The IOOF Holdings Ltd (ASX: IFL) share price is down around 8% after releasing its December quarterly update.
IOOF is one of the largest diversified financial businesses on the ASX.
Here’s what happened in Q2
IOOF said that its funds under management, advice and administration (FUMA) went down $0.4 billion to $202.4 billion for the quarter. The uplift of $12.7 billion of market movements was offset by some outflows.
The outflows were large one-offs, according to the company. There was the $8.1 billion termination of the BT relationship, $1.5 billion from the liquidation of IOOF’s cash management fund and a $0.4 billion transfer from the cash management trust.
The financial advice segment saw $1.3 billion net outflows including outflows as a result of the advice business transformation under ‘Advice 2.0’.
Next, the portfolio and estate administration division saw $40 million of net inflows.
IOOF’s investment management segment suffered a $2.2 billion net outflow, however $1.9 billion was a result of reinvestment simplification into external interest-bearing cash accounts, which deliver superior client outcomes, but the revenue differential resulting from this change is negligible.
Finally, the pensions and investments division saw net outflows of $625 million, broadly consistent with the outflow profile under ANZ ownership.
IOOF said that during the quarter, significant activities have been done to progress the P&I integration and prepare to complete the MLC acquisition. On 14 December 2020, the ACCC said it would not oppose the proposed MLC acquisition.
Management comments
IOOF CEO Renato Mota said: “We are making good progress towards the transformation of the business. In particular, we are transforming the advice business through our Advice 2.0 strategy and progressing our platform simplification strategy, while supporting IOOF’s open architecture approach and enabling choice for our clients.”
Summary thoughts
IOOF has made some strategic assets that make sense which have increased FUMA. However, the business continues to suffer from outflows in most of its categories, which isn’t good if that trend continues.
The company may be able to generate good synergies with the acquisitions, but at least maintaining the FUMA is important, otherwise net outflows could see long term profit head downwards.
There are other ASX dividend shares in the financials space I’d rather buy such as Magellan Financial Group Ltd (ASX: MFG).
