‘AFSLs need to stand on their own two feet’: IOOF

Last week, IOOF signalled it would be reshuffling its AFSLs under a new structure as part of its Advice 2.0 overhaul. Brands Lonsdale, Millenium3 and IOOF Alliances are now being housed in an integrated advice group, while Ri Advice and Consultum Financial Advisers are under a second category around holistic advice.

The Bridges business is converting to a salaried model, while the FSP, Executive Wealth Management and Actuate brands have been shuttered.

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IOOF chief officer of advice Darren Whereat told ifa that like others in the market, the group was examining the sustainability of its advice practices in a fluctuating sector. According to the advice lead, the IOOF vision of a sustainable advice business will be more corporatised, hold more than one authorised representative and use technology to boost client engagement and efficiency.

“Everybody is looking at sustainability if you’re the owner of an AFSL,” Mr Whereat said.

“The product subsidies of the years gone by and cross subsidisation are disappearing, or they’ve very nearly disappeared out of everybody’s P&L and therefore, the AFSL needs to stand on its own two feet without any product subsidies. We’re in support of that model and part of the changes that we’ve made is actually acknowledged that and making sure that we are structure properly and we actually are a sustainable organisation in terms of our multi-brand that we’re running in this space.

“I think it’s a good thing that AFSLs need to stand on their own two feet. That is, the proposition needs to be about advice and advice only, and I think that’s a good thing for the industry.”

He added that IOOF is in discussions with practices about their future in the industry and what they are going to do. The group reportedly has already facilitated a number of the smaller practices consolidating.

During the June quarter, two ex-ANZ aligned licensees had exited the group, taking $155 million in client money with them, while 12 smaller practices departed with $115 million.

Courting MLC advisers

IOOF has not bought the MLC licensees as part of its recent $1.4 billion acquisition of the NAB wealth group, forgoing exposure to any attached historic remediation issues or disruption to any ongoing refund programs. Mr Whereat added that the group had also made the decision as its advice segment had been set on streamlining the business.

The self-employed MLC advisers will be given the choice of transitioning over to any IOOF brand of their liking. If all of the 538 advisers were to join the company, IOOF’s number would jump to 1,884, making it the largest advice provider, ahead of AMP’s total of 1,847.

Mr Whereat commented that the group would like to home all of the advisers, but he added he wasn’t naïve, saying, “We’re not arrogant enough to think that we’re everyone’s cup of tea.”

The group’s value proposition to the MLC advisers will promise investment around technology, tools, staff and processes, as well as a monitoring supervision framework to keep them meeting compliance obligations.

“We believe that our offer is compelling, particularly around our technology … one that is working and one that’s being used by advisers at this stage and we’ll continue to invest in that over the next number of years,” Mr Whereat said.

“We think that’s going to be something that really will enhance the ability for advice to become more affordable and more accessible.

“For us it’s about making sure that we’re visible over the next period of time to the MLC advisers, including helping them understand what IOOF Advice stands for and why we believe that we can make advice more engaging and efficient for them, help them understand what our roadmap is. And we’re hoping based upon that decision and IOOF’s commitment to advice as an institution, that they’ll elect to partner with us.”

When asked about how IOOF’s size as an advice business could affect its ethos, Mr Whereat referred to the multi-brand strategy.

“How do you operate big and at scale without losing that intimacy? I just think you need to recognise that the reality is we have multiple brands that have multiple communities in it,” he said.

“So long as those brands have a value proposition and can operate at scale.”

Mr Whereat reported the feedback from IOOF advisers to the Advice 2.0 changes had been positive, particularly in response to its planned technology updates. There are no further changes to be expected from Advice 2.0, the advice chief said, with the plan now being to implement the reforms.

“We’ve been walking our advisory boards through the need for change, particularly around the AFSL sustainability, our desire for better client engagement and our ability to work with them around some tech to make them more efficient,” he said.

“We’ve been on this journey, probably for 18 months in terms of our assurance and governance program.”

The technology investments, which the group is aiming to underpin and improve adviser efficiency, he noted, will make advice more affordable and accessible. The group recently completed its acquisition of wealth management software Wealth Central, which chief executive Renato Mota had called a differentiating technology and an “important piece in the Advice 2.0 puzzle”.

“I’m very interested in technology that can enhance the client engagement process so clients are becoming much more engaged with the process and understand the trade-offs,” Mr Whereat said.