Audio: Jo Bird talks about financial advice fees for no service report
Audio transcript: ASIC podcast
Estimated time: 7.37 minutes
In this podcast, Senior Executive Leader, Joanna Bird, talk
about how ASIC is addressing advisers' systemic failures to provide
ongoing advice services to customers who paid fees for those
Interviewer: Hello and welcome to ASIC View,
the official podcast of the Australian Securities and Investments
Commission. On today's episode we'll be discussing ASIC's report
into the extent of failure to deliver ongoing advice services to
financial advice customers who are paying fees to receive those
services. My name is Andrew Williams and with me this time around
is Jo Bird, Senior Executive Leader, Financial Advisers at ASIC.
Jo, thank you very much for your time.
Jo: Thanks Andrew, good to be with you.
Interviewer: Can you tell us more about the
kind of fees we're talking about here? Why are customers paying
these fees in the first place?
Jo: Basically the customers are paying fees to
receive an ongoing advice service such as an annual financial
advice review. However, they're not receiving the service. There
are basically two reasons why they don't receive the service.
The first is they don't actually have a financial adviser
allocated to them, because for example, their financial adviser has
left the licensee or has retired. But they're still being charged
the fee for the ongoing advice, which they're not receiving.
The second situation is where the customer does have a financial
adviser allocated to them, but that adviser doesn't provide the
advice they've agreed to provide, even though the fees are being
taken out of, for example, the customers investment accounts.
Interviewer: Are there particular organisations
that the advisers covered in this report are associated with?
Jo: This report is part of our Wealth
Management Operations project, so we're focusing on the conduct of
six of Australia's largest banking and financial services
institutions. So we're looking at AMP, ANZ, Commonwealth Bank of
Australia, Macquarie Group, National Australia Bank and
Interviewer: And it's my understanding that's
nearly half of the overall market? It's about 40% of the overall
Jo: Those institutions account for about 40% of
the advice market.
Interviewer: So what led to ASIC looking into
this issue in the first place and producing this report? And what
did you find?
Jo: Okay. We started this project as a result
of information we obtained including through breach notification
from some of the licensees. That information suggested to us that
this conduct of charging fees and not providing any services was
occurring. AMP, ANZ, CBA and NAB have all identified systemic
issues in relation to the charging of ongoing advice fees and
failure to provide those services for the fees.
Westpac has also identified a systemic issue, but in relation to
one adviser only. Macquarie hasn't actually identified any systemic
failures of the fee for no service variety. That isn't really
surprising to us actually because Macquarie has quite a different
business model to the other institutions.
So in the course of the project, well we've discovered that the
problem exists and we've successfully negotiated a range of
positive and improved compensation outcomes for the affected
customers. We've said to the institutions, you have to make sure
you fully compensate all these customers for these breaches.
And, we've made sure that the institutions have correctly
identified the customers who have been affected by the breaches.
We're making sure that the way they're calculating their
compensation is fair. We're also insisting that they go in there
and do some further reviews to make sure that they don't have these
problems elsewhere, that they haven't identified.
Furthermore, we're actually asking them to make changes to their
businesses to make sure that these failures don't occur in the
Interviewer: Is ASIC going to take any
enforcement action in relation to the conduct outlined in this
Jo: ASIC has commenced several enforcement
investigations in relation to this conduct. But regardless of those
investigations, we think it's really important that the licensees
compensate affected customers and make changes to their businesses
to make sure that these problems don't occur again in the future
and the report we've just
published is about that part of our work.
Interviewer: Now you mentioned the importance
of compensation here, can you talk a little bit about what the
compensation process so far has entailed and what we can expect to
happen in the future?
Jo: Certainly. So, as of 31 August 2016, the
compensation arising from the failures outlined in our report was
approximately $23.6 million. And that's been paid, or agreed to be
paid, to 27,000 customers also. We expect the amount of
compensation to substantially increase in the coming months. We
have asked all of the institutions to give us the estimates of how
much compensation they expect to pay for those breaches that they
have already identified. And they have estimated that they will be
paying $154 million plus interest extra to over 175,000 further
So that will take the total compensation to more than $176
Interviewer: Yes. And that's the estimate at
Jo: Yes. I should add, obviously the earlier
figure I gave you, the $23.6 million, is money that's clear and
that money's been paid or about to be paid. The future figures of
$154 million plus interest is an estimate.
Interviewer: And the amount of compensation
that each individual customer gets will differ depending on the
kind of fees that they've been paying in the first place? So it's
not a uniform average?
Jo: That's right. It differs for each customer
depending on how much they've paid and how long they were in an
ongoing fee arrangement for.
Interviewer: Speaking of those customers, if
anyone is currently paying for financial advice, or maybe they're
thinking about paying for financial advice in the future, what
advice do you have for people that are going into this industry and
maybe looked at this report and had concerns?
Jo: Okay. My first tip would be to go to ASIC's
MoneySmart website. That's a really useful resource for people who
want to get financial advice. It gives them some guidance about how much
financial advice might cost, and it really explains the
advice process. My second piece of advice would be that
customers should always check that they're receiving the services
that they're paying for.
Fortunately, in the advice space, the Future of Financial Advice (FoFA) reforms
have made it much easier for customers to check that they are
getting the advice they're paying for. Every year a customer who is
in an ongoing advice relationship should receive a fee disclosure
statement that will set out exactly what they're paying and what
service they're getting for what they're paying. And then every 2
years they will have to actively opt-in to the continuation of that
ongoing fee arrangement.
The last point I'll make was that actually if you feel like you
might have paid fees for services in the past that you didn't
receive, you might be entitled to refunds and compensation. And you
should, in the first point, lodge a complaint through the bank or
the licensees internal dispute resolution system. And if you don't
get satisfaction there, you should go to the Financial Ombudsman Service
Interviewer: That's good advice Jo. Thank you
very much for your time.
Jo: It's a pleasure. Thank you.
report and the
media release relating to the report can both be found on
ASIC's website. Just go to asic.gov.au. There's also a link to the
relevant MoneySmart page there in the media release. So check
We'll be back with another episode very shortly. Thank you very
much for listening.
Last updated: 14 Mar 2017