IOOF acting chief executive Renato Mota

IOOF’s ability to retain 670 former ANZ-licensed advisers will be key in softening the reputational damage the group suffered in recent months, according to a Morningstar research note.

A “disastrous” appearance at the Hayne royal commission led to the Australian Prudential Regulation Authority disqualifying, among others, IOOF managing director Chris Kelaher and chairman George Venardos. Subsequent to APRA’s action – which saw the share price plunge from $7.17 to 4.28 over three days in December – IOOF’s former head of wealth Renato Mota was appointed acting chief executive.

“At a minimum, we would expect it to materially hurt the company’s reputation, making it harder to attract advisers and fund its products,” the report stated. “Some of this may be softened if it is to retain most of circa 670 advisers formerly aligned to ANZ Bank”.

The disqualification of its leaders and the spectre of “more proactive regulation” contributed to a “very high uncertainty rating”, according to the researcher.

Morningstar noted that IOOF has “strong brand recognition” and a track record of being able to maintain and attract advisers, while their institutional competitors have struggled.

“The most recent example of this is that almost 50 advisers have recently moved over from National Australia Bank’s Meritum Financial Group to become IOOF-aligned advisers,” the report stated.

The researcher also says IOOF has the edge over competitors due to its distributional reach and brand recognition. Further, advisers within the group would face challenges leaving due to “switching costs, both monetary and non-monetary”.

Leaning in

IOOF is leaning into the task of retaining the ANZ advisers by accelerating its investment in governance – which will include spending $20 million to $30 million on an advice review program – and trying harder to understand the self-employed advice model, according to the company’s recent half year results announcement.

IOOF’s advice arm is split into salaried high-net-worth advisers under existing licensees Shadforth and Ord Minnett on one side, and a mix of existing IOOF and ex-ANZ self-employed licensees on the other. These include Consultum, Bridges and Lonsdale from IOOF and Millenium3, Bridges, FSP and RI Advice from ANZ.

Work is already underway to mesh the existing IOOF advice brands with the new ANZ affiliates. In January IOOF announced a restructure to bring the two divisions together and the company is advertising for a new head of advice delivery and governance to oversee “100 staff who provide services to over 1,700 financial advisers around Australia”.

Cultural fit will be key in the union, a challenge exacerbated by the different education levels of the groups being brought together.

The importance of the affiliated licensees coming together and shoring up the IOOF brand is underscored by Morningstar’s prediction that the mooted sale of ANZ’s One Path Pensions and Investments will not go through, with the trustee of P&I likely to conclude the transfer is not in the best interests of members.

“We expect this part of the deal will not complete,” the report stated.

Positive indicators

IOOF announced the $1 billion deal to acquire ANZ’s P&I business and aligned dealer groups in late 2017, but the transfer of advisers to the new group didn’t gain traction until the latter half of 2018, according to one source.

IOOF’s advice business was responsible for 40 per cent of the group earnings in 2018 – a number which would increase if the roughly 670 ANZ advisers remain with the existing 1000 under the brand’s banner.

The Morningstar note pointed to several positive indicators for the advice business, including its ability to scale and an open architecture platform that “allows some IOOF advisers to originate investment products shelved on third party platforms”.

However, the researcher also warned that IOOF’s future as the second largest licensee owner in the country – and potentially the biggest, depending on AMP’s fortunes – will hinge on its ability to make the ANZ transfer work out.

“IOOF’s success depends heavily on its ability to foster a strong relationship with its financial advisers, dealer groups, and its asset managers, as well as their respective clients,” the report stated.


Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.
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