- The Royal Commission is investigating dodgy advice from financial planners.
- The number of financial advisers is now 25,000, up from 18,000 in 2009, but only a third have a university degree.
- In this second round of hearings, the Royal Commission is looking at fees for no service, investment platform fees, inappropriate financial advice, improper conduct by financial advisers, improper conduct by financial advisers.
The Financial Services Royal Commission has turned its attention to the fees charged by the big four banks and AMP for advice they didn’t actually give their customers.
Rowena Orr, senior counsel assisting the Royal Commission, says Westpac, the NAB, the ANZ and the Commonwealth have all admitted misconduct relating to fees for no service.
Corporate regulator ASIC had told the commission that $383 million in compensation has been paid to consumers for poor advice.
The number of financial advisers in Australia has increased to more than 25,000 from about 18,000 at the end of 2009 but only 35% of these had informed ASIC that they had a university degree.
Orr says this second round of hearings will touch on some of the events in the financial industry in recent years, including Storm Financial, which went into administration in 2009, and Commonwealth Financial Planning.
“We will summarise what consumers have told the commission about their experiences with financial advice through public submissions submitted by the commission’s online portal,” she told the commission hearing today.
The commission will present three case studies about inappropriate advice, exploring whether the behaviour of financial advisers could be attributed to culture or remuneration.
The first case study was about Westpac and two financial advisers, Rama Krishan and Andrew Smith.
“This case study will consider the financial advice provided by those two advisers and the adequacy of Westpac’s systems and processes for preventing and detecting inappropriate advice by employed financial advisers,” says Orr.
The second case study is about ANZ and two financial advisers, John Doyle, who was an authorised representative of RI Advice Group, and Christopher Harris, who was representing Millennium 3.
The third study concerns three advisers on AMP’s network. This will look at insurance switching, superannuation switching, self-managed superannuation fund advice and conflicted advice.
The first witness was Peter Kell, deputy chair of ASIC.
He says ASIC is aware of eight companies charging fees for no services: ANZ Bank, the Commonwealth, NAB, Westpac, AMP, Yellow Brick Road, First State and Bendigo Bank.
“The systems that underpinned the ability to collect revenue were better developed than the systems to ensure the clients received the advice service,” he says.
He says fees are usually between $500 and $2000 a year but could be as high as $20,000.
The big four banks have been preparing for the royal commission since it was announced in November following a long political debate over a series of scandals.
Australia’s major banks face 15 different major inquiries, including the Royal Commission, following a series of scandals involving giving poor financial advice to customers.