The sale of Westpac’s financial arm to Viridian Advisory is a good move for the struggling Australian lender says GlobalData Financial Services.
Westpac Banking Corp is the latest bank to sell its wealth operations in the aftermath of Australia’s Royal Banking Commission, transitioning to a referral model for financial advice and moving its private wealth operations into its business division.
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Westpac financial advice
This will offload risk to external partners while better aligning the needs of its high net worth (HNW) customers to its business structure.
Westpac is selling its personal financial advice assets to Viridian Advisory. This means it will no longer provide face-to-face financial advice to customers through its financial advisors at BT Financial Group or through authorised representatives.
By using a panel of advisers, or adviser firms, the bank not only offloads risk but also a good chunk of the regulatory burden that goes with providing financial advice. At the same time it also eliminates a huge stain on its profit and loss account – in 2018, Westpac’s advice business made a loss of AUD$53 million (£29m).
The bank’s HNW customers will now be serviced via its business banking unit. This move is unsurprising: ANZ, NAB and CBA have all pursued a similar strategy, with their private banking operations nestled into their corporate banking units.
Private wealth restructuring
Australia’s HNW population is notably dynamic, with 35% having made their fortune through entrepreneurship, according to GlobalData. This means Westpac – already Australia’s second-largest business lender according to Australian Prudential Regulation Authority statistics, is in an optimal position to capitalise on synergies and cross-selling opportunities.
Westpac’s decision to sell its financial advice operations and restructure its private wealth operations will not allow the provider to escape the havoc and reputational damage caused by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. However, it is clearly a step in the right direction.
