October 3, 2019 / 6:49 AM / a month ago

IOOF wealth unit Elders reviewing future amid tougher regulation

(Reuters) - Elders Financial Planning, a unit of Australian wealth manager IOOF Holdings (IFL.AX), said on Thursday it is considering its viability amid tough new regulations in the sector.

Elders General Manager Tony Beaven said Elders has conducted a review and was in consultation with its adviser network after it had “identified a potential way forward”, without providing specifics.

The Australian Financial Review newspaper reported that IOOF intends to close the business.

“Recent changes to the financial planning industry mean that it has become increasingly difficult for EFP, as a small-scale dealer group, to generate the income required to cover higher regulatory compliance and insurance costs,” Beaven said in an emailed statement.

“EFP is seeking feedback from advisers on this proposal.”

The AFR reported that IOOF plans to wind up the business, terminating adviser agreements and transitioning the advisers to IOOF’s unit Millennium3, according to documents sent to financial advisers that the newspaper had viewed.

IOOF, which owns a majority 51% stake in Elders Financial via Millenium3, did not immediately respond to a request for comment, nor did Elders Ltd (ELD.AX), which owns 49% of the unit.

The potential closure comes after a government-mandated inquiry into the financial sector uncovered widespread misconduct, prompting regulators to abolish commissions and increase compliance, making it tougher for small-scale advisers.

The country’s largest wealth manager AMP Ltd (AMP.AX) recently started cancelling licenses of some of its more than 1,500 aligned financial advisors, citing the new regulations.

Commonwealth Bank of Australia (CBA.AX), the country’s largest, recently completed the sale of Count Financial - its financial adviser network.

IOOF bought Elders Financial Planning as part of its acquisition of the wealth business of Australia and New Zealand Banking Group (ANZ.AX) less than a year ago. The unit licenses 63 advisers across Australia but does not employ them directly.

Reporting by Nikhil Kurian Nainan, additional reporting by Syed Saif Hussain Naqvi in Bengaluru; editing by Jane Wardell

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