Insignia loses 330 advisers in FY23–24

In an ASX announcement on Thursday morning, Insignia Financial declared an underlying net profit after tax (NPAT) of $216.6 million for the 2023–24 financial year, up 13.6 per cent on FY22–23.

However, the statutory result was less positive, showing a loss of $185.3 million, compared with a statutory NPAT of $51.2 million in FY22–23.

Insignia said the loss was driven primarily by the impact in FY23–24 of $257.7 million of transformation and separation costs, remediation costs and penalties of $243.1 million provided for in FY23–24, and the inclusion in FY22–23 statutory NPAT of the gain on sale of AET of $43.2 million after tax.

The strong underlying result was cause for celebration, according to chief executive Scott Hartley, noting it was underpinned by a net reduction in costs of $24 million.

“Notwithstanding the positive momentum in the underlying business, NPAT was impacted by an increase in remediation provisions, as well as strategic investments,” Hartley said.

“We acknowledge the pause in dividend payments will be disappointing for some of our shareholders, however, at this time, we must prioritise strengthening our balance sheet.

“As an organisation, we have delivered on our FY24 priorities, which have further simplified our business and reduced costs. We remain on track and committed to delivering our FY24–26 commitments and, in addition, accelerating our cost optimisation program and reviewing our Master Trust end state operating model.”

Insignia said its advice net revenue increased 0.5 per cent in FY23–24, which it attributed to strong new client growth, improved client retention within Bridges, as well as a “focus on higher value clients”.

“This net revenue growth was partially offset by divestments and non-renewal of low fee-paying clients. Operating expenses reduced by 15.8 per cent during the year due to the realisation of cost optimisation program benefits,” Insignia said.

It also noted that adviser numbers fell from 1,413 to 1,086 and the number of practices from 461 to 322 following the divestment of Millennium3, the exit of Godfrey Pembroke, closure of the Lonsdale licence and the “right sizing” of the Bridges adviser numbers.

Insignia noted that the “successful restructure of advice from loss making to EBITDA positive” was enhanced by the separation of Rhombus Advisory, “creating an innovative partnership for self-employed advisers and enhancing our focus on our wholly owned and operated advice businesses, Bridges and Shadforth”.

Group net revenue increased 0.9 per cent from $1,379.7 million in FY22–23 to $1,392.8 million in FY23–24, while operating expenses declined 2.3 per cent from $1,035.7 million in FY22–23 to $1,011.5 million in FY23–24.

“Over the last 12 months we have successfully migrated MLC Wrap to Expand, restructured our advice business, and divested non-core assets demonstrating our strong track record of execution,” Hartley said.

“We continue to simplify our business and the recently announced new operating structure will drive enhanced accountability and improve efficiency.

“Insignia Financial’s strong, scalable positions across the wealth management value chain create the opportunity to deliver long-term sustainable growth for our shareholders and improved outcomes for customers.”

As at 30 June 2024, Insignia said it had net debt of $371 million; $281 million of corporate cash and $318 million of undrawn senior debt providing capacity to fund remediation costs and strategic investments.

Advice and product remediation programs impacted cash, provisions and deferred tax assets during the year. These included $70 million of cash payments to advice clients in FY23–24 and $75 million of cash payments to product remediation clients, as well as increases in provisions for both remediation programs.