The group reported its half-year results on Wednesday morning, revealing its underlying net profit after tax (UNPAT) had grown by 17 per cent in the first half of the 2021 financial year, to $65.9 million.
IOOF closed the first half with total funds under management, administration and advice (FUMA) of $202.4 billion, up by 39 per cent, despite negative moments of $10 billion during the six months, including $8.1 billion being shed from the terminated BT arrangement.
The IOOF share price spiked upon the news, reaching a peak of $3.49 after sitting at $3.24 on Tuesday afternoon.
However, a different story appeared across segments.
The advice business copped the largest fall in profit during the half, with its UNPAT down by 33 per cent to $17.8 million, while the portfolio and estate administration business felt a 23.1 per cent drop to $24.7 million. The investment management business saw its profit decline by 18.1 per cent to $16 million.
IOOF completed its acquisition of the ex-ANZ Pensions & Investments (P&I) business in January, gaining an UNPAT from the segment of $32.5 million during the six months to December.
For chief executive Renato Mota, the primary focus is achieving the group’s ambitions for growth moving forward.
“From a segment and a business perspective, we’re actually in the process of creating quite a lot of change to our business to make sure we’re actually positioned for growth going forward,” Mr Mota told InvestorDaily.
“So certainly our expectations going forward is each of our segments has a strong base to build from, but importantly has a strong path towards growth.”
IOOF has targeted growth through its acquisitions, overhauling its advice model, reducing its platform offerings down to one proprietary platform and investing in technology.
Scale is key to the group’s strategy, as its competitiveness will come down to having the lowest cost to serve, Mr Mota said.
“The importance of scale means that you can lower the cost. If you can lower the cost of service, maybe your product can be priced more competitively,” the CEO commented.
“I think that’s a really important aspect of delivering outcomes to members.”
The group envisions itself among the top-tier of mega superannuation funds in the coming years, managing around $500 billion. Currently it looks after around $200 billion.
As highlighted last year, the MLC acquisition is expected to double IOOF’s total number of clients to 2.2 million, boost its FUMA to $510.4 billion and more than triple its advisers to 1,884 – assuming all MLC advisers transition over. The transaction is expected to wrap up in June.
However, various MLC advisers have since moved across to other groups. Mr Mota commented IOOF is still expecting to rehome “the vast majority”, but declined to specify numbers.
“We won’t really know until they actually come across and the plan is for them is to come across at completion and not before completion,” he stated.
“So if you like, the process of them expressing interest, us doing our due diligence on those advisers, making sure they’re appropriate quality and standard. And when we complete the transaction with NAB and MLC, they will be transitioned across.”
IOOF commenced its Advice 2.0 transformation strategy in September, when it flagged a restructuring of its licensees.
The self-employed segment is expected to drop up to 140 advisers, Mr Mota confirmed, as the group seeks to make the advice business more sustainable. IOOF has not specified the number of practices that will be affected, but as the CEO noted, they are “more likely” to be smaller practices, which may struggle without product subsidisation.
Mr Mota also indicated support for the incoming Your Future, Your Super reforms, commenting the legislation would force greater engagement from consumers.
“Having people more engaged with their super, having them able to make more informed decisions and active decisions around where they want super to be, I think it’s a really great opportunity,” he said.
“It’s a great opportunity for organisations to engage more directly with consumers and members. Whereas in the past, the model has been quite intermediated, either through employer and workplace arrangements, or through financial adviser – those two pillars of our industry I think are still quite important, but to be able to engage more actively, directly is a real benefit.
“I think it’ll be interesting to see how different players adopt and adapt their business model to the new environment.”
Sarah Simpkins
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
