Westpac chief executive Brian Hartzer has pushed the button on a restructure of its wealth operations that will see the bank exit its personal financial advice business, BT Financial Group’s remaining businesses rolled into other divisions and the departure of group executives George Frazis and Brad Cooper.
After flagging it was looking into options for the financial advice arm over the past few months, Mr Hartzer today said Westpac would exit the provision of advice through salaried advisers and also authorised representatives operating under the Securitor and Magnitude brands. As part of this, Westpac has entered into an agreement with Melbourne-headquartered Viridian Advisory, which will take on some employees and customers who agree to transition.
Under the wealth “reset”, Westpac will, over time, shift to a “referral model” for customers seeking advice through a panel of advisers or firms, while the remaining BT businesses will move into the consumer and business banking divisions, ending BT Financial Group’s time as a standalone division.
In aggregate, the changes are expected to be earnings per share positive in 2020 as the “high cost, loss-making” advice business is removed. One-off transaction and implementation costs are estimated at $250 million to $300m, spread over full-year 2019 and 2020.
“Well it’s no surprise that financial advice has been under a lot of challenge for a number of years in the industry,” Mr Hartzer told Westpac Wire.
“That’s been a function of higher compliance costs and questions about the revenue model for the business, so we’ve been trying to think through very systematically how we can continue to provide advice for customers who need it while also running the business in a way that is compliant and sustainable at a time when revenue is under pressure.
“What we noticed in looking at the business over the last couple of years is the growth of independent financial advisers…so what we decided strategically was it made more sense for us to work to support the movement toward independent financial advisers and work on referral arrangements…where there wouldn’t be a perception that that advice might be biased towards our own products.”
As part of the overhaul, Business Bank chief David Lindberg will become chief executive of the Consumer Bank previously run by Mr Frazis, who is leaving after 10 years across several senior roles including CEO of St.George. BT CEO Mr Cooper will also depart after assisting with the transition of Insurance into the Consumer Bank and the Private Wealth, Platforms and Investments, and Superannuation businesses into the Business Bank.
General Manager Commercial Banking Alastair Welsh will lead the Business Bank on an acting basis while a global search for a replacement is run.
The move comes as several competitor banks reassess their wealth operations following regulatory changes and reputation struggles, in recent years selling or announcing plans to sell a range of large businesses. Westpac has also previously sold parts of its operations, such as the selldown of most of its stake in listed asset management group BT Investment Management (which has rebranded to Pendal) as well as Hastings.
Further industry changes are also coming from the Royal Commission, which made several recommendations relating to financial advice, insurance and superannuation that both the government and Labor have indicated they will adopt.
Mr Hartzer said while there have been many questions around banks’ wealth strategies for several years, being in or out of wealth was not “binary”.
“What we’ve done over the last few years is systematically work through every aspect of the business and decide is this something that we’re a credible, competitive provider of, is this something our customers really need and if so what’s the best way to do that so we’ve made a series of decisions progressively over time,” he said.
“I think of this as the next step in that we looked hard at financial advice, recognised customers want access to it but came to the view that ultimately the provision of advice through the independent financial channel was the best way to go.”