Westpac has admitted it did not fully appreciate the underlying risks in running a financial planning business.
The banking group’s chairman, Lindsay Maxsted used his address to the company’s annual general meeting in Perth to include the lack of understanding of the risks inherent in financial planning as being one of the key lessons Westpac had taken from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
While also listing the bank’s failure to understand and analyse customer complaints and to focus on non-financial risks, Maxsted said: “We did not fully appreciate the underlying risks in the financial planning business”.
“Better training and supervision, changes to the way financial planners were remunerated, and better documentation of advice was required,” he said.
“Needless to say, we have moved to shore up the resources, systems and related reporting to deal with any shortcomings,” Maxsted said. “We are accelerating customer remediation, recognising that where we have made mistakes, we need to promptly fix these issues for customers.”
Maxsted’s comments to the Westpac AGM came as the company’s chief executive, Brian Hartzer sought to paint a positive picture with respect to BT Financial Group which he said that, when remediation provisions were excluded, had experienced only a one per cent decline in profit.
However, Hartzer acknowledged that the bank’s overall results had been impacted “by significant regulatory and remediation costs, with substantial provisions for customer refunds and additional operational cost as we worked through the Royal Commission, various regulatory enquiries and remediation."
Comments
Whenever you have executives and senior management making decisions about financial planning when they have NEVER been advisers themselves (or at least not practiced in a FOFA environment) then expect this lack of recognition of “planning risks” to happen always. They have no credibility and should NOT be allowed to ask people to do things they have never done themselves!!
Westpac needs to stop deceiving consumers by hiding behind independent sounding "advice brands" such as Magnitude and Securitor. Similarly for AMP with Hillross, IOOF with Shadforths etc. etc. If the RC doesn't ban vertical integration altogether they at least need to ban these deceptive brands.
What about a "Financial Adviser" hiding behind the brand "interfund advice" owned by an Industry Fund? If this does not align with your definition of vertical integration, what is it?
Yes it's vertical integration. But it's not deceptive branding. Like AMP Financial Planning or CBA Financial Planning. It's fairly clear to the consumer whose product you are likely to get recommended and why. Just as when you call an Australian Super or REST call centre.
Magnitude, Securitor, Hillross, Charter, Shadforths, Bridges, etc are vertically integrated AND deceptively branded because most consumers are likely to think those brands provide independent advice. Very few consumers read FSGs or are acquainted with the ludicrous legal definition of "independent".
I'm not suggesting vertical integration is OK. I'm just saying that if Hayne doesn't ban it, he should at least make sure advice firms carry the brand of their vertically integrated parent so that consumers can make a better informed choice.
I agree with your thoughts, yet being a Charter practice I always tell clients in our first meeting that my license is part of AMP. I also explain that I didn't seek out AMP, it was a takeover. I have both lost new clients and gained new clients in the last 6 months after explaining this and telling them i'm not independent. None of those new clients ended up in AMP platform or risk.
We need to build trust with clients from the first meeting. I can't see much trust being built if i've not told them about my license and they find out later. I think most planners who have pride in the value they add to clients would take this approach. Those "not clarifying" the independent thoughts from consumers are probably those who are likely to fall below community expectations.
How is it "deceptive branding" to say in the introductory paragraph of your website's home page that YOU ARE OWNED BY BT? What nonsense. Anyone talking to Magnitude, or any other company, will either know who owns them or find out whilst doing basic due diligence. And as for vertical integration, I for one can't wait for the Royal Commission into vertical integration in the hamburger industry - McDonald's can't be allowed to be both the manufacturer and retailer of their hamburgers. It's intrinsically an evil arrangement that leads to corruption and poor customer outcomes...
I understand that having "Australian Super" at the door means you are at Australian Super but when they start giving "Financial Advice" at Australian Super why is it limited to Australian Super? If your logic is it is OK, then if a client turns up at an AMP Practice, why can they not give "Financial Advice" under the same rules.
Your comment that very few clients read an FSG meaningless I believe as the FSG is very clearly explained to each and every client - so if they don't read it they still know it's full content. If you believe they don't read an FSG, tell me what happens with an SOA, PDS (* many), client statements, FDS, Opt-in notices etc.
If a client can't read an FDS, how is a retail client to know that the "Financial Advice" given at AMP/Hillross etc is much more varied and very likely to include unrelated products (related platforms perhaps but not many related investments which is what matters) but if they see Australian Super the "Financial Advice" will be limited to Australian Super only and likely "inter fund advice" which as we all know, often rolls over external funds etc where the client may have better benefits - they just don't ever know.
An tell me, why is it OK to fund that "Financial Advice" from all members of an Industry Fund for the "benefit" of only those who receive the advice? I struggle to see how on earth this is not a "commission".
Simply, Industry Funds are acting on a business model that retail moved away from 20 years ago. Perhaps AMP would be better served having all "Financial Adviser" on salary and give inter-fund advice, paid for by all - but the client will not be better off.
I just fail to see how anyone can defend how the Industry Funds operate (not even mentioning their investment issues) simply because they have their name on the door?
Most consumers simply do not read FSG, PDS, SoA, RoA, FDS, RN, product statements, or website disclosures. There is so much disclosure they just tune out. Even when you explain it to them and they nod, most of them are actually thinking 'This is so complex and boring. I haven't understood a word he said but I'll just nod to get it over quicker". The excessiveness of the disclosure environment does more to hide things from consumers than inform them. The only people who take any notice of disclosures are lawyers and compliance bureaucrats who don't realise that normal people are actually nothing at all like them. Normal people take far more notice of brands than anything else. It's something advertisers and consumer good companies learnt a long while ago.
How does a retail client know that "Financial Advice" from an Industry Fund (Inter Fund Advice) is different to "Financial Advice" from say AMP/Hillross aligned practice (which does not have Inter Fund Advice)?
ASIC will turn a blind eye to vertically integrated industry funds in order to protect them. Intra fund advice is blatantly conflicted yet industry fund financial planners can dodge FOFA obligations!! There will never be a level playing field until intra-fund advice is banned and clients pay for advice on a fee-for-service basis like everyone else. However, with the Libs about to be thrown out in a landslide election, the comrades in the Labor Party will not allow this “free service” to be outlawed.
Yes but sadly the RC did not even raise one question about intra fund advice.
rty and Anon, Interesting points. Does anyone know if the FASEA requirements will apply to call centres offering intrafund advice? Is ASIC even allowing intrafund advice anymore.
Just on the way to nationalising the superannuation industry?
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