Australia’s two largest financial advice providers, AMP and IOOF, face heightened business risks as a result of the royal commission, according to a Bell Potter equities analyst.
In an email to investors seen by ifa, analyst Lafitani Sotiriou explained that these two companies are out of sync with the major “structural shift” in the wealth management industry.
Last week, ifa exclusively reported that NSW Nationals senator John ‘Wacka’ Williams – who was influential over the government’s decision to hold a royal commission into banking, superannuation and financial services – is confident that vertical integration will be a priority for the inquiry, despite not appearing explicitly in the draft terms of reference.
Referencing the ifa article specifically, Mr Sotiriou said the senator’s comments should raise eyebrows in the AMP and IOOF boardrooms.
“Make no mistake, if there is an issue for banks owning advice, so too will there be an issue for [IOOF] and AMP the other two fully-integrated wealth models in the market,” he wrote.
“We reiterate our view to avoid AMP and [IOOF]. Not only is there a structural shift towards independence, it now may be accelerated by the royal commission.”
Given the royal commission and groundswell towards independence, the analyst said ANZ may have timed the sale of its dealer group business to IOOF “perfectly”.
“[IOOF] has taken on significant risk with this purchase,” he wrote. “Not only will they have to wait a year to get the asset (I am unaware of any other acquisition where they had to wait a year to extract the business – [which] gives you an indication of where the technology is at), the price [IOOF] paid was too high, and now the fully-integrated model which it pursues is under risk.”
AMP also faces the risk of “intense scrutiny” since it has a “much higher portion of its own products distributed via its network, Mr Sotiriou suggested.
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