Insignia Financial’s chief executive, Renato Mota, wants to see the organisation double its customer base to more than four million in the next five years, with the group being one of the top five players in the Australian wealth management sector.
Mota said he wanted to see Insignia, which is rebranding itself from IOOF, following its merger with MLC, as one of the big players with assets of between $200 billion and $500 billion.
The group now has almost $230 billion in funds under administration, almost $100 billion in funds under management, and more than two million clients across Australia.
It is now Australia’s largest provider of financial advice, with 1,765 financial advisers.
Leapfrogging rivals
The $1.4 billion MLC deal which was finalised last year, saw what was then IOOF leapfrog rival AMP to become the country’s largest retail wealth management firm.
That deal followed IOOF’s acquisition of the wealth management assets of the Australia and New Zealand Banking Group.
“In five years’ time, you are going to have a handful of super funds of between $200 billion and $500 billion,” Mota said.
“That will be the new market scale.
“They will be the ones dictating the cost to serve and the prices. I think you need to be in the top tier, in the top four or five, but we are not necessarily aiming to be number one.”
Success measured in “lives touched”
But Mota said he did not want to put a figure on his goal for Insignia’s asset size.
“I measure success in terms of how many lives we touch,” he said. “At the moment we are responsible for 2.2 million Australians, and I would love to see that double.”
Mota said scale was important in the sector which was a key driver of IOOF’s move to buy MLC from the National Australia Bank.
“As the industry reforms and the banks exit wealth management, we want to be in that top tier of organisations,” he said.
Mergers not ruled out
Asked if Insignia would be considering another merger, Mota did not rule it out, but he said the organisation was still working through the amalgamation process of the MLC takeover.
“We only finalised the deal eight months ago,” he said. “The best thing we can do for the business right now is to execute the plan we developed on acquiring MLC.
“We are still in the ‘digestion phase’ but we are not in a position to rule anything in or out in the future.”
The Insignia group reported a 79 per cent increase in underlying profit after tax of $118 million for the six months to the end of December 2021.
But net profit after tax was down by 33 per cent to $36.2 million as a result of a range of one-off items and the MLC deal.
Mota has told the market that the bulk of the costs of the integration will be finalised by the end of this calendar year.
“We are in a transformation process [and] we were very deliberate in acquiring MLC because it strategically made a lot of sense in terms of scale, simplification and the lower cost to serve,” he said.
Rebranded
Mota said the company had rebranded itself as Insignia as it wanted to create a brand which “recognised the common heritages” of both IOOF and MLC.
“Before deciding to change a brand and a name which has been around for 175 years, it is really important to reflect on why that would be a good thing to do,” he said.
He said a key theme was to stress the “benevolent nature” of the organisation.
“We wanted to create a new organisation which is still grounded in the need and desire to help people support people in what we are now calling ‘financial well being’… but we didn’t want to be beholden to the past.”
“We wanted to create a new direction forward and set ourselves up for a new generation. Our ambition is to help all Australians with their financial well being.”
Multiple business arms
Insignia has three different business arms: a platforms business which offers financial services solutions on superannuation and investments, an asset management business and a financial advice business.
This makes it a very different organisation from its rivals in the industry fund sector including market leader, the $260 billion AustralianSuper.
Mota rejects the view that the wealth management sector can be neatly divided into industry and retail players.
“Some people might describe us as being retail,” he said. “I don’t. I don’t see a retail/industry super divide. I think that is an artificial construct.
“Super funds all have the same set of obligations. They have the obligation to act in the best financial interests of members.”
“There are different organisational characteristics but our obligations and our role in society is the same.”
The nexus between advice and product
He says providing financial advice on wealth management through a standalone business, which is not reliant on cross subsidisation by product manufacturing, is a key part of his goal for the group.
As a major employer of financial advisers, Mr Mota said his group would be making a submission to the Federal Government’s Quality of Advice review.
Superannuation Minister Jane Hume recently announced the terms of reference for the review which is to be tabled in Federal Parliament on December 16 this year.
The review will be led by Michelle Levy, a partner with law firm Allens who specialises in superannuation, life insurance, and financial services law.
Mr Mota said his firm’s submission would include its argument about the importance of “breaking the nexus between advice and product”.
“The current advice environment is very much geared towards product recommendations and ensuring that product recommendations are in the members’ interest,” he said.
“That makes sense, but advice is much more than just a product recommendation which is why I am in favour of breaking the relationship between advice and product.”
No Silver bullet
Mota maintained there was “no silver bullet” when it came to reforming the financial advice industry.
“One of the lessons of the past has been to ensure that our systems and controls ensure that everyone gets a high quality outcome,” he said.
He said he also believed that there were opportunities to make the delivery of financial advice more efficient including through the greater use of technology.
“We are a big proponent of financial advisers using technology to help guide people through complex decision making. The human experience, the coaching or advisory relationship is still important for part of the population,” he said.
“But technology can reach a lot of people in a scalable way that helps people make their decisions.”
Modest background
Mota, who has been working with the IOOF group for the past 19 years, has been chief executive since June 2019 after acting in the role since December 2018.
He said his background, growing up in Victoria’s Latrobe Valley, the son of Portuguese migrants to Australia shaped his thinking.
“There is no doubt that my background and my upbringing has been a key feature in how I think about the world today,” he said.
“I grew up in a really modest family with really hard working parents who, thankfully, had a really strong sense of financial discipline.”
“I’ve inherited that.”
He said he had always had a “curiosity about how money works” as he had also seen what happens when people make bad financial decisions.
“There is no doubt that has framed the way I think about Insignia, the (wealth management) industry and the role we can play in helping others,” he said.
