IOOF’s profit plummeted 39 per cent from the previous year at their half-year result. But Morningstar blamed the loss on the acquisition of the ANZ pensions and investment (P&I) business and said that it will soon bounce back.
“The first-half fiscal 2020 result is an anomaly and doesn’t reflect the group’s earnings power from acquiring the P&I,” Morningstar said in a note.
“The biggest contributor to the reduction in UNPAT is from the lower interest earned on an $800 million debt note (2 per cent interest compared with the previous 14.4 per cent), which was part of the terms of the P&I agreement.”
Morningstar expects that the P&I business will swell IOOF’s funds under management and administration (FUMA) 50 per cent to about $220 billion. IOOF has also enjoyed continuing net cash inflows when compared with competitors like AMP, who are experiencing substantial outflows, and the business continues to attract advisers.
“Profit improvements are also expected to be generated by making its adviser network of 1,443 salaried and aligned advisers economically viable as stand-alone businesses,” Morningstar wrote.
“A key to this strategy is increasing the number of salaried advisers. Aligned adviser groups will also be required to pay higher fees for IOOF’s administrative services.”
And while the revelations of the royal commission could prompt more class actions and further investigations by regulators, the business has co-operated with APRA and ASIC, which have indicated that they don’t plan to take any further action against IOOF off the back of royal commission referrals.
“Heightened regulatory scrutiny made cost reductions difficult,” Morningstar wrote.
“Although we expect ongoing regulatory scrutiny, the intensity should reduce from the first-half fiscal 2020, as all APRA conditions have now been met.”
However, APRA is also seeking licence condition changes and ASIC is proposing to embed officers within IOOF. Morningstar also slapped a ‘poor’ stewardship rating on the business for the unprecedented action APRA took in seeking to disqualify five of IOOF’s leadership team from being a responsible officer of a superannuation trustee.
How does the growing number of IOOF advisers meet their FASEA and BID requirements if they are being “required” to recommend expensive IOOF platforms?
It’s interesting that IOOF themselves like to report a headline FUM number that includes funds under “advice”. This has the clear implication that they regard funds currently under advice by their aligned advisers with competitor platforms, as an intangible asset under IOOF’s control that will be progressively switched to IOOF products.
Morning star has no idea about investigations going on IOOF, and the wealth leadership cover up and misleading updates. Smoke and mirrors. Nothing more.
Isn’t it time Anonymous that these people are brought to justice given the multiple breaches of corps act and cover ups
It sets a great example to everyone that BEAR regime is BS and ASIC are frightened of them
Would love to see the emails and lack of remediation at a special RC
IOOF’s adviser businesses are breaking even. Presumably before remediation costs. Where is the profit coming from?
Yes …. of course Morningstar would put a positive spin on IOOF’s results ….. the bulk of IOOF’s research comes from Morningstar and they are probably their biggest client …… nothing like a good back scratch !!
Or conflict of interest.