ASIC has accepted an enforceable undertaking (EU) from two financial advice business owned by the Commonwealth Bank in relation to a failure to provide annual reviews to more than 30,000 clients who had paid for them.
ASIC accepted the EU from Commonwealth Financial Planning (CommFP) and BW Financial Advice (BWFA) after they failed to provide, or failed to locate evidence regarding the provision of, annual reviews to 31,500 customers from July 2007 to June 2015 (for CommFP) and from November 2010 to June 2015 (for BWFA).
The customers were due to receive the annual reviews as part of an Ongoing Service package which were offered to CommFP and BWFA financial planning customers for an annual fee.
Under the conditions of the EU, CommFP will be required to:
- Pay a community benefit payment of $3 million in total (in conjunction with BWFA)
- Provide an attestation from senior management detailing changes made to CommFP’s compliance systems and processes in response to the misconduct
- Provide an attestation from senior management, supported by an expert report, that CommFP’s compliance systems and processes are now reasonably adequate to track its contractual obligations to its Ongoing Service clients
- Provide an attestation from senior management, supported by an expert report, that CommFP has taken reasonable steps to identify and remediate its Ongoing Service customers who did not receive annual reviews from July 2015 to January 2018
“…these failures show that… financial institutions prioritised revenue and fee generation over the delivery of advice…”
ASIC stated that since BWFA ceased trading in October 2016, CommFP would be the focus of the compliance improvements required under the EU.
The regulator stated that as a result of its investigation, it was concerned the two groups did not provide, or had not identified, evidence regarding the provision of the reviews and CommFP and BWFA did not have adequate systems and processes in place to ensure reviews were provided to clients.
ASIC was also concerned that senior management were aware of problems in the annual review process from at least mid-2012 did not notify the regulator of the issue until July 2014.
Both CommFP and BWFA acknowledged ASIC’s concerns were reasonably held and agreed to compensate the affected customers and at the end of February 2018 had paid or offered to pay approximately $88 million of an estimated total compensation of $88.6 million.
The investigation and EU are part of ASIC’s Wealth Management Project to address failures to provide ongoing advice services to customers who paid fees to receive those services.
ASIC Deputy Chair, Peter Kell said the regulator’s report on ‘fees for no service’ found systemic failures in this area and “…these failures show that all too often the financial institutions prioritised revenue and fee generation over the delivery of advice and services paid for by their customers”.
The acceptance of an EU by ASIC is the second in as many week with the regulator recently accepting an EU from ANZ in relation to it charging more than 10,000 customers for advice reviews they did not receive (see: ANZ Receives EU Over Fees For No Service).