Deutsche pips UBS to BT Financial deal

Deutsche Bank has secured a contract to offer CPPI to clients of BT Financial in Australia, via its wrap platform.

Deutsche Bank's Tokyo offices

Deutsche Bank has bagged a contract with BT Financial, providing the independent financial advisor (IFA) and distributor with capital protection on investments made by retail investors on its wrap platform, according to several market watchers familiar with the deal.

UBS and Deutsche Bank are understood to have been the final banks on the shortlist to offer protection – often dubbed 'insurance' in the country, and operated via a constant proportion portfolio insurance (CPPI) mechanism – with Deutsche Bank reputedly securing the deal on price.

Chris Freeman, head of BT Wrap at BT Financial Group in Sydney, interviewed for an article in Asia Risk in July before contracts were finalised, said that a domestic Australian dealer could have bagged the contract at that stage. "Platform business is competitive," he said at the time. "It's about service, functionality and prices. You differentiate yourself in product development."

Providing derivatives overlaps to instruments traded on wrap platforms is viewed as a vital new revenue stream for dealers and distributors as the Australian pensions industry looks set to balloon further following the Future Tax System Review (also called the 'Henry Tax Review'), which is pushing Australians to save more. The amount Australian companies must contribute to guaranteed retirement benefits for employees will rise from its current level of 9% up to 12% by 2020. Moreover, the Australian market for self-managed super funds is growing rapidly, given the increased level of flexibility such a strategy has compared with investing through industry super funds.

This has seen the country's IFAs looking to add on extra services to their existing platforms, in particular access to individual equity holdings and capital protection, as well as annuities and variable annuities. These areas remain outside the distributors' expertise and technological capacity, however, which has seen them turning out tenders into the market seeking partnerships with institutional-like international investment banks. Market participants cite several other contract negotiations as ongoing between major participants but decline to offer details.

According to Towers Watson, the Australian pension funds market is now the fourth largest in the world behind the US, Japan and the UK, with a 2011 report finding that Australians hold 4.8% of all pension assets globally with $1.26 trillion in assets under management in 2010 – representing 103% of Australian gross domestic product.

BT Financial and UBS declined to comment, while Deutsche Bank officials did not return calls by press time.