After BT Financial Group yesterday announced the removal of grandfathered payments for the Westpac, St.George, Bank of Melbourne and BankSA networks (BT Financial Advisers), Westpac Wire asked BT CEO Brad Cooper a few questions about the changes.
First, can you talk us through these changes and what they mean for customers?
I was really pleased to announce to the market, our people and customers that BT will remove all grandfathered payments, such as trailing commissions and any volume-based bonuses, previously paid in respect of BT Financial Advisers and pass these benefits back to customers.
This applies to any form of conflicted remuneration that was banned as part of the Future of Financial Advice reforms (FoFA) in 2013.
So in simple terms, it means 140,000 customer accounts will benefit from these changes to their BT superannuation, investment, insurance and platform products – this is a significant step for BT.
What benefits can customers expect to receive?
For the 140,000 customer accounts still subject to grandfathered payments, the benefits will flow back through reduced fees or better returns.
It will vary depending on various factors, such as the number of accounts they have, the type of product and their account balance. Based on our calculations, the benefit to customers will range from around $51 to $1000 per annum at an account level. So clearly this is good news for those customers.
Depending on the product they hold, customers will be notified about how this change will benefit them either through their periodic statements, our online portals or via letter or email.
Customers of BT Financial Advice operating through Westpac, St.George, Bank of Melbourne and BankSA will benefit, as well as BT’s aligned advice licensees, Securitor and Magnitude, where contractual obligations allow.
From an IT and implementation perspective, this is a significant change and we’re dealing with a lot of legacy systems, so we’re working towards these changes beginning from October 1, 2018.
If grandfathered payments are permitted under FoFA, why are you stopping them for BT Financial Advisers? Is it because of the Royal Commission?
Looking at Treasury papers submitted to the RC, grandfathering was always seen as a transitional move. There were lots of conversations in 2013 around grandfathering and at the time, grandfathering provisions were designed to facilitate a smooth transition to the new regime for the industry while ensuring the ban on conflicted remuneration commenced as soon as practicable.
Now five years on, while many customers have moved to a fee for service arrangement, there are still a significant number of customers with grandfathered payments in place. So for us, we felt that this was the right time to make this change and draw a line under these payments.
What about external advisers, will they continue to receive grandfathering?
Yes is the short answer. As we have contractual obligations in place for external financial advisers, we will honour these for those who are currently receiving grandfathered payments in respect of a BT financial product. However if these advisers choose to remove grandfathered payments, we will be very pleased to support them to make similar changes.
How did your teams respond? Did they expect this announcement?
I know our people will be really excited and proud to know that BT is again leading the industry. And personally I’ve been really looking forward to making this change since the decision was made recently. It really is a big step forward that we know will benefit many customers.
But for BT, it’s really the next step on a journey that we have been on over several years to raise standards.
We have a proud track record of leading change in BT Financial Advice. Whether it was moving to fee for service prior to the commencement of FoFA for super and investment products, launching BT Adviser View and giving our customers the opportunity to provide and view feedback on their financial adviser or in mid-2016 partnering with The Ethics Centre to introduce ethics training for our advisers.
What impact will this change have on BT advisers and do you expect some to leave the business in response?
Not at all. Our business is about building long term, trusted relationships with our clients. I want our advisers to feel proud to work at BT and to know that they are at the leading edge of change and rebuilding trust in the industry.
By Michael Bennet
Editor, Westpac Wire