Westpac Banking Corp. is exiting the financial advice segment and has announced changes among group executive responsibilities.
The Australian company has entered into a sale agreement with Viridian Advisory Pty. Ltd. that will see the latter absorb 175 salaried financial advisers and other management and support staff at its BT Financial Group business. Viridian will also start supporting many advice customers who consent to the transition from the expected completion date of June 30. Westpac will cease to offer face-to-face personal advice by Sept. 30.
Further, the company is on track to complete its customer remediation programs in relation to ongoing advice fees for customers by the fourth quarter of 2019.
The BT Financial Group's wealth and insurance businesses will be moved into Westpac's expanded business and consumer divisions. The private wealth, platforms and investments, and superannuation businesses will move into an expanded business division, while the insurance business will move into the consumer division.
Westpac CEO Brian Hartzer said the changes will deliver a more integrated experience for customers, as well as simplify the group's structure. The announced changes come as the four major Australian banking groups look to exit their wealth advice businesses to realign their focus on core businesses.
The financial advice business was an area of focus for the yearlong Australian royal commission looking into misconduct in the financial sector. The commission in its final report recommended a review by 2022 to improve the quality of advice.
Meanwhile, Westpac is also reorganizing some group executive responsibilities. The consumer division will be led by the current business bank CEO, David Lindberg. The company named Alastair Welsh, general manager for commercial banking, as head of the business division on an acting basis, while an executive search is conducted for Lindberg's replacement.
George Frazis, consumer bank CEO, will leave the group to pursue other opportunities. He will assist with the transition until June. Brad Cooper, head of BT Financial Group, will also leave the bank following the transition of those businesses into their new divisions.
Westpac expects the changes to be EPS positive in 2020, excluding any remediation costs, as the company is exiting a high-cost, loss-making business. The one-off impacts from the transaction and transition will be spread over fiscal 2019 and 2020, with initial estimates include costs of between A$250 million and A$300 million.
Exiting the advice business will result in removing the A$53 million cash earnings loss in fiscal 2018 from the advice business, as well as result in A$20 million in productivity savings.
The divisional changes will be effective April 1.