The thing that struck me during the Q&A session was the myopic focus of the broking analysts on the current "noise" in the wealth management industry. Some of the questions concern such arcane minutiae, that I often wonder what analysts actually do with the answers they receive.
The main takeaways for me, from the Q&A session, were Management’s comments about grandfathered commissions and “fees for no service”, the non-materiality of which was unambiguously reiterated by both Chris and David.
Those, I would have thought, were the residual hard-to-quantify short-term issues [*] with a potential to impair earnings going forward and/or to trigger sizeable one-off payments (in the form of fines or remediations to customers).
[*]: They are not the only residual uncertainties, to be sure, there are also the proposed 3% fee caps and the possible break-up scenario whereby the advice business needs to be separated, but the economic impact from those is easier to quantify (and, from my own rough estimates, it is essentially already fully priced in).
The fact that, with those main issues addressed and vastly clarified, the following round of questions was focussed on things such as the wholesale fee arrangements between BT and IOOF, and whether the 82% economic interest in ANZ P&I would be paid to IOOF as an explicit function of reported ANZ earnings, did make me raise my eyebrows.
It turns out that those questions came from the only house (Bell Potter) that has an outstanding “Sell” recommendation on IOOF and a revised Price Target of 7.61$ (sic), the rationale for which must be clear only to them. Not that I would mind buying some at that price, of course (absent any earnings downgrades).
A final positive I noted, from the first part of the presentation, was CK’s comment about ANZWM’s performance having improved since the acquisition was announced.
For what it’s worth, I too have added meaningfully to my holdings since the earnings release [**].
Cheers
[**]: For completeness, as I maintain a degree of concern about the market risk inherited from the underlying FUMAS exposure, I have also scaled up my short SP500 hedging overlay accordingly (see my previous posts on the topic); within 1% of all-time highs, at a PE well above 20x, and with the Fed steadily hiking, I just can’t see that as being a value-destructive proposition on a risk-adjusted basis.
IFL Price at posting:
$8.84 Sentiment: Buy Disclosure: Held
(20min delay)
