Colonial advisers hold grave concerns that their interests will not be served in the Commonwealth Bank’s proposed takeover of Colonial.
Colonial advisers hold grave concerns that their interests will not be served in the Commonwealth Bank’s proposed takeover of Colonial.
President of the newly formed Colonial Advisers’ Association of Australia Kevin Owen says: “We want an assurance that there will be a fair and reasonable forum to discuss the concerns of all members.”
The association represents Colonial’s 500 strong distribution force, most of who are small business owners. Over the past two years, they have had to bear the brunt of a series of takeovers and acquisitions, involving the State Bank , Le-gal & General and Prudential.
“The merging of three companies into one was always going to be administratively difficult,” says Owen. “But now we’re going through the same thing again and we feel the problems we experienced during the past mergers still haven’t been sat-isfactorily addressed. Eighteen months later, we’re still trying to fix things.”
Owen says the previous takeovers have cost advisers a great deal of pain and a lot of money. “While we received some small compensation, it went no where near recovering those costs.”
Jossel Ginsburg from Ginsburg Financial Services says that while Colonial and the bank have acknowledged the value of the adviser to the business, they have never sought adviser input into merger negotiations. “Following the previous mergers, we were advised that new business increased by 113 per cent. The super-annuation business, a major proportion of which is written by advisers, in-creased from $87 million to $185 million. That’s our goodwill that was sold to the bank and we haven’t been consulted.”
Colonial’s group public affairs manager Simon Morgan says: “We understand that the advisers are small business people with their own interests at heart. But they’re only thinking of the short-term. These issues were raised with the pre-vious acquisitions and sales still grew, so everyone benefited.”
On the subject of compensation, Morgan says: “Colonial and the Commonwealth Bank are merging to grow the business, not close it down.”
Michael Scott, managing director of Total Financial Solutions of Australia, says it is time Colonial took advisers’ concerns seriously. “On the one hand the merger is exciting and opens opportunities, but the bank has to be careful to consult the distribution force. Large organisations sometimes disregard the distribution force, but they do so at their peril.”
The Commonwealth Bank would not comment while the due diligence process for the merger is still being completed.
Jossel Ginsburg 16/3/00
Colonial bought L & G for $900 million
Colonial bought Prudential for $1.2 billion
Advisers and agents were paid nothing.
Colonial’s Managing Director, Stuart James and Commonwealth Bank’s John Mulcahy held a meeting on Friday 10 March to talk to Colonial agents about the merger. There were around 70 Colonial and Prudential agents in attendance – interest-ingly, at an education meeting this week, seven of the 15 agents in attendance had not received invitations to the Friday meeting. It was blamed on adminis-trative oversight.
James & Mulcahy acknowledged that in the period since the L & G and Prudential acquisitions (ie 1999) new business has increased 113%. The superannuation business, written almost entirely by agents, has increased from $87 million to $185 million. They acknowledged the value of that business and the value of the agent in acquiring that business.
However, as agents we feel that our good will has been sold to the Commonwealth Bank for $9 billion. What do we get for it? Not a bean. Agents are now band-ing together on this issue. One agent said that Colonial agents would get some value if they were shareholders, but the only shares offered to me came through my own personal insurance policies, not because I operate a Colonial agency.
There was a meeting between Colonial and agents held at the beginning of the year – they had quite a time convincing the agents to stay with Colonial because they perceived that their treatment during the acquisition of L & G and Pruden-tial had been so poor. There were complaints about service and a video was made (by Services Manager Graham Ireland) and played at the meeting featuring agents’ complaints about administrative mess ups following the L & G and Prudential mergers. The guys spent a lot of time putting out fires. As one agent, Derek, said on the video, “I don’t want Colonial losing my clients for me – if I’m go-ing to lose clients I’d rather do it myself.” Colonial’s response to the prob-lems was, “That was the old Colonial – you’re going to be dealing with the new Colonial”.
At the Friday meeting, James & Mulcahy made much about Colonial being the “AFR Insurer of the Decade” and Commonwealth Bank being the “AFR Internet Bank of the Decade”. The focus of these two organisations appear to agents to be diametri-cally opposed – as Insurer of the Decade, Colonial gives business to advisers; as Internet Bank, Commonwealth takes it away.
We were told the rationale behind the Com Bank/Colonial deal was “to create scale, growth, and increase in markets”. The Commonwealth Bank, they said, is a domestic bank and Colonial is a complementary financial services operation in life and super and both operations are successful. All shares were covered, there would be special CGT rollover arrangements and the Board had recommended the deal. The value of agents to the agency force business was recognised.
When the L & G and Pru mergers were going on, we received only a tiny retainer for our old business and told to focus on the new. We’ve brought new business – it’s up 113% – but we’re unlikely to receive anything for that.
Personally, I don’t blame them – they’re very good businessmen, it makes very good business sense. And they’ve got away with not paying agents anything twice before.
