CBA Announces Shut Down of Financial Wisdom

The Commonwealth Bank has declared that in less than 10 months, it will cease providing licensee services through its aligned advice business Financial Wisdom. The move will affect over 300 advisers across Australia. The bank said these advisers will be supported through an orderly transition to alternative arrangements, including self-licensing or joining another licensee.

In the announcement, which came of the back of the release of its full year results today, the bank said "The estimated pre-tax costs of supporting the Financial Wisdom and CFP-Pathways businesses, their advisers and their customers through this transition, as well as other internal project costs, is approximately $26 million." 

The announcement means that CBA will have completed it exit from all of its aligned advice businesses, though it will continue managing remediation for customers of Financial Wisdom who require it.

Financial Wisdom currently licenses 308 advisers, with NSW providing nearly a third of the licensee’s advisers. Other the mainland states are well represented by the brand. A state by state breakdown shows that Financial Wisdom has 96 advisers in NSW – the majority located in North Sydney and Hornsby (30 advisers) and Newcastle and Lake Macquarie (18).

Queensland is the next most effected state with 56 advisers, mainly concentrated around inner and southern Brisbane (33). WA has 51 advisers effected (42 in. Perth itself), Adelaide will see 22 advisers affected from central Adelaide, and 42 across the state in total. The remaining advisers are in Victoria (44), Tasmania (14) and the ACT (5).

Looking at some of the characteristics of the Financial Wisdom advisers may give us a clue to what might happen next. The licensee has been around for well over a decade and has licensed over 200 advisers since 2006. Its size and stability may have contributed to the fact that Financial Wisdom advisers are more experienced than the average adviser, averaging 15.6 years, compared to 11.7 across the rest of the industry. Adelaide, Newcastle, South Brisbane and Inner Perth each have around 20 of the most experienced advisers effected, with Fin Wis advisers in these areas all averaging over 18 years experience.

In its announcement, the CBA that agreements pre-dating 2013 allow Financial Wisdom advisers to exercise a Buyer of Last Resort provision, although no applications have been received to date. Depending on contracts, this provision would potentially be available to 148 current advisers who joined the licensee prior to 2013.

The closure of Financial Wisdom means there will be another large chuck of advisers looking for a new home in the next 12 months – even if the announcement brings forward the retirement plans of some of the advisers effected. The obvious move would be to find a new licensee who is looking to grow their adviser numbers, but for those interested in self-licensing, given the application times have stretched out to 10-12 months before being granted, there may be some “stop-gap” licensing sought to enable continuity of service while any applications are assessed.

This particular licensee cessation is just the latest for the industry, and although expected, it will add considerably to the current disruption and flux being experienced by the industry.

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