In a quarterly update, IOOF chief executive Renato Mota declared that due to COVID impacts on business outcomes and returns for shareholders, the wealth group’s top staff would be seeing lighter pay packets.
Mr Mota and chairman Allan Griffiths will have their base pay reduced by a fifth for six months from August, while the group’s directors and its chief financial officer will take a 10 per cent decrease in base pay.
No discretionary short-term bonuses will be paid to the executive team for the year to 30 June, which Mr Mota said was “appropriate” given the context.
IOOF has forecast an underlying net profit after tax (UNPAT) from continuing operations of $123-$125 million for the full year, a 33 per cent drop from the previous year’s result, as the pandemic-induced volatility across financial markets takes effect.
Substantial early super withdrawals and client concern leading to outflows were also cited for the shaved profit expectations.
For the five months IOOF has owned its recently acquired Pensions & Investments business (P&I) from ANZ, it expects a total contribution of $25 million to the group’s UNPAT – an “adversely impacted” result due to the market decline.
But despite copping millions of dollars in outflows across segments during the last quarter, in the fourth quarter of financial year 2020, IOOF saw its funds under management, advice and administration (FUMA) surpass the $2 billion mark. The group’s FUMA grew to $202.3 billion, up by $6.7 billion from the previous quarter and $76.5 billion year-on-year.
The early super scheme had weighed on inflows during the June quarter. IOOF has paid out around $743 million across 99,174 requests, the bulk of which came from the P&I business, which covered $573 million of the withdrawals.
Meanwhile, the investment management division recorded $51 million in net outflows for the quarter, a smaller loss compared to the year before with $181 million in net outflows.
Financial advice posted $93 million in net outflows for the quarter, as 14 advice practices were offboarded, resulting in $270 million in outflows. Inflows into the business were flat.
The portfolio and estate administration segment had managed $398 million in net inflows, excluding withdrawals from early super.
Mr Mota reported the contemporary IOOF Essential, eXpand and Shadforth Portfolio Service products grew in popularity with advisers, contributing to the segment’s inflows for the quarter.
Further, the P&I business saw $183 million in net outflows during the quarter, excluding early super.
Mr Mota said the acquisition has contributed to the group’s resilience and will be important in its post-COVID-19 recovery, for long-term earnings.
He added the impacts of coronavirus are still being felt.
“Our advisers are seeing first-hand client concern and uncertainty around macro-economic conditions,” Mr Mota said.
“This client sentiment is particularly apparent through withdrawals associated with the early release of superannuation scheme and subdued flows in financial advice.”
IOOF is due to release its full-year results on 31 August.
You shouldn’t look to Allan Griffiths for moral leadership.