ASIC, Financial Planning

Commonwealth FP given further improvements

The initial findings of a report into the fee-for-no-service conduct of Commonwealth Bank of Australia’s advice arm, Commonwealth Financial Planning, has been released, alongside additional recommendations.

In April, the Australian Securities and Investments Commission (ASIC) accepted a court-enforceable undertaking from Commonwealth Financial Planning, with one undertaking requiring the advice group to appoint Ernst & Young (EY) to prepare an independent expert report.

In relation to the remediation of Commonwealth Financial Planning customers, EY found that for the periods 1 July 2015 to 31 May 2016 and 5 June 2017 to 31 January 2018, there was no evidence to suggest the group had not taken reasonable steps to ensure customers who should have received remediation did receive that remediation.

In addition, the report said for the period 1 June 2016 to 4 June 2017, period two, there had been a lower level of customer testing during the period and further work by the group was required.

EY found Commonwealth Financial Planning is in the process of taking reasonable steps to identify and remediate those customers who should have received remediation, with a reassessment and report on period two due in January 2019.

The group’s placement of adequate systems, processes and controls to meet its contractual obligations to customers who are paying ongoing service fees was also assessed by EY.

It found there was nothing to suggest those systems, processes and controls are not reasonably adequate to ensure the advice arm is able to discharge its obligations to its customers.

However, EY noted Commonwealth Financial Planning could make further improvements to address a low level of control awareness within the business, a high prevalence of manual processes and controls, and limitations on its ability to analyse and report information for tracking and reporting of compliance centrally.

Further, the accounting firm suggested the group address the sustainability of its manually intensive processes.

EY will assess and report on whether Commonwealth Financial Planning has addressed the report’s findings, through the implementation of systems and process improvements, in January 2019.

The advice group has requested an extension of time to 31 January 2019 for EY to produce its final report and for it to provide its senior executive attestation as required under the enforceable undertaking.

The extension of time will allow Commonwealth Financial Planning to undertake the additional work required in relation to period two and to implement EY’s recommendations to further improve its systems, processes and controls.

Commonwealth Financial Planning is required by ASIC to submit a detailed plan setting out the specific actions it will undertake to ensure it addresses the findings and recommendations.

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