As reported on Good Returns last week Westpac has confirmed that it has sold its advisory business to sharebroking firm Forsyth Barr. The move is no surprise as it appears all the banks are whittling back their financial adviser operations.
Information we have been collecting over time shows that many of the advisers who have been working for banks have moved onto other businesses.
Westpac's decision to exit had been signalled. Former Westpac chief executive Brian Hartzer told the royal commission in Australia that banks aren't interested in the additional risk of advice; nor the potential for brand damage.
He said more compliance costs raises the costs of advice businesses and makes them more challenging. "The incremental focus on record keeping and compliance and so forth around financial planning, for example, was definitely challenging the economics of that business."
Added to that banks are trying to "simplify" their businesses.
Hartzer's comments are interesting while banks are becoming increasingly risk averse, others in New Zealand are essentially prepared to take on greater risk.
That risk comes when Financial Adviser Providers (FAPs) have to take responsibility for the advice their members give. For firms like Forsyth Barr, which will have more than 130 advisers, that is not insignificant.
It will be interesting to see what other banks do. If there is an area banks should be doing more in it is KiwiSaver. This became clear when Covid-19 hit earlier this year and many members shifted to more conservative funds.
Don't hold your breath on that one though. It's far more likely those with private banking arms will stick with these highly lucrative operations which generally caters to high net worth individuals.
The plus is that there are some well-trained financial advisers about to leave the big-end of town and join more independent businesses.
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