The head of a major bank has been grilled by the royal commission over his understanding of financial advice in the Australian market.
Westpac chief executive Brian Hartzer appeared in Hayne’s witness box on Thursday where counsel assisting Michael Hodge took the bank boss to task over his understanding of financial advice.
The US-born chief executive, who took over from Gail Kelly in 2015, was asked by Mr Hodge why clients shouldn’t have to make ‘opt-in’ agreement with advisers every year, rather than every two years as is currently the case. Particularly as the major bank is embroiled in fees for no service scandals.
Mr Hartzer said a more frequent opt-in process would be an administrative burden and be of little value.
“Some of these clients are having ongoing conversations with their advisers on a regular basis anyway. So they would regard it as an unnecessary regulatory burden,” he said. “If you spend time doing that you’re not spending time doing something else.
“Some clients want an active set of meetings frequently. Some clients view it as a bit of a retainer relationship where they can ring up and bounce things off their adviser when they want to. Sometimes they are quite happy not to do that for quite a long time but still like to know that the adviser is there. I know people like that.”
Mr Hodge then asked: “You know people who what?”
“I know people who pay for an advice relationship and are quite happy about the fact that it’s at their discretion to ring up the adviser and talk to them,” Mr Hartzer clarified.
Mr Hodge said he was not being facetious when he asked if Mr Hartzer was talking about “very wealthy people”.
“Relatively speaking that would be true, yes,” the Westpac CEO said.
Mr Hodge suggested to Mr Hartzer that this was an important point, because the subset of clients that need to have an ongoing advice relationship and are in a position where they are “happy to just leave somebody to monitor their no doubt very significant investments” are going to be very wealthy clients.
“It depends on your definition. But I would say broadly, yes,” Mr Hartzer agreed.