Bankers make rotten fund managers. The cultures of the two different types of financial services could not be more different. This is the challenge for Future Fund Chief, David Murray. It is also a challenge for his successor at the mighty “Which Bank”.
Henry once ran a funds management business with a one word mission statement: “Customers”. At one point there was a fierce debate with a bank director about the importance of satisfying customers. Henry naively thought customers might be like women he had known – requiring satisfaction of various needs. “Bankers are focused on customers too,” this old snoozer snorted. “We are focused on getting every last drop of blood from every last customer.”
At the end of the 90s the game was “integration”. Genius advisors like the bright blokes from Boston Consulting earned large fees to advise bankers to integrate their funds management businesses with their banking operations. Rather than offering their banking customers a wide choice of funds management products and services, with independent advice, the idea was to stuff ’em with the bank’s own, by definition inferior, funds management products and services.
This bone-headed advice destroyed value and left customers lamenting. This was the case whether or not the banks brought funds management businesses – think CBA and Colonial, National and MLC or Westpac and BT.
Now it seems the great pendulum has begun to swing, as Katherine Jimenez reports in today’s Oz:
The Commonwealth Bank and Westpac are seen as the two major banks most likely to separately list their wealth management businesses, in a move which could unlock billions of dollars in value.
Citigroup raised the prospect in a note last week claiming that the substantial investment the banks had made over the past eight years to build a presence in wealth management had not paid off.
Such a move is the necessary precursor to recreating a funds management culture in which “customers” are valued and in which customers are treated well and in which wealthy customers lead to wealthy fund management businesses.
Our analysis from 2002 is linked here. Watch this space as the pendulum swings back.
Read more at Henry Thornton.