The Australian Banking Association will overhaul the way the code of practice deals with managing a customer’s estate when they have died, and fees for no service across the industry.
The reforms, prompted by the banking royal commission, will be the first of several changes from the ABA. Others include seeking new changes to the Future of Financial Advice reforms of 2013, to further reduce the incentive of commissions in financial services.
“It has always been unacceptable for any organisations to charge fees without providing a service,” said ABA chief executive, and former Queensland premier, Anna Bligh.
“This announcement will put beyond the shadow of a doubt that this practice has no place in Australia’s banking industry.
“Banks will change the way they manage a customer’s account, proactively contacting them to confirm what services are required for their investments and only charging for those provided.
“This issue of charging fees without service, particularly when customers have recently died, was raised during the royal commission and identified as unacceptable.
“When someone loses a loved one, they need support and compassion as they finalise their loved one’s financial affairs. Charging ongoing advice fees to dead people is clearly unacceptable.”
The ABA said banks are currently working with customers to refund those charged a fee where no service was provided. Latest ASIC data indicates customers will receive more than $1 billion in refunds.
“In addition to these changes, the industry is supporting legislation to remove grandfathering provisions in relation to financial advice,” Ms Bligh said.
“This is another important piece in the puzzle of ensuring there are no conflicts for advisers.”
You can read the latest on the progress of the royal commission here.