Insignia Financial has unleashed a bold strategy to win back shareholder confidence in the company with cost reductions and AI at the heart of a new vision for the business, particularly to help boost efficiency and revenue for advice.
Insignia presented its FY26 to FY30 strategy plan to investors this week with the top-level goal to target $200 million per annum worth of cost savings to become the “most efficient” wealth management company.
“It’s a pretty simple plan,” CEO Scott Hartley tells Professional Planner.
Hartley took charge of Insignia in March, replacing Renato Mota who struggled to materialistically turnaround the company’s share price in his five-year tenure that oversaw the aftermath of the Hayne royal commission.
Insignia stock was valued over $10 in 2017, dropping to under $4.33 by the end of 2018. The share price was $3.29 before the market opened on Wednesday morning – before the investor strategy presentation was released – and is $3.11 at close of business on Thursday.
Hartley’s tenure hasn’t got off to an easy start, posting a $185.3 million loss due to transformation/separation costs and increased remediation provisions for ANZ-acquired OnePath worth $135 million.
Although the new CEO had already announced a restructure, the organisation’s leadership pitch to investors this week was about how they will return the value of the company to its past heights.
“As you’d expect, it’s absolutely designed to do that,” Hartley says of the FY26 to FY30 strategy.
“What I said openly to investors was clearly we have suffered from all the classic, textbook dyssynergies of acquisitions. Potentially, we paid too much.”
Hartley notes it was a competitive process to win those bids, but he adds the organisation didn’t get sufficient warranties and indemnities from ANZ. “That’s cost us in terms of remediation, big time.”
He conceded the firm’s integration process was underwhelming and failed to take advantages of the scale the deals should’ve provided.
“We didn’t have a target state platform for master trust – we didn’t know what we were going to move master trust to,” Hartley says.
“All of those things add up to a lack of synergies that should have been gained from these acquisitions that weren’t. Now that’s the past – we can’t do anything about the past what we can do – what we are required to do – is to now extract the value for both our customers and our shareholders from the scale this business now has.”
Beating the clock
Insignia’s goal is for its advice channel to lift revenue per adviser from the current average of $800,000 to between $1.1 million and $1.3 million, which it aims to accomplish by increasing the number of clients from 100 to potentially 140.
Additionally, the group aims to improve cost to income from 80 per cent to under 70 per cent.
The company measured it is currently taking 20 hours over three to six months to onboard clients and produce advice and is aiming to reduce that to 10 hours with the onboarding process done in a month, with AI expected to be the key driver of those efficiency gains.
“When you first see a client and implement the advice is three to six months, that’s too long,” Hartley says.
He adds that part of that friction point can be the client, noting himself as example when joined Shadforth as a client after commencing his role at Insignia.
Insignia was left with its two salaried advice channels after it divested three of its licensees to create Rhombus Advisory, divested from Godfrey Pembroke, sold Millenium3 and closed Lonsdale.
Overall, there’s 200 employed advisers, 18,000 advised client families with $23 billion in funds under advice.
Shadforth has 110 advisers providing comprehensive advice, with an average advice fee of $10,600.
Bridges has 90 advisers providing holistic, goals-based advice to mass affluent clients with an average ongoing advice fee of $4000 and Hartley identified uplifting advice fees to the industry median – which he identified as being around $5000 – as the target.
Too much information
While AI is the key to driving efficiency gains in the advice process, confidence in the new technology has varied in the industry – some compliance experts have suggested a conservative approach to AI or not using it all, while ASIC has warned some licensees might not be doing enough governance of the growing technology.
However, Hartley is confident that Insignia has a high level of quality of systems and processes in place to execute this technological transformation.
“One of good things about Insignia when I arrived was the great work they had done on robotics and AI,” Hartley says.
“We’re not starting from zero base, we’ve got a bunch of engineers who implement this in the business every day, particularly in the wrap business.”
To protect client data, Insignia is using a closed platform through Google to help keep everything siloed.
“You’ve got to have really good data to do AI – if we get that right we will be able to get the number of clients an adviser serves from 100 today to 140,” Hartley says.
“I should say serving clients properly. I know there’s advisers out there serving more than that but I would argue they’re probably not doing that at a high quality level.”
Hartley pointed to the roughly $30 million spent on cybersecurity protection in the last few years as well as a “pass mark” from APRA over its review of prudential standard CPS 234 for information security.
“It’s a lot of work to get our cyber and fraud capability in place,” Hartley says.
“You can never rest easy on this stuff, but we’d have to be in the top quartile in the industry around cyber.”
