IOOF CEO Renato Mota added a stunning footnote to the group’s purchase of NAB’s MLC Wealth business, announcing the group will only retain the Godfrey Pembroke brand as part of the deal and will ask the 400-odd advisers licensed by Garvan, Apogee and Meritum to come over to IOOF’s own brands.
This comes after NAB officially retired the three MLC brands in May and announced the formation of the TenFifty Financial Group, which was in the process of corralling advisers from the three brands into a cleaner and leaner model under new CEO Brendan Johnson.
On a shareholder call Monday morning Mota said the decision to excise the brands was about “de-risking the transaction from a remediation obligation perspective”.
“We are not acquiring the MLC advice licensees,” Mota said. “The AFSLs that the current advisers operate under and currently have the remediation obligations associated with them are not coming as part of the transaction.”
For advisers working under the MLC group umbrella – other than the ones at Godfrey Pembroke –the choice will be to either migrate to an IOOF brand or find a way out of the largest wealth management business owner in the country.
“We are acquiring the advice business by way of an asset purchase, so the systems and processes and technologies, the people, will all come across to IOOF and the advisers will all be joining the IOOF licensees,” Mota said.
It is unclear whether IOOF could have taken on the three MLC brands that were being folded into TenFifty and written remediation protections into the contractual arrangements. It is likely IOOF’s desire to simplify the business played a role in the decision to leave the brands behind.
Mota did not mention TenFifty, leaving the fate of the newly minted licensee unknown.
The move to consolidate brands is consistent with the outlook IOOF advice head Darren Whereat outlined in May, when he said the group wants to operate with several different licensee models because it lets them cover different segments of the advice market.
Models upended
The MLC transaction comes with a raft of internal changes at IOOF as the group tries to simplify its offerings and drift towards more salaried adviser models.
Roughly 150 advisers at Financial Services Partners (FSP) will be given the opportunity to join other licensees within IOOF after the licensee is closed down, which Mota said is for “a number of reasons”.
“It sits at the smaller end,” he said, before adding that the group’s offering “sits in-between some of the other value propositions”.
The few remaining self-employed Bridges advisers will be asked to come under the salaried umbrella, though it’s understood most of those 180 or so licensed advisers have already made this transition.
Of the four other self-employed IOOF brands, Mota said they will be broken down into two business support models that are either specialised in insurance (such as Lonsdale or Millenium 3) or holistic advice (like RI Advice). “It’s a multi-brand strategy with specialist skills,” Mota said.
The transition to a more salaried advice network is no surprise after Mota indicated this time last year during his ‘reinvention of advice’ results call that the group was looking to veer away from self-employed models.
Hand in glove
The numbers in the MLC deal are staggering, and while it may not be the ‘hand in glove” deal Mota described the scale it achieves will be profound.
IOOF will become the largest retail wealth manager by funds under administration with $510 billion and the largest advice business with an estimated 1884 advisers, taking over from the beleaguered AMP in both categories.
IOOF report that it will also become the country’s second biggest superannuation provider, ahead of AustralianSuper and behind only the merged QSuper/Sunsuper fund(s). The MLC acquisition will definitely position IOOF in the ‘mega fund’ pack, however more recent numbers suggest AustralianSuper is still the second biggest fund.
While noting that the group isn’t trying to “get big for big’s sake”, Mota did boast of $150 million in synergies by 2023/24.
The CEO pointed to the IOOF’s success in integrating ANZ wealth management cohort into its fold over the last 18 months and explained that the group was now processing one intertwined migration, rather than two separate ones.
“Much of the integration processes and systems exist already because of ANZ,” he said. “The infrastructure, framework and knowledge are already there.”
Some of the synergies Mota speaks to may be more difficult than others.
For example, while it will become the second biggest platform provider in the country this will be spread across IOOF’s Pursuit, P&I and Employer Super platforms, as well as MLC’s own legacy Wrap, MasterKey and Plum platforms. This may not sit well with a group aiming to simplify and consolidate.
Retaining and migrating MLC advisers will be another challenge, as advisers within the MLC brands were in outflow and some that remain may see the transition as an opportunity to reassess their AFSL representative.
