The last two competitive advantages of the banks – distribution and brand – are both under “severe threat”, says Netwealth executive director Matt Heine.
Appearing on the 'Trailblazers' panel at the 14th annual Wraps, Platforms & Masterfunds conference in the Hunter Valley on 12 September, Mr Heine was asked about the likelihood of the big banks divesting their wealth divisions.
The brand of the big banks is getting "smashed in the press", he said, referring to revelations of poor financial advice at CBA dealer groups Commonwealth Financial Planning and Financial Wisdom.
On the distribution side, Netwealth is receiving inquiries from people looking to set up their own AFSL every day, Mr Heine said.
ifa reported in July that industry consultants are seeing a dramatic uptick in the number of new AFSL applications in the wake of the CBA scandal.
Putting the state of the advice market in context, Mr Heine said the IFA market has been hovering at around 20 per cent of the industry for the last 20 years – with the institutional/IFA ratio at 90/10 at one stage.
“I think it could shift very quickly back the other way – it might be 50/50 in the next couple of years,” Mr Heine said.
“A large part of that is because of brand. [The big banks'] brand is getting smashed in the press and [bank-aligned planners] don’t want to be associated with them anymore,” Mr Heine said.
“[The banks have] really got to focus on those two advantages [brand and distribution] which may or may not give them an advantage in the future,” he said.
But WealthTrac chief executive Matt Johnson, who joined Mr Heine on the 'Trailblazers' panel, was less optimistic about the likelihood of the big banks divesting their wealth arms.
"I can’t see that ever happening because [the banks] are also loving their term deposits which will back up their balance sheets," Mr Johnson said.
"There’s no way in the foreseeable future that they’ll divest out of product. They might start to taper down on advice ... but bring it on, I say.
"It’s a nice pond that [WealthTrac is] in and I think there are enough good quality players in there. But let them have a crack – I’ll welcome the opportunity," Mr Johnson said.
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