Fiducian Group Ltd (FID) Earnings Call Transcript & Summary

Good afternoon, all. Thank you so for joining in. My name is Rahul Guha. I'm the Executive Chairman of Fiducian Services in Fiducian Group. With me, I've got Indy Singh, who's the Executive Chairman of the Fiducian Group. Indy?

Well, good afternoon, ladies and gentlemen. I can't see all of you, but welcome. Thank you for taking the time out to hear from us about our results. And, obviously, we really appreciate your support and confidence in the company. Thank you so much. We got a presentation here, which Rahul can run through, which covers some of the stuff, many of you would know. And I think we can open for questions after we finish. So we'll try and be brief. There are some changes to what's happened, and I'll leave Rahul to present his slide show.

Thank you, Indy. So as in previous years, we likely to give opportunity for our shareholders, for our retail shareholders also. And we really enjoy the time presenting our results to you directly, and you have got to direct access to the head of the company, as well as any questions that you have, you have got the ability to ask us directly. I'll start off with the results of what we wanted to cover today is the business overview that we have got, the financials, and we can -- as Indy said, we can go through questions as well. Our business, mainly 3 lines of businesses, the platform administration, funds management, and the financial planning. Starting off with the -- starting off the platform administration business. This year, FY 2024, has been quite strong. We have been able to generate net inflows of $281 million from our aligned dealer groups, which is Fiducian Financial Services. Almost all of the net new inflows that come in from our aligned dealer groups, most of them, if not all of them, go to Fiducian Funds and Fiducian platform. Now, what I find interesting is really the next bullet, which is the funds under admin. So, as you know, the driver of our revenue is really the level of average funds we hold during the year. If I look back FY '23, we had average funds of $3,027 million. FY '24, it increased to $3,349 million. Now, when I compare that with the level of funds as of July 2024, we have got $3,668 million. So an increase of roughly about $320 million compared to the average that we had in FY 2024. So what does that mean? Of course, the revenue that we have got in FY 2024 is based on this $3.3 billion of average funds. Now, if we continue the same level of funds that we have in July, that gives us $300 million, $320 million extra funds in the platform. And applying the margins that we have in platform could at least generate an additional revenue of $1 million in the FY 2025. Now, we look at our platform and what we believe is, it's a very competitive platform and it's got the cutting-edge technology and all the features that the advisers want, all the functionalities that the advisers want. We make sure that we are able to make it available through our continuing development program in the Fiducian platform. On the next slide, if I just look at the level of flows, and as you know, if you look at the industry across and any big name you pick, any of the established players that you pick, all of the -- every single one of them over the last, at least 4 or 5 years, have had negative net outflows. Our business is very fortunate to have the support of the aligned dealer groups, as well as the IFAs. And on the left side of the screen that you can see, the net fund inflows has been positive over the last 5 years, this slide shows, but even if you go back, you'll see there's always positive net inflows that we have been able to deliver with the support of our advisers. Looking at the platform revenue and profit before tax and average funds on a margin -- funds under administration. As we have grown the funds under admin, as you can see on the green line, the revenue, as well as the profit before tax has grown in line with the increase in the platform monies as well. Now, we wanted to spend a couple of minutes on the new platform that we have launched, which is the Auxilium, as well as wanted to give you an update on the Badges that we have. We launched a new product called Auxilium and that product is mainly catered to the IFA market. It's loaded with functionality and the level of service that we provide in the new -- in the IFA Auxilium product is again market-leading, and the level of services ahead of the -- what the industry provides to the advisers. In terms of the cost, this is, if not the lowest product, it's definitely one of the lowest product in the industry as of now, the lowest cost product. And so far we have been able to -- in addition to Auxilium, we have been able to rollout 4 different badges as well. We have quite an extensive investment menu depending on what the advisers want. We are very quickly able to add the investments options that the client wants and the advisers want to this product and the badges. So the only differentiating factor is that, within the core product -- within the core platform, we also offer the Fiducian Funds, but in this product, we don't have the Fiducian Funds. And as a result, we can ensure there's no cannibalism between these products that we offer. Now, so far, as of end of June, we have got roughly about $102 million already in this platform and badges, and we have been able to also generate positive net inflows in the last current financial year. Indy, do you want to maybe add anything more as to what you're seeing in terms of market and market opportunities for this product?

You see, we had the Fiducian platform, and we were told that, I questioned some of the stock brokers why our business, which has constantly been profitable with growing earnings is valued at 13, 14x earnings. And they said, well, you're an EBITDA company, whereas the other competitors, like HUB and Netwealth are disruptors. And I said, well, surprise, surprise, we do the same thing. We administer just like they do, and we also take clients money, administer and report to them the valuation of their assets. But if you feel that because we got a captive audience, then we need to tackle the external market. We then launched Auxilium, which I think is probably the cheapest market -- platform in the market. And we don't provide Fiducian Funds. Fiducian Funds is something special. It's a value proposition, that is only available through the Fiducian platforms. The super and nonsuper. Auxilium is open to anyone and any product can go on, provided the trustees are happy to allow it on the superannuation fund, but on the IDPS, which is Investor Directed, you can have what you like.

That's right. No, thank you, Indy. Just moving on to our funds management part of the business. So, as you guys know, we are a multi-manager, which means that we don't select stock, but we select the fund managers. And our objective is to not to shoot the lights out. Our objective is to generate little bit extra returns compared to the average by taking little bit less risk compared to the average. And in our experience, what we have gone through is that, if you are able to do that 3 years on a row, 5 years on a row, we are able to end up, land up in the top quartile performance. Very similar to these numbers that I shared for the platform. If I look at the funds management business, last financial year, we had about $4.8 billion average funds during the year, which has grown to about $5,340 million. So with the extra $500 million-odd that we have compared to the last year's average, again, if you were to apply the margins, we could potentially generate additional revenue of $2.4 million in FY 2025 provided the market holds. We have also been able to launch out SMA products and as of June, all of our diversified products in the Fiducian superannuation service is offered through an SMA structure where the clients, not only have the benefits of the Fiducian Funds and the management of the multi-manager, but has got the ability to change the allocations as they fit in depending on their personal circumstances and the needs. Now, looking at the performance, as I mentioned before, our objective is not to shoot the lights out, but overall, in the last 10 years ranking that we looked at, out of 40 out of 64 rankings, we have been able to stay in the top quartile. We have been able to deliver top quartile returns across more than 150 fund managers in the Zenith survey. Now, Indy, do you want to maybe expand a little bit more on some of the performances that we have had? And maybe give the context of ultra growth fund on 3 years, 1-year, and also, touch upon technology and India funds?

Sure. Well, you see capital stable, balanced and growth, there are conventional funds that you would know of with large cap stocks, large cap securities, fixed interest and large MSCI-type securities for international. The ultra growth is a specialist fund, which is for a long-term higher return, higher growth. It has smaller companies, Australian smaller companies, which eventually over the long-term is expected to do better than the large caps because they're nimble, they can move fast, they can make changes, they're flexible. It has emerging markets which is the growth area for the rest of the world. It has technology which to us is, at least for the developed world, if there was no technology, we would hardly have any GDP growth going forward. And it has property and global smaller companies. So it has some tremendous advantages for investors who want to stay for the long-term. Now, we all know that over the last -- except for the last 1.5 years, 7 to 8 years, smaller companies have not done as well as large companies. Emerging markets have not done as well as the large cap stocks on the MSCI and S&P 500 because of the 7 -- magnificent 7, all the tech stocks which have propelled these indices up and they're not represented on these small companies in emerging markets. So it has been a bit weaker. But if you look at it going forward, in 10 years, it has delivered the highest return out of all the other 3 conventional funds and ultra growth is given 8.7% a year. When you look at last year when technology came back, it again ranked -- again, it delivered 13.3%. The ranking is a strange one because it's categorized in various funds, which are hedge funds, black box-type stuff, alternative investments, as they call them, investments in metals, copper, that sort of stuff, timber or lumber. And our ultra growth fund is purely liquid, listed companies all over the world. So there could be a slight difference, but the return eventually will be superior. When you look at the other specialist funds, technology, India. Technology had a bad year, as you can see, 3 years ago when technology stocks fell. But then the markets quickly realized, or investors realized, that technology is there for the future and they jumped back into it. So you can see that the return has been good. And if anyone had been there for the last 10 years, or even 15 years, they would have quadrupled their money straightaway. Same with India. It's a specialist fund. We put it through because we thought that there would be an opportunity for investors going forward as India was opening up its economy, as you would have learned. So, yes, the funds are going as we expected. They're delivering good results and our clients and investors are pretty happy about that.

This current slide just gives a visual on the average FUM, how it's increased over the years, and also the revenue and profit before the tax that we have been able to earn from the funds management business. Now, funds management business is quite an interesting one, given that we are a multi-manager. So what does that mean for the clients? So clients are able to come in as an example, say, balanced fund. So if they were to look for any balance fund in the industry, they'll be paying a fees roughly about 90 basis points, 95 basis points. So our balanced fund fees is very similar. So from a fee point of view, the clients are not worse off. Now, what's the benefit that they get? So if they were to go to a specialist fund manager, they'll be able to get access to 1 fund manager through their investments of $5,000, $10,000, whatever they want to invest. Through us, when they invest that same $10,000, they're paying the same fees, but they get access to, Indy, about 29 fund managers.

29 different managers. So even for $1, you put a dollar in our platform in a particular fund, that dollar will be split into 29 different fund managers.

So you get the diversification. You can derisk the single month fund manager issue, keep out some ratio. So from a client perspective, it's definitely a winner model. Now, what about the shareholders? What about the Fiducian? Now, the fee structure that we have with the fund managers, it's scalable, which means that more funds there are in our platform, lesser fee we'll be paying to the fund managers. And as a result, there's a potential for the margins to increase for Fiducian as an organization, which will flow through to the shareholders also with the growth in the FUM. So with that, I just wanted to touch upon the -- our fintech capabilities. We are one of the only ones, if not the only one actually seen in the Australian industry in the financial services industry where we own the technology for the platform, we own the technology for the client reporting, the front end, but also the financial planning software. So everything is integrated, fully integrated and have been developed by our own IT team in-house. We do not have any legacy issues. There's no legacy products. So no legacy issues in the system also. This system is going strong -- quite strong for quite a few years and it's a very scalable system as well. If I take the example, about 12 years back, if -- when we look at the platform, we had roughly about $900 million in platform. And at that point of time, we used to have close to about 20 people providing the service to our members for $900 million. Today, we have got more than about $3.5 billion in our platform, and because of the investments that we have made through the system and the scalability and the efficiency that we have added and the straight-through processing we have added, we have roughly about 14 people in our administration team, which is supporting the client number and the funds under administration volumes of 3 or 4x compared to what we had about 12 years back.

So it's quite an achievement that just 14 people now when we had about 20-odd in the past for 1/3 of the money.

Now, financial planning business. We look at it more of an enabler of steady flows in the Fiducian platform and Fiducian Funds. We have been able to expand our footprint. We opened up 3 new offices and we are very proud to say that we have got offices all across Australia in each one of the states. So currently, we have got 48 offices across 80 financial advisers, about 40 of those financial advisers are salaried and the rest are franchisees. What we looked at is also more of targets of the financial advisers as to what the targets they have and also the focus on the revenue which we expect to uplift in the FY 2025. Our focus is definitely on the quality what we have experienced over in these 28 years presenting through this company, but also otherwise, what we have learned is that, in this industry, it's not a volume game, it's not the matter of quantity, but it's a matter of quality. Some of our peers have had 1,000 financial advisers, 1500 financial advisers, but our focus has always been on the quality of the financial advisers that we are attracting and not so much on the quantity. Indy, your views on that?

Well, you're right, we don't intend to really grow beyond 150 advisers, not like the others have had thousands and 1,500 and then start culling them or firing them and stuff, but we're not a hire and fire company. But we can have about 150 advisers over the next 3 years, 5 years, and put scales on them that they need to place at least $6 million of new money a year. That will get close to $1 billion coming in. And I don't believe there is any other advice group that gets anywhere near that, even up to $400 million. So it's a good model. We just want good quality advisers, good advice, they get good training, they get good service. We have practice managers to review and monitor them. In fact, I think we have about 1 practice person or quality assurance person for about 6.5 advisers, which is probably the highest ratio in Australia. But we just have to be careful and make sure that everything they do is done properly.

So in the financial planning business we have roughly about $4.8 billion and of that about 1/3 is sitting in the external platform. So what does that mean for the clients and the advisers and the Fiducian Group? Now, when we acquired businesses, and as you might recall, we acquired the People's Choice Credit Union business, financial planning business back in February 2022 in South Australia. Now, when we acquire businesses or even when new franchisees joining Fiducian network, it's more likely that their funds are in the external platforms. Now, as the adviser reviews the client and goes through the process, if it's right for the clients, the adviser may make a recommendation to move their funds into Fiducian platform. And again, if it's right for the clients, they may be recommended to move the money into Fiducian funds as well. Now, there will always be situation where the money has to stay in external platform. As an example, there might be annuities, there might be Centrelink issues, they may decline, may lose Centrelink benefits. But excluding those exceptions, we see that there's an opportunity of at least a part of this $1.6 billion could move into Fiducian platform and Fiducian Funds and potentially could generate additional revenue synergies through the margins in the platform and the funds.

That's fine.

And just a quick update on staffing. So total staff we have got is roughly about 180. The staff level has remained pretty stable compared to last year. Slight decrease but actually the decrease is masking an increase that we have had on the services area. So as you might recall, as I mentioned before, we bought a business in PCCU in South Australia. And when we bought the business, since then some of the advisers did not join us, and as a result, we have lost some of those clients. We expect to lose about 40% of the clients and funds that we are buying in and the actual experience has been very much similar. Now, we already factored that into the prices that we paid. But what it meant was that, we took on roughly about 40 new advisers and support staff from PCCU. And as the level of clients dropped, we did not have the same level of need of the support staff. And through the natural transition, we lost about 10 people which we haven't replaced. But what we have done is, as we are expanding our business into the IFA market, as well as to enhance our service level, we have put in extra resources in our back offices to make sure that -- as well as the IT team, to make sure that we are able to cater to the high level of service. So net-net, we have got about 5 reduction. Now, staff is very important to us and that's our #1 strength in our business. I myself have been working 12 years in this organization and I'm still one of the newest person that I get reminded -- one of the newest boys in the organization.

One of the new boys in the senior management team.

We want to look after our staff and we have also made sure that through the COVID period, through the cost of living challenges that we have got, we are still able to give the increases to salary -- to these salaries to the staff and also increases to the bonus. Staff retention is very key for us and we are very pleased to report such work that we have got a very high retention, very low turnover in our business. Now, moving on to the financials. I don't intend to go through each one of these rows and metrics. But on a high level, as you can see, operating revenue has gone up by about 10%. EBITDA has gone about 16%, 17% underlying EBITDA. Net profit have gone about 17% in the last financial year. Our segment reporting, all of our key businesses, which is funds management, financial planning, platform administration, so all of them are generating positive contributions to the group. And corporate services is the ASIC listing cost, as well as the support cost. Over the year, we have been able to bring it down as well. So with that, I just wanted to maybe share this slide and this just shows how the Fiducian share has performed over the last, what about 12-odd years before the market announcement versus the ASX All Ords performance? And this includes accumulated performance also. And you can see that the share price -- that the Fiducian share has very much outperformed the ordinary index performance. And in fact, over the last year, our franked dividend has been 39.3% (sic) [ $0.393 ]. And anyone who has invested this -- in Fiducian shares in the last 12 years has benefited -- would have benefited very much on the capital appreciation, as well as the yield that they would get is close to about 40% yield if they had held the shares over the last 12 years. This is the slide I was referring to. So anyone who's invested $1,000 in -- back in July 2012 would enjoy an yield of 41%. That's excluding the franking credit that they have got. And in fact, out of the 24 years we have been listed, 18 of those years we have been able to generate double-digit earnings growth in terms of underlying NPAT. Our FUMAA, which is the funds under management, advice and administration, as you can see, has grown quite steadily over the last 5 years, has grown about 80%. And we have given some stats on the closing as well. Now, projecting the potential, just giving a caveat. This is not really a forecast, it's more of a conceptual representation. So what does that mean? So this slide, you can see some of the lines and graphs are solid and some of them are dotted. All the solids are actuals, and the dotted and shaded are really the conceptual projections. So I'll take a minute to go through this slide, what this means. So the red line is the expenses. So as you can see, over the years, as we have grown in terms of our funds, the expenses have grown. In 2013, we had $3 billion, as I mentioned before, $3 billion FUMAA. So today, we have got about $14 billion FUMAA. So in 2013, the level of expenses that we had, it certainly grown our expenses, our total cost, what it is today. Now, if you look at the green line, the revenue back in 2013 versus what it is today, that has grown also. And if you see the difference between 2013, the difference between the red line and the green line versus what we have today is, the jaws of growth, that has definitely expanded. And that's very much shown in the horizontal graphs, which is the EBITDA. So as we have grown our FUMAA, the EBITDA has grown very strongly. And what could happen, as I'm saying, this is not forecast, but what could happen is, if EBITDA was last -- in June 2024 was $13 billion. And if it were to grow by $1.5 billion across the right side of the graph, our cost will definitely increase. But what you can see is the green line will grow much faster rate compared to what the red line could potentially grow, and that could potentially go straight to the bottom line and the EBITDA which is shown in the horizontal graphs. So that's the potential of this happening as we are able to grow our FUMAA. Now, what we have experienced is acquisition of PCCU, that's a good example to take. February 2022, we acquired the business and we have been able to -- through that business, so, so far, as of June 2024, we have been able to -- that is that part of the business has been able to add $300 million into our platform and $300 million into Fiducian Funds. And that has definitely helped us to accelerate some of the growth in the green line, on the revenue line. So that -- there is that potential as we are able to grow the business. Some of those can directly go to the underlying EBITDA lines. Indy?

That's fine. I'm happy for questions if we...

So those were the main things that we wanted to share together with you guys, and more than happy to take any questions from the floor that you might have. You may just need to unmute yourself if you do have any questions.

Indy, Rahul, well done on the result. Maybe just a question on the Auxilium platform. How are you typically winning those new external customers?

Yes, well, thank you for that question. It's not an easy ride, I can say, because the others have been there well before us and seem to have a fairly large market share, but we're making inroads. And it's a question of also modifying our software and systems to accommodate what these people want. They're not Fiducian advisers who will accommodate what we ask them. But there are people in the marketplace who say, I want this, I want to apply in this way, I want the application form changed this way, and we're accommodating all that. There's about $200-odd million come through in the badges and external platform. And I think when I came in, there were the 3 distribution people were here and they're having a meeting. And now, I just look out and I see they've all gone on the street, they're all looking around. They're going to meet clients, they're going to meet advisers and trying to get more business in. So there's about 10,000 or 15,000 of them around. We have to be careful who we bring on. We have to be careful about their practices and that they're not causing problems for their clients. And so, we're putting those processes and procedures in place as well as we speak. But I'm quite hopeful about that business catching on. Give it a year or maybe 2, and it will be -- it should be a big money spinner for the business.

Can you hear me okay?

Yes.

Yes.

Yes. Lyle here. Very, very clear and concise. Just the first question I had was just a very quick clarification. So on Slide 8, there are some sort of fund of funds that basically expose clients to sort of double fees, right? The fund of fund charges fees and then the underlying funds also charge fees. It seems like you're indicating from the third bullet point there that, that's not the case for Fiducian products like Fiducian is actually paying the fees of the underlying managers. And then -- so I just wanted to clarify and confirm if I've understood that correctly and that's the case.

Yes, Lyle, you are correct. We don't double charge. Whatever the charge at the platform level or the fund that's presented on the platform, from that fee we pay the underlying fund managers. We don't double pay.

Right. So the all-in cost for the client from the fund management side is sort of order value 90 bps that you're mentioning. It depends on the fund.

Yes. And scaling down depending on the type of fund, but it's very competitive with the single manager funds that are in the marketplace.

Okay, got it. Excellent. And the second question I had, if I may. I just wanted to wonder, obviously, the performance of your funds has been very impressive over both the short-, medium- and long-term. But I have noticed you've got a reasonable tilt towards technology in India. You've also got a India specialist funds. Those are both markets that have done very well and valuations are perhaps at near cyclical peaks, acknowledging the underlying structural growth long-term. But I was just wondering, like do you see any risk of, if there was a change in the market environment, maybe a rotation back to value, not a short-term, but a longer term sort of rotation that could adversely affect some of your performance? And how are you sort of thinking about the risks there in terms of where valuations are at the moment?

Well, certainly got a good question there. For example, India is probably going to become the third largest economy in the next 5 to 10 years, third largest in the world. It's already overtaken Britain and is going to get past Japan very soon. So that market is just poised to grow. There are many, many -- there's about 10,000 or 7,000 securities listed there. We've only got about 2,000 here in Australia, and that's growing every day as we speak. So tremendous potential. A lot of the manufacturing out of China when the problems took place with the West is now moving to India. In fact, India is probably the biggest exporter of Apple phones now in the space of about 3 years when they -- before that, 3 years ago, they had none. The light rail that goes around in Sydney through George Street was built and sent from India about 6 months before the rail opened. So they're going the right way. They're growing. So that story is going to continue for a long time. With technology, look, we had a hiccup. As you can see, the 3-year returns were negative about 2 years ago when people said, oops, interest rates are going up, technology is going to suffer. But within this -- and it did. Markets tanked about 20%, 25%. But then very quickly, investors realized that, hang on, there's nothing else. So they all started piling back in again. As you can see that it returned 31% instead last year after having fallen 2 years ago. Look, the magnificent 7, you're right, are very highly valued, but you have to look at it with a different lens. The earnings potential and capacity of these magnificent 7, as they're called, the Apples and the Googles and the NVIDIAs and all is unbelievable. So when you look at NVIDIA, which has gone up so high, it's actually right now valued at about 30x, and the forecast earnings growth is about 80% for next year. People can't do without their GPUs. We have research to say that by 2040 world GDP will -- the contribution from technology will be about 95% of world GDP. And only about 5% will come from human intervention. Now, for the developed world, if we are to keep our position in the world, and if we are to keep our standards of living, there is no escape but technology. And so, yes, the prices are high. And we watch that. Sometimes we reduce our exposure to India, sometimes we reduce our exposure to technology when we find that there is rumblings in the market. But the long-term story is absolutely cast in stone. There is no question.

Any other question? You can also post your question on the chat box as well. So while we are waiting for that, Indy, if I can ask one. So what's the risk that you see? What keeps you awake at night?

Look, I've learned to sleep. I've been a fund manager for a long time and it's been a hard ride and a long, long journey. The thing that's surprising me now is that, there's clearly breaking into 2 camps. There's one camp which says, look, 13 interest rate rises here, 11 in the U.S., or whichever way it is, got to be a recession. You just cannot be without it. History tells us they're going to have a recession. The U.S. markets are going to decline big time and all the other world markets will follow. There's another camp that's now emerged which says that's nonsense. Generally, you have a recession or a problem in financial markets when there is a financial crisis, and they can't see one. And so, they're saying there is no financial crisis. People are investing. And there are in the U.S., for example, generally before a financial crisis or a recession, unemployment starts to rise. Well, right now in the U.S., I believe there's 1.2 jobs for every job that's lost. So where is this problem? And people are -- you can't get anywhere -- even in Australia, you hear talk to shops, restaurants, others, small businesses, they say, yes, prices are high, inflation is high, costs are high, we can't cover our costs. But at the same time, they keep saying, we can't get people to employ. So if you can't get people to employ, who's going to fire them? So what we've done is, basically, Rahul, is, we've gone neutral, we've gone to benchmark, we've increased our fixed interest exposure in case a recession hits or something goes wrong. And then fixed interest exposure will give us capital growth and positive returns, which compensate something for the loss in the share market, but we can't see -- and the share market was still there. We're more defensively placed. But we're playing to benchmark. And I'd rather -- I've been waiting for a recession for the last 2 years. It hasn't come. There were 12 interest rate cuts supposed to come last year, and then that became 6, then became 5, then became 4, and now we don't even know if there'll be an interest rate cut. But we've always said that interest rates will remain higher for longer. They're not going to be coming down rapidly or very quickly unless there's a recession or there's a problem. So that's the way our funds management team is playing it. So when you're neutral, you generally can't sleep easy.

One of the questions that has been asked is about a cash balance and whether we have got any acquisition opportunities in the horizon. Indy?

Yes, we do have. We just made 2 small ones, which are great because those clients should be looked after our existing advisers and that revenue comes straight to the bottom line. We don't need to get an office. We don't need to get new advisers to look after them. Yes, there are a few in the pipeline, reasonably sized ones. But that goes through a number of phases of dialogue and discussion, which I'm not in a position to explain to you. But always, there's always an opportunity we're looking for, but not at the cost of shareholders' money. If we do make an acquisition, that revenue growth should result in a higher percentage of profit. Otherwise, we're just wasting your money.

No, absolutely. So in short, it's unlikely, if not at all. In short, we won't be doing acquisition just for the sake of it. We'll rather have our cash balance and staying there. So if the right opportunity comes in, we can leverage on that.

So you can see what's happened to some of the previously better performing companies like IOOF, which became Insignia. I mean, their price was 9-point-something, $9.70 or $11 or something. And now after making those $1 billion dollars or billions of dollars of acquisitions, the price is $4 or even less. I mean, that would be -- and that would keep me awake. That's nightmare stuff. And then look at AMP. I mean, an icon of Australia, the 150, 160-year-old company. They seem to have experts at selling everything. And from $15, they're price around $1. I mean, look, I'm not here to criticize or anyone. We just need to do things the right way. Look after shareholders money, work hard, make sure we generate earnings per share, improvements. If the market thanks us, I think, Lyle, you asked the question, we lose income. I mean, we've got now $14 billion in FUMAA. If the market falls 20%, our FUMAA falls by $2.8 billion. If we're getting $280 million to $350 million inflows, that cannot compensate for the loss, which is obviously temporary. But then the market comes back and you get that hockey stick effect up. So it's really an investment for people for the long term, people who trusted us. Thankfully, you folks here in this review. And Peter, good to see you. I knew there was a handsome man in that photo. I hope you'll be coming to the AGM or I'll have to eat your biscuit. But look, we can only do what we can do. And I assure you, on my watch and the team I've got, we are not going to take unnecessary outlandish risks.

One more question has been asked around the franking credit. So, as you have rightly observed, that we have got quite a healthy balance of franking credits sitting in the books. Now, as you also might recall that the Board of Directors changed the dividend policy about a year back, and currently, the dividend policy is linked to the underlying net profit after tax, which is really the cash profit rather than net profit after tax or NPAT. The real difference is the amortization. As our business has grown and as we have acquired more businesses, we have got a quite a huge number of noncash items sitting in the NPAT, which means that because the dividend policy was tagged on the NPAT, there was cash building up. Although we were paying out 70% of the NPAT, the cash was still building up because the noncash portion is still -- the noncash portion of the expenses is not costing us anything in terms of the actual cash outflow and that cash was building up. So now, the Board's policy is the dividend policy is 60% to 80% of the underlying net profit after tax, and we try to tag it to roughly about 70%. So what it means is that, from a franking credit perspective, the franking credits that each year will be generating versus the dividends that we will be paying out. So previously, the franking credit would always grow structurally because of the noncash item. But going forward, the franking credit usage will be -- is expected to be higher each year compared to what we are generating. So that's really sort of the answers the question on the franking credit. But again, for the sake of argument, as it's been rightly observed, that there's a cash balance in there, and if the right -- when the right time came, and if the right time came, if that cash were to be paid out to the shareholders as dividends, then the franking credit is there also for that to be used up. Mark, thank you for your observation and comments. Any other questions from the floor or anything you want to put on chat?

Yes, I have one more. If there's nobody else in the queue. Just on Auxilium, you say it's the cheapest. Are you able to provide any kind of more specificity around that? And it does seem that in theory you could have quite a large counter positioning advantage because the large guys, if they reduce their fees, they've already now accumulated a very large fee base that they would have to take a big hit on. And, of course, very high market expectations baked into their share price. So how meaningful is that? And if it is meaningful, I guess, how big is the opportunity potentially?

Maybe I'll answer the first bit of the question, which is what is a cheap mean? And I'll ask -- I'll request Indy to address the opportunity bit. But let me ask you, what's the cheapest product? What's the cheapest product? Is it 50 basis points fee? Is it 30 basis points fee? What's the cheapest product? I would say the cheapest product is someone who's charging 0 fees. Because if it's 0 fees, unless they're paying you, I would say 0 fee is the cheapest fee. Now, as you know, and as I know and as everyone knows, no one can operate for 0 fee. So if someone is offering a 0 fee then there's something wrong with it. And again, I want -- like Indy, I don't want to name any of the peers, but one of our peers introduced a 0 product fee. And what's the point of introducing a 0 product fee if there's nothing you're going to gain? The point is that, you can -- how you're earning the fees, not the point is -- the point is not what you're disclosing, but how you're earning the fees. As an example, a lot of -- some of you guys are fund managers. And if you offer your product, if you offer your fund to one of the clients, one of your members, say, at 50 basis points. Now, an ordinary investor can go and access your fund for 50 basis points. Now, the product that I mentioned, which is a 0 product fee issued by one of our peers, if one of the client wants to access the same product that you have for 50 basis points, the client will be paying 70 basis points through that 0 product fee -- through that 0 fee platform, which means that it's not really a 0 product fee. The fee is being charged more on a nontransparent way. And also the fee is not capped irrespective of the balance that you have, you'll still pay on -- the client will still pay on 70 basis points fee, which they could easily access for 50 basis points. So that's sort of the context of the fee. Now, what we have been able to introduce in the market is the Auxilium product, which as I mentioned, is one of the cheapest in the industry. And that caps out the fee at about $1 million. We see that there's 2 ways we can grow the business. One is the fee. But as I said, there's a minimum on the fee. No matter what people say, they are going to charge you fee. So how can we distinguish? Because we can certainly not offer 0 fee. So how can we distinguish with the others? And that really comes through the level of service that we provide. I took the example before, and as I know, working -- looking at the industry, our level of service is definitely above the industry, and that's what you can expect. Joining Fiducian, as an adviser, as a client, that's what you can expect from Fiducian, and that's definitely helping us to win some of the businesses. Indy, if you want to touch upon maybe the opportunities that you see, especially the IFA that's operating in Australian context?

See, we're a little late in the market to get Auxilium out, because we just wanted to concentrate on Fiducian, which is the money spinner for us, and is respected and a tremendous performer, and the Fiducian Funds, and we didn't want to cannibalize what we were doing with Fiducian. So if anyone wants Fiducian Funds, which, as you've seen, and it was rightly pointed out, the results are quite attractive, I won't say exceptionally, but they're pretty good, then they have to come to the Fiducian platform, which has a slightly higher fee than Auxilium. So if we have to go into the marketplace for about 15,000 or 12,000, whatever they are, IFAs, or the independent financial advisers, we had to come with a fee structure that was much lower, but not cut the roots of what we've already got, which is Fiducian. So we came in at something like about 20 basis points. But if a person comes and joins us at 20 basis points, and they want to invest an exchange traded fund or a fund that's available in the wholesale market for 50 basis points, they will get that product for 50 basis points. But they know that the fee that they are paying for entry into their platform is 20 basis points, 100% transparent, no tricky stuff, no confusing clients, no smokescreens. You see, what you get is what you pay. Don't come and think you're paying 0. And actually you're paying, instead of 50 basis points, you're paying 75 basis points. People do that. And not only that, a lot of the platforms, sadly, very sadly, have created, got some real wordsmiths around. They don't just have a fee. They are things like recoveries, levies, costs, charges, you name it. Whatever comes out in the dictionary, they'll put. And you don't see them. We don't have any of that stuff. Straight, honest, transparent business, or we aren't doing it. So we came up with this 20 basis points because we wanted to make an entree into the market and fight the so-called disruptors who are trading at 80 and 91, 100x earnings, and we are trading at about 13, 15 or whatever it is. And we do the same thing, nothing special. A client puts money in, we give them a receipt, we invest their money, we get it valued overnight, they can see the results every day, and we give them a statement at the end of the quarter or the year. Nothing different to what the other guys were valued at, 80, 90 or 100x earnings. So besides that, when you go to a 0 fee, it's not quite right. I wouldn't like to do that. But our fees of the 20 basis point cuts out at when you put $1 million in. So from 20 basis points, it reduces to 15 basis points to 10 basis points to 5 basis points. And anyone who's got $1 million in that platform, anything above that, there is then a 0 fee.

Indy, there has been a question on vertical integration. So as you might recall, Indy, as you did research, as well as industry exploration on vertical integration back in 2017, and there has been some conversations through the Royal Commission also. So if you can, please share your views? How do we -- how Fiducian ensures that all the traps on vertical integration is managed through our adviser network?

All the...

So how do we ensure that our advisers are doing the right things?

Yes. So, look, before the Royal Commission, there was a survey done and ASIC came across and it spoke to us. And I think they spoke to another 9 other platforms and their report actually said vertical integration is good, despite of what the media said and how the general media attacked the banks and others. So in our case, I'll let you know that we are very proud to be vertically integrated because we control the advisers, we control the platform, we control the costs, and we control what they can invest in. When you look at Fiducian Funds, we don't -- we're not like, say, a Westpac that had a product, which was a Westpac product. We have a Fiducian product, but it's not technically a Fiducian independent product. There are 29 different fund managers whose products and portfolios are in the Fiducian Fund. So really there are 29 different managers managing the money for the client, not just 1 manager that could have been a Westpac. Now, what would an adviser do? They would probably go and get 4 or 5 different fund managers, a share manager, international property, whatever. We've got 29. It makes it so convenient for the client, convenient for the adviser. We do the research. We get rid of the fund manager we don't want. We keep the fund managers who are delivering to promise. And the clients, as I said, for $1 can get 29 different fund managers. So there's no issue there. Absolutely none. And when the Royal Commission was on, surprise, surprise, our performance for our platforms was absolutely top decile for every single diversified fund. Probably hasn't been done in the world for any fund manager group for every year over 10 years. So I wrote to them and I said, you can call me, I'm willing to come. This is the performance of our funds, and this is the platform we offer our advisers. Are you telling me that we had then about 50 or 53 advisers that the funds that are ranked at the top against all the world's best managers, and the platform that is excellent can be offered to 26,950 advisers, but not to the 50 that are affiliated to us? And where is the best interest of the client coming in when the adviser can't choose the best product? They never called me, they never replied. And there was nothing said about vertical integration. But this bogey keeps coming up from the general media. And they think everyone doing something wrong, they're double charging. We don't. Everything is transparent. And actually, I think we do a great service for our clients. It's a bigger business, it's a safer business, it's well capitalized and it delivers.

Indy, we may have run out of time, so if you just maybe want to thank the participants and wrap it up, please.

Yes. Look, we -- as a company, we're not a giant. We're a small company. We work hard. Everyone in this company is loyal to the business. Staff, it's a good problem to have, they don't leave. Rahul is probably the junior most senior manager, being with us only 12 years, all the others have been 2025. We love our people, we respect them, we look after them, and they in turn respect the company. We really appreciate support from our shareholders. We are very thankful that we have shareholders and a loyal shareholder base. We are an investment for the long-term and we respect our shareholders, as I think Peter was there. He's been with us a number of years. And we will just keep working hard, that I promise you. We are not going to take undue unnecessary risks. We are a conservative group. And hopefully, if the markets hold up, we will continue to deliver to your expectations. But we will not lie back and sit back and say, hey, we can take it easy. No. Everyone will do their best. So thank you so much for your support. Really appreciate it.

Thank you, all.