ClearView Wealth reported a 22 per cent dive in underlying net profit after tax for financial year 2019, but despite a challenging market environment, the group plans to snap back with reforms including repricing and repositioning its wealth segment.
The group’s profit came to $25.1 million for the full year, down from FY18’s $32.4 million, while revenue slightly increased by 3 per cent to $385.7 million.
The group’s wealth management segment, covering its investment and administration platforms WealthSolutions and WealthFoundations, saw its profit fall by 30 per cent to $3.6 million.
Funds under management were down by 1 per cent to $2.76 billion.
Income from fund management fees slipped by 5 per cent to $34.4 million, while interest income grew by 17 per cent to $500,000.
ClearView said the wealth segment was impacted by competition, with outsourced wrap technology lagging behind its rivals, underperforming model portfolios, platform pricing changes along with delays in achieving its life insurance and wealth management integration objectives and a “general adverse sentiment” from the general public to financial services.
Meanwhile the life insurance business, the largest segment, saw its profit drop by 16 per cent to $22 million, while profit from ClearView’s financial advice fell by 44 per cent to $1 million.
Chairman Bruce Edwards called the group performance disappointing, admitting “with the benefit of hindsight ClearView made some mistakes in the early years of establishing its current business,” in poor life insurance sales practices.
However, the company believes it is positioned well to take advantage of structural changes in the market in FY20, having made changes including repricing wealth management products, reviewing its financial advice business strategy and dealer group pricing model, and terminating “certain poor performing life insurance distribution relationships.”
Reacting to competition in wealth
ClearView repositioned and lowered its wrap platform pricing in February and it has further work ahead in the first half of FY20 on product pricing and positioning to add to its already modified models and fees on its WealthFoundations product.
It is also reviewing its approach to investment products, looking to change its technology and broaden their market appeal.
The company has retained an opportunistic outlook, noting: “The unprecedented level of merger and acquisition activity in the Australian financial services industry in the past few years has resulted in fewer companies now providing both life and wealth solutions.”
“A number of ClearView’s competitors have, or are in the process of, divesting assets. This structural change, and the subsequent distraction, [provide] a significant competitive advantage for ClearView.”
Managing director Simon Swanson said as a relatively new player, the ClearView is not constrained by cumbersome and expensive legacy systems, and its investment in technology will make it more efficient and easier to do business with.
“Australians are underinsured, under-advised and, when it comes to superannuation and investments, they are typically overexposed to domestic equities and property,” Mr Swanson said.
“They need professional help to sort out what are increasingly complex financial products, services and investment, wealth and retirement strategies.
“As the compulsory superannuation guarantee rises and more baby boomers retire, the demand for wealth management advice will only increase.”
ClearView closed its direct life insurance business in 2017, which along with the royal commission incurred $2.4 million in remediation costs during FY19. A further $800,000 was expensed for advice remediation.
The company also indicated it has conducted an external governance review as well as a culture program currently occurring.
Capitalising on financial advisers
The group entered distribution deals agreements with 113 Australian Financial Services licensees during the year, with ClearView LifeSolutions now being on 532 approved product lists, up 27 per cent from the prior year.
Interestingly, independent financial advisers represented 84 per cent of new ClearView LifeSolutions sales, comparing to 80 per cent in FY18.
Reflecting on the sector being in flux, ClearView commented: “Manufacturers that offer both life insurance and wealth management solutions have a unique opportunity to maximise their relationship with financial advisers.”
ClearView’s share price on Friday morning sat at a year low of 59 cents. A year before it had been almost double at $1.04.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].