Major dealer groups consider pulling out of BT

BT Funds Management will face even further scrutiny of its acquisition by Westpac, with Australia’s major financial planning dealerships reviewing whether to pull their investments out of the group.

At a time when $2.9 billion flowed out of BT in the 12 months to March this year, even before the announcement that Westpac would acquire the group, major networks of financial planners — including those owned by Sealcorp, AMP, the Commonwealth Bank and MLC — are poised to decide whether they will redeem any of their remaining BT investments.

The move by the dealer groups follows the decision by the Assirt research house last week to place a ‘sell’ rating on all BT Australian equites, Australian fixed interest and diversified products. The Lonsec research house has also called for investors to ‘redeem’ any investments in the BT Australian Share Fund.

Dan Powell, the director of distribution at Sealcorp, which owns the Securitor and Pact dealerships, says the group is yet to finalise its position on BT, but that there was a strong chance it would follow Assirt’s advice and sell.

Meanwhile, Australia’s largest financial planning dealer group, AMP Financial Planning (AMPFP), has maintained a hold rating on BT funds.

However, AMPFP managing director Greg Kirk says the rating is under review. He says AMP has made a formal request for more information from BT about the status of its funds management products, including whether they are experiencing large scale redemptions in the wake of the Westpac acquisition, which could affect their liquidity.

It is a similar story at the Commonwealth Bank’s two commissioned based dealer group’s, Commonwealth Financial Solutions and Financial Wisdom.

“We have had BT on hold for quite some time, so advisers haven’t really put any new investments into BT for some time. With respect to putting them on sell, I can say they are certainly under review,” Commonwealth Bank general manager of practice based financial planning Jerome Bleijie says.

A spokesperson for the MLC group says it already had a ‘sell’ recommendation on a number of BT funds prior to the Westpac acquisition, but has since put all remaining BT funds, except the group’s cash fund, on hold.

The growing anxiety over BT by dealer groups was triggered last week by the announcement that Marcus Fanning, the head of Australian equities at BT, would not continue with the group after its acquisition by Westpac.

In a statement issued last week, the Lonsec research house said Fanning’s departure — which came on top of the departure of BT’s chief executive Ian Martin, chief investment officer Gary Symons and chief operating officer Graeme Fowler — would be the final straw for many BT investors.

However, Australia’s largest independent dealer group, Professional Investment Services (PIS), said last week it would break the mould and not pull its money out of BT funds.

PIS general counsel Graham Evans says BT funds would have to significantly underperform to override the costs of pulling out. He says PIS holds hundreds of millions of dollars in BT funds, and the costs of exiting, including capital gains tax, would be a major disadvantage to clients.