Slaters hits Colonial First State with class action on behalf of 500,000 Australians
Personal injury firm Slater and Gordon today filed a class action on behalf of half a million Australians who were allegedly charged excessive superannuation fees to fund ongoing commissions paid by Colonial First State to financial advisers.
The class action, Slaters noted in a statement, alleges that – since 2013 – CFS “failed to act in the best interests of its members and acted unconscionably by charging them higher fees to pay for ongoing commissions to financial advisers who were not required to provide any ongoing services to members”.
It marks the fourth class action that Slaters has launched as part of its Get Your Super Back campaign, and is the second against Commonwealth Bank subsidiary CFS.
This particular action relates to members of the FirstChoice Super fund and it is being funded by Augusta Ventures.
The banking royal commission revealed that, since 2013, CFS paid financial advisers or the licensees they worked for over $400 million in commissions that were funded by charging higher fees to superannuation members, Slaters outlined in its statement, noting that “many of the advisers worked for the Commonwealth Bank group which made significant profits from retaining these commissions”.
Slaters special counsel Nathan Rapoport said that, in 2013, the federal government banned commissions to financial advisers for new members because it was clear they were not in members’ best interests, through its Future of Financial Advice reforms.
“Ever since, Colonial continued to pay commissions with respect to existing members under what became known as the ‘grandfathering exception’, and because of this it continued charging those members higher fees,” he said.
“The Hayne report found there was no justification for continuing to pay commissions to financial advisers. We agree. Paying these commissions – and as a result charging members higher fees – ripped hundreds of millions of dollars out of members’ retirement savings to profit the financial advisers or the licensees they worked for who were not required to provide any services in exchange.”
Slaters is alleging that CFS should have stopped paying the commissions for all its members and reduced their fees accordingly, as it properly did for new members, he continued.
“At the royal commission Colonial accepted that some of its conduct fell below community standards and expectations. This is an understatement. We believe Colonial’s conduct was in breach of the law and it should be held to account and required to compensate its members.”
Mr Rapoport said that CFS had the power to transfer existing FirstChoice Super members to identical products with lower fees and where commissions were not paid.
“Rather than use this power for the benefit of its members, Colonial kept them in the more expensive products, preying on their passivity so it could continue to charge them higher fees to fund the commissions,” he said.