Media Coverage
Company: Hewison Private Wealth
Date: 5 July 2014
Publication: Australian Financial Review
Page: Online
Readership/Circulation: 220,000 monthly
Scandal causing CBA brand damage: analyst
CLANCY YEATES AND SALLY ROSE
The scandal engulfing the Commonwealth Bank’s financial planning arm is inflicting
brand damage across the group and could make independent advisers less likely to
recommend its products, a leading analyst says.
After the CBA this week broadened the compensation scheme for customers who
received bad advice, veteran banking analyst Brian Johnson, from CLSA, said there
was no question the bank’s reputation had been tarnished by the scandal.
Mr Johnson also cited anecdotal reports of independent advisers being reluctant to
sell Colonial-branded products because of the fallout from the affair. CBA bought the
Colonial group of wealth management companies in 2000. “There is no doubt the
CBA brand in both wealth management and banking is today being adversely
impacted by the present mis-selling media coverage,” Mr Johnson said in a note to
clients.
CBA has so far paid out $52 million in compensation to victims. The cost of further
compensation is not likely to be material for CBA. But Mr Johnson said the prospect
Media Coverage
Company: Hewison Private Wealth
Date: 5 July 2014
Publication: Australian Financial Review
Page: Online
Readership/Circulation: 220,000 monthly
of further payments would ultimately force the CBA’s wealth unit to hold more
“regulatory capital”.
Financial planners contacted by Fairfax Media said the affair would not prevent them
recommending CBA products, but the scandal had left some clients sceptical.
David Hancock, the managing director of Financial Spectrum, said he had noticed a
backlash among the public from the CBA scandal.
“We don’t tend to recommend many bank products because our focus is to help
clients develop a strategy, for which we charge a fee, not sell them products,” Mr
Hancock said.
“The general attitude we are getting from clients at the moment is that they are glad
we are not affiliated with one of the banks,” he said.
Tim Wedd of Crystal Wealth Partners said the main impact of the CBA financial
planning scandal on client attitudes had occurred a few years ago when news of the
mis-selling first broke. There had not yet been a significant response from customers
to the latest events, he said.
A director of Hewison Private Wealth, Chris Morcom, said that if CBA products were
the most appropriate for clients, advisers had a duty to recommend them.
As part of CBA’s latest compensation scheme, it has website and phone hotline for
people who may have received bad advice between 2003 and 2012.
The bank would not say how many customers had contacted it about the issue on
Friday. CBA is expected to announce further details on the compensation
arrangements over the coming weeks – including who will sit on the independent
panel that will be open to customers who want a second opinion.
The bank is talking to law firms about joining the review and reputable people such
as retired judges, QCs and consumer advocates.