One may think the continuing trend of banks offloading their insurance and wealth management businesses signals the end of the bancassurance model but there is life in it yet, according to IOOF's Renato Mota.
In a recent blog post Mota said the traditional bancassurance model in which product was king has failed to live up to expectations, with the cost-benefit ratio in favour of owning wealth and insurance product manufacturers shifting negatively post-GFC.
"If banks were going to offer insurance and wealth management to their clients, then why not control both the manufacture and distribution of those products? Poor conduct, often related to warped incentive structures, led to increased regulatory scrutiny and oversight, as well as reputational damage," he said.
Higher costs brought about by heightened regulatory scrutiny have ultimately made the vertically integrated bancassurance model unfeasible.
Perhaps the enthusiasm for bancassurance blinded the banks from fully considering the end customer as "reconciling clients' best interests with a limited product line from only one manufacturer is very difficult", Mota said.
"However, there is merit in banks being able to offer their clients a broader array of products and services that help them reach their goals. It allows banks and clients to benefit from a trusted relationship to meet a broader range of financial needs, and particularly suits simple needs where holistic advice from a financial adviser may not be sought."
He said the fact banks are now entering strategic distribution partnerships represents an evolutionary shift in the bancassurance model away from manufacturing which should result in better outcomes for clients, given the benefits associated with specialisation and best of breed solutions.
This shift presented a significant opportunity for IOOF recently, acquiring part of ANZ's wealth management business. Under the agreement, one such strategic partnership was struck - a 20-year alliance by which IOOF will distribute wealth products through ANZ's Australian banking network.
"This arrangement aptly reflects the 'new generation' model of bancassurance that is emerging in Australia and overseas," Mota said.
Ultimate success comes from delivering outcomes to clients that are customised to their needs - irrespective of the manufacturer or origination, he continued.
"IOOF is committed to an open architecture model which gives advisers and clients a genuine choice over what product providers they decide to use. This model fits product and business processes around the client, instead of the opposite approach of trying to fit clients around particular products - leading to advice-led and client-first outcomes," he said.