Financial advisers and major banks are breaking up

Financial advisers and big banks are breaking up even before the royal commission has finished its work.

NAB’s Andrew Hagger leaves the banking royal commission in Melbourne last month. (Stuart McEvoy/The Australian)

Financial advisers and big banks are breaking up even before the royal commission has finished its work. the executive team at Godfrey Pembroke, one of the best known adviser brands in the market, is planning to part ways with National Australia Bank and start afresh under an independent licence.

With senior bank executives before the Commission, including NAB’s Andrew Hagger, indicating they were no longer committed to troubled financial adviser subsidiaries, it is now a race between banks moving subsidiaries off the books — such as NAB moving to sell JB Were — and the subsidiaries taking it upon themselves to quit the parent company.

Godfrey Pembroke had been one of the market’s best known independent adviser agencies before it was acquired by NAB in 1999. Meanwhile, CBA is planning to sell the Colonial funds management group. CBA has also been forced to top up capital levels by $1bn after a review by the prudential regulator APRA found big profits “dulled its senses’ towards risks.

In July last year, NAB had its entire financial advice network — which along with Godfrey Pembroke also includes the brands Apogee, GWM and JB Were — blasted by the consumer regulator ASIC which found planners were not telling the 150,000 customers of the bank that products being promoted were manufactured by the bank.

It is widely expected the banking royal commission will recommend an end to the highly controversial “vertical integration” model among the major banks — such as NAB where the bank created the products and directly influenced more than 1,500 planners selling those products.

The reports of the Godfrey Pembroke plans first surfaced in the financial trade press, with Tom Reddacliff, a former Godfrey Pembroke executive and now CEO of Encore Advice, telling Professional Planner magazine of the plans.

NAB has not denied the plan. A spokesperson for the bank would offer no further comment. It is widely expected that the Royal Commission — which is expected to deliver its key report in September this year — will specifically recommend that advice and product manufacture be split in the Australian financial services sector after a searing list of scandals at the major banks and AMP found advisers were not acting in the best interests of their clients under the currently poorly regulated model.

The departure of key financial planning subsidiaries from the banks may also be a pre-emptive measure to halt the exit of top talent from the banks. Godfrey Pembroke experienced its own breakaway a few months ago when a Melbourne financial advice unit, Scholten Collins, and McKissock exited the company to start a new company.