Westpac boss doubts IFAs have ‘resources’ for compliance

Institutionally aligned advice groups have a better chance of affording the systems required to keep records and run a compliant shop, according to the big four boss.

During his appearance at the royal commission on Thursday (22 November), Westpac CEO Brian Hartzer agreed with counsel assisting Michael Hodge’s assessment of the financial advice industry – that the FOFA reforms have forced advisers to transition from a commission-earning “distribution channel” for products into professionals who offer advice.

Mr Hodge asked the CEO what role advisers have within a bank like Westpac if they are now going to be truly professionalised.

“That is an issue of ongoing discussion,” Mr Hartzer replied.


“As we have seen, the systems that are required to demonstrate compliance and record keeping and the controls around that are substantial, and I would make the point that an institution like Westpac has the resources to invest in those systems and to sort things out when they do go wrong.

“By not being in institutions and being out on their own means you either have to have large, independent companies or you have a fragmentation of the industry. And in that case, you don’t necessarily have the resources to invest in the controls to give the clients the comfort level that ultimately, we all seek.”

Mr Hodge said he had seen Mr Hartzer give this explanation before and suggested that in the past, nobody had been paying the true cost of high-quality compliant advice.

“Isn’t one possibility that it is recognised that for most Australians, they don’t need an ongoing advice relationship with a financial adviser?” Mr Hodge asked.

Mr Hartzer replied: “Possibly. I’m not sure most Australians have one. But there is a reasonable proportion of Australians that would see value in that.”

Earlier in his testimony, the Westpac boss was asked by Mr Hodge why clients shouldn’t have to make ‘opt-in’ agreements with advisers every year, rather than every two years as is currently the case. Particularly as the major bank is embroiled in fees for no service scandals.

Mr Hartzer said a more frequent opt-in process would be an administrative burden and be of little value.

“Some of these clients are having ongoing conversations with their advisers on a regular basis anyway. So they would regard it as an unnecessary regulatory burden,” he said. “If you spend time doing that you’re not spending time doing something else.

“Some clients want an active set of meetings frequently. Some clients view it as a bit of a retainer relationship where they can ring up and bounce things off their adviser when they want to. Sometimes they are quite happy not to do that for quite a long time but still like to know that the adviser is there. I know people like that.”

Mr Hodge then asked: “You know people who what?”

“I know people who pay for an advice relationship and are quite happy about the fact that it’s at their discretion to ring up the adviser and talk to them,” Mr Hartzer clarified.

Mr Hodge said he was not being facetious when he asked if Mr Hartzer was talking about “very wealthy people”.

“Relatively speaking that would be true, yes,” the Westpac CEO said.

Mr Hodge suggested to Mr Hartzer that this was an important point, because the subset of clients that need to have an ongoing advice relationship and are in a position where they are “happy to just leave somebody to monitor their no doubt very significant investments” are going to be very wealthy clients.

“It depends on your definition. But I would say broadly, yes,” Mr Hartzer agreed.

Westpac boss doubts IFAs have ‘resources’ for compliance
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