The Sargon Australia-owned Heritage Trustees has revealed a third corporate supervisor client after winning the gig at $180 million non-bank deposit-taker, Christian Savings.
Heritage replaced Covenant Trustees in the role this June, ahead of securing its first investment scheme clients, Kōura Wealth and Kernel Wealth. (Christian Savings is not to be confused with the Anglican-run Christian KiwiSaver scheme, formerly known as Koinonia).
Covenant Trustees is part of the Andrew Barnes-owned Complectus that includes Perpetual Guardian and Guardian Trust.
Christian Savings specialises in term deposits and loans to church-based organisations but it also offers an investment option supplied by the DecisionMakers financial advisory group.
The DecisionMakers ‘Stewardship Portfolios’, held via the Aegis platform, invest into AMP Capital, Harbour Asset Management and Mint Asset Management funds as well as the in-house Christian Savings term deposits.
Furthermore, the Baptist-originated financial services group plans to start offering members a KiwiSaver scheme – likely provided by a third-party rather than an in-house product.
James Palmer, Christian Savings chief, said the group “selected Heritage after a seven month due diligence process, as it is obviously an important decision for the organisation and our depositors”.
“We have had significant growth over the last four years since becoming licensed as a non-bank deposit taker,” Palmer said.
The organisation has $180 million in loans under management, including $129 million to churches and charities across NZ, and gross capital of more than $19 million.
While Christian Savings does at least have assets to administer from the get-go, unlike start-up Heritage clients Kōura and Kernel, it falls into similar niche territory.
However, Phillip Kingston, Sargon co-founder, said Heritage had a “quite a number of other deals in the pipeline” including more mainstream schemes.
“We have interest from each segment of the market,” Kingston said.
But it’s the mandated growth in KiwiSaver that prompted Sargon to shell out $10 million for the newly-licensed supervisor firm Heritage last December.
According to the Financial Markets Authority (FMA) 2018 KiwiSaver report, supervisor firms collected a combined $6.3 million in trustee fees over the 12 months to the end of last March on total scheme assets of $48.6 billion. The FMA figure might understate the true amount given some schemes report trustee costs under bundled administration fees.
Regardless, given supervisor fees are tied to assets under management – typically starting at about .003 per cent and scaling back for large schemes – the rising KiwiSaver market (now about $60 billion) remains an attractive growth prospect.
Kingston said Heritage fees would be competitive but the firm was pitching mainly on the basis of its supervisory technology platform, unveiled last month as the Sargon Trustee Cloud.
Sargon’s supervisor system is part of a package of six technology products that includes the Decimal robo-adviser.
“The actual technology may not be hard to replicate but it’s hard to copy our IP – how we have digitised the workflow to make it easy for all stakeholders to use,” Kingston said.
By his reckoning, Sargon has a three- to five-year head start on the opposition with the scale of its digital trustee tools.
As reported last week, Sargon is also tailoring Decimal for NZ conditions with several providers interested in the plug-and-play robo-adviser.
“They like [Decimal’s] audit function in particular,” Kingston said. “If there is a complaint you cans see what PDS was issued to the client at the time and track all the details so the regulator can see the advice as it happened.”
Sargon built the technology suite originally for the Australian market but has adapted it for Hong Kong and NZ conditions.
Kingston said while there are differences between jurisdictions, most of the core operations are compatible.
“For example, NZ and Australia have different PDS [product disclosure statement] rules but the technical process of reviewing them is the same,” he said.
The cross-jurisdiction links could also prove attractive to NZ financial services firms that operate in multiple countries, Kingston said, such as the Australian-owned banks that dominate the KiwiSaver market.
“We can offer them a one-stop shop across the region,” he said.
Over the last three years Sargon has made nine acquisitions, mostly in Australia, but would likely ease off the buying spree for now, Kingston said.
“If we see complementary businesses – including in NZ – we will have look at them,” he said.
Firstly, though, Sargon plans to build up its NZ team, after clearing the decks in June. Kingston said the NZ crew would be split about half between tech specialists and traditional trustee staff (mostly sourced from the wider legal profession).
“We’re making a substantial investment in NZ,” he said.
And success here could play out in a couple of ways over the next 10 years, according to Kingston.
“We’re prepared for two scenarios,” he said. “A technology-driven, low-cost, high-quality market. Or one where more complexity means clients require extra services.”
The privately-held Australian company has raised about A$110 million in equity and numerous debt issues sourced from a range of high net worth individuals in Australia and the US, Kingston said.
“We haven’t taken any money from financial institutions,” he said. “We’re well-funded but we’re always looking for new investors who have the right values and are there for the long term.”