Up until recently, wealth management was a peripheral concern for the largest Australian banks. Now it is central to how these firms are pushing for dominance of their market.

Not that long ago, Australia’s Big Four banks had little or nothing to do with wealth management as we currently understand it. Today, their dominance of the wealth management market is the big driver behind bancassurance group AMP’s A$12 billion bid for the Australian and New Zealand operations of French group AXA.

AMP chief executive Craig Dunn used some telling figures when he spoke at a business lunch in Melbourne earlier this month. Mr Dunn noted that a decade ago the Commonwealth Bank and Westpac ranked in the lower half of the country’s top 10 fund managers, and yet along with the NAB and ANZ they now control 50 per cent of the industry.

When it comes to Australia’s A$1 trillion superannuation – or pensions industry – the figures are pretty much the same. After a decade of acquisitions and consolidation, the NAB has a 15.4 per cent market share, the CBA has 13.6 per cent, Westpac 11.2 per cent and ANZ 8.4 per cent.

In third position is AMP with 12.3 per cent, while its so far reluctant takeover target AXA is in sixth place with about 7 per cent.

At stake then is top ranking in the Australian domestic wealth management industry and AMP is simultaneously attempting to achieve industry leadership at the same time as it trying to avoid takeover itself.

Another factor is the looming threat to financial planning networks, and with 2000 or so planners AMP has the biggest stake in this area of the industry, with AXA in second place. A government committee is set to report and is tipped to recommend a major change through the abolition of commissions, a change which will shake the industry to its very core.

Commissions comprise a hefty chunk of planners incomes and AMP’s response is to attempt to get bigger to survive the post-commission industry. The company tried to grab Aviva’s Australian funds and insurance business back in June, but was outmanoeuvred by the NAB.

The AMP’s mantra in its AXA bid is competition, specifically non-bank competition to the Big Four whose stranglehold on the Australian financial system has only increased through the global crisis.

“What this merger will do if it goes ahead, will allow us to improve our scale, further improve our cost efficiencies and therefore improve our capacity to compete,” says AMP’s Mr Craig Dunn.

The merger would not only improve AMP’s capacity to compete, it would ensure its survival, something has seemed in doubt for much of this decade as the company reeled from the huge losses it incurred in trying to break into the UK market.  At the company’s weakest point there was the prospect of a takeover by the NAB, but that failed to materialize and AMP has limped back to enjoy some sort of health, most recently posting an interim net profit of A$362 million.

But it seems only the big survive in Australian wealth management and banking these days. If the AMP bid for AXA is successful, the French company will join Aviva and ING as the third foreign player to quit the market this year.

Old names such as MLC and BT have long-since been subsumed. No-one seems to remember another long-standing mutual society, National Mutual, which was traded as AXA in Australia for more than 10 years now since the French took control.

Speculation surrounds the future of every financial institution outside of the Big Four, with regular reports on takeover rumours for smaller players such as Suncorp and IOOF. The word is that if it fails to grow by acquisition, AMP’s days are also numbered.

All this explains a certain amount of desperation in the AMP move, and it is significant for reasons beyond the company’s survival. A successful takeover will create a fifth financial pillar to set alongside the Big Four, and will shape the Australian wealth management landscape for the next decade.