Do banks want to own everything?

Someone pitched to me today the idea that the round of reforms about to roll over New Zealand's financial services industry have been strategically designed to favour banks.

As far as conspiracy theories go, it's not a bad one.

Banks do like to control all aspects of the manufacture and distribution of financial products - the announcement this week by the National Australia Bank (NAB), BNZ's parent, of its majority buyout of 'ultra high net worth' broking business Goldman Sachs JB Were (GSJBW) is a case in point.

Banks just like buying this stuff so they can send their own products down the 'channel'. And while NAB, BNZ and GSJBW have said there will be 'separation', no institution spends A$99 million without hoping to get a payback somewhere, and it's normally in the 'cross-sell opportunities'.

However, there's always fallout. The classic response to this situation is that many brokers/advisers who previously worked for an independent operation such as GSJBW jump ship when the bank takes over, often taking their clients with them.

Malcolm Maiden writing in 'The Age' makes this point.

Back to the conspiracy theory. The reforms of the financial sector include a major shake-up of the advisory sector - about time. But the raft of new regulations currently under construction, including these Securities Commission proposals could indeed put more power in the hands of banks to control distribution channels. Independent financial advisers will find business a bit more expensive to pursue post the regulations while institutions have the option to create and monitor their own networks.

Some delegates at the Institute of Financial Advisers (IFA) conference in Auckland this week certainly think the game has been weighted against them. The industry is at a low point anyway after being bashed by media and markets for the last couple of years - it is about to be transformed but it would be a pity if that transformation was from independent advisers to bank employees.

Just a theory.

- David Chaplin