Struggle to manage perceptions forced Westpac to exit funds business

Westpac quit funds management after it became too hard to manage the “perception” of a conflict of interest.

Westpac chief executive Brian Hartzer leaves the Royal Commission, yesterday. Picture: AAP

Westpac opted to exit its funds management business, given it became too difficult to manage the “perception” of a conflict of interest with its financial advice business.

Giving evidence at the Hayne financial services royal commission yesterday, Westpac chief executive Brian Hartzer also conceded “the economics” of owning a wealth management business were becoming challenging.

Mr Hartzer is the second of the major bank bosses to front the royal commission in as many days, providing insight into the way his bank dealt with regulators and issues inside wealth management.

Coming under scrutiny is the provision of nearly $120 million to refund customers in fees for either inappropriate financial advice or no advice given. Of this figure, just $10.7m has been handed back to customers so far.

Mr Hartzer’s evidence follows gruelling questioning of Commonwealth Bank chief executive Matt Comyn and CBA chair Catherine Livingstone.

Westpac’s BT wealth business, one of the nation’s biggest advisory firms, came under scrutiny.

For Westpac’s part, it has remained committed to wealth management while rival banks have exited the sector in the past year amid a string of scandals.

Mr Hartzer said providing quality financial advice was becoming an increasingly difficult business.

“My view is that yes, we should (provide advice). However, the economics of doing that are getting very difficult,” he said.

“Advice is inherently a challenging issue to monitor because you’re talking about a subjective conversation between two people.

“With the best will in the world, results don’t necessarily come out the way you expect them to. The standards of documentation and proof that we’re now expected to meet are very high, and so the cost of training, storing documents, auditing and the like is very high relative to the revenue associated with providing that advice.”