Westpac’s chief executive in Australia has blamed a “dramatic rise in compliance costs” forcing him to reconsider his commitment to a full-service wealth operation.
It is the last major Australian bank to hold on to the wealth channel there, as others ditched it amid allegations of misconduct.
Now, although chief executive Brian Hartzer said vertical integration was still a viable proposition for banks, he said it was hard to make a financial advice business sustainable.
He said compliance costs had gone up dramatically because client files had to be “checked and double-checked”.
A spokesman for Westpac in New Zealand said it used a different model in this country to offer financial advice and had no plans to make any immediate changes.
“We regularly review our wealth advisory service to ensure we are operating efficiently whilst continuing to provide good quality financial advice to our customers.”
Banking commentator Claire Matthews, of Massey University, said it would be unfortunate if New Zealand banks stopped gibing financial advice because it was the most accessible form of advice for New Zealanders.
ANZ is going through shake-up, after the sale of OnePath to Cigna last week.
“While it would be good to think that non-bank financial advisers could fill the gap, I don’t think that is realistic, at least in the short term. It’s possible that the New Zealand banks will follow their parents if the parent bank has made a strategic decision to restrict their operations to pure banking, either due to the risks or lack of profitability.
"However, the costs being faced in Australia are the outcome of the recent enquiry and related issues, and as the FMA/RBNZ review has indicated the same issues are not evident in New Zealand, it’s possible the New Zealand banks will be left to make a decision on wealth management services that best suits their circumstances. “
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It's a convenient position to say that the regulations should be soft on banks because they are so big and see so many consumers.
But I would like to see the results of a survey of the banks that shows the % split of the bank's recommendations over the last 6 months to their customers in all of these product categories
Kiwisaver
Life Insurance
Mortgages
F&G insurance
between
(a) the bank's own or white-labelled products on the one hand and
(b) independent 3rd party product on the other.
My guess is the split would be well over 90% own product and well less than 10% independent. In some categories, I would bet the % would be insignificantly different from 100%/0%.
In most other industries, that would be called pure sales.
We should really compliment the banks on the way they have completely captured the regulators, and it seems now an academic.