Westpac announced yesterday that it was creating a new listed company, BT Investment Management, as a way of providing equity to the investment management professionals in the group. Westpac will retain majority ownership.That looks like the wrong move. A better option would be for Westpac to have backed the investment team in a management buyout and got out of the investment management business altogether. Westpac is making good money out of its broader BT wealth management business. BT's earnings are growing faster than the bank's overall and those earnings make a substantial contribution to the group total.Westpac chief executive David Morgan said that in four year's time BT would contribute 20 per cent of the group's overall earnings. Last year the figure was 13 per cent.Morgan made a good buy in BT and he is justifiably proud of what was probably his best management decision.But BT makes most of its money from distribution - running the administration platforms (wrap accounts) that third party financial planners rely on, and organising investment advice through the bank's branch and private banking networks.Investment management is the part of the value chain that has been squeezed hardest by price competition in the wealth management market. BT has played its part in this process.In February it launched BT Wrap Advantage, a service that operates within BT's existing platforms that offers investors a fee rebate if they choose funds in a subset called the Wrap Advantage Investment Series. BT Wrap offers investors a choice of 700 funds. Sixty-six of those funds are on the Advantage list. Part of the deal to get on that list was to agree to a reduction in investment management fees of as much as 40 basis points. While groups like BT are squeezing investment management fees, the hot shot investment managers are demanding more and more for themselves. The boutique boom of the past decade has been driven by investment managers leaving institutional investment houses for small shops where they can have equity.Westpac hopes that by giving its top fund managers equity in BT Investment Management it will keep them. There is no guarantee that will happen. Some of the early boutiques, such as Perennial, have lost key staff even though they gave them equity.Sometimes the distribution of equity is not right. Sometimes it has nothing to do with the rewards; as boutiques grow their investment managers find they are doing all the marketing and client service work they left their old jobs at big institutions to avoid.A big bank like Westpac will never be an ideal home for investment managers. There will always be movement in the top ranks.BT Financial Group chief executive Rob Coombe said he was looking for an alignment of interest between company goals, employee incentives and customer needs. He reckons a listed vehicle, majority owned by the bank, will provide that alignment.Does the head of the organisation that developed BT Wrap Advantage really think he can align his interests with the investment managers he is screwing?As BT's