Remediation was mostly about bad paperwork, not bad advice
As the major banks continue winding back their financial advice remediation process, it has emerged that their exposure was owed more to bad administrative processes and the absence of paperwork than it was to the delivery of bad financial advice.
Remediation with respect to non-compliant advice was dwarfed by the amounts paid by the major banks and AMP Limited with respect to fee for no service.
According to the most recently available data compiled by the Australian Securities and Investment Commission (ASIC) remediation attributable to non-compliant advice totalled $260,114,462, while that attributable to fee for no service totalled $3,328,609,917.
And, according to a number of executives who oversaw the process, the enormous scale of remediation was driven by the absence of adequate documentary evidence and the pragmatic approach ultimately adopted in addressing that absence of evidence.
Quite simply, given the time and cost of undertaking a comprehensive file search, it was deemed more cost-effective to settle matters by offering clients a remediation payment.
The Commonwealth Bank has thus far paid the most in remediation costs, but in last update issued last year reported that remediation costs for the period were just $324 million and the other major banks have similarly indicated lower levels of provisioning for remediation.
And as the client remediation process has been wound back across the major banks, it has seen a commensurate winding back of both internal and contract jobs with as many as 6,000 full-time and part-time employees having been involved at the peak of the remediation process across the Commonwealth Bank, National Australia Bank/MLC, ANZ, Westpac/BT and AMP Limited.
Apart from clients, the major consultancies were amongst the biggest winners from the remediation exercise including companies such as Deloitte and PWC and a significant number of people employed in the remediation process over the past eight years are expected to find their way back into the financial planning profession either as planners/authorised representatives or in compliance roles.
The degree to which remediation will largely be off the books of the major banks by the end of 2023 was indicated by ASIC’s update issued in June, last year, in which it outlined when the bank expected to complete their remediation.
Westpac and ANZ cited an expected completion data of September, last year, while the Commonwealth Bank and National Australia Bank cited December across their former licensee business, with NAB also suggested that remediation with respect to JBWere Limited might not be completed until next month, February, 2023.
Whilst I agree the file searching & researching going back a long way is very costly and easier to settle for crazy rich big banks ………. ah I mean the banks shareholders actually settle these bills.
But please don’t make up BS stories to try to make the banks sound good.
Reality is the Big Bad Banks Management and AFSL compliance RM’s, along with ASIC all knew for a decade that people were being robbed blind by these Banks FFNS.
The travesty is not one single Bank Manager, Compliance RM or anyone in Banks responsible management for this massive theft has ever been busted, fined, banned or jailed.
Disgusting ASIC
Disgusting Banks.
Fully agree with Colin. This is shareholder money we’re talking about. Not a single bank employee or executive lost their house or had to cough up cash. The billion $ fine for Westpac, hailed as such a triumph for ASIC, was in reality a transfer of wealth from Westpac shareholders (and most super and pension account holders in Australia) to the Federal Government. These fee for no service investigations were a smokescreen to divert attention from the eye watering KPI’s inflicted on salaried bank planners (with some exceptions) turning them into a de facto sales force. Once you started looking into this you have to sit down.
“Fee for no advice” was a concept made up by Hayne and ASIC.
This was to justify a massively costly flawed exercise seeking perfection at the price of good.
Apply the same microscope to the medical or legal profession. The findings will be worse than anything discovered in financial services.
In 2009 I drove to the Hospital and completed a Disability pension application, and went to Centrelink. This was followed by a meeting with their solicitor for my client’s estate planning During the GFC told them to sit tight with their super and ride it out. Unlike my Accountant who was setting up SMSF telling people the world was ending so invest in 100% term deposits in a new SMSF on a daily basis, only for those clients to miss out on the recovery. In 2009, not many advisers I spoke with were doing hold ROA’s just doing fact finds, file notes and talking to clients in droves, all due to markets falling 50%. Accordingly, in today’s standards, I have breached my ethical standards, as I have not provided a ROA saying “hold” as such I would be castrated and closed down by ASIC. Now in 2021, my credibility is only judged on my ability to say “Sell CBA and buy WBC” according to ASIC definition of “service”…now my file notes are talking about that recommendation to “hold CBA shares”.
Personally, spent two months and several thousand in staff costs in getting files together from 10-11 years ago, well past the 7-year requirement. Another Adviser said he spent $50,000 on hiring someone just to get files together. In the end, as I followed their request for files (some four years after ASIC told them to investigate) they just handed back money regardless . They didn’t chase me for it as they threatened me with doing. Was told “we’ve run out of time and so we just reimbursed everyone” …Then after at least 18 months with no notice they paid money to clients, even to clients that I know would pass 2023 standards. I spent the next two months on a daily basis explaining the fee reimbursements and requests for bank details were not a fraud. Now we’ve got a situation where we can’t sign a fee agreement on the 18th of January because the anniversary date falls on the 20th of January.
An AMP licenced financial adviser?
Remediation certainly wasn’t about bad advice in the main. But it wasn’t about “bad” paperwork either. It was about paperwork that couldn’t meet ASIC’s draconian “guilty until proven innocent” standards.
Most remediation was paid to clients who did receive the service they paid for. It was paid to clients for whom there was perfectly adequate paperwork if judged by the standards of other industries, or by the requirements of the law. However ASIC concocted their own paperwork standards, which went way beyond the bounds of reasonableness. It was just another element in ASIC’s persecution campaign against all licensed financial advisers, including the honest majority.