Banks plot a careful course on wealth management

ANALYSIS

Between them the major banks spent close to $1 billion getting into the financial planning industry and have now spent many millions getting out.

A pattern has emerged of the banks almost paying buyers to take elements of their financial planning businesses off their hands. The latest is ANZ which revealed in its half-year results that it had agreed to “sell its financial planning and advice business servicing the affluent customer segment” to Zurich Financial Services Australia.

It then went on to say that, “as a result of the transaction, the Group recognised a $62 million loss largely comprising a goodwill write-off of $40 million in Other operating income, restructuring expenses of $7 million, and an income tax benefit of $9 million in the Australian Retail and Commercial division.

This follows on from the manner in which the Commonwealth Bank sold its Count Financial business to CountPlus and, more recently, the manner in which it dealt with its remaining Commonwealth Financial Planning business through its “partnership” with major insurer AIA Australia.

National Australia Bank (NAB), of course, sold is MLC Wealth business to IOOF (now Insignia) and Westpac selling its personal financial advice assets to Viridian Advisory.

At the core of almost all these transactions were indemnities provided to the buyers to cover the cost of any ongoing remediation issues.

The bottom line, however, is that the banks are making it abundantly clear to clients and potential clients that they are no longer in the business of providing financial advice unless those clients have around $3 million in investible assets.

The approach of the major banks appears to be to approach wealth management at the low end via the use of artificial intelligence and at the high-end by operating in the wholesale client environment. By doing so, they are minimising their exposure the complexities, costs and dangers of financial planning regulation.

As the Commonwealth Bank announced at the time of its arrangements with AIA Australia – “the Commonwealth Bank has confirmed it will commence the closure of the remaining Commonwealth Financial Planning (CFP) business and will cease providing advice services from 30 November, 2021.

Of course, the major banks have not entirely exited the wealth arena, with most of them happy to service high net worth clietns via their private bank offerings, such as NAB Private Wealth.

For its part, ANZ also maintains ANZ Private which explains that if you have a minimum of $3 million in funds to invest or borrow (excluding the family home) they you may be given access to a “trusted adviser”.

Having covered off the bottom and the top, the banks are leaving the highly-regulated middle to financial planning licensees.