Assirt downgrades CFS after staff exodus

Assirthas downgradedColonial First State’s (CFS) business management rating from ‘Strong’ to ‘Competent’ on the back of a spate of recent departures from the group.

CFS announced yesterday that chief financial officer Tim Foster, general manager administration services and business systems Hayden King, and head of marketing Joanna Wagstaff, would be following former chief executive Chris Cuffe to CPH Investment Corp.

Assirt says the departures deal another blow to the remaining management executive at CFS and its parent the Commonwealth Bank, who will have to deal with increased pressure and a considerable impact to morale and culture.

The downgrading comes after the research house dropped CFS’s business management rating from ‘Very Good’ to ‘Strong’ after Cuffe announced his resignation in January.

Assirt says that doubts remain about the ability of CFS chief executive John Pearce to maintain morale and retain key staff over time.

The research house also says the departures come at a time when CFS is still recovering from negative publicity surrounding CBA’s recent wealth management write-down and Cuffe’s $32 million payout.

Meanwhile,Morningstarhas maintained its rating for CFS subject to further assessment, saying the departures are not that material or surprising as they could be expected as follow-on from the departure of a chief executive.

InvestorWeb chief operating officer Toby Potter says that since the staff departures were not from the investment team and there was not a direct impact on the company’s funds management capabilities, its rating of CFS would not be changed.

Assirt has warned that since Cuffe has managed to attract key staff to his new venture, the risks are heightened that CFS may suffer from further staff departures.

However, the research house says CFS has identified qualified replacements, with former head of administration Steve McGregor to replace King and Nicolette Rubenstein replacing Wagstaff in an acting capacity. A replacement for Foster is yet to be finalised.

Assirt senior investment analyst Rene Pyszko says CFS is at an interesting inflection point, where its challenge is to reinvent itself and mature to the next level after the departures of the individuals who were the initial instigators of the group.