News in Focus: Rebuilding the Tower

Tower Australiahas been making big news in the past few weeks. First there was a proposal of a $200 million capital raising effort to retire debt, then the Guinness Peat Group (GPG) started to buy up a stake in the group and is now looking to increase that to nearly 30 per cent, which has met mixed reactions.

While an independent group, Grant Samuel, supported the capital raising, and GPG’s part in it, the expert also touted it as the last chance for the group to extricate itself from its troubles.

Tower chief executive Jim Minto is quite open about what those troubles are and how the group came to be where it was, but he and the new team underneath him regard the changes as an effort to rebuild the group from the ground up by returning to its risk roots.

“Much of what has happened is because the group is at the start of a new journey and we are taking a very back to basic’s approach,” Minto says.

“We have committed the group to being a specialist non-bank risk provider with platforms and as such, we have pulled back from the provision of managed funds in the market.”

Minto says the reason for the withdrawal from the managed funds space was that while the group had products and a funds management operation, it never transcended the middle space it was in.

The group has also dropped a number of other projects in the areas of software and platforms, and will focus on its existing technology — Arc and Portfolio Management Services — pitched at the lower and upper ends of the advisory market.

“We are doing fewer things better as a result of the refocus late last year, but in just saying that, it was a hard thing to do considering we had to lay off a number of people and merge or close business units,” Minto says.

In fact, last year could be said to have been the group’sannus horribiliswith 120 jobs cut from across the group, its online annuity business sold, the Tower managed funds business merged back into the wider Tower Australia group and its corporate superannuation business downscaled.

Further dilemmas included a $32 million write down of its Australian financial planning business,Bridges Financial Services, and the closure of its in-house salaried financial planning division, Tower Financial Consultants, in December.

The first six months of this year brought little respite with a further 120 staff retrenched and the group dropping its growth style Australian shares product and replacing a number of senior management figures.

This change in management led to the appointment of a new team headed by Minto and includes head of sales Stephen Robertson, head of marketing Mark Sheldon, a new national sales team led by Jordan Hawke, a new underwriting team led by Phil Hill and specialist risk manager Michael Downey, all brought in to focus on the repositioning of the group.

The group says it has also tightened its product offerings to fit in with the new positioning, swinging the focus to the risk, superannuation and retirement markets.

The group recently dropped its growth style Australian shares product, moving instead to an internally managed, style neutral, multi-manager offering.

With the shift away from funds management, the group says the aim is to get more exposure and business through risk-based adviser dealer groups.

“The new focus is on risk, with investment as a side thing, so we’ve been focusing on increasing product and service quality levels to service risk advisers,” Robertson says.

He says the group is really planning to “go out to the market in a few months” with a new campaign, including an announcement regarding the new sales strategy to be made in the third quarter.

In the meantime, the restructured Pivotal dealer group will be relaunched and Minto says the group is still on track to meet sales targets for this year through the repricing of its risk products and increased use of its platforms.

But Tower is not out of the woods yet.

At the time of going to press, it was due to head to court to meet with the Australian Securities and Investments Commission regarding alleged incorrect payments made to its superannuation policyholders.

Also, the group’s shareholders have yet to approve the increase in the size of the GPG stake at an extraordinary shareholder meeting on July 4, despite recommendations by independent consultancy group Grant Samuel that the move would greatly assist the group.

However, both the board and management of Tower believe that the proposal, together with a new senior debt facility, use of internal surplus funds and possible asset sales, will provide sufficient funds to meet its immediate debt repayment objectives and stabilise the business.

No doubt investors, planners and the general market will continue to carefully watch each and every step. As Minto says: “Now it as much about what we do not do as what we really do.”