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'CONbank' says sorry but consumer protections must go

Commonwealth Bank apologises for poor financial advice while lobbying for removal of consumer protections 

3 July 2015

Today the Commonwealth Bank issued a public apology for nearly ten years of bad behaviour from their financial advisers.

CHOICE questions the sincerity of this apology as the Commonwealth Bank has been publicly lobbying for the reduction of consumer protections in the Future of Financial Advice or FoFA legislation.

"If the Commonwealth Bank was truly sorry they would not have lobbied to remove essential consumer protections for financial advice. Just a few weeks ago the Commonwealth Bank wrote to the government calling for lower standards for financial advisers – this action does not match today's apology," says CHOICE Chief Executive Alan Kirkland.

Eight weeks ago the Commonwealth Bank made a submission to a Senate Inquiry examining the Government's proposed amendments to the FoFA protections. The Bank claimed that the original consumer protections resulted in "unnecessary complexity and burden on industry."1

In the submission the Commonwealth Bank supported all proposed amendments to FoFA, including watering down of the obligation that a financial adviser must act in their client's best interests at all times.

"Today the Commonwealth Bank has acknowledged that advisers failed in their primary obligation – to act in their client's best interests. Yet they have successfully lobbied for the obligation to act in a client's best interests to be watered down in legislation. If the Commonwealth Bank is genuinely repentant they need to back strong consumer protections."

"Only three days ago, the Government introduced regulations which wind back protections for consumers seeking financial advice. These regulations took effect from 1 July 2014 but can still be repealed by the Senate."

"Now more than ever, consumers need professional financial advice to help them save for their retirement, not advice distorted by hidden fees and advisers pushing products that don't meet their needs."

The Commonwealth Bank's apology was issued after a Parliamentary Inquiry uncovered an aggressive sales culture amongst Commonwealth Bank financial planning businesses which led to forgery, advisers hiding information from their clients and people losing life savings.

"Consumers must be able to feel confident that they are getting impartial financial advice they can trust. And advice should not be clouded by any type of financial incentive that reward them based on how much of a particular product they sell.

CHOICE has launched a petition calling on all politicians to oppose the wind back of FoFA at www.choice.com.au/consumer-advocacy/campaigns/financial-advice

FoFA Background

The Future of Financial Advice reforms were introduced in 2012 following extensive consultation with industry, government and consumer groups.

On Monday 30 June 2014, Acting Assistant Treasurer Mathias Cormann announced that changes to financial advice protections will be implemented through regulation from 1 July 2014 where legally possible. The Senate is able to repeal this regulation in the coming weeks.

In May 2014, the Commonwealth Bank made a public submission to the Senate which supported lower standards of consumer protection in financial advice.<

CHOICE has strongly opposed all changes to FoFA. For more information see CHOICE's submission to the recent Senate Committee Inquiry examining these reforms.

1. Quote from Commonwealth Bank Submission to the Senate Economics Committee Inquiry into the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014.

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