Australia’s financial watchdog has forced the National Australia Bank to return $34.7 million it charged more than 220,000 superannuation customers for financial advice they never received.
The Australian Securities and Investments Commission (ASIC) reported on Thursday that NAB incorrectly charged the customers between September 2012 and October 2016 because of “breakdowns in internal procedures”.
The breaches occurred after NAB’s superannuation trustee, NULIS Nominees, merged five super funds into two funds operated by MLC, the bank’s wealth management arm. The two funds were ‘MLC MasterKey Personal Super’ and ‘MLC MasterKey Business Super’, and the merger turned MLC into the nation’s biggest retail super fund, with $70 billion invested.
After the transfer, the fund members were charged fees “for the provision of general advice in circumstances where no plan adviser had been appointed to provide such advice”, ASIC said.
This is one isolated example of a banking industry-wide problem recently identified by ASIC. In October, the watchdog revealed that the big four banks and AMP had been charging these phantom fees for annual investment reviews that were never provided. The ‘fees for no service’ were brought to the attention of the regulator by the banks themselves.
Garry Mulcahy, NAB’s acting general manager of wealth products, apologised and said the company “didn’t execute the change well”.
“Our intention with the proactive restructuring of our corporate super products and the upgrade of insurance products was to do the right thing by our customers, and we did provide equivalent or better outcomes for customers. However, we didn’t execute the change well and we’re sorry to those customers affected,” Mr Mulcahy said in a statement.
NAB voluntarily reported the breaches. As punishment, ASIC imposed extra licence conditions on the bank’s superannuation trustee, including an independent audit by KPMG of its compliance and risk management practices.
“We support the assurance review as it will give our customers further confidence in the systems and processes supporting our superannuation business, following a period of significant transformation,” Mr Mulcahy said.
During the transfer of members to the new MLC funds, about 400,000 members were also adversely affected by changes to the opt-out insurance policies that come with the funds, resulting in 10 members being denied or underpaid $1.6 million worth of life insurance and total and permanent disablement insurance claims which the bank must also now reimburse.
NAB has compensated these members for the fees plus interest, for a total compensation bill of $1.8 million.
ASIC has been investigating the incidence of ‘fees for no service’ since 2013 when ANZ revealed its financial planning arm had billed customers for services it never delivered. This prompted CBA and the other banks to begin disclosing “fee mistakes” in 2014.
That disclosure put the spotlight on similar practices at other banks, with the ASIC investigation exposing a systemic problem of over-charging across the industry dating back to 2008.