CBA refunds fees charged to dead customers
Commonwealth Bank has pledged to review advice fees charged to the dead customers and will pay back any unauthorised advice fees to deceased estates, with interest.
While the work is ongoing, CBA said on Tuesday an initial search of 142,000 accounts identified 12 deceased estates being charged such fees between April and June 2018.
In other initiatives aimed at fixing its wealth business, CBA said it will scrap legacy superannuation products from January 2019 which will save customers $25 million annually.
Finally, Australia’s biggest lender agreed to refund all grandfathered commissions to financial planning customers which will benefit 50,000 customers by around $20 million each year.
Here, CBA is falling in line the four other major banks, including Macquarie Bank, which have stopped paying grandfathered sales commissions for their in house financial advisers.
The bank will also offer all financial planning customers the option of renewing their ongoing service arrangements every two years.
“The changes announced today continue the process of reform underway in our wealth management businesses and form part of our response to specific issues identified this year through the Royal Commission,” said CBA Wealth Management chief operating officer, Michael Venter said in a release.
"Charging unauthorised advice fees to deceased estates is unacceptable.
“A broader review of deceased estates is underway across our advice licensees. It will go back seven years to ensure that any instances where unauthorised fees have been charged are identified and refunded with interest.
“We support the removal of grandfathered commissions from superannuation and investment products across the wider industry and believe a legislative approach should be considered.”
Despite the commissions being banned in 2013, many advisers had been reaping legacy payments from products sold before the Future of Financial Advice (FOFA) laws came into effect.
CBA said it will lose $45 million in annual income from January by rebating grandfathered financial planning commissions and cutting fees on legacy wealth products.
Morningstar analyst David Ellis says he expects similar charges to be announced in coming years. After the demerger of CBA's wealth business - due for completion by 2019 - he notes the bank will retain full indemnity for provisions and costs in the future.
"It's small beer but continues the woes the sector is experiencing."
To date, the CBA has paid approximately $270 million in compensation (including interest) to customers who were provided with poor advice or charged fees for no service.