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Shares in financial advisory firm IOOF (ASX: IFL) plunged 8 per cent this morning after the company reported a 68 per cent drop in profit due to a hefty sum set aside for remediation to customers.
IOOF's relatively new CEO Renato Mota (pictured) notes underlying net profit after tax was up 3.4 per cent at $198 million in FY19, however the statutory figure dropped by more than two thirds to $28.6 million.
This was explained by a $182.7 million remediation cost provision following a review into more than 1,200 files revealing incidences of fees for no service, inadequate documentation and inappropriate advice.
This is a significant increase on the $12.1 million in remediations undertaken in FY19, and will have an associated program cost of $40.4 million.
"In one of the most challenging years for our company and for the industry, we have focused on the imperatives of stabilising the business, with a view to delivering better outcomes for our clients and our shareholders," says Mota.
"The strength and diversity of our business saw us continue to attract flows in a challenging environment with our platforms gaining $1.4 billion in net flows, in an environment where flows for the retail industry have contracted.
"We also attracted $520 million in net inflows through the advice channel."
In addition, total funds under management, administration and advice (FUMA) increased by 19 per cent to $149.5 billion and Mota emphasises all Australia Prudential Regulation Authority (APRA) licence conditions have been met.
"The Board has taken a prudent view on capital management as we stabilise the business and begin our strategy of 'transforming with purpose' so we are future fit and in a position to take advantage of the market opportunities we see ahead," he says.
Shortly after Mota took the helm, IOOF sold its 70 per cent stake in private wealth manager Ord Minnett for a sale price of $115 million.
"This was a timely opportunity to divest our holding in Ord Minnett as we transform our business and focus on our core wealth management business," he says.
"We have completed the integration of the ANZ Advice Licensees into our business and are continuing to work towards completion of the ANZ P&I acquisition."
IOOF has also seen a $16.1 billion contribution in FUMA from ex ANZ Advice Licensees.
The new CEO has also been reviewing the senior management team, leading to the appointment of Amanda Noble as chief risk officer as well as two new independent non-executive directors to the board and an independent non-executive director to IOOF's APRA regulated subsidiary boards.
"Today I am delighted to announce the appointment of Melissa Walls as our new Chief People Officer," says Mota.
"Melissa's deep industry experience and people management acumen will greatly benefit the company and the executive management team as we accelerate the cultural change process."
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