It was with great interest that I read the Australian Financial Review August 30th headline, “IOOF to buy NAB’s MLC Wealth.”
Many moons ago when I started my career in financial services the three largest providers were AMP, National Mutual and MLC in that order. Sometime in the late 90’s our big four Aussie banks decided they needed a greater slice of their customer’s wallet and all went on buying sprees for wealth management firms. The CBA bought Colonial, Westpac bought BT, ANZ bought into ING and the NAB bought MLC.
AMP also jumped on the mergers and acquisitions train and purchased AXA who had previously purchased National Mutual.
Once all the buying and selling settled down, bank management set about trying to recoup their capital spend and turned these new assets into wealth management sales factories. They integrated their own financial products into the advice given by their in-house advisers and traded on the reputational safety of the banks’ size. Unfortunately, clients paid a high price for this cookie-cutter approach, which the Hayne Royal Commission in 2019 described as a ‘vertically integrated model.’
The Hayne Royal Commission held a magnifying glass to the conflict of interest inherent in a vertically integrated model and when finally exposed to the sunlight, these obvious imperfections were laid bare. In the ensuing backlash, the big four Australian banks took the only realistic option and moved swiftly to cut wealth management and financial planning from their core business. A cynic might say the directors were worried about losing their Porsche’s. Regardless, NAB’s recent sale of MLC completed the mass exodus.
As for AMP, it has been imploding in recent years, destroying shareholder value with scandal after scandal and is now also up for sale. I could never have guessed all those years ago that the brands AMP, National Mutual and MLC would all soon disappear and be consigned to history.
Buying MLC probably makes sense for a company like IOOF which aspires to be a large institution. Their challenge, of course, is overcoming the perceived conflicts. I do not believe anyone can square that circle and be both a product manufacturer and advice provider without being conflicted.
Disappointingly this has all happened at a time when Australians have never had a greater need for advice. This was highlighted during the recent COVID-19 mayhem when large numbers of mostly non advised industry superannuation members switched from growth to conservative funds at the worst possible time and missed the market rebound. This had the effect of wiping out years of positive returns and destroying wealth. Very few people, including myself, are objective about their own money and need advice to increase the probability of making successful decisions.
Copious research shows we have better financial, health and happiness outcomes when we have a financial plan.
IOOF will now add MLC Wealth to their suite of financial planning brands. IOOF will sit alongside a handful of industry super funds as the last of the large institutions still believing its ok to be both poacher and gamekeeper.
Scott Alman (CFP® Professional, AIF®, DFP, FPA Fellow) is a representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.
Note: This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person or entity. Accordingly, to the extent that this material may constitute general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. This is not an offer or recommendation to buy or sell securities or other financial products, nor a solicitation for deposits or other business, whether directly or indirectly.