The major banks have issued a 'mea culpa' after an ASIC report revealed their respective wealth management arms failed to provide annual reviews to clients who had paid for them.
As ASIC report titled Financial advice: Fees for no service released yesterday revealed that the big four banks and AMP have compensated approximately $23.7 million to customers – a figure the regulator estimates could rise to $178 million.
The compensation is being paid because the wealth management arms of the banks and AMP have failed to deliver ongoing annual reviews to their clients, said the report.
Responding to the report, the Australian Bankers' Association (ABA) said the issue related to "problems with legacy manual systems and processes".
"It is disappointing that the administrative errors responsible for this problem were allowed to occur. The banks involved acknowledge that their compliance systems and record keeping were inadequate," said ABA executive director for retail policy Diane Tate.
The majority of the $178 million in estimated compensation will be paid by the Commonwealth Bank, which is in the process of reimbursing $105.7 million plus interest to its advice customers.
A statement by CBA said the fee refunds for affected advice customers are scheduled for completion by June 2017.
"Action to avoid [the] issue occurring again [have] already [been] undertaken as part of a long-term business transformation," said the CBA statement.
ANZ is due to refund $49.7 million to its customers, according to the ASIC report. The bank announced a $30 million reimbursement project in April 2015 after it was revealed that 8500 Prime Access clients had not received annual reviews.
NAB will refund $16.9 million plus interest to its clients; AMP will refund $4.6 million; and Westpac is set to reimburse its clients $1.2 million.
Industry Super Australia (ISA) released a statement that claimed the "shocking sham advice figures" point to the poor governance of Australia's major banks.
ISA chief executive David Whiteley dismissed the ABA's claim that the compensation is the "mere result of 'technical' issues". Rather, he said, they reveal "systemic failures which span a number of years".
"The ASIC findings are another shocking insight into the governance of Australia’s major banks. It is instructive that the banks vigorously lobbied against laws that prohibited this type of misconduct," Mr Whiteley said.