Commonwealth Bank (CBA) shares yesterday shrugged off the bank’s first major comment on the financial planners scandal since a Federal parliamentary Committee called for a Royal Commission into the issue.
The shares closed up 0.8% or 69c at $81.61, that was just under the day’s high of $81.64. The low for the day early on was $80.80.
Oddly the bank didn’t release the statement to the ASX. The details are on the website, including the inquiry promised yesterday.
The bank’s CEO Ian Narev fronted a media briefing, apologised again and announced a new compensation scheme for victims of dodgy financial planning deals in the bank’s wealth business.
He said that anyone who signed up with a Commonwealth Bank financial planner between 2003 and 2012 will be able to apply for compensation, with claims are to be assessed by a "specialist Commonwealth Bank team”.
The bank said the inquiry would not cost customers anything, would be "fully transparent to customers" and will provide "an assessment of the advice received, access to an "independent customer advocate and independent review panel”.
The move could involve hundreds of thousands of clients but Mr Narev and the bank did not put a dollar figure on the cost. The bank has already paid out more than $50 million in a limited scheme that was criticised heavily in the Senate committee’s report.
CBA 1Y – CBA shares higher despite financial planning mess
Media reports said Mr Narev did not reveal any reshuffle in executive ranks connected to the scandal.
Commonwealth Financial Planning (CFP) is the CBA’s largest planning business and where the worst behaviour has so far been reported. There’s an estimated 300,000 clients in the business. The $52 million so far paid in compensation has gone to clients in this division of the bank.
Mr Narev said "some people" at CFP and another CBA financial planning division, Financial Wisdom had "ailed in their primary obligation – to act in the best interests of our customer".
"We know this is unacceptable and I unreservedly apologise to all customers affected. Poor advice provided by some of our advisers between 2003 to 2012 caused financial loss and distress and I am truly sorry for that.’’
Mr Narev said the CFP and Financial Wisdom had been "transformed" in reaction to the scandal. He said there had been new investment and changes in management, structure and culture.
"We have also invested in new systems, implemented new processes, enhanced adviser supervision and improved training.
"However, I acknowledge there are views among some customers, and indeed in the Senate report released last week, that our approach has not been sufficient for all our customers. We have listened carefully and this program is a direct response to those concerns," Mr Narev said.
The bank’s website says the CBA will be bound by the outcome of the Review Panel’s determination. "However, the customer will not be bound and will still have the option of taking the matter to the Federal Ombudsman Service or pursuing a claim in respect of the matter,” Mr Narev said.
And the bank said the process will be "overseen by an independent expert who will make their periodic reports public”.
