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.
Comments
in other words, IOOF says most of our ARs are self employed so loss of commissions doesn't affect us and its the Advisers problem..wow, what an insight. I bet their ARs are impressed with that.
So the article did not elaborate of why there remediation costs were modest? With so many ARs, in would have been interesting to hear what one did right.
In their result they mention they will be spending an extra $30m on compliance and previous advice review... The issues are yet to be 'identified'.... Probably because they have never actually looked.
Bear, as an AR of one of IOOF's AFSLs, I can assure that we are receiving a lot of support from our AFSLs in relation to moving clients from commission remuneration to fees for service. In fact, this process commenced years ago. There is nothing in this article which suggests IOOF has thrown it's ARs under the bus.
thats interesting then considering this IOOF quote "Advisers will need to consider the impact on their business including its remuneration structure and valuations, if not so already,” the company said. Plus the need for "Adviser to consider their value proposition..." etc. I wonder why they didnt say they were working on it for years rather than state its something most IOOF Advisers now need to consider.
Throw your ARs under the bus. Must be an outstanding place. I guess the $3.4m are the grandfathered commissions that sit as orphan clients not allocated to advisers and they use the unallocated/unserviced commissions for the play. It will be amazing to see how many unallocated/orphan house accounts are held at the dealer level and not at the adviser level and the amount os unallocated commissions either held in a holding or suspense account.
Go Figure,
IOOF and it's AFSLs do not offer BOLR arrangements which were typical at AMP and resulted in orphan clients. As such, to the best of my knowledge, IOOF doesn't have any orphan clients. ARs develop their own business succession plans to ensure their clients continue to receive the services they are entitled to.
We are self employed and self motivated advisers who happen to have chosen a particular licensee where we pay a dealer cut to ensure that we are compliant and receive back office support.. We are not IOOF's advisers. We have a business arrangement that does not always involve recommending IOOF's products. The RC recommendations, if implemented, will have an impact on our cash flows but the fixed fees we pay to our licencees remain unchanged.
The financial impact is born by the self employed financial planner, which is a travesty because there will be no incentive to ongoing service of policy holders if certain trail fees are banned. Renato Motta is correct in stating that the economic impact on IOOF is minimal but the impact will be felt on the valuation and cash flows of our businesses. We do not work on piecemeal and rely on ongoing fees and trails as our reporting, documentation and disclosure is unlike any other industry. I have been in this industry for 38 years and have a MFP CFP DFP, and I can assure everybody that many of the recommendations recommended by the RC are unreasonable and have already caused a negative impact on our practices. The fallout from the RC has been largely created by the senior executive employees who have not been as vigilant as they should have been. They're still receiving the same salaries and bonuses regardless. We self employed financial planners pay our own way and I am personally so exhausted having to the wear the brunt of corporate oversights. I am also tired of media attack dogs constantly undermining our industry.
Like devils advocate, I am an MFP, CP, DFP too, only 22 years in the industry. I too am sick and tired of the media, Hayne, the Regulators, The Govt & the Dealer Groups bashing us due to the inadequacies of the Regulator & Govt. If the Regulator had done their job correctly for years, we would not be in this position now. AMP, Macquarie, Banks etc do the wrong thing, we will slap you with a wet lettuce leaf via an Enforceable Undertaking, minimal fine and away we go again. You can take me out to lunch, no problems! Next time there is an issue, we will slap another EU on you and we will be right again. Us Planners have had many changes to processes and procedures over the years due to these EU's, there the Corporates think we can continue doing what we want as the penalty is minimal and we will still make mega bonuses etc. Why can't we as a Profession, sue the arse off the regulators as they are ones who have and will further, impact the Planners bottom line. We (well, most of us) work in the client's best interests, that is why we are still here. Why should we be punished for the inadequacies of the Regulators and Corporates??????????
I'm with you Educated Planner. Forty years industry experience, not one complaint or court case ever made against me. Lot's of thank-you messages and small gifts of appreciation from grateful clients. Government and Regulators need to get rid of me though because I don't have a university degree. From early on in my career I thirsted for education, completing my ANZIIF Diploma in Life Insurance before I was 26 years old, then the DFP when it became available. I'm too busy (thanks, it's largely the compliance regime) looking after my clients and too old and tired to go back to study. Forty years of sharing in the joys and stresses and grief of my clients, supporting them, is worthless.
Rant over, for today, but I do understand that IOOF (and I am a self employed AR of their's) has to be honest as a publicly listed company and disclose numbers. If their remediation costs are low, it is probably because most of it's ARs are self employed business people just like me, without sales targets or bonuses to meet. We only want to build and retain our businesses based upon honest advice to clients with whom we build long-term relationships.
Ban commission on risk products and those who most need it will not pay a fee for service. Those that are prepared to pay fees for advice are largely the ones that use a business bank account to pay bills. That excludes a huge proportion of Australia's population.
There a very few things planners can control but one we can control is who we are aligned with and who are business partners are. When you select a product manufacturer like IOOF as a licensee as a business partner it's like a Doctor aligning him/herself with a Cigarette company. You have problems with the RC because of your business partner and linking your business to their business model of FUM/FUM and even more AUM. Being an adviser for 20 years I have ZERO issues with the RC and have a RC bullet proof business.
Have you been audited by ASIC? Unless you have your bullet proof office is a biased opinion. Ithink it’s more a case of you weren’t swept up because ASIC and the RC targeted the big boys.
It will be interesting whether IOOF as the self-acclaimed ‘advice led’ business continues to show profitability and growth in light of post RC world.
My understanding it is one of the few AFSLs which has showed profit. Contrast to AMP or the big banks that used to be in wealth management, what is IOOF doing that the rest of its conpetitors haven’t been able to do?
Still, I want to see full year earnings report and see whether IOOF model is a beacon for AFSLs turning a profit
IOOF controls a big stable of advisers whose clients erroneously believe are independent, because they operate under brand names like "Shadforths" and "Bridges" and "Lonsdale". Most clients do NOT read disclosures. They take far more notice of brands.
Fortunately for IOOF, and unfortunately for consumers, Hayne did nothing to stop this. His idiot idea of yet another disclosure document will just further reduce the tiny proportion of clients who bother to read them.
Bjol, your comments are libellous. Unlike other vertically integrated firms, IOOF, via its various AFSLs, provides wide APLs and multiple platform options. There is no incentive to recommend an IOOF product and many ARs don't recommend any IOOF products at all. Please ensure your comments are accurate before posting.
Mr sensitive, bet my house anyone who interviewed your client base would find they had no idea how licensing worked. Your ignorant or lying. As for the multiple platforms.. wow. You should sue for libel.
bjol, my clients do understand that I am not independent. I explain this to them every time I give them that I give them my Financial Services Guide. My total client count with IOOF products is three people - all of whom became clients through an Employer provided IOOF superannuation plan that I recommended to their employer in the mid 1990s, long before I was authorised through IOOF.
Because you give them a fsg they don’t read? Pretty sure you don’t say, Or write, I’m not independent anywhere. You need to soon though. Furthermore, you have no IOOF or badges products. So you’re a free loader giving nothing to the provider of your license. Why bother with you? Get your own license.
My FSG makes it clear that I am not independent. My insurance advice, including all claims assistance is charged by commissions as a percentage of premiums paid, so I can never describe myself as independent. It is not important to me. I act in my client’s best interests, first & foremost, since long before this became legislated.My Licensee receives fees from me, so I am not a freeloader. My Practice is profitable for IOOF because of those fees. Your argument is invalid.
Beat, seems your argument ran out of legs.
Not really. There is no profit in running a DG. So paying fees just ensures they break even. The DG simply provides you protection. This is a big part of the problem. Again, I stand by the fact no one reads the FSG, and again I am sure your clients don’t understand how licensing works. Money management should survey the public, 90% wouldn’t have a clue, nor do they care.
Agree with you mate. Beat's argument has run out of legs. My Practice has had files reviewed as part of a random ASIC check prior to IOOF purchasing the Licensee from ANZ. No issues. Beat doesn't want to even try and understand that self-employed advisers don't have sales targets with bonuses to be paid if met. We want long term solid client relationships built on trust, as without that we have nothing. Behaving professionally, we have those relationships. That means we have a good business where we enjoy coming to work, sleep well at nights and so do our clients. I'm not commenting on this thread any further and unticking so I don't get any more notifications. Beat seems to have a chip on his shoulder from somewhere. I won't cause him any more angst.
The angst will be yours when comms are removed and clients don’t want to pay for insurance advice.
They havent been forward moving in implementing any changes in advance. Other aligned financial planning firms abolished grandfathered commissions in advice and did all this remediation and compliance work starting years ago... IOOF have said they will be holding onto grandfathered commissions as long as they can (even if only small % of rev) and they are only just making allocations to improve compliance/review existing advice in more detail... I think their profitability will start to trend in the same direction as everyone else's from here as the RC recommendations become mandated.
Self employed advisers are going to become largely a thing of the padt, other than for the very rich. IOOF and the product manufacturers are going to have to employ advisers and pay us a wage and bonus (based on FUM or insurance under advice but not called a commission) to sell their products as the vast majority of clients will not pay an upfront or ongoing fee from their bank account to get independent advice.
These providers don’t know what they are doing by throwing us under the bus. We are your distribution network. If we don’t get paid to distribute then your products don’t get sold and everyone ends up with an industry fund and junk insurance which won’t pay out.
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