In its full-year financial results this week, Westpac included its aligned advice businesses under ‘contingent liabilities’.
Westpac chief financial officer Peter King told analysts on Thursday (5 November) that dealer groups present an issue for the bank’s remediation program.
“Financial planning for salaried we feel like we have dealt with,” Mr King said, alluding to the remediation of clients impacted by the misconduct of Westpac’s salaried financial planners.
“Consumer bank, we have done the first round of a three-year review. So, I think we have broken the back of it but we need to go back and look at it because standards do rise.
“The one that we highlight in our contingent liabilities is our dealer groups in BT. There is no industry approach to how you deal with that at the moment. That’s probably the one that we need to bottom out next year.”
One of Westpac’s reviews relates to ongoing advice services provided from 2008 by about 1,660 planners operating in aligned dealer groups who were at the time authorised representatives of the group’s wholly owned subsidiaries Securitor Financial Group and Magnitude Group.
Securitor and Magnitude, as the AFS licensees, retained a portion of the ongoing advice fees paid to those dealer groups by clients since 2008.
Westpac confirmed that it is in the early stages of engaging each authorised representative to determine the agreements in place between those representatives and their clients, and the services provided.
“Given the early stage of the review, the time period under consideration and availability of records in relation to the relevant period, it is not practicable to provide an estimate of any potential remediation costs for circumstances where a client has paid ongoing service fees but those services have not been provided,” the bank said.
“No provision has been recognised in relation to this matter.”
CEO highlights advice issues
In the second half of FY18, BT’s cash earnings fell 40 per cent from $241 million to $163 million as the division faced remediation costs and slashed prices on its Panorama platform.
“The two big impacts on the BT result were remediation costs and some strategic pricing decisions we took to set the business up for the future. We led the market in eliminating grandfathered commissions and we introduced lower and more transparent pricing across our platforms,” Westpac CEO Brian Hartzer said.
“If you think about private wealth, it’s a great business, we have a great position in it. It has grown really strongly. We’re really happy with it. If you think about the platforms, we have done a repricing but the demand is really strong there. With BT Open the appeal is strong, the inbound interest has been fantastic and we expect that to translate into volume.
“On the insurance side we have had good growth on written premiums.
“So really it comes back to the challenge on financial advice. We have had a lot of remediation claims around that and we are still figuring out how to make that work.”
[quote=Anonymous]Poor Michael – you should work for ASIC[/quote][quote=Anonymous]Poor Michael – you should work for ASIC[/quote]
Surely the writing is on the wall for institutionally owned dealer groups. As Westpac has admitted, it is too hard to effectively manage them from a compliance point of view. They are under regulatory risk of a vertical integration ban. And they are long overdue action from the ACCC for their deceptive and misleading brand names which give consumers an incorrect perception of independence.
We’re an IFA AFSL firm, you’re kidding yourself if you think it’s isolated to institutional AFSLs or planners. Get ready you’re in line, ASIC just hasnt gotten to you yet. No matter how ‘clean’ you think your business is, they’ve shown they will end you financially if and when they choose.
yep, just depends on the mood at asic, if they were late because of traffic or their kid spilled hot coffee on them on their way to work, that’s all it takes.
our lives literally depend on whether or not the officer at asic had a good or bad day otherwise we are toast
No adviser licensing fee , no conflict . makes sense . But what will AMP do as all its advisers are “tied up’ so to speak !!
Adopt the Industry Fund model – then no problems.
So they should just pay backhanders to the Unions??
From what I understand Securitor wil and should l be charging this cost back to the adviser who received the fee.Why should shareholders foot the bill again.
Because shareholders got the benefit of crooked management.
Sure, the shareholders benefited from the 10-20% dealer cut on the ASFs. The other 80-90% should be funded by the adviser…. I sense a buyers market on second hand BMWs coming up!
More to it than that.
Does the words FUM, and AUM and AUM at all costs help explain. How about…. we don’t make any money from advice we make it from FUM, .. so whatever it takes to get advisers X to write more FUM into the red product then let’s do it. It’s also a reason why advisers should not be linked to these parties and advisers who are, ultimately lower the professionalism of us all which in turn ultimately leads to over regulation. Doctors shouldn’t work for Drug Companies in my IMO. I’m happy to use their products but as far as paying them licensing fees that’s a different story. It’s about the only thing we can control these days.
Poor Michael – you should work for ASIC
Why would it be any different to CBA funding clients of Financial Wisdom?