The secret to IOOF weathering the recommendations of the Royal Commission appears in large measure to be owed to the high proportion of self-employed advisers working under its dealer group brands.
IOOF describes it as “the self-employed advice model”.
The company’s relatively modest estimate of client remediation costs and exposure to the loss of grandfathered commissions is owed to the fact that it has 1,379 self-employed advisers working within its Financial Services Partners, RI Advice, Millennium3, Bridges, Lonsdale and Consultum dealer groups and just 176 salaried advisers working within Shadforth.
Thus, the company estimates the total net impact of grandfathered commissions received in the first half of the current financial year as being $3.4 million, while it has described the financial impact on IOOF of an end to life/risk commissions as being “not financially material”.
Describing its approach to the recommendations flowing from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry IOOF told investors that situation with respect to grandfathered commissions was very much in the hands of advisers.
“Advisers will need to consider the impact on their business including its remuneration structure and valuations, if not so already,” the company said. “There is potential contention around the date to end grandfathered commissions if Labor is election – it’s unlikely to be brought forward to any earlier than 1 July, 2020.”
On the question of life risk insurance commissions, IOOF said advisers would need to “consider their value proposition for insurance advice and how this would fit into a fee-only world in three years’ time”.
“This will also affect advice business valuations," it said.