Well, that didn’t take long.

The Royal Commission is still going, won't have its recommendations finalised until next year but the CBA just announced that it will be spinning off its funds management, financial planning arm and separate mortgage business. These include Count Financial, Financial Wisdom, Aussie Home Loans and Colonial First State. These (and a few others) will become a separate business and will be listed on the Australian stock exchange. Current CBA shareholders are likely to receive shares in this new entity and it is expected to take about a year for the demerger.

All the banks have been getting into this in a big way since 2000 when CBA first purchased the successful funds management company Colonial First State. Westpac bought BT, NAB bought MLC and ANZ bought ING, which became OnePath. It was all about 'Vertical Integration' and trying to control (and profit) at each stage. You own the Adviser (or dealer group) who control distribution, own the administration (platform) and then own the funds.

What could possibly go wrong?

The big 4 have now realised that it is a little more difficult than expected and the inherent conflict of interest in owning from 'farm to plate' can lead to poor outcomes, poor advice and distort culture and behavior with people trying to meet their targets and KPI's.

The banks know that the Royal Commission’s findings will likely recommend that the business that manufactures the financial product be different to the business that distributes them or provides the advice.

So what does this mean for a client with a Colonial First State Super Fund?

Not a lot - there will just be a different board, however we will keep a very close eye on this and advise you should there be any potential issues.


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Brett Dillon is an Authorised Representative (No: 265081) of BD Financial Advisory Pty Ltd (AFSL No: 502401).
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