Mr Narev broke his silence about the recent senate committee recommendation that a Royal Commission be conducted into a string of advice failures at CBA firms Commonwealth Financial Planning and Financial Wisdom (FWL).
Mr Narev apologised to customers “unreservedly”, and promised an independent review of the advice provided to all of the financial planning clients of Commonwealth FP and FWL (the Open Advice Review).
The review means that “just north” of 400,000 clients will have access to a free review of the advice provided to them since the firms were granted their licences to give advice, he said.
“We are doing this bottom-up. We are doing this customer by customer. We’re not saying there’s a pool of ‘X’, and we’re going to divide it up among a number of customers,” said Mr Narev.
CBA has undertaken a vast amount of modelling to determine how much compensation it will be on the hook for, he said – but that “is not a number that we’re making public”.
“We expect that we are going to be able to provision this in a way that won’t be material to our shareholders,” said Mr Narev.
Speaking to InvestorDaily, Morningstar analyst David Ellis said provisioning for the remediation of clients would “not have any impact financially”.
But the current spate of bad publicity is “certainly damaging for [the CBA’s] credibility”, he said.
“The problems are the impact on credibility, and the likely impact on future financial planning business,” said Mr Ellis.
“Is it likely that CBA customers or non-CBA customers will shun [the bank’s] financial advisory services in the future? I don’t know the answer to that,” he said.
“The CBA has got a lot of work to do, and it will take a number of years to fully resolve all of the issues and try to rebuild that credibility and trust that they have in this area of their business,” said Mr Ellis.
ASIC noted the announcement of CBA’s Open Advice Review in a statement late yesterday afternoon.
“In the event any breaches of law are identified in this program, ASIC requires those breaches to be reported in accordance with the law on breach reporting,” said ASIC.
“The law requires that significant breaches or likely breaches are reported to ASIC as soon as practicable, or in any event within 10 business days of the licensee becoming aware of the breach or the likely breach,” said the statement.
“ASIC is finalising its licence conditions with the [CBA], announced in May 2014,” said ASIC.
