Westpac CEO Brian Hartzer and CBA chief Matt Comyn shared their views on the future of wealth management during a parliamentary inquiry on Friday.
Appearing before a parliamentary committee on Friday (8 November), Mr Hartzer explained that financial planning was an unprofitable business for the bank for a long time.
“We concluded that it was uneconomic to meet all the compliance around it and earn a reasonable return,” he said. “I regret that, because I continue to believe that providing financial advice to Australian consumers is important and that all Australians should have access to good, cost-effective, unconflicted financial advice.”
Mr Hartzer also made comments about “the challenge of red tape” for small businesses and noted that regulation can have “unintended consequences” for customers and the broader economy.
“One of the biggest issues that we have seen is where you have unintended consequences of regulation. We have certainly seen plenty of examples where if something is rushed and the consequences aren’t fully thought through, that there can be negative impacts on customers and the economy,” he said.
Mr Comyn fronted MPs following Mr Hartzer, where he was asked about the bank’s decision to retain its advice business.
“We do think it is important to be able to provide that service to customers. We worry about the unavailability of effective and safe and simple advice to customers over time,” Mr Comyn said.
While he admitted that there have been plenty of scandals within CBA’s financial planning arm, Mr Comyn said the bank has made changes to improve its advice offering.
“It is certainly a very challenged business at the moment,” he said. “I can certainly understand why some institutions would exit it. Our concern is what will the future of financial advice provision be in Australia and what might [be] the impact of a smaller advice industry and far fewer customers being able to either afford or access financial advice.”
The CBA boss pointed to the UK advice market, where substantial reforms were implemented. The Retail Distribution Review (RDR) began in 2006 and concluded with new remuneration rules published in 2012.
“A decade on, I think a number of policymakers there are wondering whether that was a good thing, given far fewer people have taken out products like life insurance,” Mr Comyn noted.
“We need to consider how we can develop a safe proposition, either using the model we have in place today, or, I would hope we would be able to develop over time an even simpler service that leverages technology and consistency and is able to deliver a basis service that I think frankly would serve at least 80 per cent of Australians very well.”