Usually I am disinclined to make reference to broker commentary,...

Usually I am disinclined to make reference to broker commentary, but someone sent me a copy of the summary points from an analyst an independent research house CLSA, which I thought made for some interesting reading:

From CLSA's analyst:


"The structural issues are old hat, revel in the “learning”

This analyst is a huge Adele Ferguson fan: her excoriation of the industry has, in the main, been correct and timely . . . her latest broadside misses, in our opinion, the mark (by a mile). We believe the advice industry is in the process of transforming itself, where the pained wailing of most practitioners is an indication that various reforms are both biting and hurting - this is good for the consumer and investors. By hook or crook (frankly, it’s irrelevant), IOOF is well positioned. Upgrade a notch to BUY.


Ours is not some vapid, myopic, self-interested industry response!
We have previously described IOOF’s strategy as ‘the lazy man’s quick fix - investors beware’, have admitted to being ‘all-round confused’ and (prophetically?) wrote: ‘never really “got” IOOF: to us it looked like another roll-up, another acquisition-led growth strategy which, over time, would stall and the true “cost” of those purchases/mergers would emerge’. This time, however, it’s different: while still something of an ugly duckling, looking ahead we see quality, rigour and potential. We have here a stormy teacup.


Culture: It’s the heart of any company
However, culture, in the main, doesn’t develop overnight, and neither does it in a vacuum - it develops around a strategic vision which, in our opinion, has recently coalesced: less vertical integration and more an advice-led platform. For more detail, read our 30 March 2015 Rainbows are visions... note. We believe the recent disposal of part of Perennial is an indication of this.


Risks, there are a few, but, then again, too few to mention . . .
IOOF has confirmed that it has followed its protocols around these sorts of issues: where deemed appropriate the Australian Securities and Investments Commission has been notified. The bigger impact is reputational - we believe this is the catalyst for IOOF to up the ante. We would like the company to outline what its “recovery plan” looks like. After all, it’s not about how you find yourself on the floor, it’s about how you get up. Could this “event” prove to be IOOF’s “quality” moment?


Valuation
Advice is central to IOOF. Its focus on delivering efficient, low-cost products to clients is beginning to get reflected in the strongly emerging flows to its advice and platforms businesses. Upside from leveraging its Best Advice initiative, A$20m synergies targeted for FY16, and the combined SFG adviser base expanding sales are near-term catalysts. Our target falls from A$10.88 to A$10.76 after our forecast change but still implies a 22.8% total return."