Asked about the Quality of Advice Review’s (QAR) recommendation to allow banks back into advice, NAB CEO Ross McEwan told the House standing committee on economics on Wednesday that the change in legislation would have to be “dramatic” to “convince” the bank to “go back into that market”.
“I have no plans to do so at this point in time,” Mr McEwan said.
He explained that it would have to be done in “quite a different way” that allows for affordable advice that is good for customers and that NAB itself could afford.
“We’re out of that space,” Mr McEwan said.
“It would have to be quite a change in legislation to twist my arm to go back into it.”
He did, however, recognise the need for more advice to be made available to Australians.
“I think that Australians do need to get advice particularly as they get closer to retirement, but that’s not a service that we’re in a position to provide.”
Questioned further regarding the toll the cost-of-living crisis is having on Australians and whether the banks are missing an opportunity to provide “simple digital” solutions or “suggestions” to people to help them make better financial decisions, Mr McEwan said the regulation keeping banks out of advice was “put there for a very good reason”.
It was done, he noted, to ensure only high-quality advice is given to Australians.
“I think it got to a point where we could not do that in a profitable way that would warrant us being in that business and it needed absolutely specialised advice,” Mr McEwan explained.
“Now unfortunately, going to that level took a lot of advisers out of the marketplace, took a lot of, pretty much all bar one bank out of that marketplace as well … So, as I said, there would have to be quite a change for us to be able to go back to that market.”
Was NAB to do it, he added, it would be done “digitally”.
“I couldn’t see any other way of going back to do it at scale. It needs to be done at scale and at a pricing point that customers can afford and right now, we’re not set up to do either of that, and I don’t think the legislation lets us to do it anyway.”
The QAR recommended that banks, alongside superannuation funds and insurers, should be allowed to provide financial advice in order to plug the existing advice gap.
However, in unveiling the government’s response to the QAR, Financial Services Minister Stephen Jones said that he is “just not compelled” that banks need to return to advice at this moment.
The idea, according to the minister, is to allow superannuation funds to expand their advisory powers, while consulting further on the possible addition of banks.
Noting that the review has “given us some principles to guide the conversation”, Mr Jones stressed in June that “right now, more is needed to get it to the point that it can make a meaningful difference”.
The minister added, however, that the government is “not ruling out any recommendations” and “will finalise our position on the remaining recommendations before the end of the year”.
Anyone who thinks the current perspective of a current CEO can be taken at face value to mean that no banks will ever wade back into the advice space is kidding themselves. If it looks profitable at scale at any point in the future, they will get back in, they will do it poorly, history will repeat, they will get back out…
Couldn’t have said it better myself Dave. Humans have very short memories.
They won’t go back into advice, they will however use non relevant providers or whatever the term is to cross sell via the bank tellers. Probably better qualified than the call centre staff being used by the superannuation funds.
Would ASIC single out any competition to Industry Super FUM?
Ross is a smart guy. No point throwing good money after bad. Well said and well done.
Don’t NAB still do Wholesale only Advice via Private Banking ?
NAB still owns 100% of JBWere.
So not exactly true NAB.
What other tentacles into Advice do NAB still have ?
Isn’t is strange that Mr Jones keeps saying that super funds are going to fix the advice gap. What happens when like NAB the super funds start saying they don’t intend to give advice?
They don’t need to, they just need to sell people into their own products.
Who cares. NAB wasn’t in advice for starters. They were flogging MLC verticals. Where are second tiers managers? AMP. Umm. In my experience, the next NAB CEO will probably take a completely different view. Back to the opening comment … who cares 🙂
he means it’s not viable for Banks to enter advice given the current bad legislation in place but hey….we’ll change the legislation to enable Union Super funds to hire backpackers to do and say whatever they want to keep costs lower.
Fair admission they didn’t know what they were doing last time
For as long as ASIC regulates for headlines instead of doing it’s job – the banks will stay out.
You cannot have a marketplace with different sets of application of rules for what was the Big 6 versus all other AFSL’s.
As an acquirer of financial planning practices, it staggers me how much ‘Independent advisers’ got away with during the exact same period ASIC was forcing banks to refund fees.
ASIC’s reality versus the publics reality and what’s commercially viable as well as fairly priced are so far removed from each other it’s ridiculous.
Any big organisation looking at this market beware!
On the contrary, it staggers me how much the Banks got away with, pre and post FOFA. On the inside, they were nothing but the kings of churn, with unsustainable sales targets. Collectively, the Banks have done more damage and set back Financial Advice Professionalism by decades. How many Bank execs. were held accountable and face criminal, civil and jail terms???
Were you on the inside?
I was, then aligned, then independent. Like every channel there’s excellent advisers and there’s ordinary ones. The ordinary one’s within the banks don’t take away from the fact ASIC has applied the rules stringently towards the big 6 and skipped over almost everyone else.
I see excellent advice amongst the independent sector, however I also see significantly worse practices there also. The regulatory oversight outside of the big 6 is a joke. Has been for decades.
Geez! So glad I retired when I did! (8 years ago).
Great point, my experience also. The playing drums of regulation and remediation was never close to equal nor has the ‘quality’ of advice changed post the exit of institutions (where are all those managers and advisers now……)
How’s the AFCA outstanding compensation list going….?
And for as long as ASIC have staff who don’t actually understand advice, or consumers/clients everything will be counterproductive and inefficient.
How refreshing to have a major bank CEO acknowledge the requirement of specialised advice and associated costs to deliver in a profitable manner. And in doing so, enhancing the value of our professional advice network. Well done Mr McEwan for your honesty. Hope more bank CEO’s follow your guidance.
I will assume this a sarcastic remark, because they don’t need to return to advice thanks to the QAR, and this time they can avoid a Royal Commission.
Not at this point ! Hilarious!
Good…..