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SPEECH: Hartzer on Royal Commission

08:30am April 05 2018

Westpac chief executive officer Brian Hartzer at today's AFR Banking & Wealth Summit. (Emma Foster)

The following extract is from a speech delivered today by Westpac CEO Brian Hartzer at the 2018 AFR Banking & Wealth Summit. Read the full speech (PDF 71KB).


As the CEO of Westpac, the concerns, criticisms, and case studies being aired through the Commission process are very uncomfortable and confronting to hear. Many of these stories are terrible for the customers involved, and some of these issues took too long to fix.

It’s a tough process for the industry to go through but it’s one we must embrace.  And I’m hopeful that the seriousness of this process can bring closure to the issues it has examined.  

I won’t speculate on what the findings of the Commission will be. However, there are a couple of themes that are emerging from the hearings so far, which I expect the industry to pick up on, and will deliver better outcomes for customers.

The first is the need to increase transparency for customers and remove (or at least, reduce wherever possible) any remaining real or perceived conflicts of interest.   

This is something we need to fix across the industry if we are to show customers that we have their best interests at heart. At a minimum, customers should understand what they’re signing up for and know how financial services providers – and their employees – are being paid for the services they’re delivering.

The second is to recognise that the customer issues that have been raised are broader than just the banks, and that a level playing field is needed. Mortgage brokers, auto dealers, non-bank financiers, financial planning firms, insurance companies, superannuation funds, and the regulators themselves all have a part to play – along with the banks – in delivering a financial system that is fair, resilient, and efficient.

Hear Westpac CEO Brian Hartzer's comments on the banking landscape

At Westpac, we’ve started to consider how these principles would translate into further reforms.

For example, in auto finance. We’ve consistently supported the view that payments and commission arrangements for dealers in car financing need to change.  We have advocated for the removal of flex-commissions, and introduced our own cap before this occurs.  

In mortgage broking, increased transparency around broker commissions, fees and costs would help consumers to make more informed choices.  One option that could be considered would be for brokers to charge customers directly for their services, although the consequences of such a change for all stakeholders would need to be considered carefully.  

Hear Westpac CEO Brian Hartzer's comments on Royal Commission.

My third observation relates to the suggestion that it’s not possible for banks to achieve good commercial outcomes while also delivering good customer outcomes – in other words, that banks need to tradeoff between making profits or doing the right thing for customers.

I think about it differently.

Yes, in the short term there are opportunities for banks to raise profit at the expense of customers.  But that would be very short sighted, and experienced bankers know better.

If we take Westpac as an example, the next three years’ dividends add up to about 20 per cent of the stock price.  Said another way, 80 per cent of the value that you buy when you buy Westpac shares is in the future.

And that future value will be driven overwhelmingly by the growth and sustainability of our customer franchise, as well as the health of the Australian economy. Which means that in the long run, there is no conflict between doing the right thing by our customers, by our community, and by our shareholders.

We haven’t got everything right yet, but we are absolutely motivated to run our business in a way that is fair to customers, fair to our shareholders, and supports the growth of our economy through its inevitable ups and downs.

And that’s the lens that we’ll continue to use as we engage with the Royal Commission and respond to its recommendations.


Read Brian Hartzer's full speech (PDF 71KB).

Brian joined Westpac as Chief Executive, Australian Financial Services in 2012 and was Managing Director & CEO from 2015 to 2019. Prior to joining Westpac, Brian spent three years in the UK as CEO for Retail, Wealth and Ulster Bank at the Royal Bank of Scotland Group, ten years with ANZ in Australia and ten years as a financial services consultant in New York, San Francisco and Melbourne. He graduated from Princeton University with a degree in European History and is a Chartered Financial Analyst.

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