Insignia Financial 4Q24 Quarterly Business Update

Insignia Financial Ltd (ASX: $IFL) has reported a return to positive net inflows of $189 million for the 4Q24, supported by the successful migration of MLC Wrap to Expand and continued momentum in Workplace. The Funds Under Management and Administration (FUMA) reduced by $1.0 billion to $311.3 billion as at 30 June 2024. The company also announced an increase of $135 million after tax for legacy remediation programs and new operating model and executive appointments aimed at driving improved accountability, risk management, efficiency, and focus on profitable growth. Insignia Financial CEO, Scott Hartley, expressed satisfaction with the progress on FY24 strategic initiatives, including the successful separation of Rhombus Advisory and the expectation to exceed the upgraded guidance for FY24.

Executive Commentary

We have seen strong progress on our FY24 strategic initiatives during the year including successful migration of MLC Wrap to Expand, and delivery of targeted cost optimisation. In addition, I am pleased to announce that we successfully completed the separation of Rhombus Advisory on 1 July 2024. Through this unique and innovative partnership model, we will continue to have an equity stake in Rhombus Advisory's high-quality advice licensee business, whilst focusing on strengthening our relationships with Rhombus advice practices. This is another important milestone in our strategy to simplify and optimise our business. FUMA remained resilient in a quarter of mixed markets with platforms returning to net inflows following the successful wrap migration in the previous quarter. Post-migration, Expand provides the Wrap business the scale and focus to drive future growth. Disappointingly, we have had to take up a further provision to address a significant increase in remediation for legacy quality of advice and product compliance issues. We acknowledge the impact these historic remediation programs have had on shareholders; however, it is important that clients are fully remediated. Importantly, we expect this is our final provision increase related to the legacy advice remediation program which is now substantially complete, and that funding the advice and product remediation increases announced today will not require a capital raise from shareholders. Looking forward, the operating model changes announced earlier this month will provide clear lines of accountability enhancing our focus on improved risk governance and management, driving profitable growth and enabling each of our businesses to focus on competing in their respective markets. Pleasingly we expect to exceed our FY24 earnings guidance, driven by strong revenue supported by higher average FUMA, and the benefits of the optimisation program.

Summary

Insignia Financial reported positive net inflows for the 4Q24, supported by the successful migration of MLC Wrap to Expand and continued momentum in Workplace. The company also announced an increase of $135 million after tax for legacy remediation programs and new operating model and executive appointments aimed at driving improved accountability, risk management, efficiency, and focus on profitable growth. The separation of Rhombus Advisory on 1 July 2024 marked another important milestone in the company's strategy to simplify and optimize its business. Despite the disappointment of having to take up a further provision to address a significant increase in remediation for legacy quality of advice and product compliance issues, the company expects to exceed its FY24 earnings guidance, driven by strong revenue supported by higher average FUMA, and the benefits of the optimization program. Insignia Financial also expects to achieve the upper end of the $60-70 million range for gross in-year optimization benefits announced last year, resulting in a net reduction in operating costs of $20-25 million compared to FY23. The company's revised operating model and new executive team are expected to drive increased accountability and enhance the focus on growth opportunities across the business.