Although I draw no conclusions beyond ‘this is interesting,’ at IFL the price has gone down since it stated the intention to divest .
Here is the five day price picture:
Australian Ethical, which has about $3 billion under management, says it has decided to dump its stake in troubled wealth group IOOF and also put other finance sector players on notice that it would review them after Royal Commissioner Kenneth Hayne hands down his final report in a fortnight.
The fund manager’s head of ethics, Stuart Palmer, said a management committee, of which he is a member, decided to sell Australian Ethical’s $8.8 million stake in IOOF last week.
“The key factor leading us to sell our holding in IOOF is that the company has failed over a long period, a period of years, to put in place governance arrangements and conflict management arrangements and processes that are acceptable to the regulator, to APRA, to ensure the interests of superannuation members are met,” he said.
The decision follows Australian Ethical’s decision last April to divest from AMP following revelations at the banking royal commission about it deliberately charging customers fees for services they did not receive that have since crippled the veteran wealth group’s share price.
It comes as ANZ yesterday confirmed The Australian’s report last week that it had delayed the transfer of its pensions business, which has about 700,000 super customers, to IOOF.
The decision was made despite close links between Australian Ethical and IOOF that include IOOF’s significant stake in Australian Ethical and the presence of an IOOF executive on the fund manager’s board.
Dr Palmer said it took longer for Australian Ethical to decide to divest from IOOF, which was savaged at royal commission hearings in August, than it did to divest from AMP, which it dumped in May following damning testimony in April, because of differences in the evidence before the inquiry.
“There were some key undisputed facts about what AMP had done wrong, charging people incorrectly, decisions made by very senior management to continue doing that in the face of protests from staff, AMP staff — that was uncontested,” he said.
In IOOF’s case, “there were a number of aspects of that which were the subject of serious dispute between what was being put by the royal commission and what IOOF was prepared to accept”.
Other factors included significant differences between the positions of IOOF and super regulator, the Australian Prudential Regulation Authority, together with the regulator’s decision not to pursue the company over its alleged breaches, he said.
He said Australian Ethical planned to wait for Mr Hayne’s final report, which is to be handed to government on February 1, before deciding whether to divest from IOOF and other finance sector companies hit by “seriously concerning cases” raised at the commission.
But unprecedented legal action taken by APRA last month to ban top IOOF brass, including chief executive Chris Kelaher and chairman George Venardos, from the superannuation industry, prompted a fresh look at the company.
“That brought us back to say, okay, let’s not just wait until the royal commission report, let’s look at those actions, think about their significance, look at the information that APRA has provided to the court.”
He said Australian Ethical asked IOOF for more information before the Christmas break and its ethical advisory group — Dr Palmer, chief investment officer David Macri and chief executive officer Phillip Vernon — returned to work last week. “We crunched all that and we’ve made a decision that we will be divesting from IOOF.”
He said Australian Ethical plans to sell down the IOOF stake, part of Australian Ethical’s diversified shares fund, in a way that does not disadvantage investors, rather than dumping it on the market all at once.
IOOF is among finance stocks that have already taken a severe beating from the royal commission, with shares in the wealth manager tumbling more than 45 per cent over the past year to close yesterday at $5.56.
Dr Palmer said the divestment decision was one made by management, not Australian Ethical’s board, where IOOF group general manager of corporate development Julie Orr serves as an independent non-executive director. IOOF is also Australian Ethical’s biggest shareholder, holding 17.5 of the company, and Australian Ethical’s investment products are available through IOOF’s platform. “The internal decision, it’s very robust,” he said.
He said Australian Ethical acknowledged the royal commission had also aired “concerning incidents” at other finance sector players.
Decisions on what to do with its investments in big four banks Westpac and NAB — it already excludes Commonwealth Bank and ANZ — as well as second-tier players including IAG, Suncorp and QBE would be made following commissioner Hayne’s final report, he said.
Australian Ethical invested in IOOF in 2017, two years after Fairfax Media, now part of Nine, published a stinging attack on the wealth manager that raised allegations including insider trading and research plagiarism.”
BEN BUTLER BUSINESS REPORTER
Business reporter Ben Butler has covered everything from tractors to fashion to corporate collapses. He has previously worked for the Herald Sun and as a senior business reporter with The Age and Sydney Morning... Read more
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