IOOF ifl strategic entry point, page-15

madamswer

Happy to explain more. First - Their acquisitions included acquiring advisers. There have been retention strategies in place that ensured advisers were retained and the underlying funds and margins were retained. Eventually the advisers who benefited from the retention deals on acquisition retire or the benefit ends and advisers leave and often take clients and funds. Alternatively, to stop this, IOOF has to share more margin with the advisers. The effect is that value/profit of acquisitions in the early years following the acquisition - usually 3 to 5 years - looks very good but then declines. On top of this, the value depended on them getting value out of clipping the ticket from funds under advice becoming funds under admin as well as funds under investment as well as trustee services. The ability of all players to do this is going to reduce. The margins are also going to decline. IOOF tried to increase fees.

On the second point, while there are questions and concerning answers about how well the other major players have handled being an integrated player as a trustee/admin/investment/advice business, based on the CEO’s answers, IOOF does not seem to know there are any questions. How does a trustee sell to the IOOF business now with and look those whose interests they protect and assure them that IOOF will act with the client’s best interest?