Off the back of a failed takeover bid, Sequoia Financial Group CEO Garry Crole remains focused on progressing the restructure of the financial services business.
Earlier this year, the group of shareholders sought to replace Sequoia’s CEO and director Kevin Pattison with Peter Brook from Diverger and Brent Jones from InterPrac.
At an extraordinary general meeting on 5 June over 64 per cent of shareholders voted in favour for the pair to stay in the firm.
Reflecting on the process, Sequoia CEO Garry Crole tells Professional Planner the interaction with shareholders provided a good lesson.
“The support that we got from non-aligned parties in that corporate meeting was extremely strong and they were very supportive,” Crole says.
However, Crole says there was “no winners” out of the process.
“When shareholders call for an axing of the board, whether you win or you lose, I think everyone is a little bit of a loser and that is reflected in our share price over the last month,” Crole says.
“The staff get concerned about their jobs, your client base gets nervous about of what you are doing. The only thing I have learnt is we cannot have those things happen in the future, and if we can communicate better with those shareholders who are unhappy to avoid that type of incident that would be good.”
After the takeover failed, Sequoia announced several changes to its divisional structure in early July, reducing the number reporting divisions from four (licensee services, professional services, equity markets and direct investments) to two (licensee and adviser services, and legal and administration services).
The streamlining of the number of reporting divisions is aimed at reducing Sequoia’s cost base in terms of headcount by 10 per cent.
Crole says the business was about 60 per cent through the headcount reduction already, with a couple of reviews still under way.
“Media business is struggling and we are doing a complete review of it at the moment – I haven’t given up on it but it is under review,” he says.
“We have [also] six full time consultants in IT and we have about eight staff in that media sort of business, so I think that 14 would come to around 10.”
Following the completion of its headcount’s reduction, the business will have approximately 90 people in total.
“I think there will be around 50 people in the licensee services part and about 40 people in the legal and admin part,” Crole says.
On the other side of the equation, Sequoia’s corporate finance segment looks more positive, with a potential to grow even further.
“In our opinion, the corporate finance over the last two to three years have been really difficult particularly in the smaller end of the market but we expect the next three or four years to be stronger,” Crole says.
He adds the company is interested in increasing its presence in this area and “acquiring a small team”.
“We continue to look at those types of businesses for sure, so we so we’ve got a pretty small corporate finance business four or five people but we are very keen to grow that,” Crole says.
Crole says Sequoia is looking to achieve a benefit of scale through potential acquisitions despite a steady organic growth in adviser numbers.
“The growth is not like it was 10 years ago as obviously the industry is shrinking, but we have been winning the market share,” Crole says.
“All of our growth has come from organic growth, and not through the acquisitions, in the last 18 months but I think there is a benefit in scale…and we are looking to see if there are acquisition opportunities out there.”
However, he stresses, he will most likely buy a smaller licensee, preferably with a salaried adviser business model.
“We are not likely to buy a big [licensee] and I am open to merging because I do see there is a benefit of scale but it is a very difficult thing to achieve,” he says.
As far as the potential acquisitions are concerned, valuation remains the most difficult part of the process but others factors, such as like-minded culture and people, would be also at play.
The group currently operates two primary licensees, Sequoia Wealth Management and InterPrac Financial Planning, which collectively have more than 360 advisers.
Last year, Sequoia decided to shut down one of its other major licensees, Libertas Financial Planning, which was acquired by the group in 2019. At that time, the business had approximately 70 authorised representatives and following its liquidation advisers were offered an option to join one of Sequoia’s other licensees.
The group said it would focus on providing services to two market segments: financial planners and accountants.
“We are looking at financial planners and accountants and try to think about all the services that we can provide to them, including licensing and employing them,” Crole says.
“Then on the other side there is the accountancy industry and there is [opportunity to] provide them legal documents and self-managed super fund admin and all the type of services that the accountancy practices might want to outsource.”