Strategy& paid $600,000 for CPA Australia financial viability report

09 August 2018

Strategy& – formerly Booz & Company and now newly formed strategy consulting practice of PwC – has been paid a grand sum of $600,000 to provide CPA Australia with a report concerning the financial viability of the accounting accreditation body’s professional service business CPA Australia Advice. Whilst details of the report have been kept confidential, a one page letter from Strategy& outlines the strategy consulting firm's stance on the subject; cut your losses.

CPA Australia, one of the world’s leading accounting, financial services and business professionals bodies has been advised by PwC’s strategy consulting services arm Strategy& that their advisory business is no longer viable. The Big Four consulting firm came to the conclusion that there was not a sustainable demand for CPA Australia Advice. 

CPA Australia Advisory has been operating at a loss for the recent past, only posting a revenue of $217,000 over the past year. However in the same period the firm lost over $3.8 million due to the fact that they only had 37 planners operating under their licenses. 

CPA Australia has been in a world of strife due to both the lack of generated revenue and excessive payments to senior management staff. One vocal member by the name of Brett Stevensen of CPA Australia suggested that the firm had managed to incur $7.5 million in debts in the past 19-months, of which over $1.5 million had gone to CPA Australia directors. 

President and Chairman of CPA Australia, Peter Wilson wrote to PwC earlier this year to ask the firm to “provide our assessment of the approach that CPA Australia has taken in relation to the setting of its fees for its Board from 1 October 2017.” This is due to the fact that prior to Wilson taking the top job at the firm, CEO Alex Malley was sacked in a membership uprising that purged the CPA board as well. 

With the board down and a new CEO at the helm, the firm attempted to reel in costs, especially those associated with paying the senior management. But it wasn’t enough. The company was still bleeding dollars and sought the consulting firm’s help to shut down the advisory operations. The firm reviewed the situation and agreed in the affirmative; CPA Australia Advice would not become profitable in the foreseeable future. 

Strategy& paid $600,000 for CPA Australia financial viability report

"Demand from members for the CPA Australia Advice offering in the form established was insufficient to ensure financial viability and we have found no evidence to suggest that future demand for the offering in its current form will increase to a financially viable level. As such, we recommend CPA consider exiting CPA Australia Advice in its current form," PwC partner Anthony James wrote in the letter. 

The advice however came off the back of another issue CPA Australia members had with management. Exorbitant spending. The $600,000 cost of the report is said to add to the total bill of over $13 million in losses in under two years. "I think the review by PwC into CPA Australia Advice pretty much completes the professional whitewash done of all the wrongs exposed at CPA Australia,” Stevenson said.

"There are also no details of the actual financial budgets that allowed this to go ahead. They must have been fairyland stuff. After all the matters exposed at CPA Australia and this subsidiary, no-one has been held accountable, and the new board are pressing on with virtually absolute power with an even more disinterested and apathetic membership," Stevenson said.

Whilst the report may not provide any names of those who have have gotten their hands dirty and neither does it point blame, it does provide some constructive feedback. “CPA should undertake a detailed investigation of the most appropriate model for providing members who provide financial product advice with support and we believe there are a number of potential models that should be considered” 

The exact advice given however was not made public due to the sensitive nature of the information. CPA Australia however did take the advice that they were hoping to get from PwC and shut down the CPA Australia Advisory practice. “In light of these findings, the Board of CPA Australia has decided to exit the business of CPA Australia Advice although we note that the role of accountants in providing high quality independent fee-for-service advice remains important to Australians,” it states on their website.  

“Today CPA Australia Advice has provided notice of the decision to all of its existing authorised representatives and to staff. CPA Australia Advice will work with all authorised representatives to transition from the business before the end of the calendar year.”


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Commonwealth Bank working with McKinsey on massive job cuts

16 April 2019

The Commonwealth Bank could be set to cut up to 10,000 jobs and around $2 billion in costs according to reports, with the bank working on the plan with McKinsey.

Driven by new CEO Matt Comyn, who was appointed to the helm last year, the Commonwealth Bank of Australia (CBA) is said to be mulling a plan devised in conjunction with global strategy and management firm McKinsey & Company to axe up to 10,000 local jobs – saving about $2 billion in operating costs. It continues the close relationship between the bank and the consultancy dating back for more than 15 years.

The largest employer among Australia’s Big Four banks, the potential cuts could see an almost 25 percent reduction to its approximate workforce of 44,000, the CBA’s headcount then dropping below the ~34,000-strong staff at National Bank. The plan is also reported to include the shuttering of 300 of its 1000 branches around the country, although as customers shift to online banking the closures are not unexpected.

“My understanding is that the story is good and there has been a plan underway,” said Your Money’s chief reporter Leo Shanahan of the reports which first surfaced in The Australian (Your Money was formed through a partnership between Nine and NewsCorp subsidiary Australia News Channel). With its potential ramifications for the government’s hopes in the upcoming federal election, the reporting from Murdoch’s stable provides an unexpected twist.

“Matt Comyn has been wanting to shut branches in particular for a while and cut costs at the bank. There is broadly a plan underway over the next few years for [this cost-cutting] to happen,” continued Shanahan on Comyn, who replaced former McKinsey New Zealand head and global partner Ian Narev as CEO last year following the anti-money laundering breeches which saw the bank fined a record $700 million.Commonwealth Bank working with McKinsey on massive job cutsComyn has since broadly criticised his predecessor at the recent Royal Commission into misconduct in the banking and financial services sector, which stemmed in part from a Four Corners report on the profit-at-all-costs culture within the CBA’s financial planning division, but the bank’s relationship with McKinsey apparently remains strong – having dated back to before Narev’s arrival and featuring other close links.

In 2003, the CBA brought in McKinsey for an ongoing “benchmarking” project to cut $500 million in costs – with 600 staff said to be in the retrenchment cross-hairs at the time following a significant reduction in the years prior. McKinsey has continued to serve the CBA in the years following, and had throughout the 80s and 90s advised all of the NAB, Westpac and the ANZ on various cost-cutting and re-organisational measures – including saving Westpac from potential collapse.

Meanwhile, CBA’s Group Executive for Retail Banking Angus Sullivan, who will be responsible for overseeing any strategy to close branches and let go customer facing staff, was like Narev a former partner in McKinsey’s New York office, spending nine years with the strategy firm before joining CBA in 2011. Former CFO Rob Jesudason is also among others a McKinsey alumnus, while the leadership team of the CBA’s strategy division continues to feature a number of ex-McKinsey consultants.

For the Commonwealth Bank’s part, it has described the reports of a mass redundancy – which The Australian contends were meant to be kept secret until after the election – as “unnecessarily alarming” and “misleading”, while reiterating the need to manage costs. McKinsey meanwhile traditionally refuses to comment on matters concerning its clients, although the firm recently committed to greater transparency following a series of its own public image issues.

The financial sector accounts for nearly a quarter of Australia’s $5 billion management consulting spend, with the Big Four professional services quartet Deloitte, PwC, KPMG and EY in recent years all scoring multi-million dollar contracts with the big Australian banks – particularly around the areas of digitisation. McKinsey, meanwhile, was last year brought in by Telstra on another $1 billion cost-cutting program.