ANZ Bank has confirmed its support for – and renewed engagement with – its financial planning networks; and to financial planning as a business that sits at the core of its overall wealth strategy.
ANZ chief executive officer Shayne Elliott, and managing director of wealth in Australia, Alexis George, told a briefing for specialist press in Sydney last week that even though the bank’s wealth division, which contains its financial planning licensees, accounts for only about eight per cent of group earnings, it is a business the bank is committed to and plans to bring closer to its core banking business.
“We have a large family of financial planners that we deal with and we are really re-engaging with them and, as a wealth division, making that a very important part of our future strategy,” George said.
“Not to say digital is not important but…we know people are important, we know millennials certainly do not make decisions without talking to someone, so we are really refocusing on that. Over the next couple of weeks we’ve got a couple of really big things happening that we’ll talk to you about.”
George said that migrating ANZ’s Oasis platform over to Macquarie Wrap in coming weeks would be “transformational for us, and with a first-class provider”.
“And then we’ve got some other things happening in insurance which I don’t want to go into too much more detail today, but it really is a step forward and we have not been in those spaces for a while,” she said.
While many products – such as mortgages, credit cards and life insurance – are increasingly becoming commoditised, George said the same was not true of financial planning.
Advice and product are two different issues
“If you look at the different advisers we have, whether they are aligned to ANZ or outside – because we have a very big footprint on open-market advisers – they will all have different propositions, they’ll all have different customer segments they are targeting, they’ll all be moving through from a general to a strategic advice perspective,” she said.
“My view is that advice and product are two different issues, and they should be treated separately. Clearly, that’s the way the regulation is going as well. If you look now at dealer groups there’s not too many out there that are making a profit and I think that, over the future, needs to change. Whether they are super-profitable, I don’t know, but they need to wipe their face, I believe.”
George says technology will play a big part in making dealer groups profitable and improving advice consistency across large groups of advisers.
“We know customers are not going to pay $4500 or $5000 for a plan, except at the very high level. We know they are prepared to pay less than $2000 – so how do we get that experience to be less than $2000?”
George said it is disappointing that legislation enacting the Life Insurance Framework (LIF) has not passed parliament, and there remains considerable uncertainty about the form and structure of proposed education and ethical standards for financial planners, which also remain as draft legislation.
However, ANZ is “encouraging everybody to adopt what the standards are likely to be,” she said.
“We know you’re going to end up at some point with a degree qualification,” she said.
“For our salaried planners we’re insisting they have the Advanced Diploma of Financial Planning for now, and we’ll continue to do that. We’re still working with our aligned groups about what the best way to go forward is, because I do not think we should dismiss experience. Experience is important.
“But we do need to start putting those minimum education standards in over time. It’s out to 2024 now for existing advisers to degree or similar, but there’s no one with courses yet. So it seems like a long time, but we don’t know what it looks like and we haven’t got any courses.
“I was talking to the team about this this morning and it seems like 2024 is a long way but we don’t have a standards body, we don’t know what the standards are like and we don’t have anyone to provide the course to meet the standards. You can see the industry changing anyway and imposing self-regulation…but I think the introduction of those more formal things are important.”
Elliott said wealth is “a tough business, going through all sorts of change from an environmental point of view, regulatory in particular, and that continued with the budget and things changing”.
“There’s a lot of transition happening in the industry,” he said.
“I think our business did really remarkably well in that environment to maintain its market position. Particularly things like our retail life insurance business, it’s a good business. It’s well run; it always has been, and ANZ continue to do pretty well in that space in particular.”
Risk belies its financial profile
Elliott said that when things go wrong in the wealth space they can have an effect that belies their revenue significance. ANZ, like its peers, has been paying close attention to what is going on inside its advice businesses to ensure it does not encounter problems like those currently afflicting the Commonwealth Bank.
“There’s no doubt that we’ve been going through our own process, like our peers by the way, of just continual cleaning up,” he said.
“Rules are changing, things are becoming clearer, the Future of Financial Advice, all that stuff. Yes, we’ve been going through and cleaning up and doing well. Some of that is public. We report things to ASIC as we find them and proceed with the clean-up.
“And then of course as we learn where there have been issues elsewhere, pretty clearly we go and say let’s go again. What we’ve found in the last few instances is those were areas that we’d already looked at, so it wasn’t like, oh, we’d never thought of that. We’d already looked, but you still go back and have a look again.
“So that’s what we’ve been doing. Within the group, wealth has more than its eight per cent share in clean-up stuff, just because of the industry focus.”
Elliott said ANZ is simplifying its product range and structures to improve transparency and make them easier for customers to understand.
“In today’s world – and wealth is a brilliant example – with all the regulation and complexity, if you’re trying to do the right thing by customers and [produce] a decent return for shareholders, simplicity is a much better option than trying to be too complicated. If you make it too complicated, more things can go wrong, and what we’re saying is, in the new world when things go wrong, it really hurts. It really hurts customers, or it really hurts our shareholders, because we end up in all sorts of bother.”
The technology and the capability to make a bionic bank
But assuming that simplification is a strategy not being executed by ANZ alone among its peers, it puts pressure on the organisation to stand out from its competitors in the way its products and services are delivered.
“This is true in banking and wealth, so you’re right,” Elliott says.
“Essentially we operate in a relatively commoditised world. All mortgages look the same; credit cards kind of do the same thing. Life insurance. They work the same. It’s unlikely I am going to win because I have got a better mousetrap…because if they’re really good, everyone else will copy them. So I agree with that.
“So it’s not about you having better mousetrap. And it’s unlikely you’re going to win in the long term by being cheaper. It’s a strategy that some industries have [but] it’s hard, for the long term.
“Ultimately it comes down to the way it is delivered to people. It gets overused, but it is about the service model. It’s about, is it easy and engaging online?”
Elliott said technology will underpin ANZ’s strategy but not at the expense of human interaction.
“I absolutely do believe that when people are making what to them is an important financial decision, they still want to talk to somebody,” he said.
“All the research shows that. This idea that millennials are not interested [in face-to-face contact], that’s not true. Their definition of what’s ‘important’ has changed, but when it’s important, they still want to talk to people. So it’s about how that is delivered. Is it done with care? Is it predictive? Is it intuitive? Is it easy to use? All those things. Whether it’s using technology or individuals, that’s how you win, I think.
“And that’s why banks – we’re complex – [but we] have a bunch of technology and some really great people and those are the ways you win. We use a term, which we unashamedly stole from a consultant, and it is building a ‘bionic bank’. And if you’re old enough to remember the bionic man, here’s the best of astronaut/humankind and technology.
“That’s what we want, because it cannot be just about the technology. It absolutely can’t be; and it can’t all be all about the people either. It’s got to be about the blend and getting the balance right.”
