Yesterday, ANZ announced it was selling its pension and investments business and aligned licensees to IOOF for $975 million, with a 20-year “strategic alliance” commencing between the two listed institutions. The deal will make IOOF the second-largest financial advice network by numbers and will allow it to retain its second-place position for national funds under advice (FUA).
Speaking to ifa, Steve Prendeville of Forte Asset Solutions said the deal significantly alters the Australian FUA leaderboard and may see the former friendly society take top spot in the longer term.
“[IOOF] is growing and AMP seems to be diminishing, and that obviously signals their intent, that they are acquirers,” Mr Prendeville said.
“This is probably a pretty big bite to chew, so I wouldn’t be expecting anything from them for a while, but they’ve certainly got, I would expect, that number one position in mind.”
The M&A consultant and licensee matchmaker said IOOF faced little risk in on-boarding due to the “conservative” and compliance-focused nature of ANZ’s dealer businesses, but said retaining the 1,500-plus new recruits may be challenging.
“The interesting part will be how they keep [the new advisers] if there’s no real incentives being offered,” Mr Prendeville explained. “Normally you’d expect transactions like this to have a three-year structure that maps or gets paid according to adviser or FUM retention, so that’s not evident from what little detail we have so far. Adviser retention is going to be a significant part.”
He also suggested that the businesses were “highly priced” and that it is unusual for acquirers in the current climate to pay above their own profit to earnings ratio, though added IOOF’s acquisition of Shadforth Financial Group in 2014 followed a similar pattern.
“It’s interesting that they’re buying dealers at full price when they’ve actually been devaluing their own dealerships progressively,” Mr Prendeville said.
IOOF issued a statement arguing that the transaction reflected an “attractive valuation based on earnings which already reflect legacy closed product rationalisation”.
“This acquisition cements IOOF’s position as Australia’s leading advice-led wealth manager,” said IOOF managing director Christopher Kelaher.
“ANZ Wealth Management has a natural fit with IOOF’s current business model.”
Big risk for IOOF. Surely it can’t be long before product providers like IOOF & AMP will either be completely banned from controlling advice practices, or forced to clearly brand them as “IOOF” or “AMP” and nothing else. The current farce of institutionally controlled advice businesses operating under “independent sounding” brands cannot persist.
ANZ has seen the writing on the wall and got out at the expense of some other sucker willing to play regulator roulette.
Smart move ANZ. Ditch the business with huge compliance issues and cost. Let IOOF fund the numerous litigations down the road. Financial Planning is the new feeding ground for lawyers. Try defending your best interest and know your client rules in court with a good litigator who knows what to look for. Good luck!
I’d be surprised if IOOF or any other acquirer would accept open ended liability on future claims. That is not standard practice. There would be a “line in the sand” date stipulating claims before this date are responsibility of xyz, after that date new owner.