Slater and Gordon achieves $100m settlement with Colonial First State over excessive super fees

Slater and Gordon achieves $100m settlement with Colonial First State over excessive super fees

Photo: Clay Banks, via Unsplash.

Almost five years ago Slater and Gordon (ASX: SGH) launched its 'Get Your Super Back' against Commonwealth Bank (ASX: CBA) and its then subsidiary, Colonial First State, claiming it could recover more than $100 million for customers affected by excessive superannuation fees.

Today the law firm has practically delivered on that promise after Colonial First State Investments Limited (CFSIL) - now a standalone business - agreed to pay $100 million in a settlement.

The class action was lodged on behalf of thousands of CFSIL customers who, between 2013 and 2020, paid the high fees so that Colonial could pay ongoing commissions to financial advisers, who were not required to provide continuing services to customers in return.

This is despite legislation being introduced that banned the charging of commissions on new super accounts from 2013 onwards. The case is one of multiple group proceedings launched by Slater and Gordon against banks and superannuation trustees in the wake of the 2018 Banking Royal Commission, for putting profits before customers’ interests.

It was alleged that Colonial had the power at the time to reduce the fees or transfer existing members to identical products with lower fees and where commissions were not paid, but this did not happen until 2019 and 2020.

The settlement, still subject to court approval and following a confidential court-ordered mediation in mid-June, is the highest ever achieved by Slater and Gordon in a group proceeding.

Lead applicant Marcel Krieger welcomed the outcome, having joined Colonial’s FirstChoice Personal Super in 2010 during a branch visit to CBA where a financial adviser recommended the product. Although the adviser mentioned that a commission would be received for signing him up, Krieger didn't realise he 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,” 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, which would be returned to their superannuation accounts.

"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," Morrison said.

She said it was likely that some members of the class who had financial advisors linked to their accounts would have to register to participate in the settlement and confirm that they did not receive ongoing financial advice under the commission arrangements.

However, she noted no action needed to be taken until further notice.

"Settlement funds will not be distributed until the settlement has been approved by the Federal Court, and that process will take some months,” she said.

“We will be contacting group members with more information about the settlement and the steps required to register for the distribution.”

Second lead applicant Jason Burton said he joined FirstChoice Employer Super through his employer in 2005. After an initial information session with Colonial, organised through his employer, Burton said he did not receive ongoing financial advice.

"I was not made aware that I had the option to switch my super to an equivalent super product with lower fees that did not pay ongoing commission to a financial adviser,” Burton said. 

“These fees continued on my super account until I was automatically transferred in late 2016 under MySuper.

"I am pleased to have represented thousands of ordinary working Australians like me who had their super balances impacted by these fees."

The class action was funded by litigation funder Augusta Ventures Limited. The settlement was reached with the respondent without admission of liability.

In the wake of the 2018 Banking Royal Commission, Slater and Gordon launched multiple group proceedings against banks and superannuation trustees for putting profits before customers’ interests as part of the firm’s Get Your Super Back campaign.

Today's result marks the second settlement reached under the Get Your Super Back campaign, the first being $29.5 million in compensation from BT Super for members late last year

Slater and Gordon is also pursuing Commonwealth Bank and Colonial First State in a separate group proceeding for breaching the trust of superannuation fund members by investing members’ retirement savings with its parent bank, even though the bank did not offer the best interest rates. 

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