Fiducian Group Ltd (FID) Earnings Call Transcript & Summary

Good morning, everyone. Thank you, as shareholders, for joining us today. And I've got with me Mr. Rahul Guha, who is the Chairman of Fiducian Services and also the CFO of the company. We can answer questions at the end. Meanwhile, we'll just go through what's happened, cover some of the numbers and explain to you how we achieved those numbers. As you know, as I wrote in my report, it's been a rather turbulent time, the wars, Ukraine still going on, Gaza still going on and some serious repercussions coming from Mr. Donald Trump's increases in tariffs and then reductions in tariffs. So, there's been a fair bit of turmoil. However, we worked hard, and we've continued to work hard to deliver for our shareholders. And I think the results are reasonably pleasing as I hope shareholders would see them. Without me saying much more, I can answer questions towards the end. I'll pass on to Rahul, who will go through the presentation pack. Thanks, Rahul.

Thank you, Indy, and good afternoon, everyone. Thank you for giving us the time to share Fiducian's story. The last half, if you can refer to the presentation that last half has been quite interesting. If I go to the highlights quickly, our FUMAA, which is funds under management, advice and administration, so that went up about 9 percentage to $15.6 billion. Now, that's contributed mainly by 2 factors. One is the market improvement, which was quite strong last half, but very importantly, our net inflows, which was $178 million in the last 6 months that came from our own financial advisers. Now when you have FUMAA up, when you have net flows pushing the FUMAA up, that flows through the gross revenue, which was also up by 9 percentage to $48.5 million. And with our cost-to-income ratio of 57%, lot of the revenue also flow through the underlying net profit, which was up by 17% to $11.5 million. We remain quite a strong -- we remain to have quite a strong balance sheet, $35.7 million in cash to factor in to accommodate any acquisition opportunities we may have or any other incidents that we need the cash for. So in the last financial year, we also saw quite a few small acquisitions that helped bring in some of the revenues. We did quite a lot of improvements on our platform offering. We enhanced our new SMA offering, the separately managed accounts, which we believe we'll be able to cater to a lot of the smaller advisers' needs in terms of what they need to offer to their clients, what they need to structure to their clients. We were also able to absorb a platform fee reduction from 1st of July 2025 onwards, and we were able to cut down a number of scale in our platform fees, which helped the advisers and their clients. And finally, we were also able to declare a dividend of $0.255 per share, which was 70% of our underlying net profit. So, how are we as a company? We often get asked, are we a boring company? Now that's a good one, good interesting one. And my response would be sometimes boring is good. And what we can see is that on a financial services company, what you would expect is stability on management, a conservative management and also looking at the long-term growth prospect of the company, very predictable results. Hopefully, you guys will appreciate and experience that we were able to deliver not only last year, but over the years. On this current slide, you can see we have put up the numbers for last 10 years, and our top line revenue has grown by about 13% over the last 10 years. And our underlying net profit as well as the EPS growth has been 13.6%, which means that we are not only increasing the revenue, but we are also able to grow our earnings -- our earnings per share faster than the revenue growth. Our main business segments, 3 main business segments: Platform Administration, Funds Management and Financial Planning. Platform Administration had an average FUM of $4.2 billion in the last half, and we were able to generate an annualized margin of 57 basis points, which includes the headline fee rates that our clients pay, the cash margin that we earn, the expense recoveries we do. So overall, 57 basis points margin on platform. Similarly, Funds Management, our average FUM or funds under management was close to $6 billion in the first half. And after paying out the fees that we paid to the underlying fund managers, the annualized margins was 51 basis points for last half year. Financial Planning segment, our enablement division, which brings the clients into both platform as well as Funds Management, mainly 2 sectors or 2 buckets of Financial Planning. First one is the salaried advisers and salaried advisers managed about $2.6 billion funds under advice. And here, average fee has been about 55 basis points. Our franchise part of the business has got $2.7 billion. As you might recall, some of you guys might recall, the revenue earned by our financial planners on the franchise segment gets paid back to them. We get a small margin about 8 basis points, 9 basis points. And overall, we have got other revenue in the Financial Planning segment, including what we charge from the franchisees of $2.9 million in last half. I must mention that if you have got any questions, feel free to ask. We'll answer the questions at the end. But also if you have got any questions, on the top right, you will see Q&A and you can type in the questions and we'll try to address as best as we can. Looking at the Platform Administration, our core platform, which is mainly supported by our own financial advisers, the aligned financial dealer group that we have got last financial year, net inflows of $178 million. And almost 100% of this net inflows goes to our -- [ goes ] right for the clients, goes to our funds management as well as the platform -- as well as the platform business. Now funds under administration, we have put on some numbers there. But essentially, what we are saying is that the funds that we have as of today, as of end of Jan, is roughly -- is higher compared to what we had about a year back. And if the market stays where it is today, our average funds would be roughly a little bit more than $400 million up. And on that, if the market continues at the same level, there could be an estimated revenue of more than $2 million what we earned on an annualized basis about a year back. In terms of our system, we have got a separate slide. We'll cover the system separately. But what we believe is it's a very leading edge technology platform that we have got, which is mainly focusing on the client efficiencies and the adviser efficiencies. Just trying to change the next slide. Just give me a sec. The Slide 7 -- the core -- Slide 7, the core platform net inflows and the platform PBT and also the average FUAdm. I think the main story here that sticks out is really the consistency. Over the last -- as we saw in the previous slide, over the last 10 years -- in the current slide over the last 5 years, you can see that the net inflows have remained very, very consistent over the period. And if I were to look around in the industry and any big names that you might take on any other platforms, at least for the last 5, 6 years, most of the platforms have delivered a net outflow -- net outflows. That means the money that's coming in versus the money that's going out. We have got more money going out compared to what's coming in. As opposed to that, in our Fiducian, we have got consistently net inflows over the period. And these net inflows are coming not only from the salaried advisers, but a mix of salaried and franchise advisers. And also very interestingly, a very strong mix of brand-new clients coming to our platform. Net flow is contributed by the acquisition that we have done in the past. If it's right for the clients, those clients may get referred to Fiducian platform. But very, very importantly, all the new monies, all the new clients that were never clients of Fiducian before, we are getting a significant proportion of that 60% to 70% of the money that's coming in are brand-new clients. Our marketing team is working very hard, running a lot of marketing campaigns. We are getting lot of new leads through our website. We have got referral arrangements and all of these are contributing to the new monies coming into our platform. Our bank offering and Auxilium offering, which is catered to mainly the independent financial advisers, we launched it couple of years back, and that's a low-cost value proposition that we have got in Auxilium. Roughly the market size is -- currently in Australia, there's about 16,000 financial advisers, but 10,000, 11,000 of them are considered independent financial advisers. Our markets -- we are targeting that segment of the market. What's happened over the past maybe 2 or 3 years, some of our peers are focusing more on the larger client base. And as a result, for the smaller IFAs, there seem to be a vacuum created. If someone has got $20 million, $30 million, $40 million, $90 million, there is no one able to service those client segments strongly as we would be able to. We are seeing some early success and our distribution team is working very hard to win on new advice group and new clients. In the last financial year, we have won quite a large client in the last financial year -- sorry, in the current financial year and the first half, we are working with a number of financial advice groups, and we have been able to see some small net inflows come through as well. But overall, the funds from our IFAs, which is across the badges, the core platform and Auxilium, stands roughly about $550 million as of now. Indy, if you want to maybe touch upon your views on Auxilium and where you see the -- what are the opportunities for Fiducian you see, Indy?

Well, Auxilium is, as Rahul said, something we've established to capture market share from the likes of the big platforms like HUB, Netwealth, AMP, BT Panorama and the others. It's in its nascent stage. It's growing. I think we are seeing some positive responses from the marketplace. We've also had to do a lot of development in terms of systems and software because what the market needs is not exactly what we offer through the Fiducian platforms. And I must say that we've been reasonably successful in completing that. We've introduced new products, which will enable advisers to select product more easily and yet have their own identity. So, all that's coming along. The system is now developed almost and being tested. We've added on new testing, people overseas to test the system. And I think it should be a positive addition to Fiducian where there are about 10,000 independent advisers who could use Auxilium and even just a small fraction of that would be very beneficial. So yes, we're going to press on regardless, and I think it would be a great winner for shareholders and for the company.

Thank you, Indy. Moving on to our next business segment, which is the Funds Management. And some of you guys would know that we are a multi-manager, which means that our investment managers are not selecting stock. They are not the one who is buying BHP and selling Rio, but they are appointing and working through with almost about 40 different fund managers, both in Australia and overseas. To the investment team, they are highly active in the market and the portfolio that they review, the diversification that they are able to create for our clients through the offering that we have. We have got about 15 Fiducian Funds, a few of them core funds, a few of them diversified funds and our clients can come in and invest in one of the Fiducian Funds and get the diversification. As an example, in our balanced fund, we have got what about 23 managers, so...

29.

29 managers. One client investing as with less $1,000 gets the access to 29 specialist manager through our balanced fund as an example. The flexibility, the research that goes through, that's what the clients want and that's the value that we are able to create for our clients through this unique process. Indy, if you want to touch upon the fund performances? We measure ourselves very regularly on every quarter and still almost about half of the readings that we have are still ranked in top decile and top quartile performances. But Indy, you may want to touch upon the performances little bit and how we are changing, how we're looking out in the market, Indy?

Our clients are generally advised, and they are -- in fact, almost all are advised by financial planners and our long-term investors in superannuation, which is a long-term investment plan anyway and also non-super, which is also a long-term investment. So, we're not so concerned about rankings within 1 year and 3 years, but we present them anyway. And what our clients really are looking for are more on returns that come through over 7, 8, 9, 10 years where the real target is. And you can see that the performance is reasonably good and the rankings are also quite spectacular compared to something like about almost 160 to 170 fund managers. These are our flagship funds, the diversified funds. They may not rank right at the top, but even over a year, the returns are positive after a rather tumultuous year and fairly conservative management by us without having exposed ourselves to some of the high-risk, higher tech companies too much. But you can see we also have a technology company and an India fund, which got affected by largely the tax changes in India and the technology fund, which has delivered pretty good returns. But all our funds are multi-manager. We don't risk single managers because they can be really good 1 year and maybe not so the next year. So for example, our share fund has got 6 different managers, which protect the adviser from making those decisions, which protect the client from high volatility. And then we hope that, that diversification and lower risk will result in better longer-term returns. Thanks, Rahul.

Thank you, Indy. Very similar to the platform business, what we can see even our funds management, that has grown quite a lot substantially over the last year. And if you were to start -- if you were to compare what the funds management funds are as of now versus what it was about 1 year back, we could potentially see an increase in revenue of $2.8 million if the funds -- if the market stays at that level. Now if I also maybe just add upon, so what's the benefit of a client using the funds -- Fiducian Funds? If you are using the online fund managers, why can't we just go directly? As we talked about, the diversification even for $1,000 investments, they can have a range of fund managers access through a balanced fund. In Australian, say, core fund, we have got access to about 6 managers. So essentially, financial adviser, if they were not using one of the tradition funds, they would need to research maybe 100 different Australian equity managers in Australia and recommend that to their clients. And how do you pick the right managers? Maybe the right managers last year, the best performance could be the worst manager this year. So, Fiducian is able to package that through the multi-manager process and make advisers' life and clients' life much easier. Now, how about the fees? Isn't the clients if they're going to directly to one of our competitors, would they give a cheaper fee? Actually not. What they will get is the retail fee. Again, in Australian Share Fund, most likely they will get a fee between 90 basis points to 100 basis points. The fees that they would pay through Fiducian Funds, again, is very similar. But the way that we are able to make a margin is that we will get access to our wholesale fee rates. Through our underlying managers, we will pay the wholesale fees and the difference we are able to keep as a margin. And the way the margin works, most of the fund managers, we have got an arrangement of a tiered fee, which means that as the funds grow, effectively, we'll be paying, on an average, lower and lower fees on the additional fund that comes in. So essentially, it works great for the adviser, great for the clients and also the company and the shareholders. Let's talk about our fintech capabilities quickly. We have got 3 main systems, which is Fastrack, which is our platform administration system, FORce, which is the financial planning software and Fiducian Online, which is the reporting system. Our Fastrack, it's what we believe is a very competitive system in the industry, one of the leading ones. And we will see every now and then, even in our management meeting, we were discussing that some of the big names in the Australian industry funds. A couple of months back, they came back with announcement that now they have rolled out multi-factor authentication wherein you need a code in order to maybe access your accounts or do transactions. Now, multi-factor authentication is something that we rolled out almost about 4 years back. You can look at industry bodies like FSC who recommend some of the improvements on standards on IT security coming back -- coming in place maybe in 2 years' time, we have already rolled those out. Now you can never be proud, you can never be boastful about cybersecurity, but we take that very, very seriously. And what we believe is that, that's some area -- that's one area that we can't cut corners. And that holds good for all of our platforms. We have got our own development team. We have got our own testing team and everything is developed in-house, mainly to create the efficiencies and reporting capability for our clients and the advisers. Our FORce software, which is a financial planning software, integrates 100% with our financial planning, with our administration system as well as the reporting system that we have got. And we are also considering quite a few improvements that we are trying out, currently on testing mode for our financial advisers. I'll give you maybe one short example before I ask Indy to expand. But when a client sees -- when an adviser sees a client, they'll be spending maybe an hour, 1.5 hours, and then they'll take a lot of notes, they'll do their file keeping, they'll talk to the adviser and then they'll write an SOA or statement of advice. The overall process can take as long as 5 days. Now, some of the improvements that we are pushing in, where the adviser and their support staff will be spending a day to document what they have recorded all their proceedings. We are trialing out a system that can do that roughly maybe in 5 minutes. And maybe after that, the adviser needs to spend half an hour, 1 hour. Anyway, the point that I'm trying to make is that there's a lot of improvements and a lot of efficiency gains that we can look forward to. Indy, your thoughts?

Yes. I think you're right, Rahul. Sometimes people ask me whether we are a fintech company offering financial services and funds management, or are we a financial services business offering fintech. It's an extremely important component of our business. The whole system works on it. We're extremely mindful of cybersecurity. We are upgrading Fastrack systems as we speak, so we can capture a larger share of the market, the IFA market that Auxilium is trying to target because the external advisers are not necessarily functional on the way we've been doing things on the Fiducian software. But I think that's pretty much done now. New algorithms have come in, and we've got a number of people testing it to make sure it comes through and becomes operable very soon as soon as, let's say, March. We're also introducing AI into the planning process where we've now developed certain agents as they call them, and that these will now be introduced to the financial advisers during our March practice development date, where they will actually use AI to conduct interviews, to create financial plans and to create records of advice, which will come out accurately and can be checked and tested very quickly, and enable the adviser to contact the client pretty promptly and discuss any issues that need to be addressed or any new strategies that could be introduced for the client. So, we think that will really bring up the efficiency of the financial planning team, which we have been using, as you know, as an enabler of new money. But now hopefully, it can -- with these efficiencies start to become a profitable venture in its own right.

Absolutely, Indy. No, thank you. Our financial planning, as you rightly said, is in a rock steady flows. We ended the year about 68 financial advisers, and I'll address this number next. The last number that we reported was 77 financial advisers, about 6 months back. So the number on the face of it has dropped by about 9. Now out of those 9, some of you guys might note that some of the educational requirements in Australia changed from 1st of July 2026 onwards. And that has been back and forth and a very long-draw process from the government for the assessment of the advisers' qualification, whether that meets the new standards or not. Unfortunately, a few of our advisers, which are about 5 advisers had some gap on their educational requirements. And currently, they are going through bridging those gaps. So as of 31st December, we had to take these 5 advisers off the register. But what we are hoping is within the next month or a couple of months, they'll be able to do the bridging courses and we will be able to put them back into the register. There's a couple of more advisers, unfortunately, resigned just before 31st December, and the recruitment was ongoing as of that date. And again, those positions have already been filled in the organization. So, those advisers have been put back in the organization. So, really out of 9, 7 of them are more of a timing, but 2 of them had departed, which was really the 2 franchisees. One of the franchisee has been with us about 1.5 years, did not really write any business, did not grow business, did not meet what we -- the requirements that we had and we exited that adviser. The other adviser retired, and we took on this adviser's business, acquired that client portfolio and the adviser exited the business. So really, although there's -- on the face of it, there's a reduction of 9, but what we believe is 7 of them are really timing and 2 of them did not matter. But what's really more interesting is the -- not so much on the number of advisers, but the net inflows and the funds we are managing. So in spite of this reduction, as we shared, $178 million came through and also the funds under advice grew up as well. What we are finding in the financial planning business is that the level of fees that we are charging, it is roughly maybe 20% to 25% lower than what the industry is charging. So, our financial advisers are -- as we are seeing the clients every year, every 6 months, they are taking into that consideration. And what we expect and what we hope is that we'll be able to narrow this gap, which means that we'll be able to lift the revenue of the financial planning business in terms of -- and also the profitability. But I'll come back to the profitability just in a moment. The other aspect, Indy touched upon this before. As a result of AI, what we believe is that our advisers potentially could service many more clients than what they're servicing today. The industry average on FUA, that is the funds that each adviser is managing, is roughly about $75 million to $80 million. Our advisers, our average is $60 million and some of our advisers are sitting $40 million. Our target for number of clients that we service is roughly about 140. Currently, our client numbers in the financial advice business is roughly maybe about 110 or 120. But through the efficiencies that we're looking at, we very much expect that the advisers will be freed up and will be -- potentially could service much larger number of clients and lift the FUA for advisers much more compared to where we are today. All of those efficiencies could lead to increased profitability of the financial planning business as its own on its own right. As we have discussed with you guys before, financial planning business is a very, very hard market to make money on. In last financial year, if you take all expenses into consideration, not only the direct expenses, but some of the overhead expenses, be it the technical guys, be it the power planning team, be it the management, which sits in the corporate segment in our reporting segment. If you take everything into consideration, we were behind roughly about $1 million. This year, our target is to breakeven, and we are very pleased to report that although we are not breaking even as yet, but we have been able to reduce to roughly about $300,000 to $400,000 negative on an annualized basis. But through these efficiencies that we discussed and also some of the acquisitions that we are doing, we hope that by the end of the year, our target remains to breakeven and by increasing the revenue streams of the financial planning business. Anything you would like to add, Indy?

Yes. It's important for us to increase the revenue from financial planning. We're obviously going to use AI to increase productivity. We find our advisers are actually undercharging and overworking themselves. And maybe that's a good thing because they like to give great service and good service to their clients, which keeps the clients locked in with them. We don't have much outflow of clients. But I think with AI coming in as we're going to introduce it, it will make them more efficient, increase productivity and they can probably give that previous level of service or even better. Plus it should create greater revenue for us.

Thanks a lot. A quick mention on staffing. At the end of December, we had 172 people directly employed by the company, very similar number what it was 6 months back. Staff loyalty and commitment remains very, very high. I'm one of the newcomers. I'm one of the new boys in Indy's team, and I've been working only about 14 years. Even after 14 years, Indy calls me the newest kid on the block. And the senior staff, our senior management, it's also average tenure in Fiducian is 14 years. Our longest staff member is 30. Second long is about 26 years. So, very, very long commitments over the years. I'll quickly go through financials. I don't want to -- I don't intend to go through each of the numbers. But what I like is really the last column in this graph. And as you can see, all the arrows are pointing in the right direction. So, operating revenue going up, net revenue going up, underlying EBITDA going up, underlying net profit going up. And we have got the right direction through the concerted effort of the company. Our segment reporting, also all of the business units are performing quite strongly, Funds Management, Financial Planning, Platform Administration. I've talked about the Financial Planning. And overall, the business, as I said, some of the Financial Planning expenses, which is not directly relating to servicing the clients, they are being reported under corporate. But overall, Financial Planning, we have seen an improvement already in the current financial year in the Financial Planning numbers, almost about $0.5 million compared to what it was last year. A quick slide on Fiducian outperformance against All Ords Accumulation Index. And again, you can see the divergence is quite large. In fact, if -- and some of you today in the room are long-term investors with us. In fact, if one of you guys had invested in Fiducian in 2012, just $1,000, today, you'll be earning a dividend, annualized dividend more than $500, and that's before taking into consideration any franking credits. Funds under management, again, as usual, everything is going on the right direction. And my final slide before addressing any unanswered questions, is this slide, which is really projecting the potential. It's not a forecast. It's not an estimate that we're giving now, but it's more of a conceptual representation of what could happen. In this graph, if I can work through, take a couple of minutes. But in this graph on the left side of the graph, you can see everything is solid, which means those are the actuals over the last previous years. In 2012 -- in 2013 or end of 2012, 2013, our total FUMAA was roughly about $3 billion, which has grown to $14.3 billion average in last financial year and currently sits at $15.5 billion average FUMAA. Over this term, our revenue in 2013 was about $30 million, give or take, and our expenses was roughly about much lower compared to what it was. And during this period, the green line, which is the revenue line has grown and the red line has grown also. But the red line has grown at a much slower rate, giving the gap between the green line and the red line more of an expanding jaws. And through that expanding jaws, we are able to create more margins, which flows through on the underlying EBITDA for our organization. So as we see the FUMAA to continue to grow, there's a potential for the green line to continue on the same trajectory, while the red line and the green line difference could potentially be further away, which means that potentially, our EBITDA could grow even further as we grow our FUMAA. Those were the main things I wanted to share. But with that, just before going to the questions, Indy, if you wouldn't mind giving an update on the ASIC case, please?

Yes. This is a close to heartbreaking thing that's happened. We're very disappointed when we're still struggling to see what we've done wrong because clients were invested in 2 underlying funds in a fund of funds way when we closed the fund down because for 9 years, we hadn't made any money on that, and there was hardly new money coming in. But clients made money. They earned around 7.5% a year. When we did close the fund, 3/4 of the clients decided to stay in the underlying 2 funds. And because they did that, we actually paid the buy-sell differential and they're still there. The 2 underlying funds, which it was -- it was basically a fund of funds, are still operating. And so as I said, we are quite disappointed because there was no infringement notice. There was no discussion. There was just questions and regulator went straight to court. Now, we've got a message that there should be a mediation and let's see what the regulators willing to mediate with us for. But as we understand, it's more a question of setting an example for the industry or telling participants that you can be up for a lot of penalty and let's see what they come back with. The company has hopefully sufficient cash. The funds in total, when the fund closed was only $15 million. Everyone had made money. People have stayed there. So if we have to pay it, unfortunately, we will. I don't wish to really go into litigation. It doesn't help us because even if we win it, as I think we probably will, you end up losing when you turn the regulator offsite. So it's a wait and see. It's in progress. And I hope we can get over this pretty quickly. And it's sad that I have to inform you about this, but it doesn't affect the business. The business is still growing. People are still using it. As far as inquiries from investors, we haven't yet received one. They know this is happening. No clients have actually asked us about it. Shareholders may have, and that's fair enough. But once this is out of the way, we just continue as we are and inflows are coming in strong. Advisers are happy. Our staff, thank God, are happy, and we don't see turnover. And we'll just take this is in its stride when it comes through and hopefully can resolve it and move on. Over to you.

Thank you, Indy. If you have got any questions, please pop that in the Q&A box and we will try our best to share that with you as well. If I can go through some of the questions now, Indy, if that's okay. The first question was whether DSAF, which is the case that you mentioned with ASIC. And again, quickly recasting that case, about $15 million funds we had, about 160 clients, each one of them got their money back and 86% more on an average. No one lost any money. We closed on the fund mainly because of the scale, but as Indy rightly said, we will deal with as it comes up with ASIC. And in terms of whether there's any other funds, there's nothing for us to disclose. There is no other funds that we are aware of as of today that are under investigation by any of the regulators.

And even with the social aspirations fund, every client, 100% of clients that we got were advised by financial advisers. It wasn't that we were raising money from the market. Everyone had an adviser, everyone was advised, they knew what they were doing. And as Rahul said, no one actually lost money. They made money. We lost money. But I suppose that's life and that's what happens.

So the next question is DSAF. Hopefully, I don't need to answer that. The next question is the decline on the financial kind of numbers, which I've addressed. Financial planning profitability, we addressed that also. Questions on AI, Indy, you have captured that on your response. The software development, there was one question around how much do we capitalize for our software developments? As I mentioned, so we went live on our current system in 2012. And each year, we spend roughly about $3 million. But what distinguishes our company versus some of our peers is that every dollar spend is expensed through our P&L. So, there's no sins sitting on the balance sheet coming to bite us back in the future years. Everything is expensed. And as Indy mentioned, we are strengthening the team. We are taking help externally where we can to make sure that our developments can progress quicker, our testing can become more robust so that we can turn around the functionalities that our advisers are seeking for. And all of these expenses are already part of our P&L. So, no surprises or hidden sins in our balance sheet to come and cause trouble in the future years. Now, there was one question on the AASB 16 lease adjustments of $400,000. Now, this is an interesting one. As we know that Australia often willingly or unwillingly, we need to follow what's happening in the other jurisdictions. If you look at Europe, most of the properties, no one owns the property, but they are on long-term lease. And as a result of that, there was a large-scale change on how rent or lease costs are accounted for. It's probably basic sent through an example. So if you please bear with me, and I'll try to take an example for that. Let's assume that we have entered into a lease arrangement for $100,000 a year and the lease is for 10 years. So over the years, in 10 years, we are going to pay $1 million. Now previously, before these new lease accounting standards came in, we will show $100,000 as a rent expenses and $100,000 cash on the cash flow. It's as simple as that. But after these lease adjustments came in about -- lease standards came in about 2, 3 years back, what we need to do when we enter a new lease arrangement, the $1 million, we need to discount it and record it in our balance sheet as right-of-use assets. So, $1 million, maybe when we discount it becomes $800,000. So $800,000, we record as an asset in our balance sheet. And we also record a corresponding liability in our balance sheet, saying that that's what we need to pay out over the years. Now when the actual payment comes in, we amortize what's in the balance sheet over the period. In my example, $80,000 comes up as amortization. And although our rent payable is $100,000, the balance goes as an interest. So, $20,000 is paid on interest. So the point is that when we are calculating underlying profit, amortization is not included. However, the actual rent that we are paying out, that's cash going out of the door. So, we make adjustments to normalize it so that people can relate to what the actual cash profit is and that's what the adjustment is for the lease standards. There was one question around the ASIC legal fees and costs. Now, you might recall from our results that we haven't called out any of that as abnormal expenses. Now as Indy alluded to, we would like to work with ASIC and hopefully, we can agree to an outcome. And whatever the outcome is, if it's a significant outcome, it's very likely that we will call it out as an abnormal item so that the -- our normalized result can present itself. As Indy touched upon before, irrespective of the way the ASIC discussions go, our balance sheet remains strong, $36 million in balance sheet. So if we have to pay any cash, whether it's legal fee or elsewhere, including for amortization, we have got enough ammunition in our house to make sure that we are able to cater for that. In terms of our ongoing future earnings capability, nothing changes. Again, Indy mentioned, at the cost of repetition, there has been close to none inquiries from our clients. And in terms of the net flow that you saw that's coming in, that remains very, very strong. In terms of our fundamentals of the business, nothing changes irrespective of what the outcome would be for ASIC case.

We have generally expensed around close to $1 million over the last year.

Last 12 months.

Last 12 months for legal costs. And whatever the settlement of mediation result is, we're going to have to accept liability much as we may or may not want to, to come to a mediation settlement. And I suppose that's the way it works here with the regulator. And so we just want to settle it and maybe accept whatever liability willingly or unwillingly, we just buy the dip and accept it.

Yes, no, thank you, Indy. As you rightly said, $0.5 million every half year reporting. It's neither here nor there, which we haven't called out as extraordinary items. Indy, if I can -- one of the question, if I can please ask you to address that as to what our acquisition strategy is. In the last half, we have done a number of smaller acquisitions as well as 3 years back, we have done a larger acquisition, which is PCCU. So Indy, if you don't mind sharing your views, the pros and cons so forth?

See, if we get a large one that fits in with our model and can fit in and we can absorb advisers and train them and use them, of course, that's an easier one because the amount of time we probably spend on a large one would be almost similar to the small one in making the acquisition. But then what follows in terms of training and systems and altering their IT network, office space, all that stuff, that comes after the event if the advisers want to stay. With the smaller ones, it becomes easier from the execution point of view because like, for example, we've done one in Melbourne, where the -- we only pay the vendor if the client switches over to us and accepts the advice from our adviser. In which case, it's 100% transition. The client comes across to us is willing to accept our processes and methods of investment. Small ones are good because we get the revenue pretty quickly, and we're on the lookout for as many as we can. I think there are 2 or 3 non-disclosure items. We've signed contracts, and the people and the distribution team are looking at them. We may make the acquisition or alternatively, the adviser may come on as a franchise and bring clients with them and work as the other franchises do. So, there's a bit of activity going on there. It's not that we aren't looking. We are constantly on the lookout, but it also means how we spend shareholders' money. You can just go on buying whatever there is and find that it doesn't add to your profit, increases your revenue, but no increase in profit. That's not the way we work because it's shareholders' money, and we want to use it wisely. If it makes sense, we'll make the acquisition. If it doesn't, we fully say, sorry, not interested.

Great example, Indy. And one of the benefits of the smaller acquisition, let's imagine it's a $50 million acquisition. So, that can be very well absorbed within the existing offices for the -- with the latent capacity we have got amongst our advisers. So, $50 million, roughly 60 basis points, we can earn a revenue of $300,000 and the incremental expenses for that acquisition would be minimal, if any, at all. So the $300,000 drops to our bottom line. But not only that, if it's right for the clients, if all of them get referred and accepted and if the clients accept in our Fiducian platform, that's another 50 basis points additional margin and similarly, 50 basis points additional margin in our Fiducian Funds. So essentially, what we pay for is a revenue stream for $300,000, but what we get is a $300,000 and if it's right for the client and additional revenue synergy of 100 basis points, which is another $0.5 million. So, that's the beauty of the integrated model that we have got. The last question we had was on insurance coverage on ASIC matters and anything else. Like any other prudent company, we have got an insurance coverage also. And we are in discussions with our insurers what would be covered and what would be not. And with any other insurance, it's a matter of discussions. It's a matter of getting to the bottom of what the entry cases of the case are, and we will keep the market informed if there's any significant amount that's either going to be impacting our bottom line or will be covered by insurance. Thank you.

That's good.

Just wanted to check if there's any other questions. Indy, if I may ask one from myself. We have talked about the opportunities. We have talked about the business growth, how we have done in the past. What would be one of the bigger risk in your mind, Indy?

Well, to me, the biggest risk is always cybersecurity. Regulator can come from left field and they will do business our size, which is being reasonably profitable. Of course, my view of a regulator is that they're there to help business grow, to help the economy, help the GDP, help employment. If they wish to point fingers on the way operations are, that's their choice and that's how they do things. Risk-wise, systems is the most important for us. We have been quite careful in terms of cybersecurity, introducing a number of measures like multi-factor authentication and other things. We develop our own systems. And so we're pretty careful there. Of course, staff is an important matter as well because they are trained, they're experienced and we have a lot of close working relationship, which hopefully doesn't get fractured. Getting new funds in, that's continuing quite strongly. But if there's a big market decline, then investors sit on the sideline and hold off any new investments until they see some stability and then come back. Sooner or later, they find that having a good diversified portfolio across various different asset sectors stands in good stead. So yes -- but there's always -- whenever there's a market decline, we find that inflows may reduce a bit because people wait and our asset values reduce a bit because the market decline takes that into account and possibly even then our revenue as well reduces because we're charging fees on a smaller volume of business. These are the key risks, I'd say. But they are pretty much par for the course, and we are handling them and managing these risks as best we can. Staff is fantastic. Managers have been phenomenal. They've worked exceptionally hard and done very well over the last so many years.

Any other questions at all? If not, I thank you for your time and I hope you enjoy the rest of the day.

Thank you very much for your time, and for your confidence in Fiducian and your support. We really do appreciate it. And I can promise that we will continue to work very hard to help you achieve your objectives through this investment. Thank you very much.

Thank you all. Bye.