Product manufacturer ownership of financial advice firms is not inconsistent with a business model that is in the consumer’s best interests, CBA CEO Ian Narev has argued.
Addressing a press conference in Sydney yesterday to elaborate on the bank’s annual profit results, Mr Narev fielded questions about the appropriateness of bank-owned wealth management in the post-FOFA environment.
“The intent of FOFA was to make sure that no matter how you are dealing with a customer, you are dealing in their best interests and I think a financial institution and a financial system has got to hold that principle absolutely paramount,” Mr Narev said.
“If we violate that [then] we need to put it right, but we have got to have business settings that make sure the customer’s interests are absolutely paramount. I don’t think that is inconsistent with [an advice provider] owning the asset management arm.”
Separate businesses within the same institution can be run efficiently and ethically if the “processes, management structures and incentives” all place the consumer’s interest as the top priority, Mr Narev said, adding that “they can be and are”.
The comments came as Mr Narev announced a $793 million profit for the bank’s wealth management business in the 12 months to 30 June 2014.
“If you look at the wealth management business this time around, 17 per cent cash net profit after tax creates an environment where the regulatory spend is still very significant,” he said.
“I think that is still a very good contributor to the group, and even more importantly, it is good for our customers.”
In addition, the banking chief spoke about the appointment of Promontory Financial Group to head the external elements of the Open Advice Review, though made clear that further updates may be limited.
“Because we want to ensure that independence is there and the facts are given by independent people, we are not going to be giving out bits of information on the way,” he said.
“But we are working through with Promontory a reporting format that is going to be designed to give people confidence that there will be independence, fairness and transparency in the program.”
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