Managed Accounts to invest in advisory firms
Transcription of Finance News Network interview with Managed Accounts Holdings Limited (ASX:MGP) Executive Chairman Don Sharp
Lelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me from Managed Accounts Holdings Limited (ASX:MGP) is its Executive Chairman Don Sharp. Don, welcome to FNN.
Don Sharp: Thank you for the invitation.
Lelde Smits: Managed Accounts Holdings has just announced it will create a wholly owned subsidiary Planner Holdings Limited to invest in advisory firms. What was behind the move?
Don Sharp: Yes, that’s a good question. The first thing, and most importantly, is that we want to assist our planners in the market place expand their business. At Managed Accounts we’ve been able to assist them in their efficiencies and now they’re able to expand their business.
Lelde Smits: Could you outline what is the company’s objective?
Don Sharp: The company’s objective is to take initial investments in financial planning businesses up to 25 per cent and then at a later date acquire up to 50 per cent. But, at no times will the Planner Holdings control the dealer group.
Lelde Smits: Does Planner Holdings have plans to list and how much will it initially invest into advisory firms?
Don Sharp: Yes we do have plans to list, Planner Holdings will be an independent company from Managed Accounts and we propose that after two years from the date of the first investment we will be looking at listing the company. And, we intend to invest into Planner Holdings up to $5 million to be used to take initial stakes in planning groups.
Lelde Smits: What kind of advisory firms will you be targeting?
Don Sharp: The bulk of Managed Accounts client base are financial planners that specialise in or have large holdings in self managed super funds. So, they are the target that we are looking at and from that we can assist them in expanding their business further.
Lelde Smits: How do you expect the advisory firms will use the funds that you have invested to grow their businesses?
Don Sharp: The first thing is that we are looking at helping those planning groups to expand their existing business by acquisition. So, what we will be doing is assisting them in funding the purchase of another dealer group or a book of clients to expand their business.
Lelde Smits: How does Planner Holdings plan to work with the advisory firms in the future and what kind of returns are you expecting?
Don Sharp: The planning groups that are using Managed Accounts services are highly efficient and from that point of view it increases our profitability, so they are profitable. What we are going to assist them doing is expand their business further by acquisition and that will allow them to further increase their profits.
Lelde Smits: How are you financing the investment?
Don Sharp: We currently have over $6 million in cash and we propose to utilise up to $5 million of that to invest in Planner Holdings which in turn will be investing in the dealer’s businesses.
Lelde Smits: Finally Don, what will Planner Holdings’ first milestones?
Don Sharp: First milestone is to invest up to $5 million into dealer group businesses. That will give us interests of up to 25 per cent in their businesses. The second step is then to look at listing, and at that point the planners have already utilised the cash to buy a book of clients and expand the business, increase the profitability, and the second tranche that we’ll be acquiring through issuing shares in Planner Holdings will be at a higher price because we will be expecting their profits to grow by maybe up to 50 per cent.
Lelde Smits: Don Sharp, thank you for the update from Managed Accounts Holdings.
Don Sharp: Thank you very much.