IOOF Holdings (ASX:IFL)

Renato Mota
Market Cap (AUD): 1.73B
Sector: Financials
Last Trade (AUD): 5.09 +0.15 (+3.04%)
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1. About

At IOOF, the Company has been helping Australians secure their financial independence for over 170 years and has grown to become a leading provider of quality financial advice, products, and services.

IOOF is one of the largest financial services group in Australia. The Company is an ASX top 100 company with $161.7 B in funds under management, administration, advice, and supervision, and it currently provides services to more than 500,000 customers around Australia.

The Company’s broad range of products and services means that its ability to provide tailored solutions to help its clients achieve their financial goals is unparalleled.

IOOF provides a range of wealth management solutions for Australians, including:

Financial Advice

The Company believes in the value of financial advice. Whether provided through the organisations it partners with or the Company’s own extensive network of financial advisors and stockbrokers, its goal is to help clients build, maintain and protect their wealth.

Platform Management and Administration

The Company offers financial advisers, their clients and hundreds of employers around Australia leading superannuation and investment administration platforms. The Company’s unique open architecture model means the Company not only offer its IOOF platforms but selective leading external platforms to ensure advisers and their clients can choose the product and service solutions that best suit their individual needs.

Investment Management

Through the Company’s investment management expertise, the Company offer a range of highly rated multi-manager solutions that add value on several fronts; those being the Company’s active management of underlying investment managers, its dynamic asset allocation and its robust risk management approach. The Company also offer a tax effective alternative to Super through its leading investment bond.

Trustee Services

The Company’s trustee business includes compensation trusts, estate planning and administration, personal trustee services, philanthropy, self-managed super fund (SMSF) solutions.

2. Business model


The Company operates the following divisions:[1]     



Revenue ($M)

% of total Revenue

% of  Net Operating Profit

Profit drivers[2]

Financial advice and distribution




  • Average funds growth has been offset by Shadforth fee mix impacts and divestments of owned advice business into owner operated dealer groups
  • The addition of advisers has brought new revenue streams into the IOOF group, albeit at a dilutive margin in percentage of average funds terms
  • Operating expenditure has been impacted by redistribution of corporate charges in the wake of significant divestments in the prior year. In particular, there has been significant re-weighting toward front line support for advisers under the IOOF Group’s Client First initiatives

Platform management and administration




  • Average funds benefited from significantly improved organic growth. Improvements in fund flows in the sector more generally, the transfer of Bridges’ clients to Pursuit and the administration of increased native title and compensation funds from the trustee segment were the key drivers of this outcome. This growth was complemented by positive investment returns
  • Net operating revenue decrease was driven primarily by lower pricing tiers for Bridges’ clients following the rationalisation of two flagship retail platforms to one and a full year of MySuper pricing on higher balance accounts
  • Significantly reduced operating expenditure resulted primarily from reduced staff numbers and technology support and license costs following platform rationalisation

Investment management




  • Net operating revenue was stable with broadly equivalent average funds and margins across both years. Other revenue was affected by PVM performance
  • Decreased operating expenditure resulted from lower allocation of IOOF Group service costs following the divestment of Perennial

Trustee services




  • Net operating revenue has increased in line with higher client numbers; in particular, an improved contribution from the compensation trust and native title trust businesses resulted from an investment in capability and service delivery
  • Reduced operating expenditure resulted from efficiencies following stronger alignment with the broader IOOF Group operating model

Corporate and other





3. Strategy


Key strategies include:[3]


Strong organic growth continues

  • 2018 saw advice net inflows of $4.4 billion, up 48%. Platform net inflows were $1.6 billion, up 34% vs FY17. These significant increases show that IOOF continues to be an attractive alternative for advisers looking to partner with a specialist advice-led group and that our focus on service excellence results in significantly increased flows
  • The Company’s adviser numbers continue to grow. At 1 October 2018, we had 1,707 salaried and licensed advisers, including 661 advisers who joined us from ANZ Aligned Dealer Groups. Company’s commitment to financial advice and our advice led strategy means it is unique in an industry which is consolidating. This unwavering dedication is leading to record levels of interest in the Group’s advice businesses. The choice open architecture provides is the major reason advisers choose to partner with IOOF


The value of financial advice

  • At IOOF, the Company believes in the value of financial advice. With its Advice Academy, the Company is committed to improving the quality of financial advice for all Australians, in addition to improving the efficiency of its delivery
  • Recently, 12 of the top 50 advisers in Barron’s inaugural survey of Australian financial advisers were IOOF employed or aligned. This was the highest number achieved by any institution and showcases that its advisers are delivering high quality financial advice and superior outcomes for their clients


Environmental, Social and Governance matters

  • IOOF is committed to ensuring Environmental, Social and Governance (ESG) practices are embedded in its culture. ESG is the Group’s responsibility to clients, shareholders and the communities in which it operates
  • IOOF Foundation has continued its work in assisting some of its most disadvantaged communities. The Foundation has now surpassed $13.5 million in total donations since its formal establishment in 2001
  • In September 2018, IOOF announced its support for the Taskforce for Climate-Related Financial Disclosure (TCFD) recommendations. The Company is proud to join over 30 other large Australian organisations in expressing support for consistent, useful information on the material financial impacts of climate-related risks and opportunities


Transformational acquisition to deliver long term value

  • In october 2017, the Company’s significant acquisition of ANZ’s Pensions & Investments businesses and Aligned Dealer Groups (ANZ Wealth Management). ANZ Wealth Management fits seamlessly with IOOFs existing advice, platform and investment management businesses - its core wealth management offerings
  • In addition to the acquisition, the Group announced it would be entering into a 20 year partnership to offer its wealth management products to ANZ’s customers. This is a transformational acquisition for IOOF in terms of the additional scale it provides
  • On 1 October 2018, IOOF obtained full legal ownership of the ANZ Aligned Dealer Groups whilst also securing 82% of the economic benefit of the Pensions & Investments business. IOOF anticipates taking full ownership of that part of ANZ’s business towards the end of March 2019.



2018 has seen a period of intense scrutiny on the financial services industry. Any changes legislated by government as a result of the Royal Commission will be beneficial to confidence and trust in Australia’s financial services sector. Ultimately this will lead to better outcomes for those Australians who place their trust and hard-earned financial resources with the Company and its competitors. IOOF’s commitment to financial advice is unwavering. The Company is different from its peers in offering a genuine choice of products and services. The Company remains committed to Its ClientFirst approach. Diligently pursuing IOOF strategy will deliver positive long-term outcomes for its advisers, their clients, and its shareholders.

4. Markets


The Company operates in markets including:[4]


Industry (Australia)

Industry Revenue (2018)

Growth Rate

Custody, Trustee and Stock Exchange Services

$15 billion

1.6% (annual 14-19)

Fund Management Services

$8 billion

3.8%(annual 13-18)

Financial Planning and Investment Advice

$5 billion

0.3% (annual 13-18)

5. Competition


Major competitors include:[5]


  • Centrepoint Alliance Ltd (ASX: CAF)
  • Magellan Financial Group Ltd (ASX: MFG)
  • Prime Financial Group Ltd (ASX: PFG)
  • Fiducian Group Ltd (ASX: FID)

6. History



IOOF originated in Melbourne, as a friendly society called the Independent Order of Odd Fellows



IOOF was the largest friendly society in Australia, with approximately 200,000 members



Demutualised and acquired Sydney-based financial services company AM Corporation



Listed on the Australian Stock Exchange (ASX)



IOOF acquired the remaining equity in Perennial Investment Partners Limited (PIPL), thereby strengthening its foothold in the funds management industry



IOOF Holdings Limited acquired both the Australian Skandia operations and Australian Wealth Management Limited



IOOF acquired the remaining shares in the financial planning business, DKN Financial Group that it did not already own



Plan B Holdings Limited, a wealth management advisory firm joined the group



IOOF acquired SFG Australia, a financial advice and end-to-end wealth management firm



Divestment of Perennial boutiques to Henderson Group plc



Group has completed the transfer of almost 40,000 client accounts and $7.1 billion from the Portfolio Service platform to newly enhanced flagship retail platform, IOOF Pursuit



IOOF to acquire ANZ’s OnePath Pensions and Investments business and Aligned Dealer Groups



ANZ’s RI Advice, M3 and FSP become part of IOOF

Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry

7. Team


Board of Directors[7]


Mr. Allan Griffiths – Acting Chairman

Ms. Jane Harvey – Independent Non-Executive Director

Ms. Elizabeth Flynn – Independent Non-Executive Director

Mr. John Selak – Independent Non-Executive Director

Mr. George Venardos – Independent Non-Executive Director *On leave


Management Team


Renato Mota – Acting CEO

Julie Orr – Group General Manager, Corporate Development

Sharam Hekmat – Chief Information Officer

Dan Farmer – Chief Investment Officer

Frank Lombardo – Group General Manager, Client, and Process

Ingrid Liepins – Group General Manager, People, and Culture

Ian Lancaster – IOOF Group Chief Risk Officer

Gary Riordan – General Counsel

David Coulter – Chief Financial Officer

Paul Vine – Company Secretary

read more

8. Financials


2018 Full Year Results Presentation


Financial Year 2017/18 (ended 30 June):[8]



Revenue ($M)

% Change

Net Operating  Profit ($M)

% Change

Financial advice and distribution





Platform management and administration





Investment management





Trustee services





Corporate and other










9. Risk


Changes in investment markets[9]

The IOOF Group derives a significant proportion of its earnings from fees and charges based on the level of FUMAS. The level of FUMAS will reflect (in addition to other factors such as the funds flowing into and out of FUMAS) the investment performance of those funds. Therefore, changes in domestic and/or global investment market conditions could lead to a decline in FUMAS, adversely impacting the amount the IOOF Group earn in fees and charges. Deterioration in investment market conditions could also lead to reduced consumer interest in the IOOF Group’s financial products and services. The principal response to this risk has been to establish comprehensive investment governance committees, policies, and procedures which are subject to continuous monitoring and oversight.



There is substantial competition for the provision of financial services in the markets in which the IOOF Group operates. A variety of market participants in specialised investment fund management, wealth advice, and corporate trustee services compete vigorously for customer investments and the provision of wealth management services. These competitive market conditions may adversely impact earnings and assets. The IOOF Group manages this risk by continuously investing in product design, stakeholder relationships, and continuous improvement initiatives.


Information technology

The IOOF Group relies heavily on information technology. Therefore, any significant or sustained failure in the IOOF Group’s core technology systems could have a materially adverse effect on operations in the short term, which in turn could undermine longer term confidence and impact the future profitability and financial position of the IOOF Group. The IOOF Group has implemented a next-generation firewall, pursues continuous improvements to protect user devices and imposes segregation of duties between technology environments. More broadly, the IOOF Group uses policies and procedures which are subject to continuous monitoring and oversight, maintains a significant complement of experienced staff and employs specialist advisers. Information technology controls are highly complementary to those employed to minimise cyber security risks.


Cyber security

There is a risk of significant failure in the IOOF Group’s operations and/or material financial loss as a result of cyber attacks. To manage this risk, the IOOF Group has followed the recommendation of ASIC and adopted the United States government’s National Institute of Standards and Technology cybersecurity framework. In doing so, the IOOF Group has implemented measures and controls that cover identification, detection, monitoring, and response in relation to cyber threats. More broadly, the IOOF Group has developed and tested its disaster recovery capability and procedures, implemented high availability infrastructure and architectures, conducted mandatory staff training which is focused on cyber risk and continually monitors systems for signs of poor performance, intrusion or interruption. Cyber security controls are highly complementary to those employed to minimise information technology risks.


Brands and reputation

The IOOF Group’s capacity to attract and retain financial advisers, employees, clients and FUMAS depends to a certain extent upon the brands and reputation of its businesses. A significant and prolonged decline in key brand value or group reputation could contribute to lower new business sales, reduced inflows of investment funds and assets, damage to client strategies and may impact adversely upon its future profitability and financial position. The IOOF Group actively monitors media and other public domain commentaries on its affairs as well as proactively promoting the value of its services, products, and community initiatives and building a customer centric culture.


Provision of investment advice

The IOOF Group’s financial advisers and authorised representatives provide advice to clients and may be exposed to litigation if this advice is judged to be incorrect or if the authorised representative otherwise becomes liable for client losses. This risk is managed by having high educational, compliance and training standards for the IOOF Group’s advisers whilst its potential financial impact is generally mitigated by taking out appropriate insurance cover.


Operational risks

Operational risk is the risk arising from the daily functioning of the IOOF Group’s businesses. The IOOF Group has specific operational exposures relevant to the industry in which we operate including exposures in connection with product disclosure statements, investment management, tax and financial advice, legal and regulatory compliance, product commitments, process error, fraud, system failure, failure of security and physical protection systems and unit pricing errors. This risk is minimised via policies and procedures which are subject to continuous monitoring and oversight. The IOOF Group maintains a significant complement of experienced staff, builds a positive culture and utilises specialist advisers to carry out such monitoring.


Conduct risk

Conduct risk is the risk of failure of the IOOF Group’s frameworks, product design or practices to prevent inappropriate, unethical or unlawful conduct (either by negligence or deliberate actions) on the part of the IOOF Group’s management, employees, contractors or representatives. The IOOF Group’s culture of honest and ethical behaviour is supported by the IOOF Code of Conduct and its Compliance Manual for Authorised Representatives, which set out the tenets of professional and personal conduct with which directors, employees, contractors, Authorised Representatives, agents and consultants are required to comply. These include promoting a healthy and safe environment, protecting private and confidential information, acting at all times within the law and acting in the best interests of the IOOF Group, its shareholders, clients, and investors. As an additional safeguard, the IOOF Group’s Whistleblower Policy protects employees from detrimental action where employees disclose, in good faith and with reasonable grounds, any unethical, illegal, fraudulent or undesirable conduct.


Credit risk

Credit risk refers to the risk that a counterparty will fail to meet its contractual obligations resulting in financial loss that arises from receivables, loans and other receivables. The IOOF Group’s counterparties generally do not have an independent credit rating. The IOOF Group assesses the credit quality of the debtor taking into account its financial position, past experience with the debtor, and other available credit risk information.


Cash flow and fair value interest rate

Interest rate risk is the risk to the IOOF Group’s earnings and capital arising from changes in market interest rates. The financial instruments held that will be impacted by interest rate risk consist of cash and cash equivalents, loans, and borrowings. Short and long-term investment mixes and loans to related entities are influenced by liquidity policy requirements. Interest rates (both charged and received) are based on market rates and are closely monitored by management. They are primarily at variable rates of interest, and will expose the IOOF Group to cash flow interest rate risk.


Liquidity risk

Liquidity risk relates to the IOOF Group having insufficient liquid assets to cover current liabilities and unforeseen expenses. The IOOF Group manages liquidity risk exposure by maintaining sufficient liquid assets and an ability to access a committed line of credit. The liquidity requirements for licensed entities in the IOOF Group are also regularly reviewed and carefully monitored in accordance with those licence requirements.


Reliance on Australian Financial Services Licence, Registrable Superannuation Entity, and other licences  

In order to provide the majority of its services in Australia, a number of the IOOF Group’s controlled entities are required to hold a number of licences, most notably AFS or RSE licences. If any of those entities fail to comply with the general obligations and conditions of its licence, this could result in the suspension or cancellation of the licence. While it is not expected to occur, a breach or loss of licences could have a material adverse effect on business and financial performance. AFS and RSE licences also require the licence holder to maintain certain levels of capital. These capital requirements may change from time to time. Earnings dilution may occur where a higher capital base is required to be held.



The IOOF Group holds insurance policies, including errors and omissions (professional indemnity) and directors’ and officers’ insurance, which are commensurate with industry standards, and adequate having regard to the Company’s business activities. These policies provide a degree of protection for the IOOF Group’s assets, liabilities, officers and employees. However, no assurance can be given that any insurance that the IOOF Group currently maintains will:

  • be available in the future on a commercially reasonable basis; or
  • provide adequate cover against claims made against or by the IOOF Group, noting that there are some risks that are uninsurable (e.g. nuclear, chemical or biological incidents) or risks where the insurance coverage is reduced (e.g. cyclone, earthquake, flood, fire).

The IOOF Group also faces risks associated with the financial strength of its insurers to meet indemnity obligations when called upon which could have an adverse effect on earnings. If the IOOF Group incurs uninsured losses or liabilities, its assets, profits, and prospects may be adversely affected.


Unit pricing errors

Systems failures or errors in unit pricing of investments are issues affecting the broader funds management industry that may result in significant financial losses and brand damage to a number of financial services organisations. A unit pricing error made by the IOOF Group or its service providers could cause financial or reputation loss. This risk is minimised via policies, procedures and contractual enforcement which are subject to continuous monitoring and oversight. The IOOF Group maintains a significant complement of experienced staff and utilises specialist service providers to maintain robust systems and accurate inputs.


Dependence on key personnel

The IOOF Group’s performance is dependent on the talents and efforts of key personnel. The IOOF Group’s continued ability to compete effectively depends on its capacity to retain and motivate existing employees as well as attract new employees. The loss of key executives or advisers could cause material disruption to operations in the short to medium term. While equity incentives of key personnel align their interests with the IOOF Group’s future performance, they do not provide a guarantee of their continued employment. The IOOF Group utilises succession planning to manage this risk.


Dependence on financial advisers

The success of the IOOF Group’s advice and platform business is highly dependent on the quality of the relationships with its financial advisers and the quality of their relationships with their clients. The IOOF Group’s ability to retain productive advisers is managed by monitoring and, where necessary, improving service levels, technological capability, suitability of product offerings and the quality and relevance of professional training.



Acquisition transactions involve inherent risks, including:

  • Accurately assessing the value, strengths, weaknesses, contingent and other liabilities and potential profitability of acquired businesses;
  • Integration risks including the risk that integration could take longer or cost more than expected or that the anticipated benefits and synergies of the integration may be less than estimated;
  • Diversion of management's attention from existing business;
  • Potential loss of key personnel and key clients;
  • Unanticipated changes in the industry or general economic conditions that affect the assumptions underlying the acquisition; and
  • Decline in the value of, and unanticipated costs, problems or liabilities associated with the acquired business. Any of these risks could result in a failure to realise the benefits anticipated to result from an acquisition of new business and could have a material adverse impact on its financial position.

Any of these risks could result in a failure to realise the benefits anticipated to result from an acquisition of new business and could have a material adverse impact on its financial position. The IOOF Group maintains a significant complement of experienced staff and holds relationships with specialist advisers to assess acquisition opportunities. This is designed to ensure the Board is fully informed of the risks and opportunities associated with any potential individual acquisition.



The IOOF Group’s need to raise additional capital in the future in order to meet its operating or financing requirements, including by way of additional borrowings or increases in the equity of any of the consolidated entity’s companies, may change over time. Future capital raisings or equity funded acquisitions may dilute the holdings of particular shareholders to the extent that such shareholders do not subscribe to additional equity, or are otherwise not invited to subscribe in additional equity. This risk will be managed by examination of relevant factors and circumstances prevailing at that time


Regulatory and legislative risk and reform

The financial services sectors in which the IOOF Group operates are subject to extensive legislation, regulation, and supervision by a number of regulatory bodies in multiple jurisdictions. The regulatory regimes governing the IOOF Group’s business activities are complex and subject to change. The impact of future regulatory and legislative change upon the IOOF Group cannot be predicted. In addition, if the amount and complexity of new regulation increases, so too may the cost of compliance and the risk of non-compliance. The IOOF Group maintains a significant complement of experienced staff and holds relationships with specialist advisers to minimise this risk.


Financial risk

The financial risk management objectives, policies and processes and the quantitative data about the exposure to risk at the reporting date, as set out in the remainder of this note, excludes the benefit funds and the controlled unit trusts. This is because the risks associated with financial instruments held by the benefit funds and controlled trusts are borne by the policyholders and members of those funds and trusts, and not the shareholders of the IOOF Group. There is no direct impact on the net profit or the equity of the IOOF Group as a consequence of changes in markets as they apply to financial instruments held by those funds and trusts at the reporting date.

Similarly, the objectives, policies, and processes for managing the risks of the IOOF Group are separate and distinct from those for the benefit funds and trusts. The funds and trusts are managed under extensive regulatory requirements, and in accordance with specific investment guidelines, risk management strategies, risk management plans, and product disclosure statements. The IOOF Group is managed under a set of separate corporate policies and review processes that are directed toward the interests of the shareholders of the IOOF Group.


Market risk

Price risk

Price risk is the risk that the fair value or future earnings of a financial instrument will fluctuate because of changes in market prices (other than from interest rate risk or currency risk, as described later). The financial instruments managed by the IOOF Group that are impacted by price risk consist of investment units held in trusts and available for sale financial assets.

The price risk associated with the units held in trusts is that the fair value of those units will fluctuate with movements in the redemption value of those units, which in turn is based on the fair value of the underlying assets held by the trusts. Available for sale financial assets are exposed to price risk as the share price fluctuates.


Currency risk

The IOOF Group is exposed to insignificant foreign exchange risk in relation to the financial instruments of its foreign activities in New Zealand and Hong Kong.


Cash flow and fair value interest rate risk

Interest rate risk is the risk to the IOOF Group’s earnings and capital arising from changes in market interest rates. The financial instruments held that are impacted by interest rate risk consist of cash, loans, and borrowings.


Credit risk

Credit risk refers to the risk that a counterparty will fail to meet its contractual obligations resulting in financial loss to the IOOF Group. Credit risk arises for the IOOF Group from cash, receivables and loans.


Statutory Fund Risk

Financial risks are monitored and controlled by selecting appropriate assets to back policy liabilities. The assets are regularly monitored by the Investment Management Committee to ensure there are no material exposures and that liability mismatching issues and other risks such as liquidity risk and credit risk are maintained within acceptable limits. The Investment Management Committee is chaired by an independent expert and its membership is drawn from appropriately skilled senior management. There are no Non-Executive Directors on this Committee.


Liquidity risk

Liquidity risk relates to the IOOF Group having insufficient liquid assets to cover current liabilities and unforeseen expenses. The IOOF Group maintains a prudent approach to managing liquidity risk exposure by maintaining sufficient liquid assets and an ability to access a committed line of credit. It is managed by continuously monitoring actual and forecast cash flows and by matching the maturity profiles of financial assets and liabilities. Temporary surplus funds are invested in highly liquid, low risk financial assets.