The Australian Securities and Investments Commission (ASIC) monitors and regulates the financial services industry in Australia to ensure that consumers receive appropriate advice and services, and are protected from misconduct by financial advisers and institutions.
From investigations beginning in 2016, ASIC found that six of Australia’s largest banking and financial services institutions had been providing fees for no service or non-compliant advice to consumers. Following the release of reports identifying this misconduct, these institutions developed and implemented remediation programs to compensate affected customers.
As at 31 December 2022, these institutions have paid or offered a total of $4.7 billion in compensation to customers who suffered loss or detriment due to this misconduct. This includes $1.1 billion paid or offered by the institutions between 1 July and 31 December 2022.
This article explores the key considerations as outlined by ASIC.
The misconduct
ASIC identified that these banking and financial services institutions engaged in two different types of financial advice related misconduct: providing fees for no service, and providing non-compliant advice.
“Fees for no service” refers to instances in which consumers were paying fees to institutions to receive ongoing financial advice, however this advice was not provided.
“Non-compliant advice” refers to instances in which personal advice was provided to a retail client by an adviser who did not comply with the relevant conduct obligations in the Corporations Act, such as the obligations to give appropriate advice or to act in the best interests of the clients, at the time the advice was given.
The institutions that engaged in the misconduct
ASIC’s investigations revealed that AMP, ANZ, CBA, Macquarie, NAB and Westpac had engaged in financial advice related misconduct.
ASIC commenced a project to ensure that affected customers were adequately compensated, which has since resulted in significant remediation payments to affected consumers from the institutions in question.
Compensation by institution and misconduct type
ASIC outlines the compensation that was paid or offered by the institutions for engaging in fees for no service misconduct and for providing non-compliant advice.
| Institution | Fees for no service misconduct | Non-compliant advice | ||
| Compensation paid or offered | No. of customers paid or offered compensation | Compensation paid | No. of customers paid compensation | |
| AMP | $636,624,166 | 340,573 | $42,612,265 | 2,844 |
| ANZ | $308,599,117 | 79,643 | $44,700,475 | 2,123 |
| CBA | $1,116,445,119 | 250,298 | $9,354,027 | 626 |
| Macquarie | $4,628,000 | 1,105 | – | – |
| NAB | $1,379,566,053 | 799,990 | $114,755,842 | 3,034 |
| Westpac | $970,333,025 | 119,080 | $58,785,777 | 3,341 |
| Total | $4,416,195,480 | 1,590,689 | $270,208,386 | 11,968 |
It is evident that fees for no service misconduct affected a far greater number of customers than those who were impacted by receiving non-compliant advice, and therefore the compensation associated with fees for no service misconduct is much higher.
Ongoing monitoring by ASIC
ASIC anticipates this will be the final update on compensation because most of the remediation programs undertaken by the institutions concerned are substantially complete. ASIC will continue to monitor the implementation and finalisation of remaining programs.
“While this final update on remediation figures draws a line under this program of work – following 8 years of addressing financial institutions’ and advisers’ failure to provide ongoing services to fee paying customers – we will continue to monitor institutions’ processes to complete ongoing work in this area,” said Commissioner Danielle Press.
