International News 03/08 – Global groups have edge over locals

Financial services groups with global scale and reach will be the big industry winners in coming years, according to AXA Australia chief executive Les Owen.

Owen warned delegates at the recent Investment and Financial Services Association (IFSA) conference that we have only seen the beginning of the dominance these groups will have.

"The top 50 firms in the world have 75 per cent of funds under management," he says. "AXA is the third biggest player with $900 billion under management but it has only one and half per cent of the total market."

Australia, according to Owen, is being left behind the race to become global.

No Australian based financial services groups make it into the top 50 and the focus for acquisitions in Australia has been with other Australian groups.

"Australian companies are very small players in the global market," he says.

"Consolidation in the Australian industry has been Australasian-centric not global."

Global managers will have the edge over regional players in the retail market, Owen says, due to a surge of interest in international equities and the ability to access those investments through the Internet.

"Global groups have the brand value of size which gives retail investors a sense of comfort," he says.

"They can also leverage size to ensure experience in one country is passed on to others and attract the best people due to the potential for overseas posting.

Companies will also find that unless they have global presence, they will not be an attractive partner for other global groups looking to form alliances."

Top 5 global fund managersFunds under management (US$b)

Fidelity 1050

UBS 1000

AXA 900

Barclays 780

Credit Suisse 730

FSA delayed

Pressure from Britain's financial services industry has delayed the final stages of implementing a plan to create a new single financial regulator, the Financial Services Authority (FSA).

The new regulator will be delayed until next year, according to a report on the Reuters newswire. The new Financial Services and Markets bill was passed through parliament last month, but there are at least 55 statutory instruments that are still needed including implementing secondary legislation, establishing new FSA rules and systems, and preparing the industry. The move is set to delight banks, stockbrokers and other financial services companies that had asked for more time to implement changes and scrutinise the secondary legislation.

FPA member input

The Financial Planning Association (FPA) in the US has turned to its members for help in the development of the future direction of the association through a series of meetings. The first meeting will be held in September at the association's annual conference in Boston. Further meetings will be held in person with FPA representatives, via conference call or through the association's Web site. The general themes of the meetings will centre on how to move the profession forward and how the association can help.

ING buys Aetna

Mercantile Mutual's Dutch parent ING is to buy financial services group Aetna for $US5 billion in cash, along with the company's $US2.7 billion debts. The transaction is expected to close around the beginning of next year. ING says the purchase will help it fulfil several strategic aims, including becoming the largest deliverer of life-insurance policies in the US and the largest insurer overall in Latin America.

AXA unlocks assets

Axa has unveiled a plan to allocate the inherited assets of Axa Equity & Law, a deal which could potentially unlock up to $US30billion of surplus assets languishing in the UK life assurance sector. Under the terms of the proposals, eligible with-profits policyholders will be offered £300 million in return for having their policies allocated to a new with-profits fund of Axa Sun Life, now 100 per cent owned by Axa, and giving up any future distribution from the inherited estate.

The Financial Services Authority (FSA), the financial regulator, has approved the proposals.

Average cash payments to policyholders are estimated at £400 per with-profits policy.

Asian heavyweight

Taiwan's KGI Group will merge with Singapore stockbroker Sassoon Group to form a "pan-Asian financial powerhouse". KGI has provided no financial details on the merger, but says the new entity will have 3,500 employees and more than 390,000 clients around the world. The new company is to be named KGI Sassoon in Singapore. It's client and customer base will span Hong Kong, Singapore, Korea, Indonesia, Taiwan, Thailand, Japan, London and the Philippines. The merger is expected to become effective Oct. 30, assuming regulatory approval has been obtained in all relevant markets.