Last week, IOOF announced that chief executive Chris Kelaher will step down after 10 years with the company.
IOOF also confirmed that long-serving director Allan Griffiths has been named independent chairman. Former chairman and director George Venardos is still on leave after APRA brought legal action against him and Mr Kelaher in December last year.
The company is currently being led by acting CEO Renato Mota, who has held various management positions at IOOF since 2003.
While the removal of Mr Kelaher from the top job was explained as a “mutual agreement”, it’s safe to say that the APRA action and his performance at the royal commission definitely helped.
In August, the Hayne inquiry found that IOOF and its super trustee, IIML, continually failed to understand their duties to super members and may have breached the law.
The commission also learned that in early 2018 the company placed its own interests ahead of 29,000 of its superannuation members when it decided to make fee reductions voluntary rather than automatic.
These revelations couldn’t have come at a worse time for IOOF, which was in the middle of a major deal to acquire ANZ’s One Path wealth and superannuation assets.
Two months later, on 12 October at a parliamentary committee hearing in Canberra, Victorian Labor MP Clare O’Neil was eager to find out where ANZ was up to in the sale of its wealth businesses to IOOF.
“I think IOOF has not come out very well from the royal commission. I don’t think I’m editorialising too much to say that,” she said.
The MP highlighted APRA’s concern about IOOF’s structure and governance and noted that there has been evidence presented that half of the members of IOOF’s Super Choice fund would be better off in another account and that IOOF is making an additional $8 million a year through what it calls ‘low-arbitrage risk’.
ANZ’s deputy chief executive and the head of the group’s wealth unit, Alexis George, acknowledged that she is responsible for ANZ’s superannuation customers but insisted that there is an “independent” trustee board overseeing the transaction.
That interaction took place six months ago. Since then, IOOF has done little to show that it has the capability to service ANZ’s customers, should the sale go through. For starters, the wealth manager has plenty to deal with already.
Last month, law firm Quinn Emanuel Urquhart & Sullivan announced that it is filing the lawsuit on behalf of investors who purchased shares in the company between 27 May 2015 and 6 December 2018.
The class action will allege that IOOF was aware that its conduct would have significant legal and regulatory risks during those three years, saying the wealth management company breached its continuous disclosure obligations and engaged in misleading or deceptive behaviour.
In addition, the company is facing a $75 million court action against subsidiary Australian Executor Trustees over the loss of investors’ money in a forestry scheme from the 1980s.
While the removal of Mr Kelaher is a step in the right direction for a company that has been battered by consistent bad news over the last year, it doesn’t necessarily help with the ANZ deal.
Mr Mota is serving as acting CEO, but IOOF has yet appoint an official chief executive. Given the level of scrutiny that financial services firms are under at the moment, ANZ will be unlikely to forge ahead with the sale of its wealth business until it knows for certain that IOOF has a full executive suite and a strategy for onboarding the OnePath business. At the end of the day, these aren’t just assets on a balance sheet. They are businesses made up of “other people’s money”, to quote ASIC chair James Shipton.
IOOF will need to sort out its internal issues before it can integrate ANZ’s wealth and superannuation customers and service them to a standard that the community expects in 2019.