The major wealth management group has reviewed its advisers and found instances of fees for no services, inadequate documentation and inappropriate advice.
IOOF posted an underlying net profit after tax (NPAT) of $198 million for FY19, up 3.4 per cent on the previous year. However, the group’s statutory NPAT was $28.6 million, down 67.7 per cent and inclusive of provision for financial advice remediation.
The ASX-listed company conducted a review of the advice given to clients that included the development of key risk indicators, a sampling of advisers and an external review of over 1,200 files. The review found incidences of fees for no service, inadequate documentation and inappropriate advice. In response, IOOF has provisioned for $182.7 million in remediation costs, inclusive of interest as well as $40.4 million in program costs. IOOF also announced that it had expensed $12.1 million in product remediation in FY19.
“We are holding ourselves to the highest standards and where there is uncertainty or ambiguity we will remediate in favour of the client,” IOOF CEO Renato Mota said.
“In one of the most challenging years for our company and for the industry, we have focused on the imperatives of stabilising the business, with a view to delivering better outcomes for our clients and our shareholders.
“The board has taken a prudent view on capital management as we stabilise the business and begin our strategy of ‘transforming with purpose’ so we are future fit and in a position to take advantage of the market opportunities we see ahead.
“As an advice-led business offering choice to clients through open architecture, we believe we are well positioned to take advantage of market opportunities as industry disruption continues, the banks exit the industry, and as client and adviser needs evolve.”
Upon his appointment as CEO and managing director in June, Mr Mota announced that he would undertake a review of the senior management team to ensure IOOF had the cultural alignment and capabilities to meet its higher organisational ambitions and expectations.
Since then, Mr Mota has announced the appointment of a new chief risk officer, Amanda Noble, with a redefined role reflecting a holistic approach to governance and risk management in support of the company’s commitment to stakeholders and the communities it serves.
The board renewal process has seen the appointment of two new independent non-executive directors to IOOF Holdings Limited and an independent non-executive director to IOOF’s APRA-regulated subsidiary boards.
“Today I am delighted to announce the appointment of Melissa Walls as our new chief people officer. Melissa’s deep industry experience and people management acumen will greatly benefit the company and the executive management team as we accelerate the cultural change process,” Mr Mota said.
Commenting on the outlook for wealth management, the CEO said exit of banks from the industry and the demand for simpler products and platforms that are more affordable and responsive to customer needs, plays to IOOF’s strengths.
“We understand the challenges of our industry and the low growth environment. However, we are placing our confidence in the power of advice and the strength of our business,” he said.
“We continue to listen to our clients, members, advisers and the communities in which we operate, in order to always look to deliver better outcomes for the benefit of all our stakeholders.”
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