Macquarie lays off advisers, merges private bank and wealth units

The Australian 12:00am May 18, 2018

Michael Roddan, David Rogers

Macquarie Group has told dozens of advisers to pack up and leave the business as it confirmed plans to merge its private bank and private wealth divisions in an ­attempt to target ultra-rich investors in Australia.

Macquarie yesterday informed about 30 private wealth staff their duties were no longer required at the so-called Millionaires’ Factory, as part of a plan to concentrate on the more than one million Australians with a wealth above $1.3 million.

Volume-based commissions also appear to have been targeted during the overhaul, with chief executive Nicholas Moore and deputy managing director Greg Ward said to be cracking down on “the grid”, a form of volume-based commissions.

The group’s private wealth division is contained within Macquarie’s banking and financial services division run by Mr Ward.

Macquarie said the merger would affect “a number of advisers”, but it is understood most will be retained. The private wealth division employs about 300 advisers. Macquarie said it was in discussions with other companies to find the redundant advisers employment.

High-net-worth clients are the exclusive focus of Macquarie’s private bank, and a substantial proportion of its private wealth business.

“We are striving to create a comprehensive and tailored wealth and banking offering for our clients that can take them from the wealth accumulation stage of their lives, through to retirement,” head of wealth management Bill Marynissen said.

“Concentrating on one client segment enables us to better deliver on this commitment.”

Australia is in the top 10 countries for the number of high-net-worth individuals, with more than 1.2 million adults with wealth of $1.3m or greater.

This share of the population has grown by about 80,000 adults since 2011.

The high-net-worth end of the wealth management industry is grappling with a rise in competition. Crestone Wealth Management was recently launched following a management buyout of UBS’s operations in mid-2016, and now caters to more than 5000 high-net-wealth clients, worth between $3m and $5m, who are interested in unaligned financial advice.

Credit Suisse Australia is also ramping up activities to target the ultra-rich.

Two years ago, Morgan Stanley unveiled changes, slashing commissions in its own pay “grid”, where advisers’ share of revenue they brought in was decreased significantly.

Macquarie private wealth was the subject of an enforceable undertaking from 2013 to 2015 after the corporate watchdog found some of the group’s advisers were not demonstrating a reasonable basis for advice sold to customers and for poor record keeping, including instances where there was insufficient evidence that customers were “sophisticated” investors, which would allow planners a greater degree of freedom.

The banking and financial services division in Macquarie accounted for 11 per cent of the group’s total net income in the last year through March. “Focusing on attracting high-net-worth clients is a logical evolution of our private client business and we believe it is a space in which we can be a market leader,” Mr Marynissen said. “We have carefully assessed growth opportunities in the high-net-worth segment against the strong fundamentals of our business,” he said.

“These include a deep understanding of the high-net-worth segment, our wealth and banking expertise and suite of solutions, and the capacity to build on our existing digital capabilities.”