There has been much speculation and commentary about the manner in which National Australia Bank’s (NAB’s) acquisition of AXA Asia Pacific, following on from its acquisition of Aviva Australia, will change the shape of the financial planning industry, but the real impact will be on the platforms space.

Indeed, as the Australian Competition and Consumer Commission (ACCC) sits down to consider the implications of NAB’s latest bid for growth, it ought not be worrying about who owns which dealer group. Rather, the competition regulator should be worrying about who now controls which platform.

While it is true that recent mergers and acquisitions have resulted in significant numbers of financial planners finding themselves working under the umbrella of one or other of the major banks, the real impact on Australian consumers will devolve from how much of the platforms market is now controlled by just three big banks – Westpac, Commonwealth Bank and NAB/MLC.

While there have been suggestions that a fourth big bank – ANZ – has been considering acquiring IOOF, such speculation fails to take account of the state of the Skandia platforms acquired by IOOF last year.

While the ACCC examined and approved both Westpac’s acquisition of St George and, more recently, NAB’s acquisition of Aviva Australia, there is no evidence of the degree to which the regulator reviewed or understood the impact of the transactions on the platforms market.

Perhaps just as importantly, the ACCC decision took a company-only approach, rather than examining the division between the bank and non-bank sectors, taking no account of the number of platforms likely to shift under the control of one or other of the big four banks.

According to the ACCC decision on the Aviva Australia transaction, the regulator said it considered that the acquisition "was unlikely to result in a substantial lessening of competition in the relevant markets".

It said the factors informing this conclusion included:

• the presence of a number of competing businesses in all relevant markets;
• the dynamic and growing nature of the markets for the supply of investment platforms and life insurance;
• the presence of external investment and superannuation options in the markets for the supply of investment platforms and superannuation; and
• the presence of a large number of dealer groups and independent financial advisers that will remain unaligned and not under the influence of NAB.

The ACCC, had it closely examined the financial planning industry and the platforms market, would have understood that while the platform industry might be dynamic, it is certainly not "growing". It has been a long time since any new players have seen fit to launch a platform. Indeed, even the existing players have proven reluctant innovators.

If the ACCC had cared to examine some (at that time confidential) research from leading research house Wealth Insights, it might have adopted a very different view.

That research reveals that in four short years the ownership of Australia’s platform market has reduced from 15 players to just eight, and that the market is dominated by only two or three players. Indeed, if the ACCC were to consider the platforms primarily used by planners, one group would emerge as dominant – Westpac/BT/St George.

So, hypothetically, what would ANZ’s acquisition of IOOF achieve? Given the bank’s recent acquisition of ING, it might hand the group as much as a further 20 per cent of the adviser market.

The managing director of Wealth Insights, Vanessa McMahon, maintained that the importance of platform ownership could not be underestimated.

"A great deal of power resides with those who own the platforms, particularly the primary platforms," she said.

McMahon acknowledged the power of those who control the large dealer groups and planning practices, particularly where rebates and choice of products is concerned, but argued that ownership of the platforms themselves was pivotal.

"The platform market is very much in the mature phase of the market cycle making it extremely difficult, if not impossible, for any new competitors to enter this space," she said.

The fallout from the global financial crisis has seen that domination increase.

So what have recent mergers and acquisitions in the Australian financial services market meant for the platform industry and why should the ACCC be paying close attention?

The regulator might care to consider that in the event NAB/MLC gained control of AXA Asia Pacific, it would then control the following platforms:

• Masterkey;
• MasterKey Custom;
• Navigator Plus;
• Navigator Access;
• Summit;
• Generations; and
• AXA North.

According to the Wealth Insights analysis, while this would give NAB/MLC control of platforms being used by a significant number of advisers, this would then need to be weighed against the dominance of the Westpac/BT/St George platform line-up, which includes BT, BT Wrap Essentials, Asgard, Asgard E-wrap and Asgard Equip.

Then, of course, there is the Commonwealth Bank’s much more streamlined but dominant Colonial First State FirstChoice offering.

In the event ANZ acquired IOOF, its presence in the platform space would be significantly extended by the inclusion of the IOOF and Skandia platform offerings on top of ANZ’s combined in-house and ING offerings, but it would remain well behind the dominant positions achieved by Westpac/BT/St George and Commonwealth/Colonial First State.

Given the state of Skandia’s platforms and the myriad of legacy technology issues that have confronted IOOF since the merger with Australian Wealth Management, some might have suggested ANZ would have been better served by looking at the synergies likely to flow from the acquisition of Perpetual – a company which, while moderately acquisitive, found itself struggling through the dark days of early 2009.

With Perpetual’s Wealth Focus having a solid foothold in the platform market and with the company boasting a strong adviser presence and a solid client base, particularly in the private clients arena, it would be unusual if the company had not been on the radar of some of the major players.