Westpac has announced that its cash earnings in the second half of 2019 will be reduced by an estimated $341 million due to its customer remediation programs, most of which relates to financial advice.
Westpac estimated that advice-related remediation would account for $168 million of the total $341 million cash earnings impact for the second half of 2019, according to a statement to the ASX.
In relation to its advice-related businesses, total remediation for the second half of 2019 is at $239 million, of which $191 million accounts for customer refunds while $48 million accounts for program costs.
The majority of new advice-related provisions are related to ongoing advice service fees and changes in how the time value of money is calculated, including extending the forecast timing over which payments are likely to be made, Westpac said.
The big four bank estimated the current provision associated with authorised representatives now represents 32 per cent of the ongoing advice service fees collected over the period, while for salaried planners the estimated percentage is 26 per cent.
Across all of Westpac, approximately 72 per cent of the $341 million impact on cash earnings in the second half of 2019 relates to customer payments (including interest) while the rest relates to costs associated with running the remediation programs.
Westpac chief executive Brian Hartzer said a key priority in 2019 has been to deal with outstanding remediation issues and refund customers as quickly as possible.
“The additional provisions announced today are part of that commitment,” Mr Hartzer said.
“We will continue to review our products and services to ensure they deliver the right outcomes for customers and, if necessary, maker further provisions.”
In March, Westpac said it would exit face-to-face financial advice in BT Financial Group, moving the businesses into its consumer and business divisions.
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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