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ASIC report reveals advice scams at banks over many years

Chris Hamblin, Editor, London, 27 October 2016


The Australian Securities and Investments Commission has warned banks that they will have to pay at least A$178 million to customers whom they charged for advice without providing it.

Report 499, which bears the damning title of "Financial advice: fees for no service," summarises ASIC's work to ensure customers are fairly compensated for the problem. The report finds that banks charged customers a fee for an "ongoing advice service" but did not receive this service, either because the banks did not allocate advisors to them while nonetheless charging them fees for advice (usually by deduction from their investment products) or because the advisors allocated to those customers failed to meet their commitments and the licensees failed to force them to do so.

To date, approximately $23.7 million of fee refunds and compensation has been paid, or promised, to more than 27,000 customers of ANZ, NAB, CBA, Westpac and AMP under various Australian financial service licensees that these businesses possess. The licensees are conducting further reviews to determine the extent of their transgressions.

As a result of the 'Future of Financial Advice' or FOFA reforms of 2013, in a continuing fee arrangement for financial advice, the fee recipient must provide the customer with a renewal notice for the arrangement every two years. The notice must include a statement that:
(a) the customer may renew the arrangement by giving the current fee recipient notice in writing;  
(b) the arrangement will end, and no further advice will be provided or fee charged, if the customer does not renew it;  
(c) if the customer does not renew the arrangement before the end of the renewal period, the fee recipient will assume that that customer has chosen not to renew the arrangement; and  
(d) the renewal period is a period of 60 days beginning on the day on which the renewal notice and fee disclosure statement is given to the customer.

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