The wealth group will consolidate its self-employed licensees under one brand, to be owned by the advisers via a new equity model. It has also confirmed it will divest most of its holding in Godfrey Pembroke and is looking to sell Millennium3.
Insignia Financial outlined a raft of changes that it says will enable it to "competitively leverage opportunities for sustainable growth." The most significant change will be to its Advice Services business, where it will introduce a partnership ownership model for RI Advice Group, Consultum Financial Advisers, and TenFifty. This business will represent about $21 billion of Insignia's $24 billion in advice funds under management, with the change to impact about 680 financial advisers.
While the new business doesn't have a name or branding, for now, it will be known as Advice Services Co or ASC and Insignia will contribute staff, resources and working capital for 12 months following the transition.
Insignia Financial chief executive Renato Mota explained ASC is the culmination of delivering on two years of promises following the acquisition of MLC.
"We've said very loudly and clearly that we acquired a business that was loss-making, that was reliant on subsidies, and we don't believe in that model. We believe in an advice industry and business model that doesn't rely on cross-subsidisation and is sustainable, and we're working towards that," he toldFinancial Standard.
"What ASC does is not only support a sustainable model, but capitalises on a growth opportunity in a really dynamic part of the industry, being the self-employed segment... We see ASC as being a partnership with professionals. If I reflect on our asset management business, we've been partnering with professionals for decades, and we're creating that same model in advice - where there's an alignment of interests and of value creation, and support of their businesses..."
Expected to be profitable after the first year, ASC will operate independently, led by current chief advice officer Darren Whereat as chief executive. Mota added that the respective leaders of the advice brands folding into ASC will also make the move, as well as business development managers.
Described by Mota as "a very specific business model to deal with very specific advice needs and adviser needs", Insignia will own the majority of ASC at the outset, with its stake to reduce over time as advisers are offered equity in the business. What the equity offers will look like for advisers will be determined in consultation with them, Mota said, adding management will also take equity stakes.
Mota confirmed there is no intention to divest its self-employed channel, adding that he thinks of Insignia Financial as "having a smaller slice of a larger pie."
Establishing ASC will allow Insignia to focus its efforts on growing its Professional Services businesses, Shadforth Financial Group and Bridges Financial Services, it said.
This will be further enabled by the return of Godfrey Pembroke to its advisers, with Insignia retaining a minority stake in the firm.
Mota said that, since taking over MLC, Godfrey Pembroke's advisers have expressed a keen desire for operational independence and management ownership. In fact, it was something Insignia was made aware of prior to the MLC acquisition going ahead.
"... we've facilitated that as best we can. I think it's evidence of a really productive ongoing relationship with Godfrey Pembroke," he said.
Meanwhile, Insignia Financial confirmed it is in discussions with several organisations over the sale of Millennium3, with Mota saying the process is being undertaken with a focus on ensuring any potential buyer aligns with the culture of the group's advisers.
"It is a specialist business, and quite different to the other licensees, and that's why I think it's important that we are cognisant of that as we look for a new home for that licence," he said.
Elsewhere, Insignia Financial will look to expand the scope of advice offered through superannuation, including developing a new technology-enabled advice service.
Mota said that with the Quality of Advice Review providing more avenues for advice, the changes the business is making will provide capacity to focus on existing opportunities in the digital advice space, as well as exploring new opportunities such as using AI to make interactions more scalable, affordable and readily accessible.
Insignia has selected FIS Global's Compass registry to underpin the shared technology ecosystem of its Evolve and Master Trust platforms, with the group saying that having commonality across the operating environments will provide opportunities to remove duplication and minimise costs, as well as the risk of change. It's expected elements of the new environment will be in place by mid-2025.
The group also flagged the migration of MLC Wrap to Evolve has been delayed following adviser feedback. It was expected to occur in 1H24 and will now likely take place in 2H24.
Having committed to finding $150 million in savings following the MLC acquisition and achieving this within 18 months, Insignia said it has identified as much as $190 million in cost savings to be realised between now and FY26. This includes a cost-reduction approach across various initiatives, including the MLC Wrap migration, with the total investment to deliver these initiatives estimated at $260-285 million over two years.
Insignia reported a 1.3% increase to its funds under management and administration in Q4, coming in at $295 billion. It has 1413 financial advisers on its books, including 242 in the employed channel and 1171 self-employed and self-licensed advisers.
Some 64 self-employed advisers were lost in the quarter, with Mota saying the losses were largely due to the ongoing closure of the Lonsdale licence and not linked to the proposed creation of ASC.
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