Commonwealth Bank steps up to refund the fees charged to dead customers and promises to rebate all grandfathered commissions for Commonwealth Financial Planning (CFP) customers from January 2019.
In an announcement dated 9 October 2018, Commonwealth Bank announced its plan to initiate further improvement in its wealth management business. However, the highlight of the story was its review and redemption program.
The Bank told that it will review unauthorized advice fees charged to any deceased estate and if identified, it will refund the entire amount with interest. The decision comes after the Hayne Royal Commission unveiled the group of advisers who were charging dead customers for advice and fees for no services to the living.
CBA Wealth Management Chief Operating Officer, Michael Venter stated that the ongoing process of reform in company’s wealth management system forms part of response to particular concerns raised by Hayne Royal Commission this year.
Under the investigations, royal commission into banking sector found that CBA’s compliance system has failed in detecting the breach of practices undertaken by its subsidiary Count Financial and other advice licensees. Following which the Bank decided to buckle its current customers and remediate the families of the deceased.
Michael Venter stated it is unacceptable to charge unauthorized fees to deceased estates. He told that the extensive review of deceased customers is underway across the company’s advice licensees.
The inspection is said to go back seven years to ensure that any case where unauthorized fees have been charged is identified and paid back in full payment with interest. So far, in the initial search of 142,000 customers’ accounts, the Bank has identified 12 deceased estates which have been charged with unauthorized fees between April and June 2018.
Besides the review of charging to the dead, Commonwealth Bank has decided to rebate all grandfathered commissions to Commonwealth Financial Planning (CFP) customers from January 2019. This will result into benefitting about 50,000 customers by saving approximately $20 million per year. The Bank further tables an option for CFP customers to get their ongoing services arrangement renewed every two years.
Mr. Venter stated that the company supports the removal of grandfathered commissions from superannuation and investment products across industry wide, with an expectation to legislative approach be taken into consideration.
The announcement also informed about the CBA’s move to initiate removal of fees on legacy wealth products from January 2019 which will enable customers to save approximately $25 million.
The Open Advice and Service Delivery Reviews and other related programs undertaken by CBA has burnt its pockets to approximately $270 million. This amount was paid by the Bank in respect of compensations including interest to customers for rendering poor quality services or for charging fees for no service at all. In the efforts of saving best interest of the customers, the Commonwealth Bank has reportedly spent approximately $580 million over the past six years on the enhancement of its advice business process, administering and assuring advice remediation and implementing its Future Advice Model.
The stock of Commonwealth Bank is currently moving down as its share price has fallen by 0.851% to $68.760 on 9 October 2018 (1:34 PM AEST). The stock has seen a performance change of -9.59% over the past one year. However, it is currently trading at a PE of 12.980 x with market capitalization of $122.77 billion.
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