The Australia and New Zealand Banking Group (ASX: ANZ) share price has dropped by 0.11% today and it's down by over 15% during the past year.
One of the biggest reasons for the fall this year has been the Royal Commission. This week the Commission will be looking into the wealth management side of the banks. Just today we have learned that ANZ will pay $49 million for charging fees for no advice.
ANZ told the Commission that its wealth division has 285,000 clients and 872 financial advisers under ANZ financial planning, Financial Services, RI advice group and Millennium 3.
The bank said that more than 10,000 customers had paid fees for annual reviews that were not provided, it has paid $46.7 million to these clients. It also said that eight representatives hadn't given reviews to 813 customers.
Another issue was that 'certain entities' deducted $931,000 in fees for services from 2,900 members of investment funds, but no services were received.
ANZ also admitted it deducted fees in excess of what was quoted in the service agreement. The bank also claimed fees from clients who had cancelled accounts. ANZ identified 41 advisers who had engaged in 'improper conduct'.
This is a large list of problems that has occurred within ANZ. It is costing the bank many millions and much worse in reputational damage.
As Warren Buffett once said "It takes 20 years to build a reputation and five minutes to ruin it."
This could cause significant damage to ANZ's future wealth management earnings. ANZ has probably done the right thing by withdrawing significantly from Asia but it hasn't done the right thing by a lot of customers according to what the Royal Commission heard today.
Foolish takeaway
The Royal Commission could turn a lot of customers away from the big four banks. ANZ does have a very nice dividend yield, but I think investors wanting to beat the Australian index should look elsewhere.
