The Commonwealth Bank (CBA) has announced plans to demerge its wealth management business, including its third party financial advice licensees, which will operate under a separate name and listing on the ASX.
Under the plan announced by the Bank, Count Financial and Financial Wisdom would operate under a new entity called CFS Group, and Commonwealth Financial Planning would be moved into CBA’s consumer financial services business within its Retail Banking Services division.
CBA Chief Executive, Matt Comyn said, ““The ability to provide high-quality banking services and in-house financial advice to CBA customers will remain fundamental to CBA’s focus on customers’ financial wellbeing and we will deliver that through a new model for advice that is safe, simple and scalable”.
The demerger would also include investment platform Colonial First State, investment management business Colonial First State Global Asset Management, and mortgage broking business Aussie Home Loans being included within the CFS Group, which will operate independently from CBA.
The separation of the aligned advice businesses would not change the 20-year distribution partnership CBA struck with AIA Australia at the time the latter purchased the the bank’s life insurance business, CommInsure, and it would now also extend to the CFS Group.
“…it also responds to continuing shifts in…community expectations and addresses the concerns regarding banks owning wealth management businesses…”
Comyn said the demerger plan was the result of a review of the bank’s business lines and efforts to increase shareholder value for all businesses and “…it also responds to continuing shifts in the external environment and community expectations and addresses the concerns regarding banks owning wealth management businesses”.
In a video interview on the bank’s website, Comyn, however, shied away from suggestions the separation of the advice businesses was related to the ongoing Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
“I think there is good reasons for why banks should own wealth management businesses. I think there are equally good reasons why banks shouldn’t own wealth management businesses. The context has changed quite markedly over the last ten years,” Comyn said.
“Ultimately for us, we have formed the view that the best decision [for] the Commonwealth Bank’s shareholders, is to demerge the wealth management businesses, enabling our core banking business to become a simpler and better bank,” he added.
The demerger plans, which are subject to final CBA Board, shareholder and regulatory approvals, are expected to be completed in 2019, and CBA shareholders will receive shares in CFS Group proportional to their existing CBA shareholding, while retaining their existing CBA shares.
