IOOF CEO Renato Mota

IOOF will cull 140 self-employed advisers and finish converting its Bridges dealer group into a fully salaried network while continue trying to attract “the majority of advisers” from the MLC network according to CEO Renato Mota.

Speaking on the group’s 1H21 results call this morning, Mota made clear IOOF’s preference for its salaried, higher-margin ‘professional services’ network over its self-employed cohort, despite the impending influx of self-employed MLC planners.

“We can afford to be quite selective in who we partner with so we’ve really got a low threshold to support advisers that aren’t aligned with our services,” Mota said.

The shedding of 140 self-employed advisers – expected to take place over the next six to 12 months – is an integral part of the group’s ‘Advice 2.0’ program and essential to the sustainability of the advice proposition, he explained.

“We need to be particular about the advisers we continue to partner with,” Mota said. “Self-employed is a segment of the market that needs to be reinvented, particularly with respect to sustainability,”

There are 292 advisers across the Shadforth and Bridges dealer groups according to the slide deck released by IOOF, and 893 self-employed advisers across its Lonsdale, Millenium3, RI Advice and Consultum licensees.

The Bridges group is currently a hybrid, however, as about 50 of its advisers remain self-employed and will transition to the larger tier mid-year.

A further 361 self-licensed advisers use IOOF’s ‘Alliances’ licensee services.

Despite having only a third the numbers of advisers, the salaried network made $54 million in 1H21 while the self-employed network only raked in $14.4 million.

Adviser cohort in flux

Getting a gauge on where the respective verticals at IOOF will settle in terms of adviser numbers is tricky because the dealer groups are in flux.

The Bridges group will split on July 1 when its remaining self-employed advisers diverge into one of the other licensees.

The advisers coming over from MLC’s Godfrey Pembroke dealer group, as well as the Garvan, Apogee, and Meritum advisers previously pegged to amalgamate at the TenFifty brand, will also slot into the self-employed group, which may mean that the eventual net loss of advisers is less than 140.

This will of course depend on how many of these advisers Mota and head of advice Darren Whereat bring over to IOOF.

Despite the confusion Mota made it clear he prefers salaried advisers and wants to see increased margin out of the group’s self-employed advisers.

“Adviser numbers themselves are not an indicator of success,” said the CEO.

IOOF will evidently not take advisers on just for the sake of having the largest network in the country. While there has been a considerable ‘land grab’ amongst licensees looking to build scale in the wake of the institutions’ combined exodus from the wealth landscape, a concurrent theme has been the need for advice practices to become more streamlined.

Nowhere is this dynamic more evident than at IOOF, where the desire for growth is being weighed against an awareness that only the most efficient advice models will prevail.

Tellingly, IOOF only allocated $900,000 to its own buyer-of-last-resort agreements in 1H21 yet has earmarked $15 million to $20 million for the acquisition of exiting adviser books in 2021 and another $8 million to $12 million in 2022.

Strong market position

IOOF’s headline numbers reflect a strong position for the group, underlying net profit after tax sitting at $65.9 million for 1H21, a 17 per cent increase on the corresponding period last year.

Gross margin was up 41 per cent to about $350 million – a figure Mota called “pleasing” in light of the group’s desire for increased profitability – while shareholders were handed a second successive 11.5 cent-per-share dividend.

Funds under management for IOOF remained steady at $202.4 billion, down slightly from an average of $204.3 billion in the corresponding period, despite another $699 being withdrawn in 1H21 as part of the government’s Early Access to Superannuation program.

Platform flows took a $4.1 billion hit, largely due to the cessation of the group’s third party platform arrangements with BT.

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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