A parliamentary committee has slammed the Commonwealth bank for significant misconduct which led to financial planning customers losing millions of dollars. SBS News looks at what happened and what affected customers can do to recover their money.
The Senate inquiry into the Performance of the Australian Securities and Investments Commission uncovered widespread misconduct by financial planners employed by the Commonwealth Bank.
The findings have rocked the financial sector.
What has the Commonwealth Bank been accused of?
The Senate inquiry found that financial advisors employed by Commonwealth Financial Planning Limited – part of the Commonwealth Bank of Australia – had deliberately neglected their duties and placed their personal interests far above the interests of their clients.
The misconduct, carried out between 2006 and 2010, included the forging of client signatures to facilitate profit-producing product switches.
The committee’s report also slammed the bank and the corporate regulator, the Australian Securities and Investments Commission, stating that the Commonwealth Bank fully identify the number of clients affected and those entitled to compensation.
Among the key finding, the committee found:
- the conduct of a number of rogue advisers working in CFPL was unethical, dishonest, well below professional standards and a grievous breach of their duties
- both ASIC and the CBA seemed to place reports of fraud in the 'too hard basket', ensuring the malfeasance escaped scrutiny and hence no one was held to account
- the CBA's compliance regime failed, which not only allowed unscrupulous advisers to continue operating but also saw the promotion of one adviser
The Senate committee, chaired by former Labor senator Mark Bishop, called for a royal commission into the matter as well as the establishment of an “Office of the Whistleblower” within ASIC.
What is the Commonwealth Bank doing about it?
The head of the Commonwealth Bank, Ian Narev, has apologised for the findings, acknowledging that poor advice had caused “financial loss and distress” to customers.
The bank has so far paid out $52 million in compensation to affected customers and has pledged to undertake an in-house review into the advice its financial planners gave to customers between 2006 and 2010.
The Open Advice Review program will review past advice, offer assessments for affected customers and will be overseen by an independent expert.
Treasurer Joe Hockey has welcomed the moves, stating “you’ve got to have a plan to ensure that people are given appropriate compensation”.
“They’re starting to do that but there's obviously a way to go,” he said.
However Opposition Leader Bill Shorten said the government should consider a royal commission into the bank's conduct, which he described as a “scandal of shocking proportions”.
“Thousands of people have lost their money for no other reason than they trusted the advice and the institution that provided the advice,” he said.
“… We don't think that the matter should rest here.”
What can financial planning customers do?
Commonwealth Bank financial planning customers given advice between 2003 and 2012 can now request a review of their case.
If unsatisfied, a second review by an independent panel can be carried out, and then taken to the Financial Ombudsman.
The Commonwealth Bank review begins in August. Affected customers can apply for a review here.
When it comes to finding a new financial adviser, Intelligent Investor’s Research Director Nathan Bell gave the following tips;
- work with a certified financial planner, rather than a qualified financial planner
- ask a financial planner where they’ve invested and compare
- ask who their financial licence is with
- look for flat fee pricing, which is not offered by all planners
Ricardo Goncalves speaks with Nathan Bell