Westpac personal advice ‘unprofitable for some time’

John Kavanagh Financial institutions / Big five & fintech

Westpac will reduce its headcount by 900 full time equivalents and aim to save operating costs of A$280 million a year, as it breaks up its wealth management division and stops providing personal financial advice.

The bank is selling servicing rights to its existing book of advice customers to Viridian Financial Group, an independent financial adviser.

Westpac chief executive Brian Hartzer said the bank’s advice business had not been profitable “for some time” and the move reflected broader changes in the financial planning industry.

BT’s adviser numbers (salaried and aligned) have declined steadily over the past few years, falling from 1192 in 2015 to 803 last year.

The bank will service customers who want financial advice by referral. And it is exploring the introduction of digital advice services.

Viridian will offer jobs to BT Financial Advice salaried advisers and the bank expects that as many as 175 of its planners will move across.

BT Group licensees operating under the Securitor and Magnitude brands will be assisted with options, such as independent licensing or moving to another licensee.

Westpac has stopped taking new personal advice clients and expects the transfer to Viridian to be completed by June 30.

The remaining parts of BT Financial Group will be broken up, with the investment platform business, Panorama, superannuation and private wealth assigned to the business banking division.

The insurance business will move into the consumer banking division.

Excluding remediation costs, the bank expects the changes to be EPS accretive in the 2020 financial year. Advice customers will have to opt in to the arrangement with Viridian and the proceeds of sale will depend on the size of the business that transitions.

Hartzer said the remediation of salaried adviser misconduct would be completed by the September quarter. Remediation of aligned adviser misconduct would take longer.

The bank is pinning its hopes on the Panorama and private wealth businesses to drive growth in wealth. It claims that Panorama is the fastest growing administration platform in the market, with most of its recent growth coming from independent financial advisers.

Private wealth client numbers have grown from 27,000 in 2014 to 31,000 last year. It has been the biggest contributor to BT Financial Group’s earnings.

As a result of the restructure, there will be a number of executive changes. Brad Cooper, the head of BT Financial Group will leave the bank after overseeing the transition.

Consumer banking division chief executive George Frazis will leave the bank in June, to be replaced by David Lindberg, who is currently the head of the business banking division.