Banks less enamoured of wealth management
The days of the major banks competing for major wealth management assets are gone due to a combination of indifferent financial results and regulatory and reputational risks.
Anyone reading the half-year results of the Commonwealth Bank and AMP Limited would be questioning whether wealth management businesses represent the burgeoning investment opportunities they seemed to be nearly two decades ago.
The most recent market update filed by ANZ Group, which is contemplating exiting wealth management, would also have given pause for thought.
A detailed reading of the Commonwealth Bank’s half-year result revealed yet another record profit for the big banking group but also revealed what many would regard as a sub-par performance on the part of its wealth management business, largely due to continuing issues with life insurance and the costs of its advice remediation process.
A few days earlier, AMP Limited announced a full-year net loss of $344 million driven by problems in its insurance business while also pointing to the exit of a large number of planners as it reshaped its planning business to take account of higher standards of professionalism and education.
What happened at Commbank and AMP must then be considered alongside National Australia Bank’s (NAB’s) sale of 80 per cent of its MLC insurance business to Nippon Life and ANZ’s update to the Australian Securities Exchange (ASX) detailing a long list of asset disposals including its retail and wealth businesses in five Asian countries and its declared intentions with respect to its Australian wealth business.
In other words, in one way or another, two of Australia’s major banks plus AMP have looked to change their exposure to wealth management and particularly with respect to insurance.
All this stands in stark contrast to the attitudes of the major banks barely five years’ ago when events such as the sale of Count Financial Limited to the Commonwealth Bank gave rise to high levels of competition with millions of dollars being on offer from some banking groups to lure particular planning practices to change dealer groups.
The starkness of this change is evidenced by those companies which are regarded as front-runners to acquire ANZ’s wealth businesses. On the available evidence, not one of the other major Australian banks has emerged as a serious contender, with most speculation centred around players such as Christopher Kelaher’s IOOF, a couple of foreign entities and even the beleaguered AMP Limited.
Also a factor is the reality that the Australian Competition and Consumer Commission (ACCC) drew some firm boundaries around such acquisitions when NAB Limited was a front-runner to acquire AXA Australia.
Kelaher has made no secret of his interest in acquiring the ANZ Wealth business and his company’s half-year results announcement to the ASX pointed to an agenda very much targeted at building the company’s wealth management reach.
The reason for the major Australian banks showing little more than token interest can be totally ascribed to their boards’ relative disappointment in the returns generated by their wealth divisions, the uncertainties of competition policy and the reality that the regulatory and reputational risks are getting greater.
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