The fate of advice businesses owned and run by the big four banks is a foregone conclusion, advisers say, with the vast majority believing they will be sold in the next couple of years.
A recent Professional Planner poll asked, “Will the financial advice arms of the big four banks be sold within the next two years?” The responses revealed that 77 per cent of advisers think this will be the case.
Liam Shorte, director of Verante Financial Planning, says the weight of bad press – in a world where social media has increased its reach exponentially – will give the banks no other option.
“I do struggle to see how the banks will manage the ongoing risk of damage to their overall brand from bad press in their wealth arms in the age of social media, where any issues go viral instantly and companies have little opportunity to manage, explain or defend their position,” Shorte says.
He points out that the litany of scandals associated with the banks’ wealth divisions in recent years has caused extensive reputational damage. At some point, the costs could outstrip the benefits.
“I would expect that they are weighing up the risk/reward equation yearly, and more of them may soon decide the benefit, in terms of aligned planners, is just not enough,” Shorte says.
Recent sales of full or majority stakes in the life-insurance divisions of NAB, ANZ Bank and Commonwealth Bank could be a precursor for an eventual sale of institutional private wealth arms. The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which turns its focus to financial planning on April 16, could be the catalyst for a similar wave of selling on the wealth-management side.
Jim Stackpool, managing director of Certainty Advice Group, says that while this may be the case for some of the banks, others may have different priorities.
“For some banks – NAB, ANZ – the royal commission will provide the external reasons for their shareholders to disband wealth,” Stackpool says, before adding that CBA has “bigger problems”.
He explains that, while all of the banks face similar issues with their wealth-planning arms, they will each come at the prospect of selling them from different perspectives; for example, Westpac-owned BT Financial Group has recently placed an enormous amount of faith in its new Panorama platform, an investment a BT representative last year told Professional Planner should cost “just north of $600 million”.
Key opportunities
Any potential sale of the wealth arms of the big four banks could cause a shift in the financial planning landscape. For Shorte, there is hope that a new genus of dealer groups may emerge for planning firms.
“If they do exit the dealer group space,” he says, “that may be a trigger for individual planner licensing in Australia, where a new breed of support organisations develop to provide aggregated services to financial planners in practice management, research, compliance and other key support areas.”
Shorte warns, however, that this may come with some unfortunate consequences.
“I am concerned that this could lead to difficulties in securing [professional indemnity] PI cover or large increases in premiums,” he says.
Stackpool cautions that if sales do occur, the banks should provide “professional opportunities” to help their current advisers step out of the fold with “no product strings attached”.
“This could be training,” he says, “or non-aligned back-office/compliance support.”
He makes it clear, though, that any impending sale could provide a tremendous boost to the industry.
“From an adviser’s perspective, I reckon the opportunities are enormous,” he says. “With the exit of significant planner employers, lots of new start-ups will be created.”
