Addressing the Association of Independently Owned Financial Professionals conference in Sydney, Mercer sales leader, investments, Adam McKenzie said the company's management consultants have detected a shift in strategy within bank-owned wealth management businesses.
“The banks have a strong desire to re-engage with their client base,” Mr McKenzie said.
“They are investing very heavily in regaining trust, especially [with] small to medium passive type investors. They are currently developing ways to bring them back.”
Mr McKenzie said that the institutions are increasingly “nervous” about their aligned financial planning networks since the “CBA and Macquarie experience” and are turning attention to salaried advisers and financial products that do not require comprehensive advice.
“Mercer is a big believer in lifecycle products for default corporate super arrangements. We think an age-based default system makes sense,” he said.
“The banks have also taken a position on this by providing no-advice superannuation products. They love these age-based products; they provide a very simply-managed risk matrix.”
Product manufacturers are viewing these structures as an “entry point” for long-term relationships with customers that were perhaps previously prime candidates for comprehensive advice.
In addition, Mr McKenzie said these products are useful as a data mining tool, with product manufacturers analysing the intellectual property for “inflection points”, whereby they may be suitable for upgrades to new products or relationships.
The ability for the institutions to make profit on these products is increasingly important as the business of financial advice licensing comes under more pressure, Mr McKenzie explained.
“They make very little money on the management of a dealership and make it back on the product manufacturing component,” he said. “They are nervous because it is high risk.”
