Superannuation
Colonial First State hit with second class action in less than a week

Slater and Gordon has filed a second class action against Colonial First State for allegedly charging excessive superannuation fees to fund outgoing commissions paid to financial advisers.

The class action is on behalf over 500,000 Australians and is the second against CFS, a subsidiary of Commonwealth Bank to be filed in less than a week.

The action 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."

"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," Slater and Gordon said.

"Many of the advisers worked for the Commonwealth Bank group which made significant profits from retaining these commissions."

Slater and Gordon Special Counsel Nathan Rapoport said in 2013 the Australian 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, CFS 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 class action relates to members of the FirstChoice Super fund.  Slater and Gordon said CFS had the power to transfer existing FirstChoice Super members into identical products with lower fees and where commissions were not paid.

"Rather than use this power for the benefit of its members, CFS kept them in the more expensive products, preying on their passivity so it could continue to charge them higher fees to fund the commissions," Rapoport said.

"We allege that CFS should have stopped paying the commissions for all its members and reduced their fees accordingly, as it properly did for new members."

"At the Royal Commission CFS accepted that some of its conduct fell below community standards and expectations. This is an understatement. We believe CFS's conduct was in breach of the law and it should be held to account and required to compensate its members."

CBA said it acknowledges that proceedings have been filed in the Federal Court and are reviewing the claim.

On Thursday last week, CFS was hit with a class action from Maurice Blackburn Lawyers in relation to alleged breaches of super trustee duties.

That class action also makes mention of the FirstChoice Super division, alleging that CFS's implementation of the MySuper reforms for members was slow.

Read more: Colonial First StateFirstChoice SuperCommonwealth BankRoyal CommissionMaurice Blackburn LawyersMySuperNathan Rapoport
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