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BFCSA: CommBank destroyed financial well-being for 61,000 clients: Commissions flow on ZOMBIE FUNDS

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http://www.theage.com.au/business/fees-still-flowing-to-cba-from-zombie-funds-20140702-3b8sy.html

 

Fees still flowing to CBA from 'Zombie funds'

Date July 3, 2014  Adele Ferguson and Ben Butler

Financial planners at the scandal-plagued Commonwealth Bank are still raking in lucrative commissions and fees for tipping their clients into $3.2 billion so-called ''zombie funds'' that have been frozen for six years.  The savings of about 61,000 investors in funds run by CBA offshoot Colonial were frozen in November 2008 as the global financial crisis rocked the world economy.  The seven funds remain frozen to this day and two of them are still in the red, but all continue to pay annual fees to the bank and trailing commissions to the CBA's financial advisers.

Those who sold the risky products include one of the bank's former star planners, named in a Senate inquiry as ''Dodgy'' Don Nguyen. A bank spokeswoman said Mr Nguyen, who left CBA in July 2009, does not receive ongoing commissions.  She said that ''over 99 per cent of client account balances have been repaid''.  Some clients received compensation eventually, but ''only through the intercession of an advocate who 'kicked and screamed' on their behalf, and even then there was no allowance for the clients' pain and suffering'', a damning Senate inquiry into the scandal found last week.  The revelations throw into further doubt statements by Finance Minister Mathias Cormann, repeated as recently as Tuesday night, that the scandal was ''some time in the past and a lot has changed since that time''.

Stephen Baume, director of Financial Resolutions Australia, which has represented CBA victims, said that if ''even one-in-five of the investors has a claim, that's over 12,000 further people who may need to be compensated''.  ''CBA has not indicated how they will review the people that put money into this mortgage fund,'' he said. ''It was iniquitous that CBA derived management fees on these funds while the investors received nothing.  ''They did not even think to defer fees until the capital was returned to the unwitting investors.''  An investigation by Fairfax Media revealed that in late April 2008, with end-of-year bonuses at risk, some planners were instructed to switch clients from the safety of term deposits to the mortgage funds. Five months later the funds were frozen and customers were unable to withdraw any money.

 

Read more: http://www.smh.com.au/business/fees-still-flowing-to-cba-from-zombie-funds-20140702-3b8sy.html#ixzz36K3xB6uY

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