Australian-owned fund infrastructure firm, Sargon, plans to attack the NZ market from both the front-end and back-office with a robo-advice system lined up beside its online trustee offering unveiled last week.
In a release, Sargon chief, Phillip Kingston, confirmed the Australian financial services conglomerate, would roll out the Decimal robo-advice service in NZ – pending regulatory approval – to complement its fund supervisory services currently marketed under the Heritage Trustees brand.
The highly acquisitive Sargon bought the-then ASX-listed Decimal for over $5 million last December while shelling out $10 million for Heritage in the same month.
Decimal was founded by Australian financial technology pioneer, Jan Kolbusz, who also had a hand in developing the first successful investment platform across the Tasman, Asgard.
Kolbusz stepped back some time ago from the day-to-day operations at Decimal, which originally targeted Australian financial institutions and superannuation funds looking to bolt-on robo-advice.
“[Decimal is] the only technology built exclusively for enterprises to add digital-advice to their financial products,” according to Sargon.
The robo-advice system provides “self-service, rules-based, automated and compliant financial advice to investors, which in turn helps them to improve investor literacy and outcomes”, the release says.
If it seeks a licence under the current Financial Markets Authority (FMA) exemption process, Decimal would be the eighth robo-advice service to launch. Although, Sargon may have to apply for a full licence under the Financial Services Legislation Amendment Act (FSLAA). The FMA licensing process for FSLAA starts this November with the new advice regime, which recognises robots, due to go live next June.
But the auto-advice engine is a minor cog in Sargon’s grand designs to shake-up NZ’s sleepy fund supervisor market (previously known as trustees), which is currently dominated by the big three: Trustees Executors (TE); Guardian Trust; and, Public Trust.
Heritage, which has a long and colourful history in NZ, only gained its supervisor licence late in 2017, joining the three main players and niche firms, Anchorage and Covenant, in the corporate trustee game.
Sargon cleaned out the Heritage ranks in June, removing recently-appointed chief executive, Stuart Howard, and business development leader, Lloyd Wong, among 10 staff cuts. The company also closed down five NZ offices and exited the personal trustee business it previously operated under the auspices of Heritage and New Zealand Trust Company (Sargon’s first NZ purchase in October) to focus on the KiwiSaver and fund supervisor market.
To date, Heritage has landed just two supervisor gigs, both start-ups: robo-advice KiwiSaver operation, Kōura Wealth; and, digital-only index fund provider, Kernel Wealth
Of course, Sargon will have to branch out beyond the niche market of start-up firms beginning with the letter K to justify its initial $10 million investment and promise of up to $25 million more.
Sargon had already sunk an undisclosed figure into its earlier 2016/17 NZ invasion plans following an aborted, and litigious, takeover attempt of Bath Street Capital, the Andrew Barnes vehicle that owns Perpetual Guardian.
If it all goes to plan, Kingston et al may ultimately carve out a place in the NZ market at a steep discount to the reported $200 million sum it offered for Bath Street.
He told a NZ crowd last week that the just-opened Sargon Trustee Cloud platform would enable local funds and KiwiSaver schemes to “lower costs, reduce systemic risk and improve compliance outcomes, with a laser focus on building better financial products for Kiwis”.
According an industry source, the Sargon tech could prove appealing to NZ investment scheme providers under pressure to deliver more client services, greater regulatory reporting while lowering fees.
Historically, NZ fund providers, KiwiSaver schemes and the like have been reluctant to change supervisors given the often-painful administrative consequences.
However, over the last year or so the trustee inertia appears to have eased. In March this year, for example, Harbour Asset Management shifted supervisor from TE to Guardian, following Devon Funds, which made the same move in the previous year.
ASB also consolidated its fund and KiwiSaver scheme supervisor duties under Public Trust in 2018, dropping TE from the trustee role it had served in the bank’s retail investment products.
The pared-back Sargon NZ business is headed by Edward Russell, with a board that includes non-executive director, Mel Hewitson, who quit as TE head of governance and oversight last year.
Hewitson is a director Sargon NZ (formed this June) along with Russell, Richard Hanna, Stephen Titter and Sargon Australia chief financial officer, Darran Goodger.
Sargon NZ is ultimately owned by Sargon Australian entity, which features SC International Holdings 2 as the sole shareholder.