Pinnacle positive on the outlook for advice post-QAR

Pinnacle Investment Management has outlined a promising outlook for advice in its half-year results, with positive momentum expected following the Quality of Advice Review (QAR).

The firm indicated that its retail distribution team has continued to expand its distribution reach despite the uncertainties and headwinds challenging the advice market in recent times.

More than 10,298 advisers were reported to be actively investing with Pinnacle affiliates across major platforms as of 30 November 2022, up from 10,017 advisers at the end of 2021.

“There are some early signs that the secular headwinds in recent years leading to higher adviser exodus from the industry and higher adviser switching are stabilising,” Pinnacle said.

“With the recent completion of Treasury’s Quality of Advice Review and the recommendations to further simplify, streamline and in some cases remove the regulatory burden imposed on advisers should deliver positive momentum over the medium to long term.”

Pinnacle noted that its aggregate affiliates funds under management (FUM) fell 1 per cent compared to the previous half, sitting at $83.2 billion as of the end of December 2022.

Total net outflows of $1.5 billion were recorded for the half-year, including domestic institutional net outflows of $2.5 billion, domestic retail net inflows of $0.3 billion, and offshore net inflows of $0.7 billion, while market movements and investment performance contributed $1 billion.

“We observed domestic investors accumulating cash holdings in the absence of compelling expected returns for risk assets and continuing rebalancing away from public equities, both Australian and global,” said Pinnacle chair Alan Watson.

“Although, it was notable that within this trend, positive inflows into private credit and alternative asset classes continued. We believe we remain well positioned to prosper when market sentiment improves.”

Pinnacle’s net profit after tax was down 24 per cent versus the prior corresponding period (pcp) to $30.5 million. Affiliates generated performance fees which contributed only $0.9 million to the firm’s profit, down from $6.4 million in the pcp.

“Several strategies which had the potential to produce performance fees during the half-year outperformed their benchmarks but earned nil or lower performance fees as they entered the period behind the relevant high-water marks,” said Mr Watson.

“In some cases, style-related performance below benchmark was the reason performance fees have not been earned. Shareholders will be aware that performance relative to benchmarks can vary significantly over even quite short periods of time.”

The firm has declared a full-franked interim dividend of 15.6 cents per share, down 11 per cent on the pcp, which will be payable to shareholders on 17 March.

“Pinnacle has an excellent platform in place to continue to prosper — driven by growth within existing affiliates, incubating new affiliates and strategies, domestically and offshore, as well as careful acquisitive growth into new asset classes and markets,” Mr Watson commented.

“Both within the affiliates and Pinnacle, a consistent pattern of investment remains, designed to drive high return strategic growth over the medium term, creating additional capacity, nothing that this moderates profits in the short term.”

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.