BTFG CEO Bradley Cooper and Westpac CEO Brian Hartzer

Wesptac chief executive, Brian Hartzer, believes the economics of advice stopped making sense “a number of years” ago, with the tipping point occurring well before both the Hayne royal commission and the roll-out of their trial referral program with Viridian Advisory.

Speaking at a media call to discuss BT Financial Group’s exit from aligned dealer group financial advice this morning, Hartzer was asked whether the advice arm of the business stopped making financial sense before or after the Viridian client referral trial.

“I would say it predates that,” Hartzer admitted. “I’d say the writing has been on the wall for us for a number of years. The referral pilot we came up with as a way to navigate out of that.”

Viridian chief executive, Glenn Calder, explained to Professional Planner earlier on Tuesday that the arrangement for BTFG to offer advisers from the two licensees the Viridian transfer option has been in place “eight or nine months”.

Hartzer said the wheels were in motion for Westpac and the other banks to unload their wealth arms long before the Hayne royal commission cut a swathe through the industry.

“I think the trends in financial advice have been well underway for a number of years, so I don’t think this is a direct result of the royal commission,” Hartzer said. “We were already thinking about the sustainability of advice for a number of years.”

The bank today announced that financial planning practices under BT Group licensees Securitor Financial Group and Magnitude Group will either be assisted to move to self-licensing arrangements or other licensees.

As at March, 2018, Securitor had just over 300 advisers and Magnitude 177 under its umbrella. Westpac’s separate in-house licensee group boasted 489 advisers at that time.

“The decision to exit the provision of personal advice by financial advisers under our license has not been taken lightly, and our priority is to ensure the smoothest possible transition for customers, advisers and support staff,” Hartzer said in a statement.

Hartzer told the assembled media on Tuesday that the split between in-house advisers and the ones being offered to Viridian is approximately 50/50.

“Half of the customer base will be offered to move across,” he said.

BTFG CEO, Bradley Cooper, addressed the media contingent with Hartzer and clarified the nature of the referral agreement.

“There’s no ongoing fee relationship between us and Viridian… they are truly independent,” Cooper said “We are referring them the same way we would refer a lawyer or accountant.”

Viridian Advisory CEO Glenn Calder

Capacity questions

Westpac’s move comes after the other three big banks made similar calls to offload their advice arms, though CBA and NAB have since placed their splits on hold.

At March last year, Viridian was the one-hundredth largest licensee owner in the country with 26 advisers, up from 15 in 2016. If all Securitor and Magnitude advisers were to join Viridian it could become one of the ten largest licensees in the country.

Viridian is an unlisted company with six offices across four states and a “ten or twelve-year history”, according to chief executive Calder. Most of the employees are former Westpac staff who banded together to purchase the business from the bank.

Hartzer flagged the need for the bank to ensure Viridian could handle rapid expansion.

“We have to make sure the capacity is there for Viridian to service those advisers,” he said.

Calder said that new Viridian offices would be opened to facilitate the on-boarding of advisers, which was something they had been planning for a while. They were confident, he said, that they could handle the numbers.

“There will be a transition period for the advisers coming across from Westpac to Viridian, which is being worked in the background now,” Calder said.

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.
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