under the Commonwealth Financial Planning (CFPL) and Financial Wisdom licenses. Additional license conditions were imposed on CBA by ASIC. The regulator also appointed independent expert KordaMentha Forensic to review CBA’s past compensation activities and to monitor the firm’s compliance with the new conditions (see: CBA Under Fire for Poor Advice Compensation).
KordaMentha has now released its first report, finding there were inconsistencies with the way CBA dealt with advice client compensation, depending upon the period the clients’ files were reviewed.
According to KordaMentha’s report there were three inconsistencies between the different compensation programs CBA applied to affected clients:
- Initial letter: Clients of banned advisers Don Nguyen and Anthony Awkar received a letter indicating that the advice they received was being investigated and that CFPL would contact them with the outcome. However, most clients assessed in CBA’s separate Compensation Program, which applied to clients of a number of other CFPL and Financial Wisdom advisers, did not receive this letter.
- Offer of up to $5,000 for independent advice: Only some of the clients who were affected by poor advice were sent a letter which included an offer of up to $5,000 for independent professional advice to help them assess the validity of the licensee’s review and any compensation offer.
- Close-out letter: Following their review, of those clients who were determined not to be entitled to compensation, only a small number received notification about this from CBA. As a result, they were not given an opportunity to participate in the review and decision making processes as to whether they were entitled to compensation.
Following the release of KordaMentha’s report, CBA has agreed to contact approximately 2740 customers, to offer them up to $5000 to have their advice assessment reviewed and to seek independent advice.
CBA will also write to a further 1590 clients, informing them that a review of their file found no evidence that they had received advice, but if that is not correct, the clients will be offered $5,000 assistance and all the options available under the licence conditions.
KordaMentha’s second report will assess whether CFPL and FWL had a reasonable basis for identifying the clients and advisers for the original compensation scheme. If KordaMentha finds that other clients or advisers should have been captured, CFPL and FWL will be required to rectify this.
KordaMentha’s third report will provide an assessment of this work and CFPL and FWL’s compliance with the licence condition program.
