Advance is a multi-manager investment business providing specialist funds management services and products.

As of the end of March 2022, Advance had A$43.7bn (£24.6bn, $30.9bn, €28.9bn) funds under management.

Funds merger

In other news, Westpac subsidiary BT Funds Management has agreed to merge its personal and corporate superannuation funds with Mercer Super Trust.

BT has A$37.8bn in funds under administration, as of the end of March 2022, which include the Westpac employee default plan.

Mercer will offer employment to BT staff who look after the funds following the merger.

The deal, however, does not include superannuation funds held on Westpac’s BT Panorama and Asgard platforms.

Westpac simplification

BT Trustee chair Gai McGrath said: “The trustee engaged broadly across the industry and after a robust and competitive process this merger will create a larger superannuation fund with the potential to deliver improved performance, lower fees, and broader member services.

“It also maintains continuity of knowledge and service for BT Super members.”

Westpac specialist businesses chief executive Jason Yetton added: “This is a further step in the simplification of Westpac and supports the group’s focus on banking in Australia and New Zealand. It also provides significant benefits for BT Super members, new opportunities for our people and redefines the landscape of superannuation in Australia.

“Since the formation of Westpac’s specialist businesses division around two years ago we have made significant headway on our portfolio simplification agenda, having announced eight business sales, of which five have now completed.”

Both deals are expected to complete in the first half of 2023.

The fine relates to the firm incorrectly charging commission payments to members of one of its superannuation funds for years.

The court found that BT charged insurance premiums which included commission until 2020; even though the practice has been banned since 2013.

Members of the Asgard Independence Plan Division Two fund who had chosen to not have financial advice, were also charged commission as part of their premiums which was then paid to financial advisers, the Australian Securities & Investments Commission (Asic) said.

Over 9,900 Asgard fund members were incorrectly charged commission totalling more than A$9m.

Penalties

Sarah Court, Asic deputy chair, said: “This conduct was caused by the failure to implement proper systems to ensure consumers are correctly charged.”

This is just one of six civil penalty procedures brought against Westpac by the Australian regulator in November 2021, as sentencing is pending for the other five.

Court added: “As the court finalises these matters against Westpac, we urge Westpac, and other financial institutions, to look at their culture of compliance and invest in systems that mean incorrect charging of fees, premiums and commissions does not occur.”

Westpac added that it will pay A$9.8m in redress to over 9,900 clients by July 2022.

The report said that the bank is allowing interested suitors access to confidential information about the business.

A deal could be worth as much as A$1.5bn (£840m, $1.1bn, €1bn).

Westpac is reportedly narrowing its focus with a plan to exit wealth, pensions, life insurance and auto finance, which were combined into a specialist businesses division in May 2020 with a view to sell them.

The bank declined to comment on the speculation.

The proceedings, each the result of an individual Asic investigation, allege widespread compliance failures across multiple Westpac businesses, which occurred over many years and affected thousands of clients.

The allegations have been made against Westpac’s banking, superannuation and wealth management brands as well as its former general insurance business.

The six matters will now be separately considered and determined by the court.

Allegations

Some of the allegations filed against Westpac include:

• Fees for no service – deceased customers: Asic alleges that over a 10-year period, Westpac and related entities within the Westpac group, charged over A$10m (£5.4m, $7.1m, €6.3m) in advice fees to over 11,000 deceased customers for financial advice services that were not provided due to their death;
• Insurance in super: Asic alleges that Westpac subsidiary BT Funds Management charged members insurance premiums that included commission payments, despite commissions having been banned under the Future of Financial Advice reforms;
• Inadequate fee disclosure: Asic alleges that Westpac licensees BT Financial Advice, Securitor and Magnitude (all no longer operating) charged ongoing contribution fees for financial advice to customers without proper disclosure; and
• Deregistered company accounts: Asic alleges that Westpac did not have appropriate processes to manage accounts held in the names of deregistered companies.

Urgent improvement

Sarah Court, Asic deputy chair, said: “Asic is disappointed to have to yet again commence legal proceedings, on this occasion no fewer than six times, against a major bank.

“The conduct and breaches alleged in these proceedings caused widespread consumer harm and ranged across Westpac’s everyday banking, financial advice, superannuation and insurance businesses.

“A common aspect across these matters has been poor systems, poor processes and poor governance, which is suggestive of an overall poor compliance culture within Westpac at the relevant time.

“Customers are entitled to have trust and confidence in Westpac being able to deliver what it promises, without suffering financial harm. Westpac must urgently improve its systems and culture to ensure these systemic failures do not continue.

“It is unprecedented for ASIC to file multiple proceedings against the same respondent at the same time. However, these were exceptional circumstances. ASIC had numerous Westpac-related matters under investigation through the course of 2021, and we decided to expedite those matters for consideration by the court at the earliest opportunity.”

Penalty

Westpac has reached agreement with Asic to the six separate matters through agreed civil penalty proceedings filed in the Federal Court of Australia.

The entities will jointly submit agreed proposed penalties for each of the proceedings, totalling A$113m, subject to court approval.

Westpac will “continue to work cooperatively with Asic to resolve the proceedings as quickly as possible”, it said in a statement.

Peter King, Westpac chief executive, said: “As flagged, we have been working to resolve a number of outstanding regulatory matters before the bank. We have cooperated with Asic through the investigations and the process to get to this resolution today.

“This outcome is an important step forward for us as we continue to fix issues and build stronger risk foundations.

“In each of these matters, Westpac has fallen short of our standards and the standards our customers expect of us. The issues raised in these matters should not have occurred, and our processes, systems and monitoring should have been better. We are putting things right and unreservedly apologise to our customers.”

The penalty is in regard to the proceedings brought by Australia Securities and Investments Commission (Asic) in 2016 against Westpac Securities Administration Limited and BT Funds Management Limited.

Asic found “personal advice” was provided in relation to calls to 14 customers concerning the rollover of their external superannuation accounts, which was found to be in breach of the Corporations Act.

Neither company was licensed to provide personal financial advice.

Background

This news comes months after the Australian High Court confirmed that Westpac Securities Administration Limited and BT Funds Management Limited breached financial services laws, including the requirement to act in their clients’ best interests and the requirement to act honestly, efficiently and fairly.

The judgment upheld the Full Federal Court decision regarding the conduct of the companies, dismissing their appeal and holding that they breached the Corporations Act by providing personal financial product advice in calls made to 14 customers.