Banks will dominate distribution of financial services in the future due to their massive customer bases and strong brand awareness
Westpac financial planning general manager Brett Himbury told the recent Rice Kachor distribution seminar that raising the question of bank domination of distribution was like asking Olympians whether they intended winning gold.
Banks will dominate distribution of financial services in the future due to their massive customer bases and strong brand awareness
Westpac financial planning general manager Brett Himbury told the recent Rice Kachor distribution seminar that raising the question of bank domination of distribution was like asking Olympians whether they intended winning gold.
“It’s like asking Ian Thorpe whether he expects to win a gold medal at the Olympics — he’s shown good form in recent times, however, it’s a highly competitive field.”
Himbury says the four major banks will win the distribution war due to consumer demand and pressure from shareholders for profits in an environment where interest margins have declined.
“Mortgage originators have put pressure on bank P&Ls,” he said.
“We are 100 basis points lower than three years ago. We can approach the problem three ways — we can push back and retain rates — a very challenging option. We can take some of the costs out, which we have done and are continuing to do and we can diversify our business streams with non-interest income.”
Non-interest income translates into income from the provision of financial advice. Himbury says the banks will aggressively pursue building the financial advice channels through the acquisition of distribution networks or, in Westpac’s case, the hiring of high quality financial planners. The Commonwealth Bank’s acquisition of Colonial will add about 800 planners to its adviser force, while the Natonal’s acquisition of MLC will add about 950 advisers.
“In the past Westpac has not been recognised as an employer of choice,” he said.
“But we have allocated $10 million for new remuneration and a further $10 million on technology for the adviser’s back office. We believe that will make help us to attract and retain high quality planners which in this environment is absolutely essential.”
However, Himbury does not believe the road to riches will be without its challenges.
“We are building the culture necessary for success in this area — and we have a customer base many would kill for — but the race is on. A large percentage of our private banking clients has a major relationship with another institution. We want to get to them and lock them up with us. It’s imperative that we get to them before our competitors.”
