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.
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