The large regional bank, Bendigo and Adelaide Bank is getting out of financial advice by selling its business in this sector to IOOF (itself a challenged operator in financial advice and funds management) for $3 million dollars.
Bendigo joins the like of ANZ, Commonwealth, Westpac, NAB, and Bank of Queensland by announcing to desire to quit the sector, or taking active steps to do so.
The Commonwealth has actually hauled back on its plans – not because of a change of heart, but because it has realised its businesses are in no financial condition to be sold with millions of dollars in extra costs and customer remediation charges to be paid.
Westpac last month sold its loss-making advice arm, costing about 900 jobs, including those of two of the banks most senior executives. But the upside for Westpac will be the reduction of costs to the tune of $280 million a year.
Bendigo said it expected the sale to effective from August, and would not have a material effect on its profit outlook.
IOOF shares were up 1.9% at $6.43 and Bendigo shares eased 0.6% to $9.77.
Bendigo said yesterday that the IOOF-owned business, Bridges Financial Services, would pay $3 million in cash for Bendigo’s “book” of financial planning customers and servicing rights. A further unspecified payment could be made by IOOF to Bendigo “on the first anniversary of completion, subject to maintaining an agreed ongoing service client retention rate.”
The two businesses will also enter into an agreement under which Bendigo will refer customers seeking advice in its branches to Bridges.
IOOF said yesterday it had found no “material issues” with Bendigo’s planning business, but Bendigo had agreed to cover any liabilities that arose from conduct in the division before the deal was completed.
Alongside the sale to IOOF, Bendigo announced that it was also selling its specialist self-managed super fund business to LBW Business & Wealth Advisors, an accounting practice based in the Victorian city of Geelong.
Bendigo, which has about 125 financial advisers in total, said in yesterday’s statement that providing advice had become “highly specialised” and it required significant investment to meet the mounting regulatory and compliance requirements.
“In considering our advice business as part of our broader banking services, we recognise we will not be in a position to create the specialised focus required to effectively meet our customers’ needs into the future,” Bendigo’s executive in charge of consumer banking, Richard Fennell, said in the statement.
“We believe a dedicated focus, from a specialist provider, with the scale and reach of Bridges, will help to ensure our customers’ expectations can be met and that advisers can be supported in meeting future development needs as the industry moves to increase the level of professionalisation of the industry.”
