Matthews makes his mark at Manulife

Former high profile National Australia Bank executive Trevor Matthews recently took the helm of Canadian-based Manulife Financial's Japanese operations after heading up its Canadian operations for the past three years. Aaron Driver caught up with Matthews in Canada just before he headed off to Tokyo.

When Trevor Matthews left his high profile position at the National Australia Bank (NAB) in early 1998 to head up the Canadian operations of Manulife Financial, a life insurance-based financial services institution, he was attracted by the fact that Manulife owned a small bank.

And looking back on a successful three years at the helm, Matthews concedes he may not have succumbed to the headhunters at all if it wasn't for the presence of the Manulife Bank of Canada, which he now chairs. It is a telling statement in the context of a company that employs 3,500 people, manages $35 billion and generates profits of about C$300 million a year.

Banking, it seems, remains dear to Matthews' heart, and it is Manulife's "quite neat little" bank, with a balance sheet of about half a billion dollars, that enabled him to pioneer a first-of-its-kind flexible mortgage product in Canada.

Matthews was still at Legal and General in Australia in the mid-1990s, when a zealous salesman presented him with the flexible mortgage concept over a Saturday morning coffee in Melbourne. From this humble beginning, the product soared, first through Legal and General, then its UK parent company and then the NAB.

Although now well established in Australia, the all-in-one banking capabilities of the flexible mortgage have proved sufficiently new in North America to help Matthews and his team win a major Canadian award for innovation in financial services.

The award, and what Matthews describes as a "staggering" 94 per cent customer satisfaction rate for the product, has allowed Manulife to stamp the Canadian market with a touch of Australian innovation.

The flexible mortgage has come a long way from a Saturday morning sales pitch, but in many ways the story points to Matthews' experience since leaving Australia for North America. Despite a population half as large again as Australia, and its intimacy with all things American, Matthews found Canadian financial services more heavily regulated and less competitive than the market he'd left behind.

"The Aussie system is more advanced, more competitive and deregulated, and as a result perhaps more chaotic than Canada," Matthews says from his Toronto office.

"For historical reasons there are certain rigidities and inefficiencies in the Canadian system that have been flushed out by the reform that's taken place in Australia in the last decade."

As a result, Matthews says Australia is one of the examples being held up around the world of how to simplify systems in order to deliver competitiveness and value to the customer. It is a theme that ties in nicely with preparations he is making at the time of this interview to speak to two industry bodies about the good ideas coming out of Australia.

The perceived value of things Australian also applies to personnel, with many Australians successfully establishing themselves in the Canadian financial services system, including about half a dozen Australians in Manulife alone. Matthews says their experience has seen them fare well.

"I think the pace in Australia is probably faster than here, the market has been through more change, and the banks and life companies have squeezed more costs out of the system. There is more pressure in Australia."

For example, in the course of its life insurance, mutual funds and wealth management activities, Manulife is forced to deal with as many as 33 different regulators - a significant obstacle to product development that was blasted away in Australia by dramatic reform that is now largely taken for granted.

Naturally, Canadian consumers see complexity and higher prices as a result, but Matthews argues the situation is not nearly as bad as the neighbouring US where product providers must negotiate regulators in 50 states.

Personally, Matthews' experience has positioned him well to deal with the complexities of the North American environment.

"I've found it very good because I have been able to live through, participate in and help shape what happened in Australia," he says. "So now it's good fun anticipating what might happen over here in the next five years."

Despite Australia's success in regulatory reform, Matthews maintains that Canada still has a lot to teach Australia, particularly in the area of retirement savings.

"The mess that we've got ourselves into in Australia is deplorable," he says. "The layer of complexity upon complexity, and backdating of rule changes, is just absurd. We have been calling for simplification for a long time but nothing has happened yet. But here [in Canada], it is pretty good."

One major positive is a tax deduction of up to C$13,500 for individuals who contribute to Registered Retirement Savings Plans. The money also accumulates tax-free and is only taxed when withdrawn at retirement.

Although savings levels are not mandated, the level of voluntary contribution is very high because of a culture of contribution over many years. Matthews attributes this to the system's simplicity and its much more clear encouragement to put money away for later on.

Another positive is that the internal build up on life policies is still tax free in Canada, provided the policies follow certain rules. The result is that life insurance, with all other things being equal, is a much better deal for the individual than it is in Australia.

Naturally, similarities also abound between the Canadian and Australian systems. Matthews cites growth in financial advice and increasing professionalism by independent advisers as examples. And as would be expected anywhere, the battle for the customer continues, with independent advisers, life insurance agents and financial planners facing increased competition from bank-owned organisations, which in Canada have a strong stockbroking focus.

Matthews says Manulife is well positioned in this battle, selling its products through the major banks' systems while also providing banking-type products to help independent advisers service their clients more comprehensively.

In the meantime, another Australian innovation continues in the form of annual expatriate barbeques.

"I will probably come back to Australia one day," Matthews reflects, "but I'm having a lot of fun just now."