NAB’s decision to sell the lion’s share of its advice business may be due to a plethora of reasons, but Andrew Hagger boils it down to two.
“The first one is that…we are embarking on a very significant transformation program, which we announced last November and is very widespread across the bank,” he says. “Within that program, we are looking to become far less complex and far more simple.”
Hagger, the bank’s chief customer officer for consumer banking and wealth, explains that the second reason goes more directly to the future of the wealth industry.
“To have a business the quality of MLC under independent ownership, able to carve out its own future from an investment agenda, will enable…the wealth business to thrive,” he says.
The result, Hagger contends, will be a win/win for MLC and the bank.
“We believe that, through this next chapter, MLC will emerge stronger in a model that is no longer under the bank’s ownership,” he says, while explaining that the move is part of the bank’s plan to “become simpler, faster, and focused on core banking”.
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has not played a major role in the decision, he insists. The matters raised, he says, have been known about by the bank for some time, and the bank has also been in liaison with the regulators for some time.
“We know that the wealth industry as a whole will change, not only for some of the reasons that are apparent through the royal commission but also in terms of broader community expectations around digitisation, the need for adviser efficiency, and further productivity challenges.”
MLC, he says, will benefit by having “a clearer run” at the opportunities these changes present.
Out in the open
Hagger is circumspect about the nature of any impending sale, ruling out neither a wholesale transaction nor individual divestments of the licensee groups.
“The good thing about having the announcement is that discussions can happen out in the open,” he says. “We’re open to trade-sale conversations, IPO aspects, cornerstone investors… you can imagine there is a wide range of opportunities.”
Hagger is quick to clarify that while NAB will retain JBWere, which services its high-net-worth and business banking sectors, the bank intends to offload all other financial advice licensees – including NAB Financial Planning.
“NAB Financial Planning will be part of the MLC business to be separated,” he confirms, while explaining that JBWere is “the part of our advice business that best enables us to power forward in business banking as it pertains to wealth advice”.
The bank will also retain trading platform Nabtrade, which Hagger calls “a quality offering now with 300,000 customers, many of whom are self-managed super funds”.
Hagger is reluctant to speculate on any referral deals that may be in the works between NAB and the future owners of any MLC-branded licensee.
“The precise details of how referral arrangements might work is something that we’ll need to take the time to work through,” he says.
NAB purchased MLC and its related entities from Lend Lease, in 2000, for $4.56 billion. It remains one of the biggest mergers in the nation’s history.
The bank’s intention to sell at least a significant portion of the wealth division has been the subject of rumour for some time. This conjecture was reignited during the royal commission when an internal file note tabled as evidence revealed former executive general manager of wealth advice, Greg Miller, had referred to the “possibility we will look to sell the advisory business or parts of it in the coming year”.
As of March, NAB owns six licensees: NAB Financial Planning, GWM Adviser Services, JBWere, Apogee Financial Planning, Godfrey Pembroke and Meritum Financial Group.
Professional Planner revealed last week that Godfrey Pembroke intended to split with the bank but it is still under NAB ownership at this time. Minus the 196 individuals registered under JBWere, NAB licensees represent a combined 1315 financial advisers.
Hagger says the prospects for these advisers are healthy, with the announcement an indication that a positive shift in the landscape is on the horizon.
“The message for advisers is not only to keep a focus on the customers and providing quality advice, but also to look forward to a really positive future,” he says, “because the announcement that we’ve made today is an important step in helping those advisers become part of a business model that will be fit for purpose in this changing wealth sector.”
The time felt right for the announcement, Hagger says. He also noted that the bank was “buoyed” by the success of the sale of its life insurance division to Nippon three years ago.
“It’s taken a full nine months to gain the kind of clarity that was required to make the announcement we have today,” he says. “We look forward to the coming months, now that we’re open with our intentions.”
Is it somewhat of a relief to get the news out?
“Whenever you work on something that you know is going to be good, you look forward to the day of announcement,” he says. “I felt the same in the run-up of the announcement to the life insurance deal.”
Asked if he would change any of the decisions made during his tenure to this point, Hagger demurs.
“I haven’t really gone into that reflective mode,” he says. “I’ve spent most days facing up to the challenges of each day and looking forward to how I can improve the business.
Hagger will retain his current role, remaining part of an 11-person team that runs NAB and having involvement in both the banking and the wealth sides of the business.
As to whether, on reflection, he believes that wealth management has been an awkward fit for the banks, Hagger says: “I’m recognising that customers will always choose the way they want to receive their banking and their wealth. What’s important for us, as a bank, is that we enable our customers to have access to quality advice, and we’ll be working through the details of that as a result of the announcement today.”