IOOF delivered a lacklustre first-half result on Friday as costs associated with the acquisition of ANZ Wealth Management licensees took their toll.
Statutory net profit for the financial services firm was down 39 per cent to $45.2 million for the six months to 31 December 2017.
However, speaking to analysts and media about the result on Friday, IOOF managing director Chris Kelaher was bullish about the company’s pivot into a “pure play” advice business.
Along with the acquisition of ANZ’s pension and investments business in December 2017, IOOF has moved away from product manufacturing with the sale the two Perennial funds management businesses to Henderson Group in late 2015.
Mr Kelaher described IOOF as an “open architecture advice-led business” with relationships with BT, Colonial First State and Macquarie.
However, IOOF retains the Perennial ‘value’ business along with a proprietary superannuation product, Pursuit.
In his analyst call, Mr Kelahar conceded that IOOF had lost 21 advisers in the past two months – five in December 2017 and 16 in January 2018.
But he stressed there had been no impact on funds under advice (FUA) by the departures.
“If you look and you drill into why [the departures] occurred, several of them were related to an accounting firm that was licensed with us, focused on SMSFs, which has moved on,” he said.
“And there were some duplication/classifications between AET and Shadforth with the number of advisers. Out of 16, that effectively accounts for 13 negative movements [in December].
“The focus for us is the maintenance of the positive trajectory of the FUA position – and that’s what you should be focusing on.”
Looking more broadly, cumulative FUA inflows have steadily increased from $500 million in December 2016 to $3.8 billion in December 2018, Mr Kelaher said.
Moreover, the acquisition of ANZ Wealth Management’s dealer groups – due to complete in October 2018 and costing IOOF $975 million, subject to ‘adjustments’ – will have a “transformational” effect on IOOF’s funds under administration, he said.
IOOF administered $37 billion in 31 December 2017, Mr Kelaher said, and that will increase to $93 billion when the ANZ transaction settles in October 2018.
“It’s truly transformational – a very exciting and a great opportunity for us,” he said.
“It’s a confirmation that we are in many respects the leading pure wealth manager in Australia.”
Bell Potter analyst Lafitani Sotiriou has recently issued a number of communications to investors warning that IOOF faces risks from the royal commission and structural shift in the industry towards independent financial advice firms and platforms.
I see the Commissioner has published information regarding the scope of the first round of public hearings. Consumer lending with case studies focused on banks. No doubt Laugh Satirical at Bell Potter will find a way of turning this into a MASSIVE RISK for IOOF…..neither a lender nor a bank
It’s always been about FUA. The provision of advice is about getting FUA, as that is profitable. Advisers are a costly compliance risk, but were necessary to get the funds in the door. I emphasize “were”.
OK. So where does that leave ‘new’ (less than 2 years experience advisers?). Should we leave? I feel like I have joined a sinking ship by joining this industry. My degree has been a mistake.
Sorry, I might be dramatizing a bit – however I think you need to find a specialist niche in the future. Advice on super and insurance will be taken over by direct/online channels. We’ll all adapt… somehow. Still heaps of baby boomers needing guidance – for now.
Gerry, with apologies to you if you truly charge fee for service based on a schedule of fees, but if not,you business is all about FUA as well. If you calculate you fees based on the holdings of your clients then your in exactly the same boat.