ANZ sale reveals bancassurance shift

06-Dec-2017

By Sarah Kendell

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The recent acquisition of a portion of ANZ’s financial planning and superannuation activities by IOOF represented a shift towards a “new generation” of the bancassurance model the major banks had been pursuing for the past two decades, according to IOOF’s wealth management head.

The group’s general manager of wealth management, Renato Mota, said an “evolutionary shift” was occurring in the way Australia’s major financial institutions handled the sale of non-core financial products to customers as they sought to partner with specialists in each product area rather than handle all manufacturing and distribution in-house.

“The fact that banks are now deciding to enter strategic partnerships represents an evolutionary shift in the bancassurance model from manufacturing to distribution,” Mota said.

“This should lead to superior outcomes for clients, with the benefits that come with specialisation and best-of-breed solutions.”

He noted the concept of bancassurance – which was initially used to describe banks selling insurance to customers, but gradually extended to investments and advice as well – was pursued by the major banks in the late 1990s and early 2000s as a way of controlling manufacturing and distribution of all financial products that banks might have a need for.

“However, this model of bancassurance didn’t live up to expectations. The cost/benefit ratio in favour of owning wealth and insurance product manufacturers shifted negatively in the years since the GFC (global financial crisis),” he said.

“Poor conduct, often related to warped incentive structures, led to increased regulatory scrutiny and oversight, as well as reputational damage.”

He added banks appeared to have decided the vertically integrated model was not working, hence the sale of some of ANZ’s wealth management businesses to IOOF.

“Ultimate success comes from delivering outcomes to clients that are customised to their needs – irrespective of the manufacturer or origination,” he said.

“IOOF is committed to an open architecture model, which gives advisers and clients a genuine choice over what product providers they decide to use. This model fits product and business processes around the client instead of the opposite approach of trying to fit clients around particular products, leading to advice-led and client-first outcomes.”

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