Why Westpac’s BT Financial swears by wealth

BT Financial boss Brad Cooper shrugs off the epithet ‘last man standing’ in wealth management.

BT Financial chief executive Brad Cooper. Picture: David Moir

BT Financial boss Brad Cooper shrugs off the epithet “last man standing” in wealth management”, as if daring to be different is a mission statement for the four major banks.

The truth is it’s not.

Just as they hurtled lemming-like into wealth in the late 1990s and early 2000s, splashing out $18 billion as if it were spare change, they are now storming the exits, utterly convinced that the only certain outcome from bancassurance is a deep cultural malaise. Apparently, all those promises of sleek, cross-selling machines were pure hype.

Instead, bancassurance became a recipe for management conflict — the remuneration was different, investment cycles were incompatible, and the hoped-for returns never eventuated.

The consensus, therefore, was that Monday’s move by Commonwealth Bank to demerge its wealth management and mortgage broking businesses was inevitable.

If you try that version of history on Cooper, who has run Westpac’s wealth arm since 2010, it falls somewhat flat. To say the least.

“We’re particularly happy with our position in wealth,” he tells The Weekend Australian.

“BT is about 10 per cent of group earnings, it’s above our hurdle (rate of return), there’s ­mandated growth in superannuation, we’ve invested in the business and we’re well-positioned.”

Where rival banks see an imperative to exit, Cooper can only see a land of opportunity.

“I don’t understand the complication — why wouldn’t we stay?” he asks.

Cooper has the firm backing of the people who count, including Westpac chair Lindsay Maxsted and chief executive Brian Hartzer.

Last September, Maxsted said BT was a shining light that “rightly sits inside a bank”, delivering a one-stop shop for the superannuation, investment and banking needs of customers.

Hartzer, as recently as April, pushed back firmly on calls for banks to quit financial advice, saying ownership was not the root cause of poor behaviour.

Responding to evidence of dodgy advice and fee rip-offs in the financial services royal commission, he defended the bank’s long-term position in the sector, saying likely reforms should address all participants.

“If you think about what we’ve seen, with financial planners, it’s very clear that these are issues to do with financial planning, not particularly to do with banks,” Hartzer said.

On Thursday night at a business dinner in Melbourne, new AMP chairman and former CBAchief executive David Murray also defended the conflicted, vertical integration model that’s widely seen as a wellspring of conflicts and misconduct.

It was Murray, as then-head of CBA, who kicked off the major banks’ headlong rush into wealth with the $9bn Colonial acquisition in 2000.

AMP is also a manufacturer and distributor of financial products.

Murray highlighted the point that the CBA spin-off, to be called CFS Group, was vertically integrated, while the collapsed Storm Financial group was not, yet both were seen to be havens for poor behaviour.

“If you don’t have serious ­financial institutions that own high-quality platforms, and invest in them, and serious financial institutions that can remediate customers, then you just don’t have the same backing for financial advice,” he said.

“Neither the US or the UK have been vertically integrated.

“They go to the actual systems underneath and draw the line at individual actions rather than one model or the other.”

The current preoccupation with conduct has masked BT’s performance since then-Westpac CEO David Morgan bought it for about $980 million in a deal that he rated as the best of his career.

Westpac has more than recovered its acquisition cost since then by spinning off BT Investment Management — the equivalent of CBA’s soon-to-be-separated CFSGAM (Colonial First State Global Asset Management) unit.

The bank has reaped about $860m after transaction costs from a progressive selldown, with its remaining 10 per cent stake worth more than $300m. But it’s the future that concerns Cooper much more than the past.

BT’s prospects depend very much on its Panorama platform, which has already attracted $11bn in funds and is widely seen as the most advanced wealth platform in the country for advisers and ­customers.

It should be, given that it’s taken almost $600m to build and only just moved into its “business as usual” phase in the first half of this year.

For the first time customers can now view and transact seamlessly across all their financial services in one place, including banking transactions, savings, credit cards, home loans, insurance, super and investments.

When Cooper says Westpac’s rivals have not invested in wealth to the same extent, Panorama is the shining example.

Faced with an investment of a similar scale in the current environment of anaemic credit growth and hyper-vigilance by regulators, it’s fair to say that others blinked and sought an exit.

Meanwhile, funds are flowing into Panorama, which has significantly lower servicing costs than legacy platforms, at the rate of $20m a day.

“That’s in a space where super is $2.5 trillion today and is going to grow to $7 trillion,” Cooper says.

“If you’re sitting on an old heritage platform, you’re going to be in outflows over the next couple of years.

“So it has to be administered by an organisation that’s made the investment in a contemporary platform, with digital solutions, broad asset classes and a capability that customers can engage with via their mobile phones.”