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.
So I’m reading the numerous responses below that, while the instos are paying out, they are then chasing SE planners for their part.
Does that mean it will then be passed onto PI, and that the SE part of the industry may be facing a PI crisis 12-24 months from now?
Would that lead to self-insurance as the only viable option?
Is this how the dominos will fall?
The big 4 should have combined a war chest of $250mill each and tackled this BS from the biased Hayne RC and corrupt ASIC. Would have been cheaper in the long run and clients haven’t really been ‘worse off’ in 99% of the cases anyway.
@soontobeextinsto exactly right, however they will report they have paid out the higher amount even though these costs were bourne by the self employed planner network.
Jewel, I think you’ll find all licensees are chasing the self-employed planners for the refunds. The licensees may make the initial payment to the client but then they’re going after the planner (regardless of whether they’re still with the license or not) to compensate the licensee. The salaried planners, however, aren’t being chased to compensate the licensee. So while the amount the big instos are stumping up is high, once they’ve clawed back payments from the former and current self employed businesses, the costs to the instos will be much lower
I wonder when AMP will update the market with their remediation costs??
Should be asking who is paying for the remediation as self-employed planners under the Westpac licencees of Securitor and Magnitude are told they will have to pay…..