From 'Break Up' to shake up at MLC

This week, three years after playing a pivotal role in National Australia Bank’s provocative ‘’Breaking Up’’ campaign and a year after being appointed head of the bank’s wealth management units, Andrew Hagger launched another high-visibility advertising campaign.

MLC’s ‘Let’s Save Retirement’ campaign might not be as aggressively directed at its peers as the award-winning Breaking Up campaign that was also created by Melbourne agency Clemenger BBDO, but it can be interpreted as an indicator that Hagger believes he now has a better brand to sell.

One of the aspects of the Breaking Up campaign that has been underestimated is that the promise of lower mortgage rates than its peers and fewer fees was built on real change within NAB’s retail banking business and, indeed, the wider group.

While the impact of the campaign may have been muted by the continuing reduction in official interest rates by the Reserve Bank, which ultimately narrowed the margin between NAB and the rest to a few basis points, it was successful in changing perceptions of the brand and reversing a longterm trend of declining market share.

When Hagger arrived at MLC the former star of the wealth management sector was confronting a similar scenario of declining relevance and stagnant profitability.

One of the oddities he encountered and a striking symbol of the relationship between NAB and the business it had acquired in 2000 was that the business banked with Westpac, not its parent. That was soon changed but it was, perhaps, indicative of the lack of integration between MLC and the institutions that represents its biggest distribution channel.

Hagger has over-hauled his senior management team, bringing across a number of NAB bankers and has begun co-locating his management with NAB’s as part of a ‘’cultural change’’ strategy.  The ‘’Let’s Save Retirement’’ campaign carries both the MLC and NAB brands, sending a clear message about the relationship both externally and internally.

There has always been scepticism about the potential for collisions of culture between the major banks and other financial intermediaries like brokers, investment banks and fund managers which perhaps explains why MLC was previously kept at arm’s-length from its parent.

Hagger, however, would argue that the success of the JB Were acquisition from NAB’s perspective and the need to change the culture and leverage off the relationship with NAB more than offsets any risk of cultural contamination and, indeed, MLC’s relative under-performance would suggest that the culture – which, in its previous existence as a Lend Lease subsidiary had been greatly admired – had to be reinvigorated.

Wealth management businesses tend to be mixes of business lines, covering retail and wholesale funds management through to a range of insurance products. In NAB’s case, it had also acquired and built private wealth management units and added to the complexity of the business and its product suite with the 2009 acquisition of Aviva’s Australian wealth management and insurance businesses.

So business simplification has been, with cultural change and bringing NAB’s banking and wealth offers closer together, a first-order priority for Hagger. 

There’s also been a strong emphasis on improving investment returns and expanding MLC’s investment capabilities through partnerships with a dozen boutique fund managers, which appears to be showing up in strengthening investment performance, in new products launched and in flows of new business. MLC now claims to be the largest manager of corporate superannuation after a 25 per cent-plus increase in funds under management last year.

This week MLC also announced it would merge its JANA and MLC-branded investment management and consulting businesses in another move to simplify the business, which has about $32 billion of funds under advice, and strengthen its offer.

It’s too early to see any meaningful shift in MLC’s financial momentum, which is being held back by the industry-wide and adverse structural changes that have been occurring in the risk insurance sector, with claims spiking and lapse rates soaring. The industry response will take some time to reverse those trends.

If it can maintain its investment performance, build its share of inflows of new business, leverage its relationship with the bank and its customer base while taking out costs and simplifying its platforms and organisation structure, however, Hagger is convinced the strategies he is implementing will ultimately feed into the improved bottom line and return on equity that haven’t been features of MLC’s recent performances.