As far as company results calls go, Iress CEO Andrew Walsh had a pretty easy run Thursday morning.
The integrated software provider has had a stellar run in the last five years, with a remarkably consistent revenue growth of about 8 per cent per year, a share price at an all-time high and a pipeline so healthy shareholders have been told to expect a doubling of net profit after tax by 2025.
In a sign the group has really hit its straps, the buyout bids are coming in. Two weeks ago Iress entertained EQT’s advances, only to reject their conditional offer.
What’s interesting about Iress is that for a firm built on the back of its success catering to the software needs of financial advisers, it has developed rather quickly into a diversified technology company with advice as an increasingly marginalised part of its ecosystem.
It’s not that Iress doesn’t need, or value, advisers as clients. The group is a firm supporter of advice, Walsh says.
But the exponential growth of the company during a time when the advice market is shrinking considerably is a clear indicator that the listed group has its fingers in more than one pie.
On a call with Professional Planner shortly after he delivered the group’s H1 results, Walsh says Iress is simply in the business of delivering software to users.
“Those users are not only advisers,” he says. “The number of users that we service is not directly correlated to the number of registered advisers there are. There are users of our software that are wholesale investment advisers, not registered investment advisers with ASIC, and the same is true in other markets.”
It’s a fair call. Iress extends its suite of around 12 advice software platforms to stockbrokers, accountants, and a whole spectrum of financial services players that aren’t registered advisers. It’s global footprint is growing, especially in the UK.
The group also has about the same number of software products that do trading and market data, investment management, mortgages and superannuation administration.
Then there is its acquisition of investment platform OneVue, which is in the process of being bolted onto Xplan, and the associated unit registry business it received as part of the $170m deal.
There is some conjecture about the OneVue play. The platform itself is subscale and a little clunky compared to its contemporaries HUB24 and Netwealth, yet Iress has the expertise to significantly improve the platform. It also has the ultimate trojan horse in Xplan.
Insiders reckon the real value in the OneVue deal, however, is in the fund unit registry business. While a low margin vertical in isolation, the data applications for a tech company here are attractive, as are the advancements blockchain could bring.
Given its many software platforms and Iress’ capability to cater to the broader financial services market, it makes sense for the group to look beyond advice. It also frees Walsh up to be candid about the future of the advice industry and what it might look like in five or 10 years.
While it won’t exactly be a self-service model, he reckons, client autonomy will be an increasing feature in the advice dynamic.
“I think the advice process will be much more driven by the client, you only need to look at what has happened in other industries,” he says, adding that clients will want on-demand access to all their financial information.
“That will not only be the differentiator for firms that operate in that way, but I think it already is the expectation of many. I think there will be a self-directed role that clients will play that that gives them the information and confidence in that information in real time. That won’t be restricted to business hours and it won’t be restricted to going going somewhere.”
The OneVue integration onto Xplan, slated to begin in the second half of this year, will be a significant litmus test for the group. The pitch to advisers, Walsh says, is that for the first time they’re going to get their CRM and investment management tool on the same platform.
“Often the efficiency of an adviser is thought about in in many different verticals, but it really is the difference achieved by cutting through and the delivering advice to a client,” he says.
Having a single platform means not cross checking and not repeating tasks. “You cannot deliver hybrid or automated or digital advice unless this occurs,” Walsh adds. “And it doesn’t exist anywhere in Australia.”
Of course, all of Walsh’s plans for OneVue, Xplan and Iress hinge on the ownership of the company. While round one of buyout talks ended in a polite rejection, Walsh says the process is far from over.
“The deal is certainly on the table,” he says.