Commonwealth Bank of Australia, the nation’s largest lender, will continue to provide financial advice to customers even after agreeing to review a decade of guidance that led to some clients losing money.
The change of management and culture, and investment in new systems is “a sign that we like the business,” Chief Executive Officer Ian Narev told Australia’s Nine television network today. The review will be open to customers who received “poor advice” at two units between September 2003 and July 2012, the Sydney-based bank said in a July 3 statement.
“We’ve spent the last four years investing heavily in this business,” Narev said. “We actually think the idea of giving customers good, affordable advice is a really critical part of what a financial institution ought to be able to do.”
Commonwealth, which has already paid about A$52 million ($49 million) in compensation to more than 1,100 clients, set up the review after the Senate economics committee last month called for an independent inquiry following an examination of misconduct by financial advisers. The company hasn’t seen a “significant downturn” from the dispute, Narev said today.
The two units -- Commonwealth Financial Planning Ltd. and Financial Wisdom Ltd. -- have improved supervision and training of advisers, Narev said in the statement. The businesses have about 400,000 clients now and probably had more in the period under review, Narev said at a news conference on July 3.
Shares of the bank closed 0.5 percent higher at A$81.95 on July 4, capping a 0.6 percent gain for the week.
The Federal government will monitor the implementation of CBA’s review with the focus on “achieving a satisfactory resolution” for the bank’s customers, Finance Minister Mathias Cormann said in an e-mailed statement on July 3.
Any compensation will be determined by losses clients suffered due to poor advice, he said. The calculations will be made by comparing the portfolio that customers were advised to invest in with what they should ideally have had, Narev said.
The company doesn’t expect provisions for the compensation to be material to shareholders, Narev said at the news conference in Sydney, declining to elaborate on the potential size.
“There are going to be some customers when these things happen who for various reasons don’t want to deal with the Commonwealth Bank,” Narev said today. “At the moment, we’re not seeing that at any discernible level but we’re never going to take these things for granted.”