IOOF has confirmed that the termination of its platform relationship with BT cost $8.1 billion.
In a quarterly update delivered to the Australian Securities Exchange (ASX) today IOOF pointed to a decline in funds under management and advice of $0.4 billion, noting that an uplift of $12.7 billion had been offset by the $8.1 billion from the termination of the BT relationship together with $1.5 billion from the liquidation of IOOF’s Cash management Fund and a $0.4 billion one-off transfer from the Cash Management Trust.
IOOF’s funds under management, advice and administration (FUMA) was down $0.4 billion to $202.4 billion for the quarter to 31 December 2020.
IOOF chief executive, Renato Mota also pointed to progress with respect to the company’s Advice 2.0 strategy.
We have seen practices with $363 million in funds under advice choose to become self-licensed and continue to utilise services under the IOOF Group. We have also seen 22 advisers with $869 million in funds under advice transition from IOOF licences due to various reasons including some practices that we don’t view as economically sustainable under our future advice model.
“The financial impact of the total $1.3 billion advice outflows is not material,” he said.
“Building an advice model that is sustainable in its own right, without economic subsidisation and allowing for ongoing investment in technology and processes is critical in ensuring that financial advice is more affordable and available to more Australians.”
Mota noted that the financial advice segment was also impacted by the termination of IOOF’s relationship agreement with BT which was announced to the market on 18 December 2020.
“IOOF received a one-off settlement of $80 million pre-tax in January 2021 which takes into consideration amounts owed in recognition of IOOF’s rights under the agreement. This agreement represented funds under advice of $18.8 billion as at 30 November, 2020, more than half of which has been retained in IOOF’s FUMA total:
- $8.1 billion transferred to BT and removed from IOOF’s FUMA total. This outflow relates to the value of the funds under advice with non-IOOF licensed advisers who utilised the open architecture arrangement between IOOF and BT; and
- $10.7 billion retained in IOOF’s FUMA total from advisers licensed by IOOF that utilised IOOF’s open architecture arrangement with BT and remain as funds under advice.”
