Commonwealth Bank of Australia (ASX:CBA) is undergoing a review of its financial advice given to its customers and has increased the amount of compensation for misguided advice. In July of last year, the bank launched a comprehensive review of the financial guidance it has offered and found that up to 13 per cent of its customers received poor advice. These customers have been offered $562,513 in total compensation so far. At the end of last month, a total of 7,237 clients had registered to have their files reviewed.
Last year, Labour Senator Sam Dastyari, chairman of the Senate Economics References Committee, requested that CBA’s chairman David Turner appear before a public forum to answer questions concerning poor financial advice. Following the publication of details surrounding alleged misconduct, the banking giant started to inform its customers and shareholders of a new program to review financial advice given and potentially offer compensation. Since then, CBA has doubled the number of staff working on the reviews to more than 500 full-time staff members. The alleged misconduct took place between 2006 and 2010, but the bank is reviewing client files from 2003 to 2012.
So far, CBA has only paid around $79,702 so far because some clients are still reviewing their compensation offers. Promontory Financial Group, headed by Jeffrey Carmichael, the inaugural chairman of the Australian Prudential Regulation Authority, released multiple reports detailing the banking giants misconduct. The report found that the bank had previously underpaid victims of the misconduct and attempted to hide the misconduct to avoid regulatory scrutiny. The report went further to say that the banking giant would have difficultly in accurately reviewing its poor financial advice because of old, out-dated and archived client files.
Author: Matthew Dibb
May 29, 2015
Matthew has an extensive track record in equity markets and derivative advisory. Spanning a career in several investment banks and prviate wealth groups including Macquarie Bank, his specialist knowledge relates to capital market advisory and equity market analytics. Matthew has a diploma in Financial Advisory, Applied Finance and is ADA 1 & 2 accredited.