Claim your share of $1bn

Thousands of customers can expect compensation in the fees-for-no-service scandal

Do you qualify for some of the $1 billion that will be paid out to clients of at least nine financial institutions? It is quite a windfall. The nine have been caught out charging for advice or services that they never provided and $1 billion is the amount being returned to customers.

The amount of compensation to superannuation fund members and investors has been climbing – at times leaping – in the past couple of months. It is a monumental stuff-up by the financial groups that has been hidden from public view until recently.

But it is now out in the open, thanks to the pressure from the royal commission into financial misconduct, although the regulator ASIC has been investigating planning groups and wealth businesses for charging fees and failing to provide ongoing advice since 2015.

ASIC realised it was onto something in 2016 when it estimated that there were 176,000 customers to be paid total fees of $154 million. It now says that the figure is at least $1 billion – and chances are it could be quite a bit more as there are many financial institutions scrambling to finalise figures.

The nine groups that ASIC has identified so far are AMP, ANZ, CBA, NAB, Westpac, Bendigo Financial Planning, StatePlus, Yellow Brick Road Wealth Management and NAB’s NULIS Nominees.

An indication of the extent of the issue is given in the 3500 documents that NAB provided the week before it was to appear before the royal commission. NAB’s overcharging (and cover-up) goes back 14 years to 2004.

The fees-for-no-service scandal has been largely centred on the retail super sector, with the exception of the financial planning division for public servants

in NSW, now called StatePlus. ASIC has also named Police Financial Services, which trades as BankVic.

Retail fund fees have always been higher than those of industry funds, which do not use financial advisers as gatekeepers or pay commissions.

But one of the worst offenders has been StatePlus. Formerly called State Super Financial Services Australia, when it was set up in 1990 it was meant to protect its members’ retirement benefits from the high fees charged by financial planners. But ASIC says 46,534 public sector or retired public sector members have been charged $92 million in fees for no service and that money needs to be paid back.

As well, the royal commission has identified IOOF as another super fund that needs to pay compensation after raiding members’ accounts to pay a tax bill.

ASIC had also engaged in extensive discussions and negotiations with Godfrey Pembroke, GWM Adviser Services, JBWere and Meritum Financial Group to assess whether there are breaches or failures in the period between January 1, 2009 and December 31, 2015.

This means that if you held your superannuation or investments through one of these institutions you may qualify for a piece of the compensation pie.

What is a fee for no service?

If you visited a financial planner, you could well be paying for ongoing financial advice. The advice fee is taken out of your super fund or investments – depending on the vehicle you chose – year in, year out. In hundreds of thousands of cases people didn’t receive any advice.

ASIC says there are a few reasons why the advice wasn’t provided. For example, the adviser might have retired or resigned and the AFS licensee didn’t appoint a new adviser to service the client. Or the adviser simply failed to provide an annual review.

How do you check if you qualify for a refund?

If you are or were a customer of any of these institutions, you would want to know if you qualify for remediation. You want to know how long you have been paying unnecessary fees and how much you can expect to receive. But how do you find out?

If you haven’t received any follow-up advice and the adviser fees are clearly set out on your statements, you could work out how much you are owed yourself.

There isn’t much, if anything, on the websites of these financial groups to date. A couple have issued a media release but many don’t mention the issue.

Trusting the financial institutions to pay back the fees that you have been paying for no service doesn’t sound like a natural response. Why would you trust them?

Yet ASIC’s stance has been to ask the financial institutions to pay back the funds.

ASIC has told them they “must be transparent with each client about why they are receiving remediation. A licensee should explain to each client how the amount of compensation was calculated and that the client may complain to the licensee (and, where relevant, the licensee’s external dispute resolution scheme) if they disagree with the remediation offered.”

AMP has told its customers that it “promised to move faster to identify and compensate anyone who received inappropriate financial advice or paid for services they did not receive”. By “faster”, AMP says it estimates this will take three years “because we’re assessing advice and fees over a 10-year period across our entire network. We’ll be in touch with any customer who may be affected – there’s no need to do anything.”

But for customers who want answers earlier, AMP recommends that if you have a financial adviser and you wish to talk about any advice you’ve received you should contact them, or get in touch with AMP.

Every year that these financial groups delay paying back the fees, the more likely members will die and the less they will have to return. Commissioner Kenneth Hayne could help consumers by stipulating a short time line for repayments to be made.

Fees are going down

The royal commission’s spotlight on fees has certainly helped reduce some of the overcharging by retail super funds. For example, AMP is cutting fees for 700,000 of its MySuper customers.

If you haven’t already heard from AMP about this, the group said in a recent media release that it would communicate with these customers with full details in coming weeks.

Another group, BT Financial, announced it would no longer charge commissions on super products from October 1 this year. This affects 140,000 BT-advised clients who have been paying grandfathered commissions since the FOFA reforms of 2013. They hold BT super, investments, insurance and platform products. They will be $14 million better off.

The table provided by ASIC is dated June 30, 2018 but the royal commission has brought out more confessions to ASIC. As at August 13, ASIC estimated that the total compensation amount is at least $1 billion.