Morningstar’s analysis also revealed it expects more proactive regulation of the dealer group by ASIC and APRA, leading to higher compliance costs and reducing the competitive advantage of its distributional reach gained from its extensive network of advisers.
However, it also noted IOOF’s open architecture model on its platform business has enabled it to attract new advisers, especially compared with the big four banks and AMP. Further, the model allows some of IOOF’s advisers to recommend investments on third-party platforms.
“IOOF has entered into arrangements with third-party platform providers such as Colonial First State, Macquarie Group and others, where IOOF earns part of their administration fee for funds originated by IOOF’s advisers,” Morningstar said.
“These platform fees are lower than if the funds had flowed into IOOF’s Pursuit platform, but the operating costs for administering these funds are also lower.
“We also believe the firm’s open architecture model could be part of the reason it has attracted new advisers unlike competitors such as large major banks and AMP who have been losing them.
“However, we believe its disastrous royal commission appearance may make it difficult to attract advisers in the future.”
IOOF likely to complete ANZ P&I acquisition
IOOF will successfully complete its proposed acquisition of ANZ’s pension and investment (P&I) business after it has been boosted by approvals for the transaction from both the big four bank and the trustee of the P&I funds, a new analysis finds.
The transaction is likely to cost IOOF around $125 million less than initially expected, subject to future completion adjustments, Morningstar said.
“The lower price drives a modest 4 per cent increase in IOOF’s fair value estimate to $7.30 per share. At the current price, the stock screens as fairly valued,” it said.
Further, Morningstar expects earnings from the P&I business to be the key driver of IOOF’s underlying net profit after tax (NPAT) growing by about 25 per cent to $213 million in fiscal year 2021 from $171 million in fiscal year 2020.
“This is based on our forecast that the P&I acquisition will complete by 31 December 2019,” it said.
“The P&I business is the profitable part of the businesses IOOF is proposing to acquire from ANZ Bank.
“Based on ANZ Bank’s most recent update on the P&I business on 1 May, we estimate the P&I business is currently generating $96 million underlying NPAT.”
Why is it that mid tier and small AFSL’s whom are white labelling the two young gun platforms, including a margin for themselves, then building managed accounts, including adding a margin for themselves doesn’t receive any scrutiny?
[quote=Non Conflicted Adviser]Every single platform on the IOOF APL is either an internal platform or an external platform that “shares” the admin fee with IOOF (and this relationship isn’t even disclosed to their clients in their SOA’s). Who says IOOF has conflicts?? [/quote][quote=Non Conflicted Adviser]Every single platform on the IOOF APL is either an internal platform or an external platform that “shares” the admin fee with IOOF (and this relationship isn’t even disclosed to their clients in their SOA’s). Who says IOOF has conflicts?? [/quote]
Seems like you are in the know here. Please tell me exactly which ones don’t show it in there SOA’s or any advice documents
IOOF will pull an amp on its advisers soon.
and in the meantime the focus is on the individual planner, must disclose all conflicts must be up to date with CPD etc. and this is going on right under the regulators nose!! What a joke
How about we just let clients be adults ? They can buy houses, cars, get credit cards, personal loans etc etc all of their own free will and guess what in all of those transactions someone is making money !!!!
Clients are capable of making a range of financial decisions in which others profit in some way shape or form.Why when it comes to financial advice does the system feel that these adults need their free will to be managed in a Nanny State Manner ?
How about we stop making all problems lead to the advisers failing BID which they can do by using products and give the clients some responsibility for their own decisions made with disclosure and eyes open.
Client free will anyone ?
It’s the very definition of conflicted payments! And none of this was picked up by the Royal Commission. And with all the brand names that sit under the parent company, most clients wouldn’t even be aware they’re being SOLD products that benefit IOOF. And of course, employed advisers are not allowed to recommend anything that is not on the APL.
[quote=Non Conflicted Adviser]Every single platform on the IOOF APL is either an internal platform or an external platform that “shares” the admin fee with IOOF (and this relationship isn’t even disclosed to their clients in their SOA’s). Who says IOOF has conflicts?? [/quote][quote=Non Conflicted Adviser]Every single platform on the IOOF APL is either an internal platform or an external platform that “shares” the admin fee with IOOF (and this relationship isn’t even disclosed to their clients in their SOA’s). Who says IOOF has conflicts?? [/quote]
Re: industry funds, has anyone bothered to add up the total fees as per RG97 requirements?
That is Admin Costs + ICR + Investment Fees + Implicit Transactional Costs etc etc
You will find that in several cases we are looking at 1.20-1.40% pa for a ‘Balanced’ fund.
Not so cheap!!!
The disclosure settings should be equalised all platforms and funds. Much too confusing atm.
Every single platform on the IOOF APL is either an internal platform or an external platform that “shares” the admin fee with IOOF (and this relationship isn’t even disclosed to their clients in their SOA’s). Who says IOOF has conflicts??
“…….. where IOOF earns part of their administration fee for funds originated by IOOF’s advisers,” Morningstar said.”
And there lies another example of why people view the advice industry in a bad light. And does the adviser also get some share of IOOF’s take? Yet again the existing system is shown to be defective.
While the big banks are pulling out of advice, no such withdrawal is occurring among the advice firms that are owned by or service the Union Super Funds.
Cleverly flying under the Haynes RC radar, these “no commission” Union funds instead collectively charge all of the union super fund members advice fees out the admin fee, to pay for their sales force of approx 1000 tied agents. These fund members are being charged (on a per account basis) for “general”financial advice that most of these super fund members will never receive.
Worse still, those fund members cannot even “opt out” of what is effectively a new form of compulsory advice fee collection (which looks remarkably like compulsory union dues, in a different form). “intra-Fund Advice” is even a bigger scam than what the Union funds & Haynes accused the AMP of doing. This racket must end.
“IOOF has entered into arrangements with third-party platform providers such as Colonial First State, Macquarie Group and others, where IOOF earns part of their administration fees for funds originated by IOOF’s advisers,” Morningstar said.
My understanding is the above statement outlines conflicted remuneration due to IOOF allowing their advisers to recommend investment platforms that pay a commission back to the licensee.