SYDNEY (Reuters) - Australia’s four biggest retail banks and wealth manager AMP (AMP.AX) have paid hundreds of millions of dollars in compensation to customers for poor advice over the past decade, a major inquiry into the financial sector heard on Monday.
Financial advice came under scrutiny at the start of a fortnight of hearings by the Royal Commission into corporate wrongdoing and abuse of power by Australia’s financial sector, which could lead to greater regulation and criminal charges.
Rowena Orr, barrister assisting the independent inquiry, said more than three hundred thousand people had been compensated and the lenders had acknowledged cases of fraud, poor advice and charging for products that were not delivered.
“The financial advice industry has been the subject of considerable scrutiny in recent years. There is good reason for this scrutiny,” she said.
Over the past decade Australia’s four largest banks, AMP and others had paid A$383 million ($297.5 million) in compensation for fees paid for no service or losses caused by bad advice, she added, quoting figures by the corporate watchdog.
The inquiry, which began last month and is scheduled to last a year, is currently focusing on Australia and New Zealand Banking Group (ANZ.AX), Commonwealth Bank of Australia (CBA.AX), National Australia Bank (NAB.AX), and Westpac Banking Corp (WBC.AX). In coming months, it will turn its attention to large insurers and pension funds.
Orr said the inquiry had been inundated with submissions from members of the public complaining about poor advice or being charged for financial advice, including instances when no adviser was assigned to their accounts.
“Many submissions refer to financial advisers providing advice encouraging Australians to engage in lending they are not capable of servicing over the long term,” Orr said.
The focus on the advice industry comes after an earlier set of hearings last month revealed the banks had abused their power and routinely breached laws when issuing home loans, credit cards and other consumer loans.
The center-right government agreed to call the inquiry after years of scandals in Australia’s financial sector, including interest-rate rigging, accusations that some institutions withheld legitimate insurance payouts, and accusations of money-laundering.
Demand for financial advice in Australia has increased in the last decade, driven by growth in the mandatory A$2.6 trillion savings system, the country’s high levels of household debt, and the complex tax laws that apply to aging Australians.
ANZ last year sold its financial planning unit to IOOF Holdings (IFL.AX), while CBA is also seeking to exit the business.
ANZ, CBA, NAB and Westpac declined to comment while AMP did not respond to requests for comment.
Reporting by Paulina Duran; Editing by Stephen Coates