Bad financial advice costs NAB millions in compensation to customers

The National Australia Bank has confirmed it has paid millions of dollars in compensation to more than 700 customers who received bad financial advice.

Since 2009 more than 750 customers have been compensated, with the NAB paying between $10 million and $15 million in total.

In a statement the NAB said it had been transparent with information and worked to rectify problems, and has now improved its practice.

"No bank wants to wake up on a Saturday morning and read that it's had to pay compensation to clients for mistakes that have been made in the past. So they certainly wouldn't be enjoying it," said Brett Le Mesurier, a banking analyst at BBY.

"Whether it's particularly damaging would depend on whether that's the end of it or not. And I hope for NAB that it is."

The compensation revelations could strengthen calls for a royal commission into the financial advice industry.

The NAB is not the first large bank to be implicated by inappropriate financial advice being given to customers.

In 2013 evidence of the Commonwealth Bank's involvement in a financial planning scandal came to light.

Mr Le Mesurier told the ABC's AM program that the industry employs many advisors and it was always disappointing for banks to learn about potential misconduct.

"Every major financial institution has many hundreds of advisers and to suspect that every single adviser is a good one, that there are no problems anywhere, would be overly optimistic," he said.

"So you would think that there would be the odd problem in a number of financial institutions.

"Whether you actually need a royal commission - I'm not sure about that but... if more revelations come out from their financial institutions about wrong dealing soon, it certainly adds some fuel to the fire."

Martin North, the principal of Digital Finance Analytics, said the industry had to work to regain consumer trust.

"My research from the consumer end is that there's a very low level of trust now from the financial planning sector and the financial advice sector," he told AM.

"So there's a job to be done in terms of rebuilding confidence, a job to be done in terms of changing the culture of the organisations and the way that advice is provided and, I think, we need some changes in the legislation as well to support it.

"So it's a very broad range of issues that need to be addressed."