Emigrant Partners taking a stake in Koda Capital shows the value a consulting firm can achieve, but most other firms are better off focusing on their own value proposition rather than pursuing a similar model, according to Tom Reddacliff, executive chairman of Emigrant Partners. ‘Encore Advisory Group.
Last week, the US-based funder took a 25% stake in the wealth management group co-founded by Steve Tucker and Paul Heath in 2015.
During the “Strong Companies for the Future” session at Licensee Summit June 6-7 in the Blue Mountains, Reddacliff will speak with Koda managing partner Jonathan Ayres about the acquisition.
Ahead of the session which will focus on different business models, advice businesses can develop, said Reddacliff professional planner the Koda agreement is specific depending on the nature of the business.
“Its funds under management are $10 billion across 40 to 50 companies and largely target wholesale or high net worth clients. Ultimately, that means they’re looking at a very different buyer of a financial planning firm with $2-3 million in revenue and half a million FUM.
Reddacliff says it’s a “different scale, customer and type of buyer”, noting it’s not possible to “jump on a plane” overseas at unless there are billions in FUM.
“You have to be on a certain scale to get on a plane to New York and have these discussions. They were talking to players who are not known at all here in the Australian market.
Reddacliff says “you don’t just wake up in the morning” and decides to replicate the Koda model.
“You need to build your own in-house investment offering, you need a large structure of wholesale sophisticated investors, philanthropic giving, the management of complex tax structures and issues, and the desire for private investment .”
To build a business like Koda, Reddacliff says, is quite an expensive and intensive foundation.
“Paul and Steve know what they are doing and why they created it. It’s not something I would recommend a company just decide to do.
Neil Younger, chief executive of Fortnum Financial Group, will also join Reddacliff, who will cover servicing a wider customer base than Koda.
“Jonathan is going to unpack exactly what [Koda] do and it will be a good comparison and contrast to Neil who is what I call ‘high end retail/a bit of a wholesale’,” says Reddacliff. “You have a pretty clear contrast between those two, but I think Neil’s businesses will be more like the high-end businesses that licensees are looking for.”
Unlike Koda, Reddacliff says Fortnum typically targets companies with revenues over $1 million that pay fees of $4,000 to $7,000.
“It would be [Fortnum’s] bread and butter, when it wouldn’t be unusual at Koda for a customer to have between $20 million and $50 million [in assets]. You’re just dealing with a totally different ball game. We will compare and contrast these two segments as well as other market segments.
Elixir Consulting’s Managing Director, Sue Viskovic, is the final panelist of the three and she will cross the rest of the market.
“We’ll talk about the business models of the future, what that means for licensees in terms of shaping their offering and the licensee market,” says Reddacliff.