ABA Banking Journal - November 2007 - (Page 10)

briefing began with even stronger growth trends, the first half showing an annualized growth rate of 28.2%. Fegan notes that five years ago, the wealth management area had $12 billion under management and 1,100 employees and “to be honest, it was a bit of the ugly duckling in the company.” Nowadays, the function has $50 billion under management and fewer than 1,000 employees. Fegan credits several factors for the shift. These include a proprietary processing platform called Asgard; a conscious decision to home in on a major aspect of the managed funds business; a strong Australian economy; and, last but not least, a government scheme called “superannuation” that’s created a huge pot of money that many types of firms can, and do, pursue. St. George has wielded its own aggressive spoon. Superannuation, recently amended and called “super” for short, is somewhat similar in concept to proposals here for privatizing Social Security. “The Australian government basically formed the view that it will not be able to afford the traditional government pension as the population ages and grows,” explains David Clark, director, institutional business services, Asgard Wealth Solutions. The government saw that the trend of more people living further into old age, joined with a falling birth rate, would create a top heavy situation, too few working people supporting too many retirees. “So 15 years ago,” Clark continues, “the government started requiring Australians to self-fund their retirement. A percentage of an individual’s salary must go into the equivalent of your 401K. It’s taken out from the gross, so you don’t even see it. And you can’t take it out until you retire after 55.” Contributions go into superannuation funds, essentially retirement-oriented mutual funds, or retirement savings accounts. At the back end, citizens can withdraw their funds as a lump sum, through superannuation pension, or a combination of the two. Clark says the program began with a 3% of income requirement. Nowadays the percentage has risen to 12% of income, “and there is argument to raise it to 15% or even higher.” (For the lowestincome wage earners, the government does offer some matching payments.) Voluntary additional contributions by employees are also permitted, subject to limits. Under a new law, retirement withdrawals are tax free; formerly they had still been subject to some tax. Originally, most superannuation deductions went into company funds run by independent trustees. Growing compliance duties and imposition of licensing requirements made this less and less attractive to employers. “So over the last three years 98% of all companies’ super funds have closed, and the money has moved into the private sector,” Clark explains, “with individuals having the ability to move their money where they choose.” St. George decided to become special“Out of $50 billion,” says Fegan, “we don’t manage one dollar of it. We manage the managers.” The bank handles administration and distribution chores for approximately 600 funds, collecting percentage-based fees for all this activity, in what has become the fourth-largest managed funds industry in the world. There’s much more to wealth management at St. George’s, of course, including insurance, financial planning, and Advance Asset Management Limited, an investment arm that links St. George clients with selected outside boutique investment firms. “I personally ring 10 to 15 customers a week. Five might be ‘welcome to the bank’ calls The rest would be about service recovery. Everyone is expected to be doing that” – Paul Fegan, acting CEO of Australia’s St. George Bank ists. The bank leaves asset management and investment strategy to advisory firms. “The focus for us has been on administration and distribution of the money,” Fegan explains. This includes the capability to administer “gearing”—what U.S. bankers would call “margin lending.” Many of the solutions provided by Asgard are essentially “white label” offerings that advisors can market as their own products and services. Asgard’s Advisenet product, for instance, enables investment advisors to establish, track, and administer client portfolios online. Asgard Elements allows financial advisors to direct client funds into a selection of managed funds that St. George works with. Ringing out a message—literally Something that sets St. George Bank apart from many large institutions is that top executives are expected to reach out to customers on the phone. “Our CEO rings customers,” says Fegan of Gail Kelly, managing director and CEO, who left in August for the top spot at $300 billion-assets Westpac Banking Corp., “and she doesn’t ring just really wealthy customers. I personally ring 10 to 15 customers a week. Five might be ‘welcome to the bank’ calls to new customers who could range from a credit card customer to a $40 million loan. But the rest would be about service recovery—there’s been a process gone wrong, there’s been a complaint. I don’t necessarily personally resolve the complaint, but I ring to make sure it is closed in the mind of the customer. Everyone is expected to be doing that.” Fegan pauses and acknowledges the math. “It will take us a long time to get through three million customers,” he says, “but we care.” BJ CORRECTION In the November 2007 feature article, “Prepaid dilemma,” on p. 50, the bank involved in the MiCash/The Home Depot Card program, was misidentified. This jointly branded card is actually issued for the two companies by Central National Bank, a $430 million-asset bank headquartered in Enid, Okla. CNB, through its subsidiary ITS (Interactive Transaction Services), also processes the prepaid cards for this and multiple other client programs. 10 NOVEMBER 2007/ABA BANKING JOURNAL www.ababj.com/subscribe.html http://www.ababj.com/subscribe.html

Table of Contents Feed for the Digital Edition of ABA Banking Journal - November 2007

ABA Banking Journal - November 2007 Contents Editor’s Column Briefing: Good News for Mortgages Sleight of Mind N.Y. Hiring Bonanza May Be Bane Snapshot: A Look at Held-For-Investment Loan Growth ABA Resources ABA Chairman’s Position “The Moose Bank” Thrives on Manufactured Housing Loans Finding the Middle Way for Your Bank’s Retirement Program Pass the Aspirin Cover Story: Self-Service Steps Up DIY U.K. Style Marketing to Millennials Getting Real With “Gen Wired” Ethnic Marketing: Disinterested Banking Getting Good at Global Sourcing Case in Point Turn Compliance on It's Head Banker’s Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - November 2007

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