IOOF looks to turnaround MLC Wealth

IOOF is looking to breakeven its recently bought MLC Wealth, which has been losing $70 million a year, by 2024.

Speaking to Money Management, IOOF chief executive, Renato Mota, said IOOF’s goal was to arrive at one business model that would support self-employed MLC advisers that was sustainable and did not rely on other subsidisation from other parts of the group over the next three years.

“We need to increase the revenue pool and we need to reduce the costs. Whilst that might sound a bit simplistic, there has been historically a lack of economic accountability because that we're used to being subsidised there's a lack of accountability around how we're using resources and making sure that those resources are translating into valuable outcomes for advisers,” Mota said.

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Mota said he expected more self-employed advisers to join IOOF due to its differentiated proposition.

“There aren't many institutional groups supporting self-employed advisers anymore. Whilst that might may not be for everyone, I still believe that a large part of the community looks to partner with a large organisation with resources, who's prepared to continue to invest and continue to help improve the way we deliver advice,” he said.

“We've attracted some, we've lost some, we do think we might lose some more as we get closer to the Financial Adviser Standards and Ethics Authority [FASEA] deadline.

“We don't expect that we'll get all our advisers to 100% passing the exam, we're at over 90% at the moment, so there might be a few still to go, but I think we're confident we can grow the business.”

Mota noted that the result of 135 advisers leaving its self-employed network during the FY21 was less than they expected (140) and was a result of some advisers looking to create their own business model, and that some advisers were not meeting or not being prepared to meet IOOF’s governance standards.

“Over the last two years, we've upgraded our audit standards and there are just certain threshold or consistency of behaviour that we felt that wasn't in line with our expectations,” he said.

Mota said IOOF had reached a point where the firm felt it was at critical mass in terms of scale and that the acquisition focus had turned into an organic growth focus that revolved around engaging with clients and building strength in its reputation.

“We've got circa 2,000 advisers making us one of the largest in the country so we don't need to get bigger for bigger sake,” he said.

“We need to make sure we've got a business model that can contribute a high quality model and grow off really a strong basis. Our focus right now is getting the model right and we're confident we will grow but we don't have an explicit number to target.”

Mota said one of the biggest barriers in running a business with over 2,000 advisers was working across three different adviser models – self-employed advisers, employed advisers, and self-licensed advisers – and how making sure each model had the support it needed.

“We've got three models with really clear on our proposition and one clear common governance structure,” he said.

“That's the thing we need to protect against is making sure that we can assure quality advice, that's a key driver for us.

“But beyond that, it's just about being really clear on how we intend to support our clients. I'm confident that we've got a really capable bunch of people, we've got clear propositions, and we've been a lot of time upgrading our governance. So, I think the foundations are in place.”

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In short, on the product side at least, No. MLC would need to offer products people WANT to use and require a substantial reduction to their bloated cost base. This would be a complete paradigm shift for an organisation that clings to an arrogant business model of yesteryear. Good luck Ronato.

“Over the last two years, we've upgraded our audit standards and there are just certain threshold or consistency of behaviour that we felt that wasn't in line with our expectations,” No Renato, they're leaving because of IOOF's arrogant, ignorant, unsupportive approach to self-employed advisers. Watch the floodgates open from October when ex-ANZ Wealth practices come off grandfathered agreements & get paid retention.

Perhaps there is an element of arrogance from IOOF. But is there also an element of unrealistic entitlement from self employed advisers? Being self employed means taking responsibility for all the core aspects of your business. For financial advisers core aspects are regulatory licensing and product selection. Taking control of these things means getting your own licence. If you're not prepared to do that, you really should be an employed adviser.

The concept of self employed advisers operating under another company's licence is like being half pregnant.

That's a terribly poor take on self-employed advisers. Considering how much of an adviser's business is outsourced, why is this any different to operating a phone system, running a managed fund, or cleaning the office?

Licensing is a necessary part of an advice business, but there's absolutely no reason it can't be outsourced in the same way paraplanning can be outsourced. Just need to ensure the business model works for that business.

The discount to the transferring MLC self employed advisers is significant, and wears off in 2 years, if they don't do well by them in that period, the drop off will be huge.

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