CBA points to industry fund vertical integration
The Commonwealth Bank has defended vertical integration and pointed to the manner in which industry superannuation funds are pursuing similar structures to meet their own objectives.
In a submission filed with the Productivity Commission (PC) this week, the Commonwealth Bank sought to point to the virtues of vertical integration and said such structures “could provide significant customer benefits by offering a wide range of financial products and services at each stage of their lives, with scale and scope benefits providing more choice, competitive pricing, and innovative technology”.
Acknowledging regulator and broader industry criticism of vertical integration, the Commonwealth Bank submission said, “some industry stakeholders and commentators have presented vertical integration to be a feature only present in banking-owned wealth businesses, however, vertical integration is a common feature throughout financial services in Australia, and not unique to conglomerate banking businesses”.
“As the [PC] Commission has itself observed, the market continues to evolve,” it said. “Some banks are exiting elements of their wealth management operations. In comparison, some industry superannuation funds are seeking to harness the benefits of vertical integration by internalising their asset management and developing financial advice.”
The submission said some industry superannuation funds also owned banking operations.
Elsewhere in its submission, the Commonwealth Bank sought to draw a distinction between platforms and products, noting that platforms were an “administration vehicle” which facilitated efficient access to underlying investment products.
It said the bank’s licensees included access to multipole platforms and insurance providers on their approved product lists (APLs) and that of the investment options on the platforms which are owned by the bank, “less than 40 per cent of the total options available are in-house products”.
Recommended for you
Sequoia Financial Group has declined by five financial advisers in the past week, four of whom have opened up a new AFSL, according to Wealth Data.
Insignia Financial chief executive Scott Hartley has detailed whether the firm will be selecting an exclusive bidder for the second phase of due diligence as it awaits revised bids from three private equity players.
Insignia Financial has reported a statutory net loss after tax of $17 million in its first half results, although the firm has noted cost optimisation means this is an improvement from a $50 million loss last year.
With alternative funds being described as “impossible” for fund managers to target towards advisers without the support of BDMs for education, Money Management explores the evolving nature of the distribution role.
