IOOF says it has no systemic issues as it unveils modest $10m compensation bill

0
24
IOOF says it has no systemic issues as it unveils modest $10m compensation bill

IOOF says it will pay some $500,000 to compensate dead customers who have been charged fees, as part of a “modest” bill of between $5 million and $10 million in compensation for charging customers without providing advisory service.

Analysts have questioned this “fees for no service” figure, which is much lower than AMP’s $778 million and all the big four banks’, which have set aside hundreds of millions of dollars in customer compensation.

Before IOOF acquired ANZ’s dealer groups of advisers, AMP was approximately 2.5 times its size.

At an investor briefing on Tuesday, IOOF managing director Chris Kelaher said the company had looked at its product and advice business for potential areas for remediation and had identified no systemic issues.

Mr Kelaher said on the product side, the royal commission’s focus had been on plan service fees being charged to corporate super customers and IOOF had a relatively modest corporate super book. ASIC is taking NAB’s wealth management arms to court over charging superannuation clients fees for services that were not provided.

Advertisement

Hundreds of thousands of dollars

On the advice side, he said based on the inspection so far there was no evidence of systemic fees-for-no-service conduct.

“It sets us apart from other institutions that have been targeted…at the royal commission.”

Mr Kelaher said IOOF had also looked at the issue of charging dead customers in the business and had set aside hundreds of thousands of dollars for compensation.

“Frankly any issues we have seen here have been relatively modest or not material but they are in the sums of a few hundred thousands in remediation,” he said.

He said these incidents occurred where the company was not aware of the bereavement and once the company found out, the deceased customers’ estates were promptly reimbursed.

“In fairness to the industry itself … we are the last people to be notified of these events and when we are notified then we take action to correct them,” he said. “It’s frustrating when you hear a lot of people make a noise about this.”

Small number

However, Morgan Stanley analyst Daniel Toohey questioned IOOF’s estimate of $5 million to $10 million, saying it “seems very small” compared to the big four banks and AMP, who have all earmarked hundreds of thousands of dollars for customer remediation.

He asked: “Is that a real number? What’s the risk of creep on that?”

JPMorgan analyst Siddharth Parameswaran also questioned the figure and asked whether IOOF was reviewing advice files one by one to make sure customers had not been charged when no service was provided.

Mr Kelaher said IOOF had reviewed advice files and admitted there were some the limitations with the company’s inspection process, but that no systemic issues had been identified to date.

“Obviously the scrutiny is not perfect because you are relying on advisers and you’re relying on your own audit of advisers.

“Once again the observation we make with inspection to date is that there’s nothing we’ve noticed that was systematic and that leads us to that number at this point in time.”

Morningstar analyst Chanaka Gunasekera said there was scepticism about the figure because it was so much lower than AMP’s and the major banks’, but it was hard for outsiders to estimate.

IOOF shares closed 1.7 per cent lower at $7.06 on Tuesday.

Read More

LEAVE A REPLY

Please enter your comment!
Please enter your name here