Yahoo Finance Payments on pause: Here’s why CBA is giving out FREE financial advice to customers
Commonwealth Bank’s financial planning arm – Commonwealth Financial Planning (CFP) – has put their service fees for financial advice on pause.
Corporate regulator ASIC has ordered CFP to “stop charging or receiving ongoing service fees from its customers” and “not enter into any new ongoing service arrangements”.
What does it mean for me?
Current customers won’t be charged for financial advice until CFP proves it’s fixed up its compliance systems and processes.
Also, anyone who isn’t yet getting advice from Commonwealth Financial Planning – but was hoping to – won’t be able to do so in the meantime.
“Existing clients will continue to receive services under their ongoing service agreements but will not be charged by CFP.”
CFP won’t be able to charge fees or accept new customers until it satisfies ASIC that all of the outstanding issues are remedied, ASIC said.
A bit of background
The regulator has ordered CFP to do this because it has failed to properly fix a problem they said in April 2018 that they would fix.
CFP entered into an enforceable undertaking (EU) with the regulator in April 2018 for failing to provide advice to customers who had paid for it.
An enforceable undertaking is a legally binding agreement that is proposed and implemented as an alternative to civil or administrative action when laws have been contravened.
As part of the EU, the banks’ financial planning arm had agreed (among other things) to remediate customers; fix up their compliance systems and processes that had led to the misconduct; as well as engage an independent expert – Ernst & Young – to provide a report to testify that the new compliance systems and processes were adequate.
However, Ernst & Young’s latest report said it still had concerns about the bank’s systems: for instance, the bank still had a “heavy reliance” on manual controls which “have a higher inherent risk of failure due to human error or being overridden”.
It led the regulator to determine that the bank had failed to meet its requirements under the EU.
As result, a clause in the EU – which requires CFP to stop charging service fees and not enter new arrangements – has been triggered.
“ASIC included this requirement in the EU to ensure that if CFP were not able to satisfy ASIC that the fees for no service conduct would not be repeated, CFP would have to stop charging ongoing service fees so as to significantly reduce any further risk to clients.”
The final report of the Banking Royal Commission will be handed down at 4:10pm today where revelations of the Commonwealth Bank’s misconduct were aired.
—with AAP
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