The major bank has today provided an update on accounting provisions for remediation associated with authorised representatives in relation to certain ongoing advice service fees.
Today’s announcement from Westpac follows the group's 25 March 2019 ASX announcement on remediation provisions, where it announced an increase in provisions for its salaried planners and indicated that assessments were underway in relation to authorised representatives. Authorised representatives are advisers who maintain direct relationships with their customers for financial planning services, while operating under the Magnitude and Securitor advice licenses.
Westpac said these advisers received ongoing advice service fees from their customers of approximately $966 million between 2008 and 2018. Based on the information currently available, Westpac today said that its cash earnings in First Half 2019 will be reduced by $357 million for accounting provisions associated with this matter.
The $510 million provision (pre-tax) is based on a range of accounting assumptions relating to potential payments of $297 million (pre-tax), interest costs of $138 million (pre-tax) and $75 million (pre-tax) in remediation program costs.
That part of the current estimated provision which relates to potential payments represents around 31 per cent of the ongoing advice service fees collected over the period which compares to 28 per cent estimated for salaried planners.
Westpac said it will continue to work with current and prior authorised representatives and their customers to determine where a payment should be provided. The final cost of remediation will not be known until all relevant information is available and payments have been made. The bank is yet to finalise its remediation approach, which may change following industry and regulator discussions.
“While it is disappointing that we have needed to make these provisions, I said at the end of last year that our priority was to deal with any outstanding issues and process payments as quickly as possible,” Westpac CEO Mr Brian Hartzer said.
“As part of our ‘get it right put it right’ initiative we are fixing issues and are determined to ensure that they don’t reoccur.”
Former CEO of ING Direct Vaughn Richtor will assume the role of chairman at MyState following the retirement of Miles Hampton, the compan...