Below are some notes from a 1 on 1 call with Nathan Jacobsen on the 31st March 2022.
Chairman
Kevin retiring, Peter came from Hub24, was not the initial intention to become chair but was voted in. Has good pedigree and on board with strategy
Competition
Synchron M&A Deal.
Never interested in Synchron as an M&A target as their advisors are largely risk advisers (Insurance). 2 main trends of exiting advisers have been accountants (limited advisers) and risk advisers. Synchron has lost a lot of their advisers over the past few years
Centrepoint alliance
Nathan says great business after clearview wealth deal. Problems with profitability. ‘Diverger is basically a cheaper version of that’
They do view centrepoint as competition
Sequoia
Nathan alluded to having products and support services under the same umbrella as a ‘don’t have to read too much into that’ scenario. (Negative)
The broker business is a much bigger part of this business.
They don’t view sequoia as competition
Share of Wallet
Spoke at length about growth not coming from new advisers but rather, share of wallet of existing advisers. E.g. new professional education stuff in knowledge shop for advisers. Talk for example about them only being some ~6% of P&L of existing advisers. 45% goes to staff costs which are increasingly outsourced. They viewed the P&L of advisers as an opportunity to grow
Easton X
Competes directly with centrepoint, which is a major force. I expected this. Some differentiated offerings in the pipeline
Equity in firms
They don’t seek ownership, more of an adviser driven solution after asking for capital in addition to licensee support. Doing so through equity rather than consulting fees is a better structured approach in their view.
They want to buy into existing profitable businesses that can pay a dividend from day 1. Focused more on creating win-wins (growth) rather than upfront multiples. Stated they would pay ‘market multiples’ so i suppose ~3x sales? (according to brett) 40% margins if they are good so 2.5x3 = 7.5x EBITDA (After cost synergies realised)/
Upcoming deal coming in a *few* weeks which is first one of these.
Thinks Brett is pursuing a good strategy, he says they can do FP as they are already heavily involved in the industry.
Knowledge Shop/taxbanter
Recognised that pricing IS largely in line with CPI as suspected. Slight drag could be due to promotional growth (discounts) leading to lower average pricing annually. Seems likely.
Combined taxbanter/tax bytes as tax bytes was a single trainer in NSW vs taxbanter with ~25 staff in VIC doing the same things. No reason to keep tax bytes as its own thing.
Paragem
Talked about paragem existing previously within hub24 as a means to grow hub24, not prioritised to be a profitable endeavour. Was loss making due to a fitted out corporate team that was developing the strategy diverger is enacting now. Interesting, basically front running costs through strategy development.