Westpac assessing implications of retaining investments platform as sale process labours

Westpac’s official line is that the sales process for the platforms business is continuing. Picture: Gaye Gerard

Westpac has quietly started a work stream to assess retaining its investment platforms business, should one of the longest-running sale processes in the domestic market fall over.

The bank has a project team gauging how the unit can be improved and structured if Westpac holds on to it, this column understands. That includes reassessing a commercial arrangement and contract with wealth management technology firm Avaloq.

The longstanding partnership, which facilitated Westpac having an operating system for customers to manage their investments in a single application, is being reviewed as part of the work stream.

Westpac’s official line is that the divestment process for the platforms business is continuing.

The bank needs to, however, either rule a line in the sand under the auction as having failed or bring it to a head, given how long it has been allowed to drag on.

After several delays, final bids in the formal process were due in late August 2022 and some were thought to have come in as low as $600m. It is unclear whether any interested parties remain highly-engaged in the process.

KKR-backed Colonial First State and AMP were separately involved in the auction.

Just months earlier than August, indicative and non-binding bids for Westpac’s investment platform division came in around $1.2bn, which was below the bank’s expectations for offers of $1.5bn-plus.

Price expectations were further hindered last year as sharemarkets declined, reducing funds under administration which didn’t bode well for the price that suitors were willing to pay.

A platform holds investments such as managed funds and shares in one place and is used by financial advisers and individuals for centralised reporting. Back-office services and tax reporting are also often provided.

Westpac’s full-year results showed it had $121.4bn in funds under administration on its platforms as at September 30, with $95.9bn of that sitting in the newer Panorama offering.

The total figure compared to $134.6bn in funds under administration a year earlier.

The results noted Panorama’s improved mobile app functionality and real-time workflow tracking for financial advisers. Investor numbers rose to 250,809 as at September 30, versus 234,948 a year earlier.

But the technology has, at times, been an issue for Westpac. In 2021, Panorama had a major outage which spurred angst among customers and financial advisers.

More broadly, it’s been a tough operating period for investment platform businesses. Investors punished platform group Netwealth’s shares on Thursday sending the stock 9.2 per cent lower on softer fund flows guidance for the full year and rising expenses.

In a quarterly update, Netwealth guided to funds under administration net inflows of $11bn for fiscal 2023, “subject to timing of transitions and no further deterioration in macro and geopolitical environment”. That was reined in from previous annual guidance of between $11bn and $13bn in net inflows.

Investors were also unimpressed with a quarterly update from rival platform group HUB24 on Tuesday. AMP will provide an update on its investment platform arm at its results next month.

Part of the issue for Westpac is the other three major banks exited their wealth and platform businesses earlier, shrinking the potential buyer universe.

Insignia Financial – formerly IOOF – snapped up National Australia Bank’s wealth business and prior to that acquired parts of ANZ’s wealth operations. Commonwealth Bank still owns a minority stake in Colonial First State after offloading a 55 per cent holding to KKR.

The platforms unit and Westpac’s operations in the Pacific remain on its business divestment list, following the agreed sales of divisions including financial advice, general insurance, life insurance, and its personal and corporate superannuation funds via a successor funds transfer.

In a market update in July, Westpac chief Peter King appeared confident that a sale agreement would be forthcoming for the platforms unit.

“Having recently announced the super and investment transactions we are focused on announcing the platform sale in coming months,” he said at the time.

In coming months, King must bite the bullet on the price tag Westpac is seeking for the platforms business or completely move on from the sale and retain the business.

Kroll watch

Kroll Australia has bolstered its local team with Chris Ives having arrived in Melbourne from London to join the forensic intelligence and investigations practice. The FII practice has had its hands full of late, including being appointed for the monitorship of Crown Resorts’ Sydney casino.

That role has entered phase two, meaning Kroll is monitoring and overseeing Crown’s remediation plan.

While in London, Ives worked on a range of projects including a task force to establish where funds laundered through Latvian bank ABLV were coming from.

Several Latvian banks closed for failing to comply with anti-money laundering regulations, some of which were entangled in the Russian “Laundromat” scheme which moved billions of dollars out of Russia.

Prior to joining Kroll, Ives worked with the Australian Federal Police as a financial investigator and at the Australian Taxation Office, where he was involved in Project Wickenby. That was cross-agency task force that spearheaded the federal government‘s fight against offshore tax evasion.

Ives has experience in conducting investigations involving international money laundering, fraud, financial crime and asset recovery.

The appointment comes as the nation’s gaming and casino groups scramble to appease regulators, including Austrac.

Crown is conducting penalty deliberations with Austrac relating to more than 500 breaches of the law, while SkyCity Adelaide and Star Entertainment are also subject to action by the financial crimes regulator.