IOOF yet to pay remediation
IOOF chief Renato Mota has admitted the wealth giant has not yet commenced paying back an estimated $183 million in remediation to customers.
Speaking to the House of Representatives standing committee on economics yesterday, Mr Mota noted when he became acting chief executive in December last year, the group undertook an analysis of its issues.
Around half of the company's reserve for remediation has been allocated for inappropriate advice, with the other 50 per cent being said to be for “fees for no service”.
The costs of processing and paying out refunds, included in the total remediation provision of $223 million, has been estimated to be approximately $40 million.
But IOOF is yet to repay a cent to its customers, with Mr Mota saying it is still working through its analysis, assessing advisers within the group who were likely to have problems.
“One of the things very early on in my time as acting CEO was, we wanted to get to the bottom of this issue for our business,” Mr Mota said.
“We undertook an analysis, using similar methodology to the large banks, which typically starts with key risk indicators where you get a whole bunch of data across a whole bunch of metrics for your advisers.
“You assess those, you identify high risk advisers, even do sampling around that. And that came up with a quantum. You then extrapolate that across the broader population.”
He added the group alerted the market it is doing “further analysis” around the assessment it has already completed, before it starts giving refunds.
Labor MP Daniel Mulino challenged Mr Mota, saying the process has been “not fast”.
But the IOOF boss defended the group, saying relative to the major banks, the group “started lighter” and completing its analysis within six months has been “relatively swift”.
IOOF has used two external consultants to evaluate its issues, with the first being engaged in February and the second coming on in the last few months.
Mr Mota told the committee the group has also allocated around 250 staff to work on remediation and governance matters, more than a tenth of its total workforce of 2,000 employees.
“We had very small capabilities, but I would say we created it from scratch because I think we wanted to apply a different lens on remediation,” Mr Mota said.
“Not only did we create a new team, we lifted the standard as well. I think one of the challenges for us is, as an organisation, we have 2,000 employees. We've probably got in excess of 250 currently working on governance and remediation related matters, so it’s in excess of 10 per cent of our workforce.
“There is a limit as to how much we can expand quickly. We've chosen to rely on third parties and we've actually separated – we’ve used two third parties, one for the investigations, one for the remediation to ensure we minimise conflicts. And I think that's the best way for us to scale up quickly.”
Speaking on the method, Mr Mota said IOOF will be evaluating advisers and their operations. The remediation process, which looks at past issues, does not relate to complaints, with IOOF receiving an estimated 275 claims about its advisers annually.
It is unclear how many cases constitute the group’s total remediation.
“There’re a process where you collect the available data to make an assessment,” he said.
“And then you make an assessment, if it is a one-off incident, if it is systemic. If it's systemic, you dig further and go through the entire advisers’ business.”
Mr Mota has been the official chief since June.
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