The big four bank chief has conceded that NAB’s wealth management business was never properly integrated into the bank or given the love and attention it needed to succeed.
NAB chief executive officer Andrew Thorburn appeared in the witness box of the Hayne inquiry on Monday, where counsel assisting Michael Hodge asks the CEO directly whether he thought the bank’s wealth management business, MLC, had been a failure.
“If you looked at the raw evidence, you’d probably have to agree that it had been [a failure],” Mr Thorburn said. “I don’t think it needed to be but it probably has been.”
The NAB boss explained that many customers believe the bank offers a broad range of products. When their banking needs are discussed with a NAB banker, Mr Thorburn said those conversations quickly move towards retirement and protecting clients against with insurance.
Rather than thinking of wealth management as something “way out there”, the NAB chief believes it fits “just outside the banking circle” and is a natural conversation to have with a banking customer.
The major bank acquired MLC from Lend Lease in April 2000 for $4.56 billion. NAB is now in the process of divesting the business, a transaction that Morningstar believes will be “complicated and messy”.
Mr Thorburn admitted this week that the bank had made some “mis-steps” during its 18-year ownership of MLC, which have led to its decision to sell the troubled wealth management business.
“When we started I’m sure we thought it was going to be successful and we were going to integrate it and we were going to make it a core part of the internet banking platform so that when you logged on you’d see your superannuation balances,” he said. “But that didn’t happen”.
Like his major bank peer Brian Hartzer, Westpac’s chief executive officer, Mr Thorburn said compliance and regulation have played a significant part in the bank’s inability to execute its vision for wealth.
“We probably didn’t understand that to the extent that we should’ve,” the NAB CEO said.
“We didn’t integrate MLC right into the bank. It was more like a separate business unit. It was more of a standalone business unit. We didn’t invest in it enough, to be honest,” he said.
“That was partly for our reason; we had a few other strategic initiatives we were dealing with, particularly in the UK.”
Counsel assisting Michael Hodge’s questioning followed similar lines to his interrogation of CBA boss Matt Comyn and Westpac’s Brian Hartzer. He asked Mr Thorburn if he believed the skills, systems and management required for running a savings-and-loan style bank had turned out to be different to the capabilities needed to run a wealth management and advice business.
“I don’t think it is so much about capability,” Mr Thorburn replied. “It is about those other things I mentioned.”