Westpac has acknowledged that because its financial advice business was a loss-maker it expects that its exit from advice and the resetting of its wealth operations will reduce costs by around $280 million a year over the remainder of this year and next year.
The big banking group used its half-year results announcement to confirm the fundamentals of its decision to exit its financial advice business via a transaction with mid-size Melbourne-based group Viridian.
It said that taken together with the organisational realignment of BT Financial Group’s businesses, with the Private Wealth, Platforms & Investments and Superannuation businesses moving into an expanded Business division and with insurance moving to an expanded Consumer division, the group had raised a provision for exit and transition costs of $190 million.
The bank’s report filed with the Australian Securities Exchange (ASX) confirmed the group booked an after-tax cost of $617 million of provisions for estimated customer refunds, payments and associated costs.
It said that in the first half, the major items included in the provisions were related to customer refunds for ongoing advice service fees associated with the group’s salaried financial planners.
“These provisions add to those in prior period and reflect an increase in the estimated proportion of instances where records of financial advice are insufficient for the purposes of remediation,” it said.
The half-year documents also confirmed a similar situation with respect to ongoing advice service fees charged by the Group’s authorised representatives that provided financial planning services under the Magnitude and Securitor brands.