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Why the IOOF share price is under pressure to start the year

The IOOF Holdings Limited (ASX: IFL) share price had a surprisingly good year in 2019.

The Aussie wealth manager’s shares have bounced back 51.57% in the last 12 months to be a top performer in the ASX 200 Financials sector.

But despite its recent rebound, the IOOF share price could be under pressure this week as it continues its financial adviser network review. IOOF shares have started today’s trade down 1.10% and will be worth watching as the week progresses.

Why is the IOOF share price under pressure in January?

According to an article in the Australian Financial Review (AFR), IOOF has classified 8.5% of its financial adviser network as “higher risk”. 

The Aussie wealth manager responded to a House of Representatives economics committee request from November. In the response, IOOF confirmed it had not started compensating customers and has identified 67 “higher risk” advisers.

The IOOF share price could come under pressure this week following the latest update. However, the group has said it will take the “necessary course of action” against these individuals.

Following the 2018 Financial Services Royal Commission, IOOF announced $223 million in provisions for its remediation bill and its reputation has taken a hit. However, IOOF is far from the only ASX wealth manager facing a hefty remediation bill 

AMP Ltd (ASX: AMP) shareholders have seen the value of their investment slump 64.12% lower since the start of 2018. 

In fact, IOOF was the second-best performing ASX 200 Financials share price in 2018, behind the unstoppable Magellan Financial Group Ltd (ASX: MFG).

Which ASX 200 shares could be in the buy zone?

I personally won’t be buying IOOF shares with such heat on the ASX Financials sector.

The Big Four banks are under pressure right now, so for me Macquarie looks like the best option in the sector. I think the February earnings season could provide a good gauge of the industry’s potential in 2020.

In the meantime, I like Afterpay Ltd (ASX: APT) and CSL Limited (ASX: CSL) as two top-performing ASX growth shares.

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Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. 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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