Financial service providers have been undergoing a number of areas of scrutiny in recent times, and ASIC has released its anticipated report on the charging of advice fees without providing advice by major financial institutions (Report 499 Financial advice: Fees for no service).
The report is part of ASIC’s Wealth Management Project which is focusing on the conduct of the largest financial advice firms, including the advice arms of AMP, ANZ, CBA, NAB and Westpac groups.
According to ASIC, the failures relate to instances where customers were charged a fee to receive an ongoing advice service, but had not been provided with this service because:
- The customer did not have an adviser allocated to them, but was charged a fee for ongoing advice – usually by deduction from the customer’s investment products; or
- The adviser allocated to the customer failed to deliver on their obligation to provide the ongoing advice service and the licensee failed to ensure that the service was provided.
It should be noted that most of the reported failures occurred before the commencement of the Future of Financial Advice (FOFA) reforms.
“Changes introduced through the FOFA reforms have shone a light on the advice fees that customers are paying and the services they should be receiving in return,” said ASIC Deputy Chair Peter Kell.
“Our report identifies the institutions’ systemic failures in this area, which we are putting right by ensuring that customers are fairly compensated.”
To date, approximately $24 million in compensation has been offered to customers of the financial advice providers being investigated, with ASIC estimating that this amount will increase over time by $154 million. Details of the institutions and compensation amounts are contained in ASIC’s report.