The fallout from the Senate Inquiry into fraudulent financial advice given by planners at the Commonwealth Bank between 2003 and 2012 has taken a new twist. Until now the CBA has done everything in its power to delay and misdirect the inquiry. But in what may far reaching consequences for the financial planning industry, CBA boss Ian Narev has opened the door to people who have suffered financial loss through bad advice given to them by the CBA financial planners.

This makes the bank vulnerable to potentially hundreds of thousands of lawsuits.

CBA boss Ian Narev. Photo:

CBA boss Ian Narev. Photo:

It does not mean the bank is offering free money. Litigants will have to show they were given bad advice based upon their risk profile. If that is established then they may only receive compensation according to the amount they would have earned in the appropriate risk profile portfolio.

Worse still – it will be the bank itself making these assessments.

As mentioned above, the bank’s track record thus far has been obstructive and defiant.

But this move by Ian Narev may signal a change. By taking such a step he is at once distancing himself from the debacle – by placing the blame for it at his predecessor’s door (Ralph Norris was incumbent CEO during the time of this activity). He is limiting the damage to the Commonwealth Bank brand. And (one can only hope) he is recognizing the very real wrong done by those planners in giving advice that benefited themselves at the expense of their clients.

What makes this decision such a game changer for the financial planning industry is that anyone who suffered a loss may apply for compensation. As stated above, that doesn’t mean you’ll get compensation, or even that it will amount to much. But recipients of advice now, for the first time, have redress to dodgy planners.

On the flip side – If you received bad advice but your stocks made you money anyway then that money is yours to keep.

But the litigation doesn’t end there. If you are unhappy with the assessment by the CBA then you have the right to get independent advice. You also have the right to appeal to an independent review committee. The committee’s review is only binding upon the CBA, not you. So if you are unhappy with their assessment you can take it even further – to the banking ombudsman or to the courts etc.

One thing is for certain – the lawyers will again make a fortune.

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