IOOF has made its case to disgruntled shareholders around why doubling down on the institutional advice market is a key play for the future, revealing further details on how cost cutting and technology investment will help the group “grow the pie” in the advice market.
In a virtual investor presentation on Tuesday, IOOF chief advice officer Darren Whereat said the group had “prioritised our investment in assurance and governance” following its acquisition of ANZ’s advice businesses in 2018, and was running its dealer groups under a single compliance model that would scale up further after the purchase of MLC.
“You can’t run seven AFSLs seven different ways with different processes – we made the decision over that period to move to a single governance framework and we’ve achieved that,” Mr Whereat said.
“We’ve centralised our research functions, our Xplan functions, our resources in terms of CPD and the way we exit advisers out. All the infrastructure that we used to have multiple ways of doing things, we now have one way of doing things.
“We built the business to be scalable and, like we will with the [Godfrey Pembroke] community and Ten Fifty, we can bolt other advisers into our system but we still only operate one advice process.”
As speculation builds that IOOF may overtake AMP as the largest institution by adviser numbers following its acquisition of MLC, Mr Whereat said growing its licensees to 2,000 advisers was “not out of reach” for the group.
He said a key focus for IOOF’s drive to build sustainable advice businesses was profitability, with the employed adviser groups Bridges and Shadforth already operating at 30 per cent EBIT margins following a restructure that had seen self-employed advisers at Bridges transitioned to other groups.
“From 1 October we’ve been working with those people that had self-employed businesses to transition and that body of work will be finished around 31 March next year,” Mr Whereat said.
“It will mean we’ll have two owner-operated brands – Shadforth in the high-net-worth space, and a mass-market opportunity in terms of Bridges. These entities will be generating $90 million worth of recurring fees from clients, and with another 100 [authorised representatives] from MLC, we will be able to plug them into that owner operated model.”
Advisers expected to pay “fair value”
While IOOF’s share price has tumbled since the announcement of the MLC purchase in August, Mr Whereat said the restructure of the existing IOOF dealer groups in preparation for the completed acquisition had stripped $10 million of costs from the group’s advice arm.
He added that the group was raising fees across its self-employed licensees and that advisers in these dealer groups were likely to see further fee hikes as IOOF worked towards making them self-sustaining.
“The reality is we’ve opened up those conversations with our advisers and there’s recognition that they will be paying more for the services they get from us,” Mr Whereat said.
“The lazy way is to say ‘you need to pay x dollars more’, but we’re making sure we’re an efficient partner so when we go back and ask for more money, we are crystal clear on how we’re running our business, so that partnership model is where we’re going to exchange fair value.”
Mr Whereat said the group’s investment in its proprietary software Wealth Central was also expected to add significant value, with initial testing of new processes implemented through the platform indicating significant time savings for advisers, which it was hoped would lower costs and attract more consumers to advice overall.
“In one of our AFSLs we estimate there is 1.5 hours per review being saved through these enhanced processes,” he said.
“We have seven AFSLs and with the approval of the regulators we will add GPL, Ten Fifty and the MLC advisers, so just in one channel we believe we will save 2,000 business days in efficiencies. This is about taking out inefficient processes and making advice more affordable, and we believe by doing that we can grow the pie for advice.”
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