The boss of IOOF has said the company “shouldn’t apologise” for seeking efficiencies when integrating different parts of the business, as the group has commenced paying remediation for advice misconduct.
IOOF chief executive Renato Mota fronted the House of Representatives standing committee on economics on Tuesday, speaking on the advice segment of the business.
Committee deputy chair and Labor MP Andrew Leigh pointed to Australian Financial Review coverage in April where Mr Mota supported vertical integration, saying people needed size and security.
Dr Leigh said: “Given that vertical integration was one of the aspects heavily criticised by the Hayne commission, does that signal that IOOF is now pushing back against the royal commission finding?”
Mr Mota responded by saying IOOF had been supportive of the commission, but there was a role for integrating different elements in a business.
“What I would say is, there is a role, I think, a very important role for [well-resourced] organisations in this sector, specifically for advice,” the IOOF chief said.
“But more broadly, I think it’s really important that when we’re going through this, these turbulent times of high volatility, that the organisations that serve our clients are large, robust and can withstand whatever comes next.
“IOOF has been around for 170 years. It’s very important to me as the leader of the organisation, I think to the board as well, that we ensure we build the foundations to be here for another 170 years.”
Mr Mota said there had been strong learning from the royal commission with respect to the “management of conflicts”, reporting the group exerts a lot of energy and resources to make sure it separates its fiduciary obligations.
He listed three different obligations for the group: as a superannuation trustee, as a trustee of an investments business and as supervisor of advice AFSLs.
“I personally don’t use the term vertical integration, because I think there are core connotations of that,” Mr Mota said.
Dr Leigh interjected: “You do in the newspaper.”
“What I would say is that we do talk about integration,” Mr Mota responded.
“And I think integrating the different elements and making sure that running the business very efficiently [are] really important because those efficiencies should be passed on to the client.
“So we shouldn’t apologise for looking for better ways with the client value and that does mean working with different elements of the value chain. However, there is no place for putting products ahead of client responsibilities and client needs.”
Earlier in the proceedings, Mr Mota had said the group, like others in the industry, is challenged by the issue of making advice affordable.
IOOF was confirmed to have recently commenced payments on its remediation program for fees for no service, poor documentation and instances of inappropriate advice, 18 months after it initially began a review into the quality of advice at the group.
It is expected to complete the refunds within the next 12 to 18 months.
Mr Mota also revealed the group had terminated 40 advisers in the last year and a half for giving poor advice.
Dr Leigh had also questioned if IOOF’s Pursuit platform had charged customers more to access external products, but Mr Mota defended the price point, saying the model reflected a higher cost to providing access to funds outside IOOF.
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].