‘Clear skies ahead’ for Clime IM after cost out completion

Clime’s disposal of advice licensee Madison “needed to happen yesterday”, managing director Michael Baragwanath has said, as he concludes a severe cost-out period at the business. 

Last year, Clime disposed of advice licensee Madison to Infocus. The business had bought Madison in June 2020 from OneVue for over $2 million, and its chief executive Annick Donat took over as group chief executive. 

But, four years later, it had struggled to fit in with the wider business, and the decision was taken to dispose of it to Infocus for $2 million. According to the firm, the Madison division reported a loss of $460,000 in FY24 and had added significantly to the cost of running the business. It also stated that Madison posed further risk to the wider business without any real benefit to its internal advice division.

Baragwanath told Money Management it was imperative to dispose of the arm as soon as possible when he joined the firm last year. 

“For the last three to four years, the company was entangled in something that didn’t fit. The board had originally wanted to pick up Madison, but anyone with licensee experience would have told them, ‘You’re in for a world of pain’. 

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“They hoped there would be synergies via osmosis, and these didn’t transpire. Our shareholders couldn’t see how things would improve and changes weren’t happening quick enough. It was something that we needed to address rapidly, and it became too clear that we needed to divest of Madison yesterday. We got rid of it quickly but, unfortunately, that came with costs.

“I wouldn’t admonish the people who bought it as I’m sure it seemed a good idea at the time, but in hindsight, you can see the problems. They were trying to capture everyone by offering everything.”

While Clime retains its Clime Private Wealth division, he said this is retained as a safety net for high-net-worth (HNW) clients who require additional help rather than as a “profit centre”. Its advisers are employed by Clime and have an open approved product list, meaning they are not restricted to Clime’s internal products.

Meanwhile, the decision to sell to Infocus’ Darren Steinhardt was an “easy decision”, which led to Infocus growing to 200 advisers and $16 billion in funds under advice. 

“Darren is what a licensee head should be; you have to be involved in the licensee at every level. It was an easy decision to sell to him.”

Cost-out process

For Baragwanath, the consultant was appointed as a director in July 2024 and promoted to managing director following the exit of Donat in July 2024. He said there is capacity for a formal replacement for Donat, but that the firm doesn’t necessarily need an additional manager in its current form.

Baragwanath has 18 years’ experience across distribution and sales at Aviva and BT Financial Group, consulting and leadership, and originally began his career working as a paraplanner and financial adviser. He has also served as a responsible manager at multiple AFSLs.

Following his appointment, he has been enacting a cost-out process to reduce overheads and increase revenue, which took up most of the second half of 2024 and included the exit of three non-executive directors, numerous appointments, the divestment of Madison, and finalisation of its IT system review.

As well as Donat, non-executive directors Andrew Coleman, Claire Bibby and Susan Wynne all resigned from the board in October, and Clime subsequently appointed chief investment officer Will Riggall and tax lawyer Henry Davis to the board. 

“We are trying to keep costs low,” he said. “I’m on half the salary I could be getting elsewhere because it was important to practise what I preach. I’m impatient and I want Clime to have more clients, but we had to do the cost-out first and I’ve turned it around in six months.”

Matt Rencken joined to manage the private client team, lawyer Angela Wang was appointed as joint company secretary, Matt Deane joined as operations manager for managed funds and market assets, Anshul Thapar as operations manager for off-market and direct assets and, most recently, Adam Sferruzzi as portfolio manager.

In an ASX statement in October, Baragwanath said “no area of the business would escape scrutiny” regarding expense reduction and cost-cutting.

“Our major shareholders and I are in complete alignment that every expense in the business needs to be reviewed and reduced where possible. No area of the business escapes this scrutiny,” it stated at the time.

This allowed the firm to return to a small profit in the December quarter, following a statutory loss of $3.8 million in FY24. Clime’s funds under management (FUM) saw a small decrease of 1.8 per cent from $1.66 billion in the September quarter to $1.63 billion as at 31 December 2024. This was primarily due to market movements at the December close and pensions paid to retired clients, the firm stated.

Meanwhile, its funds under advice (FUA) in the Clime Private Wealth division also saw a slight decline of 1.5 per cent, from $967 million in September to $953 million in December.

Although he has a consultancy background, he denies he was brought in to improve the business and sell it on.

“I didn’t come in to fix it up and sell it on. It’s a great company with unique elements that I want to turn into what it should be. I want to take it as far as I can.

“We’ve completed our cost-out process and now we want to grow. It’s easy to kill stuff off, and that’s what we’ve been doing but harder to grow it. We want to be a bigger, diverse offering, to pay a consistent dividend and have an office in every capital city.

“We have to get back to what Clime does well. The industry works best when everyone sticks to their knitting as intermingling these causes inefficiencies, cost burden and, at worse, potential regulatory problems.

“I see clear skies ahead for Clime.”