At time of writing, the share price of Westpac Banking Corporation [ASX:WBC] is down a further .69%, trading at $28.79.
The Westpac share price is coming off a 52–week high of $30.05 on 27 September:
Westpac shares are facing downwards pressure following a recent court ruling about financial advice. We identify two stocks that got a boost in the wake of the decision.
ASIC wins appeal, Westpac share price slides
ASIC won its appeal in Federal Court over the matter of Westpac rolling $640 million of customer super balances to in-house funds.
Chief Justice Allsop said that:
‘Westpac attempted, assiduously, to get the customer to make a decision to move funds to BT without giving personal financial product advice as defined in the legislation. It failed.’
The dividing line between general and personal advice is an important one — and the court case provides more clarity on this matter.
The AFR also claims the following about the ruling:
‘[It] poses a revenue threat to other large financial services firms including Commonwealth Bank.’
And notes that:
‘The threat is particularly acute for Westpac — which has announced it is exiting the business of face-to-face personal financial advice, but is retaining BT’s superannuation and funds management business — and Commonwealth Bank, which has shelved plans to divest from wealth management. NAB and ANZ by contrast are selling both investment management and financial advice.’
Given this, it is no surprise the Westpac share price slid slightly on the announcement along with shares of Commonwealth Bank of Australia [ASX:CBA].
Two stocks that have shot up after the Westpac ruling
Take a look at the chart of these two companies over the last five trading days:
You see, both stocks stand to benefit from the woes of the Big Four banks.
Praemium does financial planning technology platforms and investment administration.
Meanwhile Class is engaged in the business of cloud-based administration software solutions for SMSF administrators.
It’s interesting to note that they were rising well before the decision was announced on Monday.
It’s all part of the Great Bank Unbundling, and if you hold shares in the Big Four, now may be an opportune time to familiarise yourself with the growing risk of dividend cuts.
For Money Morning