IOOF offering ‘uncommercial’ terms to advisers

Sequoia Financial Group managing director Garry Crole told ifa that non-aligned licensees were struggling to match the terms being offered by IOOF to MLC advisers following the wealth giant’s purchase of the NAB-owned advice group, despite many practitioners not being keen to join another vertically aligned institution.

“We and other groups we got inundated with advisers when the announcement was first made saying they wanted to get out of institutionally owned [models], and as we talked to them about terms they were interested, but as time went on IOOF realised there was going to be massive leakage,” Mr Crole said.

“They’ve now come in with prices that are not commercial, and the only reason they can do that is because they’re subsidising it.

“The comments from advisers are that whilst they want to take the moral ground and recognise the need to not have the conflict, their end client doesn’t really care and they want their adviser to charge them as low as they possibly can, so if they can reduce their cost to the end client it makes sense.”

Assuming all advisers from MLC transition to IOOF, the acquisition would see IOOF become the largest advice provider in Australia by adviser numbers, previous ifa reporting has noted.

Mr Crole said the recent news of HUB24’s equity stake in listed advice group Easton Investments also showed that vertical integration would persist in the industry going forward, particularly as the costs of doing business for advisers continued to increase and they sought out groups able to offer lower fees.

“For those that have been in the IFA space for a long time, we have had this argument forever and whilst we talk about the moral grounds and the value and those sort of things, the reality is price rather than value sometimes wins,” he said.

“Adviser professional indemnity costs are going through the roof, there are ASIC fees that licensees are passing onto the adviser, and that all adds up.”

Mr Crole said Sequioa, which had significantly increased its adviser footprint through the acquisition of both Yellow Brick Road and Phillip Capital’s advice arms during the 2020 financial year, had further ambitious expansion plans in the years ahead.

“We hope to grow to about 1,000 advisers and we’re currently at around 400, so over the next three years we want to more than double in size,” he said.

“What we want to do is make the adviser the core of our business and have satellite offerings around the side, not around product but services. 

“We’re trying to think about the things an adviser needs to do to improve their business and where do they pay money to help them deliver a better service, whether it’s quality SMSF administration, research, clearing services, the list is endless. If we can provide all those because of our scale, either through a JV or doing it ourselves, that is our goal.”