August 10, 2018 / 3:41 AM / a year ago

Australia's IOOF to review ownership structure, shares fall

SYDNEY, Aug 10 (Reuters) - Australia’s second-largest wealth manager IOOF Holdings Ltd has told a powerful inquiry into misconduct that it is reviewing its ownership structure in light of a tougher regulatory environment, just months after buying ANZ’s pension unit.

IOOF last year emerged as one of the biggest financial planning and wealth management outfits in the country on the back of its A$975 million ($718 million) acquisition from the Australia and New Zealand Banking Group.

However its business model is under threat due to a reliance on conflicted remuneration structures.

Managing director Christopher Kelaher said that in response to pressure by the regulator, the company was considering separating its subsidiaries that operate pension funds from the companies that run investment schemes in which those pension funds invest.

“We resolved that we would investigate separating the (entities) - and thought was given to the fact that we would wait till we completed the ANZ transaction and then potentially pick up an RE (managed investment) structure that was ... in full compliance with APRA’s concerns,” Kelaher said.

IOOF shares fell as much as 2.9 percent in a largely unchanged broader market, retreating after gains earlier in the week when it reported a record underlying annual profit.

The powerful Royal Commission inquiry has already roiled the banking and funds-management industry and is now questioning managers of some of the largest retirement funds on alleged misconduct and poor performance.

Pension funds servicing Australia’s A$2.6 trillion retirement savings pool operate as trusts, which means they must act in the sole interest of members.

Kelaher rejected the proposition by a barrister assisting the year-long Royal Commission that the company was conflicted in having its trustee companies directing payments to its other subsidiaries.

Instead, Kelaher said, the review was due to the Australian Prudential Regulatory Authority (APRA) expressing concerns about its conflicted ownership and compensation structures.

$1 = 1.3572 Australian dollars Reporting by Paulina Duran; editing by Richard Pullin

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