The big banks’ 20-year foray into wealth management is reaching its final stages, with the completion of IOOF’s takeover of NAB’s MLC adviser cohort in Q2 leaving only 575 bank-licensed advisers in the market.
According to Adviser Ratings research Q2 was the first time the number of bank-licensed adviser dropped under 1,000, with the IOOF deal seeing several hundred advisers transfer to IOOF’s stable or among other licensees.
“The six-month trend paints a picture of sector in freefall,” Adviser Ratings’ Q2 Musical Chairs report states. “The volume of bank-licensed advisers has declined 46 per cent in half a year, as banks continue to withdraw from unprofitable advice.”
The result is a far cry from the heady days of bancassurance, when the nation’s four biggest banking entities raced to bulk up their wealth management arms as part of a broader mandate to become vertically integrated, full-service providers.
After profit margins slimmed and a raft of advice scandals came to light in the early 2010s, the banking model’s demise was accelerated by the Hayne royal commission and ASIC’s infamous January 2018 report into vertically integrated practices at the institutions (including AMP), including the revelation that 70 per cent of client investments were being funnelled into in-house products.
ANZ was the first to go, selling its network to IOOF before the Hayne inquiry hit its straps. Westpac and CBA followed, while NAB/MLC stalled until a $1.44 billion deal was struck with IOOF in August 2020.
Today, with the culmination of the MLC deal, the last bastions of bank-owned advice are mostly limited to successful private banking brands. According to Professional Planner‘s 2021 Licensee Owners list, NAB’s JBWere and CBA’s Commonwealth Financial Planning make up the bulk of those left with around 200 advisers each, while ANZ Banking Group has about 100.
Of course, the banks aren’t the only licensee owners moving. The IOOF/NAB deal led what Adviser Ratings describe as a “whirl” of switching activity for Q2.
“In fact, May 2021 was the busiest month for advisers moving from one licensee to another in two years,” the report states. “Over the quarter, 898 advisers switched licensees, which was second only to the frenzied third quarter of 2019.”
The second steepest decline over the past six months, the report continues, was in the limited licensee space (-17 per cent), followed by the Industry Superfund/Not-for-Profit space (-8.7 per cent).
Movement between licensees is expected to stabilise in Q3, the research team predicts, as the big deals are bedded down and other factors come into play.
“The re-emergence of COVID-19 in the community in Sydney may also put the brakes on switching, as advisers wait for more stability before finding a new licensee.”
Overall there are 19,116 advisers left on ASIC’s registry, with 4,500 leaving the industry since December 2019. 1,460 advisers (net) have left since the start of the year.
“While there is a small pipeline of new talent dripping into the market, the figures show it won’t come close to compensating for the volume of industry losses.”