Mike Taylor writes that seven years after AMP Limited acquired AXA Asia Pacific, IOOF has moved from bit-player to dominant non-institutional wealth organisation.
Few people were surprised when, shortly after ANZ announced it was looking at options to exit its wealth businesses, IOOF’s managing director, Christopher Kelaher was indicating his firm’s interest.
On Tuesday last week, both ANZ and IOOF confirmed to the Australian Securities Exchange (ASX) that IOOF had emerged as the successful bidder for ANZ’s OnePath pensions and investments business plus the aligned dealer groups – Millennium3, RI Advice, Elders Financial Planning and Financial Services Partners.
What the ASX announcement did not say about the transaction between ANZ and IOOF but what is revealed by Money Management’s Top 100 Dealer Groups research is that Kelaher now runs what amounts to Australia’s largest non-institutional financial planning business, given that AMP Limited has always been counted among the major banks as being an institutional player.
When the ANZ dealer groups are counted alongside IOOF’s existing Lonsdale, Bridges, Consultum and Shadforth dealer group brands it equates to a presence to rival that of AMP Limited and in excess of that managed by the Commonwealth Bank and Westpac/BT.
Perhaps just as importantly for IOOF and Kelaher, the transaction with ANZ involves a 20-year strategic alliance, the upside of which will see the business gain some significant distribution benefits via ANZ’s retail banking footprint across Australia.
The bottom line, however, is that in the space of a decade IOOF via both strategic acquisitions and organic growth has emerged to sit alongside AMP Limited as the biggest non-bank providers of wealth management products and services. Taken together, the two companies arguably dominate the market.
IOOF has come a long way since it emerged as a bit player in the 2010 bitter struggle around the acquisition of AXA Asia-Pacific which was originally looking likely to fall into the hands of National Australia Bank (NAB) but which was ultimately acquired by AMP Limited after the intervention of the Australian Competition and Consumer Commission (ACCC).
In 2010, IOOF stood to gain what NAB was prepared to discard – the North Platform now being successfully run by AMP.
Ten years later, NAB has lowered its exposure to wealth via the sale of 80 per cent of insurance business to Nippon Life and only the Commonwealth Bank/Colonial First State and Westpac/BT remain fully in wealth management, albeit that the Commonwealth Bank recently sold CommInsure to AIA Australia and ANZ is clearly hoping to find a major foreign life company willing to buy its insurance business once the dust has settled on the IOOF transaction.
Commenting on the ANZ transaction last week, Kelaher pointed to the significant scale it had delivered to his company, noting that the transaction positioned IOOF as the second largest advice business in Australia by funds under advice and by adviser numbers.
“This increase in scale provides opportunity to eliminate duplicate back office functions and realise scale benefits,” he said. “IOOF has estimated run rate pre-tax cost synergies from the proposed acquisition to be $65 million per annum from FY2021, which is approximately 11 per cent of the combined cost base of IOOF and ANZ Wealth Management.
“As a specialist advice-led wealth manager, IOOF is highly experienced in the management of advisory networks with a unique advice led proposition offering open architecture and additional services such as our IOOF Advice Academy. We look forward to expanding these capabilities across ANZ’s Aligned Dealer Groups.”
Those who have watched IOOF and Kelaher undertake previous acquisitions will recognise the strategy he is about to follow and not least the pressure the company is likely to exert on competitors as it looks to extract the maximum bang from its acquisition buck.
Kelaher flagged this intention when he said the alignment of ANZ products and IOOF products “provides substantial opportunity for improved pricing and product features for our advisers and clients.”
He also noted that ANZ had been proactive in transitioning its platform products away from higher fee legacy products towards digital distribution.
“This means that earnings have already reset and the business is now efficiently positioned for future growth,” Kelaher said.