Westpac allocates $235m to address advice failure

Westpac has announced it will be reducing its cash earnings in 2018 by $235 million to address customer issues relating to its financial advice, including ‘fees for no service’.

In a statement to the ASX, the key elements behind the reduction in cash earnings include:

  • Increased provisions for customer refunds associated with certain advice fees charged by the group’s salaried financial planners due to more detailed analysis going back to 2008. These include where advice services were not provided, as well as where Westpac has not been able to sufficiently verify that advice services were provided;
  • Increased provisions for refunds to customers who may have received inadequate financial advice from Westpac planners;
  • Additional provisions to resolve legacy issues as part of the group’s detailed product reviews;
  • Provisions for costs of implementing the three remediation processes above; and
  • Estimated provisions for recent litigation, including costs and penalties associated with the already disclosed responsible lending and BBSW cases.

As a guide, approximately two-thirds of the impact is expected to be recorded as negative revenue while the remainder will be recorded in costs, Westpac said.

Costs associated with responding to the royal commission are not included in these amounts.

Westpac said further details of the provisions/costs are still being finalised and will provide more information when it releases its full-year results in October.

It also said the program of reviews will continue into next year, which includes continuing to investigate and consider potential further costs associated with advice fees charged by its aligned planners.

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“It is disappointing some of our past practices have not lived up to appropriate standards. We are committed to fixing any issue identified, as well as ensuring that any customer affected has not been disadvantaged,” said Westpac chief executive Brian Hartzer.

Westpac allocates $235m to address advice failure
westpac  cash earnings  financial advice
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Adrian Flores

Adrian Flores

Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].

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