Insignia announces $135m increase in remediation provisions

In a quarterly update for the three months to 30 June, the licensee said it has 1,086 financial advisers in its network comprising 200 advisers in professional services (employed) and 866 across advice services.

The firm said numbers in the advice services channel “saw relative stability” in numbers ahead of the launch of Rhombus Advisory.

Rhombus, which comprises the Consultum, RI Advice and Tenfifty self-employed advice businesses, was successfully separated on 1 July 2024, and advisers and key management at those firms took ownership stakes. Insignia retained 37 per cent of equity but it is expected to be de-consolidated from the group in FY25.

Insignia Financial’s professional services advice businesses, Shadforth and Bridges, remain wholly owned and “the new operating model will allow improved focus on unlocking the growth potential of both businesses”, the firm said.

Funds under administration decreased by $1.4 billion driven by pension payments of $994 million and negative market movements of $585 million, partly offset by net inflows of $162 million.

Funds under management increased by $464 million to $89.4 billion driven by market movement of $437 million and $27 million in net inflows. It particularly saw strong inflows of $200 million into its MLC managed account offering.

Insignia chief executive, Scott Hartley, said: “We have seen strong progress on our FY24 strategic initiatives during the year including successful migration of MLC Wrap to Expand, and delivery of targeted cost optimisation.

“FUMA remained resilient in a quarter of mixed markets with platforms returning to net inflows following the successful wrap migration in the previous quarter. Post-migration, Expand provides the Wrap business the scale and focus to drive future growth.

Remediation provision

However, the licensee also announced its FY24 remediation provision will increase by an estimated $135 million after tax. This is driven by:

• An increase of $58 million after tax related to completed assessments for self-employed advisers which exhibited far higher failure rates than expected based on past experience. Assessments for these advisers have been completed.
• $41 million after-tax estimate for a small number of advisers where assessments are not yet finalised and will be completed internally. This assessment is based on assumptions updated for the recent Quality of Advice detriment experience.
• $23 million after tax, related to the enforceable undertaking to APRA from OnePath Custodians Pty Ltd (OPC) including client remediation, and infringement notices totalling $10.7 million, in respect of a failure to comply with APRA’s direction relating to the time taken to remediate breaches of “accrued default amounts” requirements and related alleged contraventions of “default” contributions requirements. These steps resolve APRA’s concerns in respect of these matters.
• $20 million after-tax related to historic product remediation.

Insignia Financial chief executive, Scott Hartley, said: ““Disappointingly, we have had to take up a further provision to address a significant increase in remediation for legacy quality of advice and product compliance issues. We acknowledge the impact these historic remediation programs have had on shareholders; however, it is important that clients are fully remediated.

“Importantly, we expect this is our final provision increase related to the legacy advice remediation program which is now substantially complete, and that funding the advice and product remediation increases announced today will not require a capital raise from shareholders.

“Looking forward, the operating model changes announced earlier this month will provide clear lines of accountability enhancing our focus on improved risk governance and management, driving profitable growth and enabling each of our businesses to focus on competing in their respective markets.”