Retirement
500k Aussies at heart of new super class action
A law firm has filed a class action on behalf of the 500,000 Australians who, it says, were charged excessive superannuation fees to fund ongoing commissions paid by Colonial First State to financial advisers.
500k Aussies at heart of new super class action
A law firm has filed a class action on behalf of the 500,000 Australians who, it says, were charged excessive superannuation fees to fund ongoing commissions paid by Colonial First State to financial advisers.
It’s the fourth class action Slater and Gordon has instigated since launching the “Get Your Super Back” campaign in September 2018, and the second that the law firm has launched against Colonial First State.
The class action relates to members of the FirstChoice Super fund.
It alleges that since 2013, Colonial First State has failed to act in the best interests of its members and acted unconscionably by charging them higher fees to pay for ongoing commissions to financial advisers who weren’t required to provide ongoing services to members.
Slater and Gordon noted that Colonial had paid financial advisers or the licensees they worked for over $400 million in commissions that were funded by charging higher fees to superannuation members.
Many of those advisers worked for the Commonwealth Bank group, which made significant profits from retaining these commissions.
The Australian government had banned commissions to financial advisers for new members because it was clear they were not in members’ best interests back in 2013, but special counsel at Slater and Gordon, Nathan Rapoport, said that “ever since, Colonial continued to pay commissions with respect to existing members under what became known as the ‘grandfathering exception’, and because of this it continued charging those members higher fees”.
“The Hayne report found there was no justification for continuing to pay commissions to financial advisers. We agree. Paying these commissions – and as a result charging members higher fees – ripped hundreds of millions of dollars out of members’ retirement savings to profit the financial advisers or the licensees they worked for who were not required to provide any services in exchange,” the lawyer said.
“We allege that Colonial should have stopped paying the commissions for all its members and reduced their fees accordingly, as it properly did for new members.”
“At the royal commission, Colonial accepted that some of its conduct fell below community standards and expectations,” Mr Rapoport continued.
“This is an understatement.”
“We believe Colonial’s conduct was in breach of the law and it should be held to account and required to compensate its members,” he added.
Colonial had the power to transfer existing FirstChoice Super members into identical products with lower fees and where commissions were not paid, the special counsel outlined.
“Rather than use this power for the benefit of its members, Colonial kept them in the more expensive products, preying on their passivity so it could continue to charge them higher fees to fund the commissions.”
Earlier this year, CBA divested its interests in the Colonial First State business.
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