The past 12 months have been a turning point for Australian banks. A regulatory crackdown in the aftermath of the banking royal commission’s findings in early 2018 exposed systematic failures and breaches of trust by incumbent banks. Their business model was far from being aligned with customer’s interest, focusing instead on revenue and shareholder profit and paying less attention to how those outcomes were achieved. Shayne Elliott, The Australia and New Zealand Banking Group Limited (ANZ) CEO, admitted to the banking royal commission that “teams inside ANZ had made decisions based on their own knowledge of their own world around them, rather than the greater group, and so they searched for and sought short-term tactical solutions when problems arose”. At the same time, banks extolled their community engagement activities to its shareholders.

This dilemma between balancing different stakeholder interests surfaced also in wealth management. The largest banks – Commonwealth Bank of Australia (CBA), ANZ, Westpac, and National Australia Bank (NAB) – cultivated a model that for years, was based on the provision of financial advice and the manufacture of financial products. Around this platform, they built a large pool of financial advisors to sell it. This modus operandi, called vertical integration, is being used across Australia and Asia in various forms to achieve economies of scale and reduce cost. As a result, they have offloaded their advice platform, superannuation and asset management businesses. The fallout from this crisis will have profound implications for the financial services industry not just related to customer compensation, fines, and penalties.

Australia’s major banks register record lows as a result of the country’s bank crisis

Figure 1: Net Promoter ...

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