AMP, ANZ, CBA, NAB and Westpac have now paid or offered customers $222.3 million in refunds and interest for failing to provide advice to customers while charging them ongoing advice fees.

This represents a further $6.4m in payments and offers from these institutions since the last ASIC media release (17-438MR) on the fees for no service (FFNS) project, which provided compensation figures as at 31 October 2017.

In addition, ASIC is overseeing FFNS remediation programs by other Australian financial services (AFS) licensees that have identified potential FFNS failings, including Bendigo Financial Planning Ltd, Police Financial Services Ltd (trading as BankVic), State Super Financial Services Australia Limited (trading as StatePlus), and Yellow Brick Road Wealth Management Pty Ltd. The total amount now paid or offered to customers across both groups of licensees is $259.6m.

ASIC is also aware that five AFS licensees or institutions have provisioned for future remediation payments, with four of these to date providing to ASIC amounts for future remediation (see below in notes). If all of these provisions are paid in full, FFNS remediation may exceed $850m.

The table provides compensation payments and estimates reported to ASIC as at 30 June 2018. Some institutions' total estimates have changed since ASIC’s previous media release as they have further investigated the compensation required and, in some cases, identified additional failures needing remediation.

Source: Data reported by the AFS licensees to ASIC as at 30 June 2018.

Table notes

(1)  This includes amounts paid to customers as well as amounts paid to unclaimed monies and charities (for example, where the licensee was unable to contact the customer).

(2)  Some estimates exclude interest. Estimates may change, as each entity further investigates the failures. Some entities do not yet have estimates of future remediation, but have provisioned for (or are in the process of provisioning for) FFNS remediation in their financial statements. The provisions may include amounts already paid.

(3) In addition, on 27 July 2018, AMP announced that it has provisioned in relation to potential remediation in relation to ASIC report 499. AMP has advised ASIC that its pre-tax estimate for FFNS remediation is $240m, or $360m including interest. This estimate covers all the advice licensees within the AMP group (both the salaried advisers and the aligned dealer groups) and covers remediation for the period up to 31 December 2017.

(4) ANZ has advised ASIC that it has provisioned for FFNS remediation, but has not yet provided details of that provision to ASIC.

(5) NAB has provisioned a further $65m across its financial advice licensees relating to FFNS remediation and project costs.

(6) Though Westpac has not provided ASIC with an estimate for future remediation, it informed ASIC that it has provisioned approximately $24m relating to FFNS remediation for the 2017-18 financial year for Westpac Banking Corporation, of which 3.24m had been paid as at 30 June 2018. This provision does not cover future periods, or other Westpac owned AFS licensees.

(7) StatePlus has not provided ASIC with an estimate of future FFNS remediation. However, it has provisioned a further $53m relating to FFNS remediation, which it expects will cover both further FFNS customer remediation and remediation project expenses.

(8) The table shows compensation paid by NAB's superannuation trustee, NULIS Nominees (Australia) Limited (NULIS), for two breaches involving failures in relation to the provision of general advice services to superannuation members who paid general advice fees. (Other fees referred to in this release relate to personal advice). This remediation was completed in 2017. As announced by ASIC on 2 February 2017 ASIC imposed additional licence conditions on NULIS following this and another breach: ASIC MR 17-022. The failure was by MLC Nominees Pty Ltd and MLC Limited. Whilst on 1 July 2016 the superannuation assets governed by MLC Nominees were transferred by successor fund transfer to NULIS, and on 3 October 2016 NAB divested 80% of its shareholding in the MLC Limited Life Insurance business, accountability for this remediation activity (including compensation) remains within the NAB Group.

(9) On 26 July 2018 NULIS announced a further remediation program relating to general advice fees. This amount excludes interest.

How to remediate FFNS failures

ASIC has published an Information Sheet 232 (INFO 232) that sets out ASIC’s expectations of AFS licensees remediating FFNS breaches. 

• Read the information sheet

Next steps

ASIC will continue to monitor the above FFNS licensees compensation programs.

In addition, ASIC will continue to supervise the further reviews for those entities subject to the FFNS project, to determine whether any additional instances of fees being charged without advice being provided are identified. ASIC expects to publish a media release on their further reviews in the coming months.

Background

In October 2016, ASIC released Report 499 Financial advice: fees for no service (REP 499). The report described systemic failures of the advice divisions of the largest banks and AMP, as well as some of their product issuers, to ensure that ongoing advice services were provided to customers who paid fees to receive these services, the failure of advisers to provide such services, and the failure of product issuers to switch off advice fees of customers who did not have a financial adviser.

At the time of the publication of the report compensation arising from the fee-for-service failures reported to ASIC was approximately $23.7 million, which had been paid, or agreed to be paid, to more than 27,000 customers.

ASIC has published updates to the above remediation in May 2017 (17-145MR) and in December 2017 (17-438MR).

MoneySmart

Customers who are paying ongoing advice fees for services they do not need can ask for those fees to be switched off. Customers who have paid fees for services they did not receive may be entitled to refunds and compensation, and should lodge a complaint through the bank or AFS licensee's internal dispute resolution system or the Financial Ombudsman Service.

ASIC's MoneySmart website explains how customers can check they are getting the financial advice they paid for. It also has a financial advice toolkit to help customers navigate the financial advice process and understand what they should expect from an adviser, and useful information about how to make a complaint.

www.asic.gov.au

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THE Australian Retailers Association (ARA) said the CSIRO report released yesterday indicates that the time has come to legalise nicotine e-cigarettes in Australia.

The e-cigarettes, smoking and health literature review indicates that e-cigarettes can assist some smokers in quitting traditional cigarettes, and provides evidence for a range of health improvements when conventional tobacco smokers make the switch.

Russell Zimmerman, executive director of the ARA, said the access to less harmful alternatives is a no-brainer for Australians, and the Government should get on with regulating these products in Australia.

“The findings in this report show support for the ARA’s position - e-cigarettes and other vaping products can be used as a quitting aid for smokers,” Mr Zimmerman said.

“As e-cigarettes are less harmful, the CSIRO report showed health improvements in smokers who used e-cigarettes instead of conventional cigarettes.”

The ARA believe that without access to less-harmful alternatives, many smokers will continue to find it difficult to quit.

“According to the CSIRO’s findings, it is clear that e-cigarettes are preferred by some smokers as a cessation method as trials have found nicotine e-cigarettes are more effective at reducing conventional smoking than nicotine free e-cigarettes or no e-cigarettes,” Mr Zimmerman said.

The ARA believe that allowing the regulated sale of nicotine e-cigarettes will also satisfy the CSIRO’s calls for further monitoring and research.

“When restrictions force consumers to import these products, rather than purchase them legally at home, consumers are exposed to the risk of unregulated and potentially unsafe products,” Mr Zimmerman said.

“The Government should listen to the CSIRO and alleviate concerns about unregulated usage by allowing retailers to sell nicotine e-cigarettes legally. This will provide regulators and authorities the opportunity to conduct further studies and address any fears.”

Along with the CSIRO’s report, a Crosby Textor poll conducted in June found almost 50 percent of Australians and more than two thirds of smokers support the legalisation of e-cigarettes and personal vaporisers in Australia.

“The Crosby Textor poll showed that 70% of Australians and 67% of smokers agreed that vaporisers were a way to completely phase out cigarette smoking in Australia,” Mr Zimmerman said.

“The CSIRO’s report provides further justification for the Government to show leadership in improving the health of smokers by lifting the restrictions on e-cigarettes.”

The CSIRO’s report follows the recent Inquiry into the Use of Electronic Cigarettes and Personal Vaporisers in Australia. The ARA made a submission to the Inquiry, calling for the legalisation of these harm-reduction alternatives, as current restrictions on the sale of nicotine-based vaping products may lead to consumers importing these products from overseas or turning to black markets.

“The number of people who are already importing nicotine-based e-cigarettes from overseas is growing, which translates into a significant loss of revenue to overseas retailers,” Mr Zimmerman said.

“Allowing retailers the opportunity to sell these harm reduction alternatives is a win-win, as it provides health benefits for the community, and economic benefits, including a reduced burden on the health system and crucial support for local retailers.”

About the Australian Retailers Association:

Founded in 1903, the Australian Retailers Association (ARA) is Australia’s largest retail association, representing the country’s $310 billion sector, which employs more than 1.2 million people. As Australia’s leading retail peak industry body, the ARA is a strong pro-active advocate for Australian retail and works to ensure retail success by informing, protecting, advocating, educating and saving money for its 7,500 independent and national retail members throughout Australia. For more information, visit www.retail.org.au or call 1300 368 041.

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HE State and Federal Governments should resolve their differences on the National Energy Guarantee (NEG) by taking action to upgrade the interstate electricity connector sending Queensland’s surplus power to the southern states, according to the Queensland Resources Council  (QRC).

QRC chief executive Ian Macfarlane said Queensland was the ideal case study on how to deliver power affordability, reliability and emissions reductions under the NEG.

“The Federal Government wants to have a ‘NEG-plus’ plan, which is the National Energy Guarantee plus a range of other actions to bring down prices and increase supply,” Mr Macfarlane said.

“A big plus for the entire East Coast would be an upgrade to the electricity interconnector between Queensland and New South Wales.

“Queensland already keeps the lights on in New South Wales and Victoria through the export of our surplus coal-fired electricity. An upgraded interconnector would mean we can sell more electricity, guaranteeing those Australians with the misfortune of not living in Queensland - a more stable power supply.

“For Queensland, it would send the signal to keep developing electricity generation, which will be primarily renewables due to the cost of gas, as well as maintaining a young coal-fired power generation fleet. This could include a new coal-fired power station using HELE technologies.

“For Queenslanders, it will mean more revenue that the Palaszczuk Government can reinvest in services and infrastructure. Those using Maroon power will be paying us for it," Mr Macfarlane said.

“Queensland is also delivering on the other extras that go hand-in-hand with the NEG, including the sustainable development of our gas resources.

“Queensland has energy security. We have coal to provide baseload power. We supply gas to the domestic market, and more is coming online. And we have a massive expansion of renewables.

“While Queensland benefits from our full energy mix, the southern states are, quite frankly, energy mixed up. They’re closing coal-fired power stations. They’re not developing gas. It’s harder, not easier, to develop renewables.

“To deliver on ‘NEG-plus’ other states must follow Queensland’s lead. That means both the Federal and State Governments should resolve their differences and deliver on the NEG.”

www.qrc.org.au

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IN A LETTER to federal and state energy ministers ahead of their COAG Energy Council meeting on Friday, the Australian Alliance for Energy Productivity (A2EP) demanded that energy productivity be put on the agenda.

“The cheapest and quickest way to reduce energy bills is to help businesses and householders use energy smarter – that means increasing energy efficiency and productivity,” said A2EP chair Jonathan Jutsen.

“High energy prices in Australia are for now an uncomfortable reality. If COAG ignores smarter energy use at this meeting, it will leaves householders and businesses to deal with higher energy costs.

“High costs are within COAG’s responsibility to address. It has a National Energy Productivity Plan (NEPP) gathering dust on a shelf. At their meeting on Friday, energy ministers could deliver meaningful reductions to bills if they fund and implement the NEPP, and commit to expanding the program and setting firm deliverables and timetable.

“Using energy better is the smart, first move to reduce costs. Current approaches to energy policy fail to consider smarter energy use. This leads to increasing costs, and ever greater demand for energy.

“COAG has failed to progress the NEPP and therefore has failed to address energy costs for households and business.

“A2EP is calling on the COAG Energy Council to reduce costs immediately through smarter use of energy, not solely focussing on long-term and costly insfrastructure investments," said Mr Jutsen.

About A2EP

The Australian Alliance for Energy Productivity is a not for profit coalition of business, government and environmental leaders promoting a more energy productive economy.

www.a2ep.org.au

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