Strategy

ANZ's Wealth Chief On Vontobel Alliance, Future Strategy

Chrissy Coleman Hong Kong 30 November 2012

ANZ's Wealth Chief On Vontobel Alliance, Future Strategy

Following the announcement of the partnership between Australia-New Zealand bank, ANZ and Swiss private bank, Vontobel,  ANZ’s chief executive for private wealth management disclosed big ambitions of becoming a “distinctive regional private bank”. (To see an analysis of this deal, click here.)

Ambitions

Joyce Phillips spoke earlier this week at an investor briefing in Sydney to present the firm’s overall strategy. She began her address by saying that ANZ hasn’t capatilised on the wealth opportunity thus far, despite having heavily invested in its Asia wealth management capability through the purchase of RBS assets three years ago. “Only 14 per cent of 3.7 million ANZ bank customers hold a wealth product with us. This is behind our peers,” said Phillips.

She continued, expressing her target to increase customer penetration to at least 19 per cent, in line with market leaders in Australia: “On a global basis, wealth is rapidly shifting to Asia Pacific - in five years, from 2011-2016, our region’s share of private wealth will increase from 19 to 27 per cent. This clearly represents a tremendous opportunity to leverage ANZ’s regional presence and in particular, to create a strong regional private bank.”

Despite flat profit growth year on year, the global wealth and private banking division’s performance improved half on half, reflecting better performance in insurance and investment earnings and a decline in costs as productivity benefits emerged, said the firm at the briefing. The cost to income ratio improved half on half, narrowing by 350 basis points to 56.3 per cent. Funds under management increased 6 per cent, with New Zealand in particular standing out, attaining a 15 per cent increase.

In light of the division’s chief executive acknowledging under delivery with regards to growth plans voiced in the past, she said that this time: “We now have a clear plan to execute against this opportunity, and I’m inviting you to track us, rather than trusting us to deliver this”.

Private wealth management going forward

Phillips described the Vontobel partnership as “one example of how we want to bring best-in-breed capabilities to deliver a distinctive private banking proposition”.

While discussing the areas of intended co-operation between the two firms, as outlined in the memorandum of understanding, she also revealed a new opportunity that her recently-made standalone division will be pursuing – affluent women.

Globally, women control AUS$20 trillion of wealth. In Australia and New Zealand, women own about one third of private wealth, a higher proportion compared to most other developed markets, according to Phillips. However, almost 40 per cent of women are dissatisfied with their wealth managers, particularly in the one-million-to-five-million range.

“While men and women have common underlining financial needs, research has shown that they have different priorities with respect to creating and protecting their wealth. They value different types of advice and respond differently to life’s events. Most wealth managers neither understand nor address these differences,” Phillips said. 

She continued to say that the gap between what women value and what most wealth managers deliver presents a clear commercial opportunity  for ANZ, and is committed to resourcing  a well-defined, executable pathway to capture this segment.

Overall ANZ strategy

As part of the overall wealth strategy, she disclosed that ANZ will invest AUS$80 to A$100 million per year for the next five years and approximately half of these funds will be used to develop new customer experiences.

“Consumers are demanding a seamless integration of physical and digital channels,” said Phillips, so the firm intends investing in innovative and technological capabilities “to leapfrog” ahead of its competitors in the industry.

More specifically, as the baby boomer generation reaches retirement age, she said a large portion of wealth will shift to pension and retirement plans. As a result, ANZ will focus on improving their currently “underweight” position in superannuation (Australian pensions), an industry which is expected to grow 10 per cent in size, annually in Australia-New Zealand.

ANZ’s efforts have begun with the recent launch of the “Smart Choice Super” product, which “automatically adjusts to a customer’s stage in life”. This new superannuation offering is positioned at a low price point, with no commission charges, and addresses the self-management needs of customers by supporting online wealth management tools.

Phillips highlighted another significant growth area for ANZ wealth to be insurance, which has an annual anticipated growth rate of nine per cent in Australia-New Zealand.

She concluded that returns and managing risks will be a “clear focus” for the firm, citing factors such as cost-cutting; synergy creation; innovation; compliance; governance and stress testing as important topics for ANZ.

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