Koda's Steve Tucker (left) and Paul Heath

Koda Capital has become the latest advice group to secure a tie-up with off-shore investors after US-based wealth backer Emigrant Partners took a minority stake in the group, giving founders Paul Heath and Steve Tucker a capital and knowledge boost they hope will take the $10 billion AUM firm to its second phase of growth.

Emigrant Partners, which has its hand in 17 wealth firms in the states that have a combined AUM of $90 billion, purchased a stake in Koda this week totalling less than 25 per cent of the firm’s ownership.

According to Paul Heath, who founded Koda with ex-MLC boss Steve Tucker in 2015, the equity stake is a way to inject capital and know-how so the business can grow, while still preserving the professional partner model that sees majority ownership stay in the hands of adviser partners.

In 2019 Heath says the two sat down with the other major stakeholders and agreed that the operating scale for the firm’s professional services model was “in line of sight” to get them through the first stage. For stage two, hatched during the heady lockdown days of early 2020, they needed a partner that could bring further funding and external know-how.

“We knew we had the right model – independent, conflict-free advice delivered by staff and partners who owned the firm – but we knew that to scale further we had to do it differently,” Heath says.

The two flew to the states and courted suitors, with Emigrant Partners – owned by Emigrant Bank, the largest family-owned and operated bank in North America – quickly emerging as what Heath calls the “logical choice”.

Emigrant can not only fund Koda’s growth now, Heath says, but when the next phase of growth nears. This means the advice group won’t need to broach the risk associated with bringing further partners into the fold.

Emigrant gets no chair seats in the deal, but Heath figures the group’s expertise will be just as valuable as its capital.

“They don’t want voting rights or a board seat; they’ve been doing this for a while and they’ve decided the minority stake is the best model,” he says. “But there’s a menu of help we can choose from, with things like M&A for example.”

So does that mean Koda is looking to expand overseas, with the US and its burgeoning ‘Registered Investment Advisor’ movement a likely target?

“No,” says Tucker. “We’re not going out and doing a deal a week or anything. We’re not an aggregator.”

Ticking the right boxes

While Koda’s wholesale advice model was attractive to Emigrant, Tucker reckons it was the ownership platform that really ticked the investment group’s boxes.

“Wholesale wasn’t a stipulation for them,” Tucker explains. “They like the market we’re in, but the main aspect was the professional partnership model, it’s key to what they’re looking for.”