IOOF CEO Chris Kelaher fronted an at times hostile Senate inquiry earlier this week, and mainstream media has again gone into overdrive to report on the alleged corporate corruption.
Commentators have drawn obvious comparisons between the IOOF scandal and those of other dealer groups at Commonwealth Bank, Macquarie and National Australia Bank.
Suggestions that IOOF’s research and compliance teams smothered news of internal wrongdoing dominated the focus of Senator Dastyari and his Scrutiny of Financial Advice inquiry colleagues on Tuesday.
There are a number of explanations why IOOF may have been keen to keep such events out of the public eye. With the company having pursued a highly acquisitional approach in recent years, it has grown rapidly. Perhaps it has grown too quickly for its own good?
IOOF owns seven separate companies in its advice division alone, including Bridges, Consultum, Lonsdale, Ord Minnett, Plan B, Shadforth and Western Pacific. Some industry figures have suggested to Professional Planner that such differentiation must prove challenging for a single CEO to oversee.
As an ASX-listed wealth management business, IOOF insiders may also have had a greater incentive to handle instances of misconduct internally. Listed companies are required to disclose to the market any events likely to have a material effect on its earnings/profit or share price. Given IOOF’s share price has fallen by more than 16 per cent since the current issues hit the public domain, it could be argued these matters were material and thus should have been reported.
The general public might expect a listed entity – and all the reporting and fiduciary requirements this entails – would be a safer, better run organisation than one which is privately-owned. While conflicted remuneration is being chased out of the financial planning sector, this is perhaps another aspect of conflict that has harder to eradicate.
Rounding up the rogues
News reports suggest there have been several examples of IOOF planners being moved on from its various brands without breach reports being filed. This leads on to another issue that is proving difficult for the regulator to stamp out, with rogue individuals posing a huge threat to financial planning practice owners, their licensees and their clients.
ASIC’s Financial Adviser Register is one of the regulator’s most recent efforts to stop this. When the anti-Semitic rants of adviser James Howarth hit the headlines, his AFS licensee at the time, Libertas Financial Planning, acted swiftly to terminate his authorised representative status.
However, the Financial Adviser Register showed him as an AR of Dover Financial Advisers. It later emerged Howarth had swapped to Libertas around five months earlier, though the FAR had not been updated.
One wonders how many other licensees’ records are already out of date, and whether ASIC is doing an adequate job of ensuring the accuracy of the register.
