Last October ASIC released a report entitled "Financial advice: fees for no service," which covered advice divisions of the big four banks and AMP and described systemic failures to ensure that ongoing advice services were provided to customers who paid fees to receive these services, and the failure of advisers to provide such services. The report also discussed the systemic failure of product issuers to stop charging ongoing advice fees to customers who did not have a financial adviser.

At the time of the publication of the report compensation arising from the fee-for-service failures reported to ASIC was approximately A$23.7 million, which had been paid, or was going to be paid, to more than 27,000 customers.

Since 'report 499,' as it is also called, was published a further A$37 million has been paid or offered to more than 18,000 customers. In addition, the institutions' estimates of total required compensation for general and personal advice failures have increased by approximately 15% to more than A$204 million, plus interest.

Recent news about compensation

• AMP's total compensation estimate decreased from A$4.6 million to A$4.4 million as the group reviewed files it held on its customers to determine the compensation it was going to have to pay and revised its previous estimates.
• At ANZ, the total compensation estimate has increased from A$49.7 million to A$52.4 million due to the the identification of further failures by authorised representatives of two ANZ-owned advice businesses, namely Financial Services Partners Pty Ltd and RI Advice Group Pty Ltd. The largest component of ANZ's so-called 'compensation programme' relates to that fees that it charged customers for the Prime Access service. Here, ANZ could not find evidence of a statement of advice or record of advice for each annual review period. In addition, ANZ found that further compensation of approximately A$7.5 million ought to be paid to ANZ Prime Access customers for ANZ's failure to rebate commissions in line with its agreement with those customers.
• At CBA, there has been no substantial change in the compensation estimate, which remains at approximately A$105 million, plus interest, the majority of which relates to Commonwealth Financial Planning Ltd (CFPL). Refunds are about to occur in cases where the CFPL advisor failed to contact the client to provide an annual review.
• At NAB, since the publication of report 499, NAB has told ASIC about "the further erroneous deduction of advisor service fees for personal advice from more than 3,000 customers" of the following licensees: Apogee Financial Planning Ltd (A$11,978 from 11 customers); GWM Advisor Services Ltd (A$179,446, from 290 customers);      MLC Investments Ltd (A$9,755, from six customers); National Australia Bank Ltd (A$2,777, from seven customers); and NULIS (A$173,120, from 3,310 customers).
• Report 499 noted that Westpac had identified a systemic fees-for-no-service issue in relation to one advisor only, with compensation of A$1.2 million paid for that. ASIC made further enquiries, however, and Westpac then said that it had paid further compensation of approximately A$1.4 million to 161 customers of that advisor and 14 further advisors, in respect for fee-for-no-service failures beltween 1 July 2008 and 31 December 2015.

When compliance takes a back seat to greed

In a section of the report euphemistically entitled "Prioritisation of revenue over service," ASIC bemoans the fact that its licensees (i.e. the firms it regulates) did not have systems in place to ensure that they and their affiliates were providing services in return for the fees they were charging. Of course, their systems for recording incoming revenue were very effective at the same time. They also allowed advisors to have many more customers on their books than they would have been able to monitor or advise. Some advisers had many hundreds of customers, often having ‘inherited’ these customers and their revenue-streams from their predecessors. Indeed, the customers of one firm paid a steady stream of fees for services that included "Retention of client records by your advisor…Retaining this information may reduce the cost of providing additional advice and service in the future." All AFS licensees have, in fact, a legal obligation to keep records of their clients for seven years and this was therefore an attempt to charge for nothing.