With the outlook for markets challenged, rising costs of doing business and scars of the Hayne royal commission still healing, life is tough enough for listed wealth and asset managers.
But in the case of Insignia Financial, transitioning to a new chief executive after the planned exit of Renato Mota in February could well make things worse.
That’s the conclusion reached by JPMorgan’s Asia-Pacific equity research team, who argue the company’s leadership changes present a risk to long-suffering shareholders.
“The wealth and funds management space has seen significant pressures and [Insignia Financial] is not immune,” analysts Siddarth Parameswaran, Tharan Jeyathasan and Rishi Parihar wrote in a note to clients this week. “The CEO transition won’t help and the stock faces a discount until clarity on sticking to and achieving targets can be shown.”
Nonetheless, the analysts slap an “overweight” rating on Insignia stock and suggest it is better placed than peers to take advantage of some emerging trends, such as potential new business models stemming from the Quality of Advice Review reforms.
But the pending change at the top creates some uncertainty, given there is no guarantee the unnamed successor will stick to the strategy embarked on by Mota.
For example, Mota was committed to the financial advice business – attempting to break even this financial year, but a successor could plausibly walk away from this guidance and commitment.
To Insignia’s own advisers and others urging commercial solutions to the well-documented problem of advice accessibility, it might be a shame to see an executive appointed to lead the nation’s largest advice network who was not committed to advice advocacy.
Of course, there are many others, including Insignia shareholders and some staff, who hold the opposite view – that Mota was too personally invested in advice, an unprofitable business division, at the expense of platforms or asset management, which may prove more lucrative.
They will be watching closely to see who the company appoints in a few weeks time, as is the broader industry. So, with the caveat that the following analysis is in the realm of unconfirmed market speculation, who is in the running?
Sources tell Professional Planner internal candidates are in with a strong chance, including chief operating officer Frank Lombardo and chief distribution officer Mark Oliver, representing the two merger partners of MLC and IOOF respectively.
But they face some steep competition from external candidates, especially former MLC and Perpetual CEO Geoff Lloyd, who has been touted by many as the most obvious choice given he previously ran one of the two predecessor organisations. But that assumes Lloyd, who has moved on to board life and serves as chair of advice technology firm DASH and online broker Stake among charitable and advisory roles, is up for the job, which would also most likely involve a relocation to Melbourne.
Colonial First State superannuation CEO Kelly Power, who was arguably overlooked for the top job at CFS which went to banker Clive van Horen, has also been talked about in industry circles as a potential Insignia boss, as has former AMP Australia and Sunsuper CEO Scott Hartley.
But there are, of course, no shortage of potential surprise candidates in the mix. An overseas appointment could be a possibility, as AMP infamously attempted with Italian Credit Suisse banker Francesco De Ferrari and Australian Retirement Trust is about to with New York-based career Mercer consultant and executive David Anderson.
Whomever the company chooses, they will have their work cut out restoring the company’s market value, which has declined by almost 60 per cent since the Hayne inquiry five years ago.
While the jury is out on whether Insignia will be able to make good on Mota’s promise to restore the advice business to profitability this year, JPMorgan expects funds under management to keep increasing, following an estimated 6 per cent lift in the first quarter of the financial year.
That is at least one problem off the new CEO’s plate.