Westpac said while implementing the Future of Financial Advice reforms, it did not embed strong enough controls and record-keeping to police fee-for-no-service advice.
The admission was made in the bank's annual sustainability report released today, stating: "We are now going back through all of these files to ensure that our planner's records show that advice was not provided, and if not, that fees were stopped and where appropriate refunded."
Over 75 employees are currently reviewing adviser files.
Westpac provided $195 million in 2018 as an estimate of what it will cost in refunds and administration of its salaried planners. It is working to identify how big the issue is for the bank's aligned advisers.
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On Friday, Westpac said it was expecting its compensation bill to shave off $281 million from its FY18 cash earnings - this was $46 million higher than Westpac's previous estimate provided at September end.
The bank spent over $1.1 billion on regulation and compliance this year, significantly more than what it wrote off in credit provisions.
Less praise, more complaints
Westpac customers sent the bank fewer compliments in the last year while complaints piled up, the report shows.
The 2018 financial year was the first time that Westpac collected fewer compliments than the year before since it started tracking the metric in 2016. Praise from Aussie customers fell 23% in 2018.
Meanwhile, Westpac received 12% more consumer complaints over the previous year.
Westpac customer advocate Adrian Ahern runs a team of 10 case managers to resolve customer complaints where they are not happy with the group's actions.
Over the last year, the team dealt with 450 cases.
"Of these, approximately one third of the group's prior decisions were substituted; one third remain unchanged; and for the remaining thirds the customer advocate agreed with the group's decision but took further action to ensure a fair outcome was delivered," the report said.
The bank has closed 47 branches and 443 ATMs in the year, but almost half of its ATMs are now smart ATMs, up from just a quarter five years ago.
More than 70% of all electricity generation projects that the bank financed in 2018 were renewables including hydro. This is a gain of 6% over the previous year.