Wealth Market's Matt Lawler, IOOF's Darren Whereat and Clime's Rod Bristow

IOOF has rejected accusations that it has abandoned its ‘Advice 2.0’ promise to eliminate product subsidies from its licensing regime after it was revealed the new owner of MLC Wealth offered discounted licensing rates to advisers it hopes to bring across to its own licensees.

As word circulated yesterday that IOOF offered discounted rates to advisers from MLC’s TenFifty licensee brand, as well as up to $10,000 for transition expenses, criticism filtered in from licensees who believe the soon-to-be largest wealth manager in the country is diverging from a conflict-free platform.

Matt Lawler, CEO of Wealth Market, says that if the offer is funded by product subsidisation – which IOOF have had vowed to get rid of – then it has failed as an industry leader. Lawler is a long time executive in the wealth industry and held senior positions at NAB and MLC before a stint as CEO of Yellow Brick Road and GM of OneVue.

“It’s that ‘kicking the can down the road’ analogy where they want to [have a clean model] but they delay what they believe in to secure the MLC guys,” Lawler tells Professional Planner.

Even if the offer to advisers is not being funded by product subsidies, Lawler says, and IOOF is willing to run licensing at a loss in the short term to build scale, it still sends the wrong message.

“My point is that the money – whether it comes from product or anywhere – is better spent building services and technology for advisers, rather than being a sign-on fee or a grab bag,” Lawler says. “It creates a culture of advisers who have their hands out.”

Nathan Jacobsen, the chief executive of Paragem, the licensee owned by platform provider HUB24, says he also has reservations about the move.

“I understand IOOF’s decision and why they would offer support to MLC advisers after insisting they would change the license,” Jacobsen says. “But equally I’m concerned about the message it sends to the market; it reinforces a culture that exists – and is slowly disappearing – that advisers can be bought and sold.”

‘Just offering certainty’

IOOF head of advice, Darren Whereat, denies that the firm is backtracking on its promise to extricate product subsidies from its books.

“We are absolutely on track to eliminate product subsidies by the end of this year – there is no change to the objective outlined by Renato [Mota] as part of our Advice 2.0 plan.”

All IOOF is doing, Whereat argues, is offering to continue the discounted pandemic relief pricing that TenFifty had already promised its advisers. The overall licensing cost advisers coming over to IOOF will pay is roughly similar to what other licensees are offering, he notes, once insurance and software is taken into account.

“We will offer that the TenFifty advisers can simply keep what they’re paying, which is a discounted Covid relief rate, for two years. However, they’ll need to pay PI insurance and Xplan separately, so when you add it all up it’s comparable with what most licensees are charging. We won’t be running at a loss. There are no freebies, we’re just offering these advisers certainty,” Whereat says.

The actual offer to advisers is yet to be formalised, he points out, but should come through over the next week or two.

CEO of MLC prior to the sale to IOOF, Geoff Lloyd, has been absent from the public discussion since the deal was announced.

In the hands of advisers

There is a lot at stake for IOOF as it attempts to reap full value from its almost $1.5 billion acquisition of MLC Wealth.

Shortly after the deal, Whereat explained that IOOF wasn’t taking the allegiance of any MLC Wealth advisers for granted and was fully aware that many – especially the self-employed advisers – might use the IOOF transfer as a catalyst to canvass other licensee propositions.

Several mid-tier licensee owners including CountPlus – the ASX-listed network that purchased CBA’s Count Financial in June last year – have made their case to MLC advisers since the acquisition was announced.

According to Rod Bristow, the CEO of licensee Clime, which also has its own product suite and recently bought advice network Madison, IOOF’s decision to offer discounted pricing to advisers is simply part of their risk mitigation strategy. The advice part of the deal only works if IOOF get a decent quantum of advisers across the line.

Bristow says he doesn’t disagree with the view of Lawler – “the industry has to separate product and advice”, he notes – but IOOF are clearly just trying to de-risk the acquisition.

“It perhaps doesn’t look great from an advice perspective but I understand why they made the decision,” Bristow says. “The public and advisers aren’t IOOF’s only stakeholder groups.”

For Lawler and other mid-tier licensees frustrated by what they perceive to be a lack of industry leadership, the integrity of IOOF’s proposition will ultimately be decided by advisers.

“We want to deal with advisers who take the position that even if there’s money on the table, they don’t want it because it smells,” Lawler says.

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. Contact at [email protected]
2 comments on “IOOF rebuffs product subsidy accusations as licensee heads bristle”
  1. Avatar Jeremy Wright

    Idealism. The pursuit of high ideals. The representation of things in their ideal form, as against their reality.

    Most people have high ideals and a small thing called the real world, can sometimes get in the way of those lofty ideals.

    From an advisers perspective. There has never been a harder time to be an adviser and with increased demands, comes increased costs and pressures.

    It is a noble cause to preach from the pulpit, however many of those voices do not suffer from the uncertainty that advisers face.

    The pursuit of Best Interest Duty for clients, while watching revenues fall, expenses rise, plus a never ending plethora of compliance and regulation that only Lawyers and audit teams think is improving the Industry, ( It has done the exact opposite ) tends to bring it all into perspective.

    From IOOF’s perspective. They are a Business and they are out to build upon what they have.
    They understand that in order to grow, they need advisers to do that.

    It is all very well for many well paid commentators who have more job security, a fraction of the stress and NONE of the costs that advisers face, to make Utopian statements that add even more cost to advisers in what is an already difficult time.
    The current Regulatory “improvements” have turned the Financial Planning Industry inside out and has caused thousands of advisers to exit the Industry, with thousands more planning to exit next year.

    The Advised retail Life Insurance Industry has been hit harder and has rapidly declining New Business, due once again to the”improvements.”

    Fees that Licensees charge, has an impact on an Advisers profitability and a large cause of the fee increases, has come about, complying with the all the Regulatory “improvements” that has driven the Industry towards a cliff.

    IOOF and Advisers are in a similar position.

    They are both being held to ransom by the Regulatory maze that is strangling all but the Lawyers and Compliance regimes, who preach from their pulpits and watch as their collection plates are being filled, while promising salvation on the other side.

  2. Avatar Nerida Hicks

    Beware the hand that feeds you!

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