Some Westpac customers will have waited 11 years to get back the fees they paid for financial advice they never received.
But, like the rest of the financial services industry, that will not be the end of Westpac’s fees-for-no-service dramas.
The bank expects to pay $106 million to 25,000 customers by April next year, on top of the $10.75 million it has so far refunded to 6657 people.
Westpac CEO Brian Hartzer agreed that meant some customers will end up getting refunds for fees they were charged as long as 11 years ago.
When the regulator ASIC first raised fees-for-no-service problems with the industry in 2016, Westpac thought the issue was limited to a small number of problem advisers.
Westpac now accepted that belief was wrong, Mr Hartzer told the banking royal commission.
“It’s a problem that grew in our awareness over time and so the response scaled up over time,” he said on Wednesday.
Its current remediation program only covers fees-for-no-service cases involving ongoing service fees charged by its employed financial advisers since 2008.
It is still grappling with the $991 million in ongoing advice fees charged by financial planners who operate as authorised representatives through its dealer groups and trying to determine how much of that comprises fees for no service.
Mr Hartzer said establishing a fact-base was difficult because the contractual arrangements varied, customers and advisers needed to be found and getting hold of records could be difficult.
Westpac and others are advocating for some sort of industry solution to the problem, with the fees-for-no-service compensation across the banking and financial services sector currently expected to top $1 billion.
Mr Hartzer said the solution would involve a common methodology for contacting customers and the information that was required for remediation, as well as what to do when the customer or adviser could not be contacted.
Westpac has also had problems with inappropriate advice at its BT wealth management business, despite devoting substantial investment and resources to system and control improvements.
Mr Hartzer said he has been disappointed with senior leaders at BT over the inappropriate advice issues, revealing some have had their short-term bonuses cut.
“Last year there were some consequences and this year the consequences were significant,” he said.
Mr Hartzer still believed banks can operate large-scale financial advice businesses in a way that delivered compliant and high quality advice.
“My view is that yes, we can, and yes we should.
“However, the economics of doing that are getting very difficult.”
He said the standards of documentation and proof the industry was expected to meet were very high and the cost of issues such as training and auditing were also high relative to the revenue associated with providing the advice.