Banks carve up platform market

Control of the Australian platform market has nearly halved in the past four years to be dominated by three of the nation’s big four banks.

That is the bottom line of a research analysis undertaken by Wealth Insights, which revealed that in 2006 there were 15 different entities owning or controlling platforms, while today there were just eight. That number will decrease further if the Australian Competition and Consumer Commission (ACCC) approves National Australia Bank’s (NAB’s) acquisition of AXA Asia Pacific.

Perhaps just as importantly, the Wealth Insights analysis has revealed the degree to which Westpac’s acquisition of St George delivered the combined group market dominance in the platform space well ahead of even its most aggressive banking rivals.

While much of the ACCC’s attention on the merger was directed towards the impact on bank branches, funds management and financial planning, the Wealth Insights analysis has revealed the benefits to the banking group of the combined BT and Asgard platform offerings.

According to the managing director of Wealth Insights, Vanessa McMahon, the merger was “inspired” in that it served to deliver control of one of the leading platforms for “non-aligned” planners in the form of BT along with a platform for “aligned” planners in the form of Asgard.

“It may not have been obvious to everyone at the time but it proved to be very clever because it has had the effect of delivering the Westpac Group control [of more than] one-quarter of the primary market (the platforms nominated by planners as their primary/preferred platform vehicle),” she said.

With the ACCC currently considering NAB’s acquisition of AXA Asia Pacific, Wealth Insight’s analysis has revealed the degree to which this would further impact control of the platform market, as well as the implications of ANZ moving, as rumoured, to acquire IOOF.

The accompanying table, provided by Wealth Insights, while revealing the change in control of the platforms and where control now resides, does not indicate market share. Rather, it indicates the degree to which those platforms are used by planners.

The table also reveals the scale of the change generated by NAB’s acquisition of Aviva compared to IOOF’s merger with Australian Wealth Management and then its acquisition of the Skandia platforms.

What is clear, however, is that Westpac/St George/BT is dominant both in terms of usage and preference on the part of planners.

McMahon said when assessing the impact of the consolidation that had occurred in the platform market, it was important to recognise the significant barriers to entry, which made it highly unlikely that there would be

any new entries.

- For more on the consolidation in the investment platforms market see News in Focus on page 12 of this week's Money Management.