National Australia Bank Ltd (ASX: NAB) is has more legal problems as it faces a class action.
NAB is one of the four largest financial institutions in Australia in terms of market capitalisation, earnings and customers. However, in 2018, it was Australia’s largest lender to businesses and has operations in wealth management and residential lending. It also operates the online-only Ubank.
The Class Action Against NAB
The Sydney Morning Herald is reporting that NAB’s MLC business is going to face a class action in superannuation fees.
The claim is that it overcharged superannuation customers regarding commissions from financial advisers.
These types of fees were some of the main things that were examined by Commissioner Hayne in the Royal Commission. Indeed, he referenced the fact that trustees may have breached its duty in his final report.
The class action is being brought by William Roberts Lawyers and litigation funding company IMF Bentham Ltd (ASX: IMF) for MLC Super fund clients.
The accusation is that it breached its obligations to act in their best interests. The claim is that NULIS kept paying grandfathered commissions to advisers from fees on the transferred accounts even though it wasn’t in the best interests of the members.
Of course, the lawyers are hoping to earn some money from this, but as IMF Bentham investment manager Ewen McNee was quoted by the SMH, “Even small changes in fees can have a substantial impact on the retirement outcomes”.
Is This A Big Deal?
Obviously (up to) $100 million is a lot of money, but it’s relatively small compared to NAB’s FY18 $5.7 billion of cash earnings. However, combined with all the other Royal Commission related costs, cumulatively this has been a disaster for NAB.
With some sources of bank earnings falling (or disappearing) after the fallout of the Royal Commission and banks being told to hold more capital, I don’t think the banks look like attractive investment options to me.
I’d much rather invest in the reliable ASX shares revealed for free in the report below for dividends and proven growth.
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