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Westpac nears deal on financial planners with Viridian
The Australian 12:00am March 19, 2019
Joyce Moullakis, Bridget Carter
EXCLUSIVE Westpac Bank is set to decide the fate of its financial planning unit and dealer groups this week, as it inches toward a complex transaction with boutique Viridian Advisory.
As revealed by The Australian online yesterday, the parties are said to be putting finishing touches on a deal that would see Viridian acquire a large portion of Westpac’s planners and include dealer groups Magnitude and Securitor.
A divestment would see Westpac chief Brian Hartzer, the most committed of the major bank bosses to wealth management, jettison the businesses alongside a long-term referral arrangement.
Unlike the other big four banks, Westpac has retained its life insurance division and Mr Hartzer has emphasised a belief that banks should forge ahead in wealth despite some parts of it plagued by scandals and limited profitability.
According to sources, the on-again-off-again negotiations between Westpac and Viridian are tense and the situation is fluid.
It is understood there are about 25 senior planners against the Viridian move, which has caused difficulties in seeing the deal proceed.
Sources said should the planners not agree to the deal, their employment at Westpac would be terminated. Advisory firm Greenhill is believed to be working on the transaction.
Viridian uses different platform providers for its customers including ASX-listed Netwealth, which would also complicate the mooted deal.
Platforms house investments in one place and allow centralised reporting.
Viridian declined to comment as did a Westpac spokesman, citing market speculation.
The talks between them were revealed by The Australian in February.
Westpac’s imminent decision on the planning divisions comes as other major banks including ANZ have sold or are considering divesting their planning operations given a string of industry scandals and increased compliance costs.
ANZ sold its planning groups to wealth group IOOF, and Commonwealth Bank and National Australia Bank are reviewing their operations, although both have put on ice considerations for a sharemarket spin off of their wealth businesses.
Westpac’s latest financial results showed it had 803 salaried and aligned planners as at September 30, down 21 per cent from a year earlier. The bank’s platform Panorama - which is being retained - houses $12.4 billion in investor funds.
Dealer groups are an umbrella organisation that provide financial planning practices with services including practice management support and compliance.
Mr Hartzer has been open to divesting the bank’s financial planning operations for some months.
In November, he confirmed a strategic review of the financial planning businesses had begun and that all options including a sale were on the table.
“As the regulations have gotten tighter and tighter, the cost of compliance has gone up dramatically, it has probably doubled, and the consequences of when we get something wrong are very severe,” Mr Hartzer said. “We have been trying to work through segment by segment, within the base, to understand what is the nature of the advice needs that those customer segments have and what are our options for providing that.”
During his time in the witness box at the Hayne royal commission, Mr Hartzer again conceded that Westpac’s systems weren’t up to scratch in the area of financial advice and the bank was still assessing how much it would need to repay customers for charging fees for no service.
Viridian is, however, a much smaller outfit so it would need to ensure robust compliance processes and a smooth transition of planners and clients.
Its website says the company’s 40 or so representatives provide traditional investment advice, estate and retirement planning, debt management and portfolio administration.
The boutique firm was set up by former Westpac financial planners almost four years ago.
Viridian is chaired by paediatric surgeon and sports management stalwart Neil McMullin who doesn’t appear to have experience in financial services. The only non-executive director that has a background in finance is former EY Australia senior partner James Joughin.
Viridian was co-founded by Glenn Calder and Raamy Shahien, who were formerly a senior financial adviser and executive adviser at Westpac respectively.
Even though they are divesting of assets deemed non-core, Morgan Stanley analysts remain bearish on the nation’s big banks.
“We have a negative stance on the major banks given a challenging operating outlook, an uncertain regulatory environment, the growing threat of disruption and full trading multiples,” they said in a note last week.