Insignia earnings slide, FUMA thins

Insignia Financial Group has published its half-year results for the 2023 financial year (1H23), reporting an underlying net profit after tax (NPAT) of $94 million, down 17% from 1H22.
 
A 7.3% decline in operating expenses ($517.7 million) was wholly offset by an 8.9% spike in operating revenue ($691.3 million).
 
The firm delivered an interim dividend of 9.3cps (50% franked), down from 11.8 cents per share in 1H22.

Advice
 
The underlying performance of Insignia’s advice business improved over 1H23 but continued to operate at a loss — $21.9 million (up 22.6%).
 
Net revenue of $103.7 million was nullified by expenses totalling $128.5 million.
 
Insignia’s financial adviser network also declined, dropping from 1,765 advisers in 1H22 to 1,525 in 1H23.

Self-licensed advisers fell from 583 to 512, self-employed advisers fell from 890 to 766 and professional services fell from 292 to 247. 

In its results, the firm said: "Adviser departures in the self-employed channel followed from the reset of management fees charged by the Group from 1 October, 2021. The departures in the self-licensed channel were largely from two member practices following reviews of their adviser base. 

“Departures from the professional services channel were primarily due to the reshaping of the Bridges business following consolidation with MLC Advice in June 2022, resulting in 30 less adviser roles and creating improved efficiencies.”
 
Chief executive Renato Mota told Money Management the contraction was part of the company’s broader simplification strategy.  
 
“Removing that cross subsidisation and putting it in a more sustainable footing has impacted the numbers,” he said.

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“We were aware of that going into this program of work [but] we thought it's really important that the business is sustainable.

According to Mota, this strategy has resulted in the loss of smaller practices that were “subscale” in relation to Insignia’s proposition.

“We're doing more work with larger, more corporatised practices, so there's definitely been a pivot,” he added.

“But that's all in the interest of making sure it's sustainable, and it's the only place that we generate revenue from the clients paying.”

Platforms
 
The weaker underlying result was primarily driven by a 16.4% decline in net profit generated by the platforms business, down from $141.5 million in 1H22 to $118.3 million.
 
Funds under management (FUA) — which included workplace and personal super, and advisory super and investment funds — contracted 11.3% from $227 billion to $201.3 billion.
 
Net flows improved, from outflows of $993 million in 1H22 to outflows of $142 million in 1H23.
 
Mota said the group would continue investing to improve the platforms business.  
 
“Simplifying and enhancing the platform suite is a key enabler of Insignia Financial’s strategy to reduce cost-to-serve while improving outcomes to clients,” he said.
 
“Platform simplification includes product enhancements and ongoing investment in our proprietary, contemporary Evolve wrap platform technology.
 
Asset management
 
The asset management business also recorded a weaker 1H23 result, with profit down 8.9% from $38.2 million to $34.8 million.
 
Funds under management (FUM) slid 15% from $98.8 million to $83.8 million, despite an improvement in net flows from a $197 million contraction to $86 million growth.
 
“Within asset management, we continued to deliver strong investment performance across our multi-asset and direct capabilities,” Mota added.
 
“Pleasingly, our flagship MySuper offering has achieved top quartile performance over one, three and five-year periods.
 
“Retail net inflows and flows into our multi-asset offerings remain positive, while Institutional flows have been impacted by rebalancing against a backdrop of market volatility.”