CBA advice remediation costs pass $1b
Commonwealth Bank of Australia (CBA) increased costs related to remediation to aligned advice by $273 million during the 2020/21 financial year.
In a statement to the Australian Securities Exchange (ASX), the bank said provisions for aligned advice remediation issues and costs increased by $273 million, including ongoing service fees charged where no service was provided.
As of 30 June, 2021, provisions had increased from $804 million at the end of June 2020 to $1 billion which included $468 million for customer fee refunds, $423 million for interest on fees subject to refunds and $127 million in costs to implement the remediation programme.
“Aligned advisers” were those who were authorised representatives at the Financial Wisdom, Count Financial and Commonwealth Financial Planning-Pathways.
These figures assumed an average refund rate across licensees of 39%, up from 37% in June 2020, and compared to a refund rate of 22% for the firm’s paid salaried advisers.
Provisions for banking and other wealth customer remediation fell from $227 million at the end of June 2020 to $159 million.
It had also made a smaller provision related to Count Financial where provisions had been increased from $252 million to $260 million. It currently had indemnity for up to $300 million to cover remediation of historical conduct and had previously been increased in May 2021.
CBA said there had also been an increase in litigation and regulation proceedings against the group with two class actions commenced during the period, bringing the total of ongoing actions to 11. This included two class actions related to financial advice, one regarding life insurance sales and one against Count Financial.
However, CBA said it was “not possible to determine the ultimate impact” or cost to the group.
AUTHOR
Laura Dew
Recommended for you
The FSCP has announced its latest verdict, suspending an adviser’s registration for failing to comply with his obligations when providing advice to three clients.
Having sold Madison to Infocus earlier this year, Clime has now set up a new financial advice licensee with eight advisers.
With licensees such as Insignia looking to AI for advice efficiencies, they are being urged to write clear AI policies as soon as possible to prevent a “Wild West” of providers being used by their practices.
Iress has revealed the number of clients per adviser that top advice firms serve, as well as how many client meetings they conduct each week.
