The era of big banks attempting to service every facet of their customers’ financial needs looks to be over, following ANZ’s sale of its entire superannuation and wealth management business.
On Tuesday, the bank announced it was selling its OnePath pensions and investments business, along with its financial advice business, to financial services firm IOOF for $975 million.
Altogether, the offloaded businesses manage almost $70 billion on behalf of their customers.
The move – which echoed a wider trend in the banking industry – is a major step in the bank’s shift away from being a ‘vertically integrated’ financial services behemoth, to being a more straightforward retail bank with an online financial supermarket on the side.
ANZ’s manufacturing energies will now go into building traditional banking products such as bank accounts, home and business loans, and credit cards. It will continue to distribute other companies’ ancillary financial products.
Critics of vertical integration, who argue the model is riddled with conflicts of interest, will welcome the move.
However, the ANZ’s decision will not comfort its non-bank competitors in the workplace superannuation sector, who will continue to struggle with the big banks’ supreme ability to cross-sell products to customers.
ANZ group executive wealth Australia Alexis George said: “Financial services such as superannuation, investments and advice are a core part of the support we provide ANZ customers now and in the future.
“By partnering with IOOF, we are able to create greater value for our shareholders while also providing our customers with access to quality wealth products from a specialist provider with the right cultural fit, financial strength and digital capability.”
The bank stated it would continue to give its customers access to super, investments and advice, but that it would no longer ‘build’ the products itself.
The move provoked a modest rise in ANZ’s share price.
Part of a wider trend
ANZ is not alone among the big four banks in looking to offload the non-banking parts of its business.
Commonwealth Bank of Australia last month sold its life insurance arm, CommInsure, to AIA for $3.8 billion.
CBA is also looking to offload its huge funds management business, Colonial First State Global Asset Management, potentially by listing it on the share market as its own separate company.
Westpac, meanwhile, has significantly sold down its stake in its funds management business, BT.
Of the big four, only NAB has continued to express commitment to its own wealth management and superannuation business, MLC.
Alex Dunnin, a superannuation expert and director of research at Rainmaker, said the big banks’ move to ditch wealth management had been unexpectedly quick.
“The speed at which they’ve done this is a real surprise,” he said.
“Not that long ago, they wanted to own everything. But they’ve realised that running a bank is different to running a wealth management business. There are different risks.”
He said banks were not turning their backs on ancillary financial services such as super and life insurance, but said they had realised their natural role was as distributors, not manufacturers.
“What banks have is national distribution to the local branches and living rooms of millions of Australians. If you think of it like that, do they really need the extra risk of manufacturing products themselves?”
But industry superannuation funds – who are locked in a longstanding battle with the banks over superannuation distribution rules – did not welcome the move.
Matt Linden, public affairs director at Industry Super Australia, said: “The decision by ANZ today still does not address the problem of banks cross selling superannuation products.”