IOOF CEO (left) with the group's chief financial officer.

IOOF will look to grow its salaried advice network and convert authorised representatives from elsewhere in its business into its salaried brands, the listed wealth manager’s CEO, Renato Mota, has described.

As part of IOOF’s so called “reinvention of advice”, Mota pointed to a new style of salaried advice model which he said could contribute better margins to the boarder business and better outcomes to the community at-large.

“We are talking about a very different business type from bank salaried advisers,” Mota said, when asked to describe the kind of advice offering IOOF planned to invest in. His comments were made during an analyst call as part of the group’s full year results announcement on Monday; shares in IOOF were trading down 6.25 per cent late in the day of the results announcement.

Mota described a private practice advisory business which is “corporatised in nature” and which is capable of contributing an EBIT margins of up to 50 per cent.

The group includes Bridges and Bendigo Financial Planning on its investor presentation under its salaried advice brands. Consultum, Lonsdale and Shadforth are some of the other prominent brands within the IOOF network which ranks second largest in the country by adviser numbers.

Mota said IOOF would provide more detail on the group’s plans to invest in advice during an investor briefing later this year, but he added that existing buyer of last resort (BoLR) arrangements would be used to convert existing IOOF businesses into the group’s salaried networks.

“There is an increasing need for advice succession in the businesses we already own,” Mota noted. “The BoLR [agreements] are opportunities to convert authorised reps to salaried advisers,” he said.

Mota and IOOF’s CFO David Coulter were quick to point out the difference between IOOF’s BoLR agreements and other agreements in the marketplace during the Q&A component of the announcement. Coulter noted that if an agreement can’t be reached between IOOF and an exiting adviser or practice owners, an independent valuer is called in, ensuring terms are always pegged to current market valuations.

Contrasting with the past

The top-line takeaway from the IOOF result was the company’s $223 million provision for advice remediation, an amount the group arrived at based on a sample investigation of 67 advisers. The investigation encapsulated the advice of 788 advisers and was based on client files dating back to the start of 2015.

The advice remediation as well as the sale of brokerage firm Ord Minnett for $115 million in June featured in the 3.4 per cent increase in underlying NPAT to $198 million for the 12 month period.

Mota took the opportunity during the results announcement to contrast IOOF’s decision to invest in advice with the banks’ collective retreat from owning and investing in advice; he also condemned the banks’ use of advice networks to sell products.

“I believe history will suggest that our large banking institutions have created the false industry we are dealing with today and created the crisis in confidence in our advice and this is something we are committed to restoring, to ensure we have a professional and sustainable advice industry for all Australians,” he said.

“Four years ago we put a stake in the ground to be an advice led business,” Mota said.

Smith is the editor of Professional Planner’s print and digital platforms. He is an experienced financial journalist, editor and multimedia producer who has held senior editorial positions both in mainstream press and trade media.
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