Issue: 343
Sent: 30-06-2009 14:53:01
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More Consolidation in Funds Management?
Tony Negline
Recent media reporting contains some interesting views from fund managers.
Some people believe that the Australian funds management industry is about to undergo another round of consolidation.
A recent speech by AMP's Craig Meller has received wide coverage.
He is quoted as saying that 'wealth management [in Australia now is like] ... the manufacturing industry in Australia in the 1970s and early 1980s.'
"Consumers are questioning the value they receive from the industry, both as advisers and product providers, risk management systems are being tested and in some notable cases found wanting, the efficiency of the industry is being questioned and business models based on scale and cost efficiency are holding up the best," Meller said.
When I joined the life insurance industry over 20 years ago there were 52 life insurers operating in Australia. The management of the various companies I worked for all seemed to believe that the number of life insurers had to reduce - on the basis that our market is too small to cope with this number of life insurers - and would reduce very quickly.
As it turns out they were all correct on one point - there are now 32 life insurers operating in Australia. One could argue that the sale of Aviva Australia will mean that we now have 31 life insurers but this fact will take about a year to appear in the APRA's statistics.
But the consolidation did finally arrive. It just took a lot longer than most people expected even allowing for the various recessions which gripped the economy in the intervening period.
I suspect the wealth management industry as it stands in Australia now will repeat experience of the financial planning community - it will certainly consolidate but over a reasonably long timeframe of between 10 and 15 years. Over the time I think it's reasonable to assume that there will be a steady stream of wealth management corporate transactions.
In other developments, the ATO has finalised some Self Managed Super Fund Rulings. The most interesting part of these rulings is the comments and changes which were requested after the initial draft of the ruling was issued and the responses to those wishes.
Also of great interest in these rulings are the many examples which are included. For example in the ruling which has just been finalised on in house assets, the ruling contains a good example of a super fund leasing artwork to a related employer. There is also an excellent example of a super fund leasing part of a residential property to a related party.
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