Wealth manager IOOF pays 3.5c special dividend; shares jump

The wealth manager which oversees $200bn in funds said it still expected to complete its $1.4bn acquisition of NAB’s wealth business within months.

IOOF Chief Executive Renato Mota. Picture: Stuart McEvoy

IOOF chief Renato Mota sees “tremendous opportunity” for the financial advice industry in the post-COVID environment, but has cautioned that the sector must reinvent itself to stamp out old, outdated practices that don’t serve clients’ best interests.

Providing an update on IOOF’s own transformation program, Mr Mota, who has been in the top job at the wealth manager since his predecessor, Chris Kelaher, left in disgrace following the banking royal commission, spoke of the higher governance standards rolled out across IOOF’s network, as well as the ongoing “sustainability challenge” of advice.

“We have clearly uplifted our governance standards and our expectations around the quality of advice over the past 18 months. There will be some advisers who simply won’t meet that threshold, so they’ll be asked to leave,” Mr Mota said.

“There’ll be other advisers and practices that have, in the past, been subsidised by product manufacturers. Again, economically, we want the business to stand on its own two feet, so therefore, we won’t continue those subsidies.”

IOOF is expecting to lose about 140 advisers in the coming six to 12 months as it seeks a more sustainable model with higher standards, he said.

Speaking to The Australian after handing down IOOF’s first-half results, which showed underlying net profit rose 7.4 per cent to $65.9m over the six months through December, Mr Mota described the result as “solid” and said it showed the momentum in the business.

Revenue jumped 35.1 per cent to $709.2m over the same period.

Funds under management, administration and advice, stood flat at $202.4bn on the June 30 number, despite a positive market performance by the fund manager, which was offset by one-off negative movements of $10bn.

Outflows of $1.2bn relating to the early release of super also impacted its funds under management, it said.

Funds under management of $202.4bn were 40 per cent higher than the prior corresponding period. “This is a solid result. We grew FUMA, increased underlying profit, and achieved a significant uplift in gross margin,” Mr Mota said.

“Importantly, we declared a special dividend, as well as a fully franked interim dividend, bringing the total dividend payout for the half to 11.5c per share.”

IOOF declared a 3.5c per share special dividend as well as an 8c per share interim dividend. The payout was down 50 per cent on the prior corresponding period.

Mr Mota said IOOF had always focused on returns to shareholders.

“This continues even as we invest for future growth. We have a very clear strategy for growth. It centres on scale, economic diversity, and developing end-to-end client relationships,” he said.

The wealth manager also revealed it had ramped up its remediation program, paying out $9.3m to affected customers over the six-month period. This compared with the $400,000 it paid out in the prior six months, when it first started paying refunds to its customers.

In total, IOOF expects to refund more than $200m to customers who were given poor advice or charged fees where no service was given.

It made no change to the date it expects to finalise the program, telling the market on Wednesday that it would be “substantially complete” by the end of fiscal 2022.

IOOF has in the past been accused of “dragging its feet” on paying back customers.

As it moved to repay customers affected by the fee-for-no-service scandal aired at the banking royal commission in 2018, IOOF also declared total dividends of 11.5c per share for the first half.

The wealth manager said it still expected to complete its $1.44bn acquisition of NAB’s wealth business by June 30.

Approval is yet to come from the prudential regulator.

IOOF shares finished the session up 3.3 per cent at $3.39.