Trustee industry faces shake-up

Rationalisation of the trustee industry has started, with IOOF selling its operation to TowerTrust for an undisclosed sum.

IOOF Trustees has assets under management of more than $1.2 billion and the purchase will boost TowerTrust's figures to $6 billion. According to IOOF's last annual report in 1999, the trustee business had earnings of $536,000 and more than 45,000 clients.

The Adelaide trustee business of IOOF will be integrated into TowerTrust in the next few months with a new corporate trustee division operating out of Sydney.

IOOF group managing director Rob Turner told Money Management the move came after the company looked at taking an active part in the rationalisation of the industry.

"If it had been a core business of IOOF, we would have taken part in the trustee industry rationalisation that is going to happen," he says.

"But it clearly made sense for Tower Trust, which is bigger than IOOF Trustees, to grasp this opportunity."

It is understood a number of trustee companies are being discreetly offered for sale at present. AXA chief executive Les Owen recently says AXA Trustees could be for sale in the future. The sector is dominated by National Custodian Services, with $93.2 billion under administration.

Tower group managing director James Boonzaier says the purchase will enable TowerTrust to gain critical mass in a sector that is expanding at a rate of 15 per cent a year, mainly due to compulsory superannuation.

"This is a good acquisition for Tower and our shareholders as it is targeted at further building a strategic presence in the fast-growing Australian wealth management sector, and will be earnings per share (EPS) positive in less than a year," Boonzaier says.

"The initial profit impact will be $1 million to $2 million per year, and this is merely a starting point which will grow."

Head office for Tower Trust will remain in Adelaide.