IOOF won’t be press-ganged into acquisitions

IOOF is refusing to rule out hitting the acquisition trail — given it is debt-free and has $70 million in the bank — but stresses it won’t be making any rash decisions and will need convincing of the merits of any proposed purchase.

IOOF chief executive Ron Dewhurst said at a briefing for advisers today the company would not be pushed into making acquisitions because the stock market wants it.

“The money is not burning a hole in my pocket,” Dewhurst said. “We get shown a lot of things, we look at a lot of things, but the story would have to be very compelling for us to make another acquisition.”

In an interview with Money Management earlier this week, Dewhurst also said the high rate of failure in integrating acquisitions has made IOOF wary, although the AM Corporation integration was continuing to payoff for the group.

“We will not be growing for growth’s sake, but I do want IOOF to grow its business organically.

“We are not trying to be number one in funds management, but we do want to exceed investment returns and deliver a quality of service people expect,” Dewhurst said.

The firm listed on the Australian Stock Exchange late last year and has been reviewing its operations for a large portion of this year — a process that is still continuing Dewhurst said.

The funds management business is now seen as a core operation and has achieving good growth.

“We have seen funds under management and advice grow to $17.5 billion, which is on top of 35 per cent growth in 2003/4,” he said.

“We have also been focusing on suites of products as we cannot be all things to all people.”

Despite some products being culled and the profitability of others being questioned, Dewhurst said IOOF was not going to launch more ‘me-too’ products such as indexed funds or hedge funds.

“We are not going to launch a product just so we can participate in the market,” he said.

The review of operations is continuing and distribution and platforms have come under scrutiny, with Dewhurst flagging at the adviser briefing the possibility of “doing more with less”, and focusing on “deepening existing distribution relationships” rather than just chasing new ones.

Dewhurst said the pressure on platform fees means the operator has to be very efficient running the service.

“Everybody’s cost structure is the same, but you can run your platform very efficiently,” he said.

“But some of the larger [platform] players have a unit cost structure that is not very advantageous to their profitability.”

Dewhurst says the advantage of a business such as IOOF running a platform is they are able to earn a fee on the many components of the operation ranging from fund management products to platform fees.

After a rocky year in which many key IOOF staff have been replaced, Dewhurst also signalled a shift in the company’s attitude to staff retention.

“It will be intellectual capital that drives the business, not financial capital,” Dewhurst said, adding that employing, and importantly, retaining staff had become a performance metric for managers.