Unhealthy competition in financial services?
When the National Australia Bank (NAB) late last month announced its acquisition of Aviva’s wealth management business, its documentation lodged with the Australian Securities Exchange noted that the transaction was subject to approval by the Australian Competition and Consumer Commission (ACCC).
With the transaction being worth a total of about $925 million, and with the acquisition of the Aviva business giving NAB/MLC arguably a dominant presence in the wealth management industry, it follows that a reference to the ACCC was mandatory.
And while many might suggest that ACCC approval of the transaction is a formality, it should not be. The best interests of the Australian financial services industry would be served by having the competition regulator take a very close look at the NAB acquisition of the Aviva business and its implications for both financial planners and consumers.
What is more, the NAB/Aviva transaction should not be looked at in isolation. It should be viewed in the context of other recent transactions, which have seen a diminution in the number of major brands in the market and, as a consequence, the number of clear-cut options available to planning practices and individual planners.
In the space of less than 12 months, the industry has been witness to a consolidation involving the merging of Australian Wealth Management and IOOF, followed by IOOF’s acquisition of Skandia, and now Aviva’s wealth management business seems likely to flow to NAB.
On top of these major transactions, there have been a number of smaller mergers and acquisitions, and Perpetual chief executive and Investment and Financial Services Association chair David Deverall has suggested that further merger and acquisition activity is inevitable.
The question that now needs to be asked is whether what is happening in the financial services industry will ultimately prove to be in the best interests of all concerned.
There can be no doubting that the transactions have made commercial sense to the companies involved, but the ACCC really needs to determine whether they have also served to undermine healthy competition, particularly where mid-tier players are concerned.
In assessing the issue, the ACCC might also care to consider the implications of the major banks having asserted their dominance on the back of tight liquidity and the Commonwealth bank deposits guarantee.
- Mike Taylor
AUTHOR
Mike Taylor
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