ASIC gave us an update last week on how our largest financial institutions are tracking on remediating customers for various financial advice-related wrongdoings of recent years. So far, the bill stands at $5.6 billion for around seven million individuals and there’s another $1.6 billion yet to be paid to around 2.7 million customers.

For those of you who – like me – can’t quickly do sums in their head, it means remediation will be at least $7.2 billion, for 9.7 million customers. Those are Optus-like numbers of consumers affected and it works out at an average of about $740 per person.

Looking at these numbers another way, the Australian Bureau of Statistics says there are about 19.3 million Australians aged over 20. If 9.7 million people (adults) have been affected by poor advice, as ASIC says, it means half the adult population has had a bad (or at least a remediated) experience with a financial adviser. That seems somewhat unlikely, but it’s what the numbers suggest.

We know that remediation has been paid in cases where the actual need for it, and the impact on the client, is minimal and often it has been paid without the adviser’s explicit knowledge. Essentially, that’s the institutions in question just clearing the decks. These cases often involve relatively small sums of money (perhaps a fee that’s been incorrectly calculated by a couple of hundred dollars or has been applied for a few days too many) and they have the dual effect of lowering the average remuneration figure per customer and inflating the number of individuals who have been affected by “bad advice”.

But the law is the law: overcharging is overcharging, and fee for no service is fee for no service. So here we are, with a bill escalating to the point that one must ask whether, net of remediation, any of the big four banks, AMP and Insignia Financial have managed in the past 10 years to make much of a profit at all out of giving financial advice.

Remediation doesn’t begin and end with the big end of town, though. ASIC has put all licensees on notice that they have responsibility for identifying instances where clients require remediation.

ASIC believes the heavy lifting it’s done on remediation programs to date is nearing an end, but the process doesn’t stop for that reason.

“Going forward, while ASIC may need to intervene in some isolated cases, we cannot and should not oversee remediations in order for consumers to receive fair and timely outcomes,” ASIC deputy chair Karen Chester said in a statement recently.

Remediation of advice clients is likely to be an ongoing process, and the onus is on licensees to make sure it’s done effectively. It is a complex issue, but it’s one that ASIC doesn’t want licensees to shirk or mess up. The regulator’s updated Making it right: How to run a consumer-centred remediation document says consumer-centred remediation will:

  1. Be fair in all the circumstances;
  2. Be timely without sacrificing quality or resulting in subpar consumer outcomes;
  3. Deeply understand the problem and the affected consumers;
  4. Put the consumers at the heart of all decisions;
  5. Ensure that consumers are returned, as closely as possible, to the position they would have otherwise been in;
  6. Make it easy for affected consumers by minimising complexity and consumer action;
  7. Give consumers the benefit of the doubt when making assumptions;
  8. Be transparent;
  9. Incorporate tracking and monitoring, and record outcomes against the goal;
  10. Learn and adapt by identifying areas for improvement and fixing them;
  11. Be well documented throughout the entire remediation; and
  12. Not profit from your misconduct.

That’s quite the checklist.

ASIC’s Regulatory Guide RG 277: Consumer remediation suggests a remediation program could sit between a licensee’s internal dispute resolution scheme, and an external dispute resolution scheme (AFCA). The IDR is where a consumer can go if they spot something they think is wrong and needs fixing, whereas a remediation program should be run proactively by a licensee.

If neither an IDR nor a remediation program identifies and addresses the client’s concern, it’ll end up at AFCA. One imagines that AFCA, when it makes a determination, will pay quite a bit of attention to how effectively a licensee has been running its remediation program.