Fiducian’s Auxilium platform identified as ‘disrupter of the disrupters’

Fiducian’s Auxilium platform has been identified as a strong capability at the firm, having recently opened up to external advisers for the first time.

Yesterday, Money Management identified Fiducian as one of the best-performing listed advice licensees in terms of share price growth. Over one year, it has returned 28 per cent while its returns over five years are 56 per cent.

The firm was founded by Indy Singh in 1996 and currently has 80 advisers, although it is forecast this could grow to 150 in the medium term. This is divided evenly between salaried advisers and franchisees.

In a Veritas broker note about the licensee, it highlighted the firm’s platform administration business as an opportunity for growth. Described as a “disrupter to the disrupters” of the legacy platforms, it recently opened up to external planners for the first time.

Movement of funds onto Fiducian’s system can lead to a 100 bps uplift in Fiducian revenue with reduced costs and better administration for the client, it said.

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“We have modelled a what-if analysis for Auxilium – assuming that it gains only 500 financial planners (not a 1,000 target from a 15,000 planner market) and the average planner has $40 million of FUM, and Fiducian only gets 30 per cent of this. At 20 bp – it quickly adds up to a material estimated $12m in additional revenue at high margins, given the platform has already been developed and is managed via internal IT staff/systems. Auxilium has 103 external planners already using it (in some capacity) and over $100m in FUM.

“We estimate that up to $1.5–$2 billion in FUMMA may sit on external provider systems and that insourcing some of this over time is an area of opportunity for Fiducian.”

Rahul Guha, executive chairman at Fiducian Services, said: “We have a full service platform administration offering where we hold both IDPS and RSE licenses for our investments and superannuation offerings and all systems are developed and supported in-house giving us absolute scaleability and controls over the development programs.

“Given all development and administration staff are employed directly by us as part of the Fiducian Group, we are able to retain stable margins on the roughly $3.5 billion in our platform. In recent times, we have started promoting our platform services through a low-cost product, Auxilium, which has generated quite a fair bit of interest in the market and attracting a growing numbers of advisers registering in the platform.”

Another area of opportunity is the firm’s “manage the manager” system which has helped to drive inflows and reduced adviser time spent with external business development managers who are trying to get on the system. The firm has stated it prefers its advisers use its own internal services rather than stockpicking themselves.

However, the broker flagged this may not suit those advisers who are used to using external products and conducting asset allocation themselves.

“Fiducian has developed a ‘manage the manager’ system of investments and manager selection. This has been developed through in-house expertise and does not rely on external asset consultants. The track record of fund manager selection has been extremely strong. 

“Fiducian puts considerable expertise, time, experience and research into picking high-quality fund managers that blend well with their current roster and reflect the underlying investor’s needs.”

Regarding its financial advisers, a strong compliance culture and adherence was noted including regular face-to-face compliance checks, sampling and spot-checking which had contributed to keeping complaints at a low level.

“We also believe that Fiducian adviser numbers continue to grow organically versus other many other industry players that are highly likely to still be losing advisers.”