Transactions unravel vertical integration
The completion of two transactions to close out the 2022-23 financial year have revealed the degree to which vertical integration is no longer a dominant feature of the Australian financial services industry.
Those two transactions were the sale by AIA Australia of its inherited Pensions and Investments business to Resolution Life and AMP Limited’s sale of its SMSF administration business, SuperConcepts, to a private equity-backed consortium led by former CountPlus chief executive, Matthew Rowe.
Importantly, both businesses were a manifestation of the days when the major banks and AMP Limited dominated the Australian wealth management sector largely via vertically-integrated structures.
AIA Australia acquired the Pensions and Investment business via its acquisition of the Commonwealth Bank’s insurance business, Comminsure, and by exiting via its transaction with Resolution Life, AIA is making clear it wants to focus on its core business – life insurance.
The same applies, if only slightly differently, to AMP’s decision to sell SuperConcepts the SMSF business it began building more than a decade ago but which it deemed no longer to be a fit for a business based on a bank, a platform and the delivery of financial planning.
There is some symmetry to the two latest transactions because AIA sold the Pensions and Investments business to Resolution Life which also acquired the AMP Life business with a transaction first announced in October, 2018 and which resulted in full control in July, 2022.
However, while exiting its SMSF Administration and software business, AMP is continuing with its superannuation business albeit that its most recent update to the Australian Securities Exchange (ASX) revealed a $610 million decline in first quarter net cashflows from the master trust.
I would have thought these transactions represent an unravelling of horizontal integration, not vertical integration. They are product lines, being sold off by product companies, to streamline their business.
Vertical integration is when product companies also own or control advice businesses. This is still very much a part of AMP’s business model, and the SuperConcepts sale makes no difference to that. While vertical integration may have declined due to banks exiting personal advice, it has simultaneously grown in other ways. Particularly by advice licensees becoming product companies through inhouse SMAs, and by product companies taking equity positions in advice practices.
Congratulations ASIC & Government on completely destroying the banks financial planning arms, a 140 year old business in AMP, the entire personal insurance business, the training ground for all new entrants to financial planning, countless small financial planning business, 15 thousand individuals who operated as financial planners 5 Yrs ago.
Wow, I hope you are all so proud that you were able to wreck the aspirations of hundreds of thousands of individuals livelihoods? Bravo 👏 .
Hang on a minute you missed something. You only missed the largest vertically integrated business on the planet(i.e. The Industry Super Funds).
Ohh and what, you now want them to be able to replace the banks with another vertically integrated advice model despite preaching for the last 5-10 years that these business practices were the axis of evil.
Is this true? You now want uneducated, untrained, unprofessional individuals to provide the majority of the Australian community ‘ Financial Advice’. Isn’t this the same community that has been attacking Financial Advice, and Financed Advisers for the past 10yrs?
So you (labour government & community) really believe a vertically integrated Super Fund with one agenda will provide the community with unbiased, comprehensive, ethical, & honest advice. Are you out of your mind??????
In all my years on this planet I have never witnessed are more corrupted decision by any Australian government.
This action to give vertically integrated Super Funds all power over Australians life savings must be stopped. It’s disgraceful,
Brad, no one cares. Sad but true. Do your blood pressure a favour and move on.