Colonial First State, the Commonwealth Bank’s wealth arm, broke the law when it failed to switch thousands of members into a low-fee into a MySuper accounts, the financial services royal commission was told.
The prudential regulator APRA was informed that Colonial First State hadn’t moved 13,000 default fund members to low fee accounts by January 2014 in breach of the Superannuation Industry Supervision Act.
Changes to the law required that default super fund members, or those who did not make a choice of fund, would automatically go in to commission-free MySuper.
Linda Elkins, the Executive General Manager of Colonial First State, told the commission the bank had made an “error” in recognising that these customers were eligible for MySuper.
Customers were then contacted.
However, transcripts from the bank’s call centre shows customers being told they must give a direction on how they would like their contributions invested.
Michael Hodge, Senior Counsel Assisting the commission, asked: “Is that statement true?”
Hodge says the only requirement is that contributions must be paid into MySuper if there is no direction from the member.
Elkins said: “Standing on its own, you’re right.”
Not moving members to MySuper enabled the continuing payment of trailing commissions to financial planners.
Elkins first appeared at the commission in April giving evidence over the fee for no service scandal.
The Commonwealth announced in June it is spinning off its wealth management and mortgage broking business as a separate company.
The new ASX-listed company, CFS Group, will include Colonial First State, Colonial First State Global Asset Management, Count Financial, Financial Wisdom and Aussie Home Loans.
The major banks have been ditching their wealth management businesses following a series of scandals involving financial planners now being investigated by the financial services Royal Commission.
All three of the businesses CBA is either spinning off or selling have been under the spotlight.
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