Big four bank hints at return to limited financial advice

Speaking at a recent event in Sydney, the chief executive officer of Westpac, Peter King, reflected on the Quality of Advice Review (QAR), specifically discussing the recommendation made by Michelle Levy, the lead of the review, that banks and other entities should be incentivised to offer advice.

Namely, in her final QAR report, Ms Levy suggested that banks, superannuation funds, and insurers should be allowed to provide limited advice exempt from best interest duty. Instead, the QAR lead proposed the introduction of a good advice duty that would attach to personalised financial advice offered by the institutions.

Asked whether Westpac plans to return to financial advice if Ms Levy’s recommendations are adopted by government, Mr King suggested that while the big four has no plans to return to the high net worth end of town, it could play a role in making the financial advice system more accessible and effective in addressing the financial literacy gap in Australia.

“If you think about high net worth, very specialist, broad financial advice, there’s not really an aspiration for us to get back into that market. And so, but that’s the top end, if you like, what’s really missing in the country now is the mass market,” Mr King told the AFR Banking Summit.

He explained that currently, an increasing number of customers are doing their own financial planning through social media platforms and opening themselves up to fake investment prospectuses and scams.

“One of the things that I hate looking at is customers who have lost money in an investment scam, it’s massive. And you go, what’s happening, and they’re doing their own financial planning, through Google, Facebook, and Twitter and they’re getting access to fake investment prospectuses. So that’s what’s driving me nuts. You then get the money going in and it gets out of the country and they’re life-changing losses for individuals. And so that’s the passion for me,” Mr King said.

“It’s about how do we, how do we help people become more financially literate, how do we work with the telcos to stop these texts, how do we work with the social platforms to pull down the dodgy prospectuses, how do we put sand in the wheels to make the money not flow as fast when people are subject to it?”

He emphasised that at the core of this “big system” lies the issue of financial illiteracy among people and their exploitation, and ultimately, banks need to respond to it.

“You step back and you go at the heart of it, we’ve got people that are not financially literate enough, we’ve got people taking advantage of them and we’ve got to respond. So, I think the financial, where we’ve got with the review I think is good. I think we need to change it so it’s easier, but it needs to solve the problem at the top end of town, the high net worth end of town as well as the mass. It’s really important,” Mr King explained.

Westpac and its big banking peers ceased providing financial advice to retail clients after the damning royal commission.

Earlier this month, at a breakfast event in Sydney, Financial Services Minister Stephen Jones hinted that while the government could heed Ms Levy’s recommendation to allow superannuation funds to provide limited advice, banks may not be granted the same privilege.