IOOF hit with $2bn in outflows on adviser exits

IOOF grew its funds under management and advice by $1.5bn in the March quarter despite outflows topping $2bn as dozens of advisers exited the wealth manager.

IOOF chief executive Renato Mota. Picture: Stuart McEvoy.

IOOF grew its funds under management and advice by $1.5bn in the March quarter despite outflows topping $2bn as dozens of advisers exited the wealth manager.

Funds under management, advice and administration hit $203.9bn by the end of March, boosted by positive market movements which more than offset the $2.1bn that flowed out of its advice arm along with 53 advisers.

“We continue to deliver on the transformative agenda for the business. The strength, scale and economic diversity of our business model has supported this solid quarter and increase in funds under management and advice,” IOOF CEO Renato Mota said.

The 53 advisers left for “various reasons including practices that we believe will not be economically sustainable under our future advice model,” he added. More adviser exits are expected in the coming months.

Inflows of $700m from new self-employed advisers joining IOOF licensees and organic inflows helped to offset the funds flowing out.

Mr Mota in February said there was “tremendous opportunity” for the financial advice industry in the post-COVID environment, but cautioned that the sector must reinvent itself to stamp out old, outdated practices that don’t serve clients’ best interests.

This was the driving force behind its Advice 2.0 transformation program, with IOOF previously flagging around 140 adviser exits as it strives for a more sustainable model with higher standards.

“We flagged in February this year an expected reduction in adviser numbers and during the quarter, we rationalised arrangements with practices that were considered unsustainable,” Mr Mota said.

In investment management, the wealth manager was hit with $507m in net outflows. This included $469m that flowed out due to AET cash product simplification.

Outflows in the pensions and investments business, meanwhile, ramped up in the quarter, hitting $782m by the end of March. IOOF acquired the P&I business from ANZ in January 2020 for $825m and is exploring ways to stem the outflows.

“IOOF are in advanced stages of strategic activities to address the competitiveness and outflows within some of the acquired P&I products. Further details will be provided at our full year results in August 2021,” Mr Mota said.

Its portfolio and estate administration arm gained $267m in net inflows over the quarter.

Providing an update on the $1.4bn acquisition of NAB’s MLC wealth business, Mr Mota said it was on track to be completed by June 30.

“MLC will deliver a step change in our scale and reach and will provide substantial benefits to our clients, members and ultimately our shareholders,” he said.

IOOF earlier this week said it would take remedial action to address deficiencies identified as a result of an ASIC surveillance of two of its financial advice licensees: Bridges Financial Services and RI Advice.

ASIC found that 15 per cent of advice provided to clients at Bridges and 17 per cent of RI Advice “contained indications of some potential client detriment”.