The best interests duty is not intended to prohibit advice providers from charging fees and costs for their services.
But to what extent have advice providers failed to deliver ongoing advice services to financial advice customers who were paying fees to receive those services?
This was the subject of ASIC Report 499 Financial advice: Fees for no service.
The report also details compensation paid to customers.
Compensation outcomes as at 31 August 2016, and future projections
| Group | Compensation paid or agreed to be paid | Estimated future compensation | Total (estimate) |
|---|---|---|---|
| AMP | $2,120,000 | $2.4m | $4.6m |
| ANZ | $16,202,860 | $33.5m | $49.7m |
| CBA | $575,587 | $105.1m plus interest | $105.7m plus interest |
| NAB | $3,523,500 | $13.4m plus interest | $16.9m plus interest |
| Westpac | $1,244,659 | N/A | $1.2m |
| Totals | $23,666,606 | $154.4m | $178.0m plus interest |
Source: Data is based on estimates provided to ASIC by the institutions and will change as the reviews to determine customer impact continue. For further details, see Table 2–Table 4 in Report 499.
The Wealth Management project covers Australian financial services (AFS) licensees that are product issuers or provide personal advice to retail clients, and that are part of AMP Limited, Australia and New Zealand Banking Group Limited, Commonwealth Bank of Australia, Macquarie Group Limited, National Australia Bank Limited and Westpac Banking Corporation.
AMP, ANZ, CBA and NAB all identified systemic issues in relation to their obligations 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. Westpac also identified a systemic issue but in relation to one adviser only.
The report also discusses the systemic failure of product issuers to stop charging ongoing advice fees to customers who did not have a financial adviser (because, for example, the adviser departed the advice licensee or retired).
The payments were principally trail commissions paid by financial product issuers to advice licensees and their representatives (advisers), based on the amount of the customer’s investment or insurance premium. Most of the systemic failures identified in the project covered in the report occurred before the Future of Financial Advice (FOFA) reforms.
ASIC observed that some licensees and advisers failed to keep adequate records or to capture sufficient data electronically to enable monitoring and analysis.
