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Why the IOOF Holdings share price sunk lower today


The IOOF Holdings Limited (ASX: IFL) share price has been amongst the worst performers on the S&P/ASX 200 index on Thursday following the release of a third quarter update on its funds under management, administration and advice (FUMA) and an update on Protecting Your Super regulatory impacts.

In afternoon trade the embattled financial services company’s shares are down 4.5% to $6.24. This latest decline means its shares have lost 35% of their value since this time last year.

What happened in the third quarter?

According to the release, IOOF experienced net inflows of $337 million in FUMA for the third quarter of the 2019 financial year.

This comprised $183 million of net inflows for the Portfolio & Estate Administration segment, $263 million net inflows for the Financial Advice segment, and $129 million of net outflows for the Investment Management segment.

Whilst this seems like a decent quarter, it pales in comparison to the net inflows of $1,035 million achieved in the prior corresponding period and appears to show the impact that the Royal Commission has had.

Nonetheless, the company’s acting CEO, Renato Mota, was pleased with the quarter. He said: “It’s pleasing to see continued positive flows into our proprietary platforms despite challenging market conditions. In an extremely competitive environment, subject to much uncertainty, it is a credit to our people and advisers that we continue to support advice through our products and services.”

In addition to this, the company provided an update on Protecting Your Super regulatory impacts.

According to the release, IOOF has reiterated the expected revenue impacts of approximately $3 million for removal of exit fees in FY 2020.

Furthermore, the impact from other Protecting Your Super measures will be $5 million in FY 2020. This includes a 3% cap on fees and changes to inactive low balance accounts.

Overall, the cumulative aggregate impact of Protecting Your Super legislative changes is expected to be $8 million in FY 2020.

Should you invest?

I would suggest investors stay clear of IOOF shares for the time being, especially given how APRA has taken aim at the company and its former directors.

Until that matter is resolved I think investors should focus elsewhere in the industry at shares such as Macquarie Group Ltd (ASX: MQG) or Magellan Financial Group Ltd (ASX: MFG).

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Returns as of 6th October 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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