While IOOF’s acquisition of MLC Wealth has raised questions about how deeply vertical integration will be leveraged to take advantage of its increased scale, the group’s head of research says the team remains firmly agnostic on product.

Matt Olsen, who joined IOOF in 2018 after heading up research at Lonsec, says the group is intent on supporting its advisers and their clients, not building a distribution funnel for its own products.

“Nobody puts any pressure on me to promote an internal product,” Olsen says. “Quite the opposite; the philosophy from Renato (Mota, CEO) at the top is that any adviser, external or internal, has to live and die by the quality of their advice and what they recommend.”

Olsen will speak on conflicts in advice from a research perspective at the Professional Planner Researcher Forum Digital on December 2nd.

Since the $1.44b acquisition of MLC Wealth was announced in August, observers have queried the extent to which IOOF would use its outsized advice network to promote its proprietary products.

In his Royal Commission final report, Hayne brought up ASIC research into inhouse product usage to highlight the extent of the challenge in keeping providers honest. After noting that the proportion of inhouse products on APLs controlled by the big four banks and AMP was between 31 and 88 per cent, he said: “The result is not surprising.”

IOOF’s tremendous scale raises the stakes for consumers. In its 2020 annual report IOOF said it was making “significant progress” on its Project Evolve to consolidate its platforms, which in June administered $12.9 billion. ASIC has previously found platforms to be among the most egregious vehicles of inhouse products.

Shortly after the MLC purchase announcement, IOOF head of advice Darren Whereat denied that the group was looking to broaden its distribution base, saying the group’s open architecture model allows for an even spread of products and platforms.

“If you look at the flows of the organisation you’ll see that the vast majority are not going to inhouse products,” Whereat told Professional Planner.

Olson agrees, adding that the allocation between internal and external products isn’t even discussed at IOOF.

“We’re completely agnostic,” he says. “On my side there is not one skerrick of pressure to put an internal product in a model or anything like that.”

Externals rating internals

Olsen says the IOOF research team has a robust process to ensure its internal products are rated objectively. The group’s products are all rates by external teams, he explains, to avoid any perceived or actual conflict.

“My advice research team within IOOF will use an external research house for the products IOOF manufacture,” he says. “We don’t rate them ourselves because there’s a conflict of interest there.”

The group uses a spread of ratings agencies including Mercer, Zenith, Lonsec and SQM Research. “We don’t rely on just one,” he adds.

The topic of conflicts in the funds rating model will be debated during the session featuring Olsen, T Rowe Price’s Casandra Crowe and Zenith’s Bronwen Moncrieff at the Digital Researcher Forum.

Olsen says an important part of this dynamic is IOOF’s responsibility to keep track of the research houses rating their products and make sure their processes are up to scratch.

“If we are relying on a research house rating then we also have to research that research house and make sure it’s robust, and we do that periodically as well as part of our process,” he says. “At the end of the day our advisers are relying on that external research and it’s our obligation under RG179 to provide it.”

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]
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