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Royal commission focus on financial advice

 

DODGY FINANCIAL ADVICE IN THE SPOTLIGHT AT THE BANKING ROYAL COMMISSION

FEES FOR NO SERVICE

The Australian Securities and Investments Commission ordered AMP and the big four banks to compensate customers who were charged fees for financial advice they never received.

About 306,000 customers had been paid $216.42 million in compensation for fees for no service by February this year.

The final total is expected to be $218.94 million to more than 310,000 customers.

THE FEES FOR NO SERVICE CASE STUDIES:

* AMP and its subsidiaries AMP Financial Planning, Charter Financial Planning and Hillross Financial Services

AMP has a network of 2800 authorised financial advisers through its various advice licensees.

The contractural arrangements typically include a buy-back clause where the advisers' client register can be acquired by the licensee and held until it is on-sold.

The case study will examine AMP's conduct in connection with the charging of fees to clients that its licensees had bought back from advisers and who did not receive services.

* CBA and its subsidiaries Commonwealth Financial Planning and Count Financial Planning

The inquiry heard clients often received no service or did not receive the service they were entitled to, yet ongoing fees continued to be deducted from their investments.

CBA subsidiaries Commonwealth Financial Planning and BW Financial Advice are paying $88.6 million in compensation to 31,500 customers over fees for no service conduct.

INAPPROPRIATE FINANCIAL ADVICE

* Westpac and BT Financial Group

This case study concerns the financial advice provided by two advisers and the adequacy of Westpac's systems and processes for preventing and detecting inappropriate advice provided by employed financial advisers.

* ANZ, RI Advice Group and Millennium 3 Financial Services

The case study concerns the financial advice provided by two advisers and the adequacy of the systems for preventing and detecting inappropriate advice by authorised representatives.

* AMP, AMP Financial Planning, Charter Financial Planning and Genesys Wealth Advisers

The case study concerns three advisers within AMP's network.

It will look at specific forms of inappropriate advice, including insurance switching, superannuation switching, self-managed superannuation fund advice and conflicted advice.

It will also consider systemic issues concerning the recruitment of advisers, the vetting of advice and client remediation.

IMPROPER CONDUCT BY FINANCIAL ADVISERS

* NAB

This concerns the incorrect witnessing of beneficiary nomination forms by NAB financial advisers.

In late 2016, NAB identified a financial adviser who had forged two customers' initials and asked another employee to falsely witness a beneficiary nomination form.

By October 2017, it had identified 353 employees involved in incorrectly witnessing binding beneficiary nomination forms for superannuation funds.

The incorrect witnessing potentially affected the validity of beneficiary nomination forms for about 2500 customers, the royal commission heard.

* ANZ and Millennium 3 Financial Services

The case study centres on a financial adviser who engaged in a range of improper conduct, including falsifying documents, misappropriating customer funds and engaging in misleading and deceptive conduct in relation to customers.

DISCIPLINARY SYSTEM WITHIN FINANCIAL ADVICE SECTOR

The inquiry will hear from ASIC, the Financial Planning Association of Australia, the Association of Financial Advisers and Dover Group (financial advisers).

Source: Senior counsel assisting the royal commission Rowena Orr QC.