Emigrant Partners taking a stake in Koda Capital shows the value an advice business can achieve, but most other businesses will be better focusing on their own value proposition rather than chasing a similar model according to Encore Advisory Group executive chair Tom Reddacliff.
Last week the US-based wealth backer took a 25 per cent stake in the wealth management group co-founded by Steve Tucker and Paul Heath in 2015.
During the ‘Solid businesses for the future’ session at Licensee Summit on 6-7 June in the Blue Mountains, Reddacliff will chat to Koda managing partner Jonathan Ayres about the acquisition.
Ahead of the session which will focus on the different business models advice businesses can build around, Reddacliff tells Professional Planner the Koda deal is specific based on the nature of the firm.
“It’s funds under management is $10 billion for 40-50 businesses and they very much target wholesale or high net worth clients. As an end result that means they’re looking at a very different buyer than a $2-3 million turnover financial planning business with half a million FUM.”
Reddacliff says it’s a “different scale, client and type of buyer,” noting it’s not possible to “jump on a plane” overseas unless there is billions in FUM.
“You have to be at a certain scale to get on a plane to New York and have those discussions. They were talking to players that aren’t well-known here at all in the Australian market.”
Reddacliff says “you don’t just wake up in the morning” and decide to replicate the Koda model.
“You’ve got to be building your own internal investment offer, you need major wholesale sophisticated investor structure, philanthropy donation, dealing with complex tax structures and problems and the desire for private investment.”
To set up a firm like Koda, Reddacliff says, it’s quite a high-cost base and intensive.
“Paul and Steve know what they’re doing and why they set it up. It’s not something I’d recommend a firm just to decide to do.”
Also joining Reddacliff will be Fortnum Financial Group manager director Neil Younger who will cover servicing a broader client-base than what Koda offer.
“Jonathan’s going to unpack what exactly [Koda] do and it will be a good compare and contrast with Neil who is what I call ‘high end retail/bit of wholesale’,” Reddacliff says. “You have quite a clear contrast between those two, but I think Neil’s businesses will be more like the premium businesses licensees look for.”
In contrast to Koda, Reddacliff says Fortnum typically targets business with million dollar-plus revenues that pay a $4,000-7,000 fee.
“That would be [Fortnum’s] bread and butter, whereas it wouldn’t be unusual in Koda for a client to have $20 to $50 million [in assets]. You’re just dealing in a totally different ball game. We’ll compare and contrast those two as well as other segments of the market as well.”
Elixir Consulting managing director Sue Viskovic is the final panellist of the three and she will traverse the rest of the market.
“We’ll talk about business models of the future, what that means for licensees in terms of shaping their offer and the licensee market,” Reddacliff says.