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Westpac sells ‘loss-making’ financial advice business

The major bank has announced a raft of changes to its wealth strategy, including the sale of its “high-cost, loss-making” personal financial advice business to Viridian Advisory.

Westpac has announced that it will no longer be providing face-to-face financial advice to customers through its salaried planners working for BT Financial Group or through authorised representatives, instead selling personal financial advice assets to Viridian Advisory.

The exit will see Viridian Advisory offer employment to around 175 BT Financial salaried advisers and other management and support staff. The firm will also commence supporting ongoing advice customers who consent to the transition from the anticipated completion date of 30 June 2019.

The major bank, which has about 900 staff in financial advice, will instead move to a referral model for financial advice, using a panel of advisers or advisory firms.

According to Westpac’s disclosure to the Australian Securities Exchange (ASX), the exit is expected to result in:

  • removing the cash earnings loss from the advice business ($53 million in FY18 excluding remediation costs); and
  • $20 million (pre-tax) of productivity savings from operating one less business division.

Effective from 1 April, BT Financial’s insurance business will be rolled into Westpac’s consumer division, while the private wealth, platforms and investments, and superannuation businesses will move into its expanded business division.

Westpac CEO Brian Hartzer explained: “We’re realigning our capabilities into the lines of business where it makes most sense based on customer needs. Most customers don’t differentiate between banking and wealth products; they want help buying their home, paying their bills, planning for retirement, or protecting the things that matter most to them. They expect professional service that meets their financial needs.

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He continued: “Moving private wealth into the business division recognises that many of our high-net-worth customers have their own businesses or work for many of the companies we bank.

“Similarly, superannuation – including corporate superannuation and support for SMSFs – is strongly linked to our business division.”

The bank has also revealed changes to its management structure, which will see Westpac consumer division chief George Frazis leave the bank in June to “pursue other leadership opportunities”. Mr Frazis will be replaced by current business division chief David Lindberg.

Westpac general manager of commercial banking Alastair Welsh has been appointed to lead the business division on an acting basis until a permanent replacement for Mr Lindberg is found.

BT Financial chief Brad Cooper will also depart the group upon the completion of the restructure.

The changes are expected to be earnings-per-share positive in 2020 due to exiting a “high-cost, loss-making business”, according to Westpac’s ASX disclosure.

Westpac said it will absorb one-off impacts from the sale and restructure over FY19 and FY20, with initial estimates including one-off costs of between $250 million and $300 million.

The value of the transaction will depend on the size of the BT business that transitions to Viridian Advisory, the bank said. 

Westpac additionally reported being “on track” to completing its customer remediation programs in relation to the charge of ongoing personal financial advice fees by its salaried BT advisers by the fourth quarter of 2019.

As part of the changes, responsibility for BT remediation programs will move to Westpac COO Gary Thursby.

Westpac said the divisional changes will not be reflected in its first-half financial results for FY19.

The major bank’s share price rose nearly 1 per cent to $26.74 in early trade following the announcement.

[Related: AMP ‘surrenders’ fees-for-no-service documents]

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