Remediation payouts made by Westpac has led to improved certainty over the expected provisions that will need to be made by the big four bank in the future, having remediated over one million customers in 2021.
In an update to the Australian Securities Exchange (ASX), it described the progress made in its remediation programs as reducing “the degree of estimation uncertainty” in the programs. It held $1.14 billion provision for compliance, regulation and remediation as of 30 September, 2021, out of a $3.5 billion provision in total.
In 2021, it had offered or paid over $1 billion to more than one million customers and “largely finalised” its two largest financial advice remediation programs.
In 1H21, there was a $104 million reduction to net fee income for additional provisions related to salaried advice remediation and for some customers on its platforms who were not advised of certain corporate actions, as well as another $88 million reduction for dealer group advice remediation.
During 2H21 there was an $18 million reduction to net wealth management and insurance income for additional provisions for aligned dealer group advice remediation.
“It is possible that the final outcome could be below or above the provision, if the actual outcome differs from the assumptions used in estimating the provision,” it said.
“Remediation processes may change over time as further facts emerge and such changes could result in a change to the final exposure.”
BT Panorama funds under administration (FUA) increased 235% to $105 billion, compared to September 2020 following platform migrations and organic growth.
The migration of customers from BT Wrap to Panorama was completed in July and there were now over 6,000 active users on the Panorama platform.
Superannuation
Superannuation FUM had grown 19% to $45 billion, while $0.1 billion in early super release payments were made.
Net flows excluding pensions and early release of super increased by 134% from the previous year to $3.8 billion.
According to the ‘Plan For Life Platform Wrap Admin Report’ BT led in market share with 18.8%, as of June 2021 excluding corporate super.
Westpac acknowledged the heightened scrutiny over the BT Superannuation products after failing the Your Super, Your Future performance test.
“Two BT MySuper products (AESA MySuper and BT Super MySuper) failed the annual MySuper performance test for the year ended 30 June, 2021, and the BT trustee has notified relevant members of this outcome,” it said.
“If those BT products also fail the next annual performance test, the BT trustee will be precluded from accepting new MySuper members.”
Westpac noted the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) had increased supervisory focus on superannuation providers when it came to member outcomes.
“Westpac’s BT superannuation entity trustee has been responding to requests for information from APRA in relation to comparative underperformance of certain MySuper products, having regard to APRA’s MySuper ‘heat maps’,” it said.
“BT’s superannuation trustee is also continuing with a program of work on enhancement of member outcomes and accelerating its remediation programs.
“With increased regulatory focus on superannuation, including a number of inquiries and investigation into BT’s superannuation business, further issues requiring attention may be identified.”
Westpac said it was aware of media reports and “other publicly available material” that other class actions against were being investigated.
“In July 2020, a law firm publicly stated that it intends to commence a class action against BTFM [BT Funds Management] alleging that since 2014, BTFM did not act in the best interests of members of certain superannuation funds when obtaining group insurance policies,” it said.
“In August 2020, another law firm announced it was investing claims on behalf of persons who in the past six years acquired, renewed or continued to hold a financial product (including life insurance) on the advice or recommendation of a financial adviser from Magnitude Group, Securitor Financial Group or Westpac Banking Corporation.
“Westpac has not been served with a claim in relation to either of these matters and has no information about the proposed claims beyond the public statements issue by the law firms involved.”
Westpac also noted it was defending a class action related to the AUSTRAC civil proceedings and although damages being sought were unspecified it expected any alleged damages would be “significant.”
