Insignia reports profit lift for advice business, broader profit decline

Insignia Financial has reported a 22.6 per cent increase in underlying net profit tax (UNPAT) for its advice business in the half-year ended 31 December 2022 to $6.4 million.

According to Insignia, this result was driven by synergy and simplification cost savings of $16.7 million, which were partly offset by net revenue decrease of $10.5 million, mainly due to a reshape in service offering following the integration of Bridges with MLC Advice.

“Delivering an accessible, sustainable advice offering across the advice spectrum is a key priority for us. We believe technology and innovation will help drive personalisation and the ability to deliver advice across various digital channels,” said Insignia chief executive officer Renato Mota.

However, this came amid an overall 17.1 per cent fall in UNPAT reported by Insignia in its half-year results on Thursday to $94.4 million, excluding discontinued operations.

Meanwhile, the firm’s NPAT, including discontinued operations, was $45.1 million, representing an increase of 67.1 per cent compared to the first half of the previous financial year.

“It’s pleasing to see us continue to make strong progress in executing on our strategic priorities, simplifying the business, and delivering improved client outcomes,” said Mr Mota.

“Against a backdrop of market volatility driven by economic uncertainty, it’s important we continue to realise our strategic opportunities.”

Insignia saw a decline of 13.6 per cent in adviser numbers to 1,525 in the first half compared to the same period a year earlier. According to the firm, this was primarily through the loss of smaller practices in the self-employed channel that were not able to transition to the new sustainable model.

The number of practices in its network declined by an equal 13.6 per cent over the same period to 504.

The firm’s funds under management and administration (FUMA), which were impacted by negative market performance over the half, decreased by $5.5 billion or 1.9 per cent to $285.1 billion.

According to Insignia, net flows improved by $0.9 billion in its platforms business and by $0.3 billion in its asset management business.

“Notably, we saw significant improvement in net flows across the pensions and investments (P&I) and MLC platforms, particularly in the Workplace channels, recognising new business wins as a main driver,” Mr Mota said.

“Our ongoing success in winning and retaining employer clients highlights the attractiveness and competitiveness of our contemporary offerings.”

A 16.4 per cent decline in UNPAT was reported for the platforms business, which Insignia explained was driven by net revenue decrease of $47.5 million as a result of lower average FUA due to market declines and repricing.

UNPAT was also reported to have decreased in the asset management business, with an 8.4 per cent fall to $34.8 million. This was said to have been driven by a net revenue decrease of $9.0 million as a result of lower average FU balances due to market performance.

Specifically on its advice business, Mr Mota said that, as the sector enters a new phase, there will be opportunities to provide a wider range of advice to a larger number of people.

“We welcome the final report of the Quality of Advice Review. If implemented appropriately, the recommendations will help make advice more accessible and affordable for Australians,” he said.

“The integration of MLC Advice and Bridges has created a unique advice asset and opportunity to reshape the client experience, streamline the advice process, and develop an offering tailored to every life stage.”

Insignia’s board has declared a total dividend of 10.5 cents per share, franked at 50 per cent and to be paid on 3 April 2023.

This dividend represents a payout ratio of 70 per cent of UNPAT for the half-year, which is in line with the firm’s aim to pay dividends within the range of 60–90 per cent of UNPAT on an annualised basis.

“As the industry continues to be impacted by the uncertainty of macroeconomic and geopolitical conditions, Insignia Financial’s scale, diversification, and strategic focus makes us well placed to deliver sustainable outcomes for clients, members, and shareholders,” said Mr Mota.

“Our diversified business model is supported by positive long-term industry trends, providing growth opportunities as we continue to deliver on our ultimate ambition to improve the financial wellbeing of all Australians.”