The mediation agreement will return funds to members charged ongoing fees for advice they did not receive.
CFS settles super fees class action for $100m
Colonial First State has agreed on a $100 million settlement for superannuation customers who were charged excessive fees due to ongoing payments to financial advisers who had no obligation to provide services in return.
A group action by Slater and Gordon alleged CFS paid commissions to advisers which then charged members of the FirstChoice Superannuation Trust from July 2013 to June 2020. It claimed CFS, then a part of Commonwealth Bank, failed to act in customers’ best interests by levying the fees despite a law banning commissions on new super accounts from 2013.
The action claimed CFS failed to reduce the fees or transfer members to identical products without commission and with lower fees until 2019-20.
Colonial First State Investments Limited said the mediation agreement remained subject to court approval and it continued to deny the allegations and made no admissions of liability or wrongdoing.
“If the court approves the settlement, eligible group members will each recover a share of the agreed settlement sum of $100m after accounting for any deductions which may be approved by the court, such as legal fees charged by the applicants’ lawyers and any commission approved by the Court to be paid to the funder of the class action,” it said.
Slater and Gordon said lead applicant Marcel Krieger welcomed the outcome after joining FirstChoice Personal Super in 2010 during a branch visit to the Commonwealth Bank.
Mr Krieger said a bank financial adviser recommended the product and although a sign-up commission was mentioned “I didn’t realise I would be paying ongoing higher fees to fund ongoing commission payments”.
“After that initial meeting, I never sought, nor received, any financial advice in relation to my super,” Mr Krieger said.
“Prior to this class action, I didn’t know that from mid-2013 I was paying higher fees than members who joined the same product after that time. I would not have stayed in the higher fee product if I had been told that almost identical but lower fee options were available.”
Slater and Gordon class actions practice group leader Kirsten Morrison said many Australians would be eligible for a share of the settlement.
“This is a great outcome for the many thousands of customers who put their faith in Colonial to look after their financial interests but were disadvantaged by the arrangements in place with financial advisers that were not in customers’ best interests,” Ms Morrison said.
“We will be contacting group members with more information about the settlement and the steps required to register for the distribution.”
The settlement is the highest achieved by Slater and Gordon in a group proceeding.
In a separate group action the firm is pursuing Commonwealth Bank and CFS for breaching the trust of super fund members by investing members’ savings with its parent bank, even though the bank did not offer the best interest rates.