Fiducian Group Ltd (FID) Earnings Call Transcript & Summary

Good afternoon all. Indy, we might start off.

Good afternoon, ladies and gentlemen. Thank you for joining us when we present our 2026 results. I can see there are about 47 attendees who've already joined and some more may be coming on. May I please request that all questions remain until the end, so please make a note of them, and we'll respond to each one of them. And if time doesn't permit, then we'll respond to you directly. But welcome. I'll ask Rahul, who is the Chair of Fiducian Services and Head of all our Financial Services as well, to start the presentation, and I'm there to answer any questions or if any matters come up that you might want me to respond to. So Rahul, I suggest you please take over now and start the presentation.

Thank you, Indy, and welcome, everyone, to our 30th year of annual reports. As Indy said, if you have got any questions, please pop that in, in the Q&A chatbox, which you should be able to see on the right of the screen, and we will have our best endeavor to answer all of your questions. So 30 years, 30 years of delivering value for our shareholders and clients. It's been a long journey for us. Indy, with one of his staff, started this organization about 30 years back now. And today, we have more than 2,000 shareholders on our register. Today, we have got quite a few of you joining us, and it's very good to see a lot of the old names in there as well. We have got almost about 15,000 clients that we are able to support through our organization together with our own staff as well as franchisee staff, almost about 300, 350 families, we are able to commit and continue delivering through to the shareholders and clients. What we wanted to do today is provide you a business update, talk about the 3 main lines of businesses we have. We will also look at the financials that we announced this morning. And after that, we'll take any questions that you may have for us. So essentially 3 main lines of businesses: Platform Administration, Funds Management and the Financial Planning, which is our enablement division. Our business model is very simple. And some people call us a boring company. And hopefully, we'll be able to share the story from a boring company with not so boring results. A very simple business model, 3 main lines of businesses, as I said, Platform Administration, Funds Management and Advice. So a client journey is if one client walks into our financial planning office and if it's right for the client, they will -- they might be recommended to Fiducian platform. And if it's right for the client, they might also get recommended to Fiducian funds. Our advisers are not stock pickers. We are not selecting BHP and [ selling ANZ ]. We are more of holistic advice. And through that holistic journey, the client will get a holistic financial plan and we get our fees out of that financial planning part of the business. So a client that comes in with $1 million of assets, we will charge a fee from them for the financial planning. And as I said, if it's right for the client, they will go to a Fiducian platform, which is on the screen, and we will charge a fee for the platform services that we provide and similarly, Fiducian funds also. So suddenly, the $1 million client translates to $3 million worth for us, and we get revenue from each of those individual segments. Our Platform Administration, last financial year, we clocked about $264 million net inflows from our own financial advisers and aligned dealer groups. If you look around the industry in Australia, at least for the last 7, 8 years, all of the big names have been having net outflows, and we are very fortunate to be able to produce net inflows in each of the halves that you'll see in the next slide as well. Our funds administration currently sits at roughly about $4.3 billion as of end of June. And last financial year, we had -- financial year FY 2026, an average of $4.2 billion. What we believe is our platform is -- has got the cutting-edge technology. We have got all the functionalities that the adviser looks for in servicing their clients. And we have been able to produce a very -- what we would think is above-average services to what the industry expects. We have got 2 parts of the Platform Administration. One is the core platform. Then we have got the Auxilium also, which is more catered to our IFA clients, but we will talk about that in a moment. As I was mentioning, on the next slide, if you look at all the net inflows that we have had over the past half years and each individual halves, we have been able to produce positive net inflows to our platform. On the right side of the chart, you can also see how the -- as the funds balances have moved -- the average funds balances have moved, the revenue has also increased in last financial year and in each of the halves, we have got roughly about $12 million revenue. But what sticks out is really the EBITDA portion, that is the gross -- the revenue that the platform earns, less the direct cost to support the platform services, that EBITDA has remained positively -- has remained consistently positive. As I mentioned before, Indy established this company 30 years back. I joined the organization almost over 15 years back. And although we have got $4.2 billion in our platform today, about 15 years back, we used to have about $850 million. And we used to have 20 people supporting our clients for that $850 million at that time. Today, we are sitting at $4.2 billion. And because of the scalability in the system that we have and also the investments we have made in our fintech capabilities, we are able to support $4.2 billion worth of clients by roughly about 15 or 16 staff. And that really shows how with the growth of our funds under administration, we are able to continue on our EBITDA journey. Auxilium, which is more of a newer offering from our core platform, in effect, we have got 1 system, but 2 branding. So core platform is mainly tailored to our aligned dealer groups. And the main difference between core platform and the Auxilium is what gets offered in there. We have roughly about 10 Fiducian funds, in IFAs and again, 10 or 15 SMAs that are offered exclusively to our -- exclusively through the core platform, which financial advisers have got access to, mainly our aligned dealer groups. But also, we have opened up a new channel and the market is quite large in here. So although we have got 75 financial advisers very strongly supporting us through our aligned dealer groups, the market, what we feel is -- among the 15,000 authorized reps we have got, we feel that we can target about 10,000 of them through this Auxilium platform. So this platform is one of the lowest offering -- lowest cost offering in Australia that we have, 20 basis points scaling down to 0 over $1 million with the highest level of service that any advisers can access today in Australia. We have been able to grow this platform slowly. And in this financial year, we had about $4 million net inflows, but the total amount under badges and Auxilium sits today at $261 million. Indy, if I can maybe please request you to share your views as to what you think the growth prospects are for Auxilium in the coming years, Indy.

Yes. Thanks, Rahul. I'm starting to get quite positive about Auxilium. It's been hard work trying to get through and make inroads, but we are now starting to see some good interest from dealer groups. And we are starting to get transfers of money moving into our platform by these particular advisers who have been using the major competitors like Hub and Netwealth and BT and Colonial. And that's where the transfers are taking place. We have some unique features in our -- in Auxilium which help advisers and reduce the need for unnecessary bureaucratic work. And I think that's what's being the attraction. The other good feature is that, for the first time, we are seeing advisers want to use our financial planning software FORCe, which only our advisers are using. But now these people outside of our network are asking for it and 5 or 6 dealer groups have already signed up and are starting to use the software. So that could become another revenue-generating item for us as we go along.

Let's look at our next business segment, Funds Management. Funds Management at the end of June 2026, we had a little bit over $6 billion under our funds under management. As I mentioned before, we have got 10 managed investments and about 12 separately managed accounts. And as a fund manager, we are a multi-manager, which means that we are not trying to shoot the lights out. All we are targeting is to generate above-average returns by taking below-average risk. And what we have seen is that when we do that year-on-year on a consistent -- when we stick to our process, we are more likely to produce consistent results over long term against the best -- world's best fund managers that we have. In our funds, we use roughly over 40 fund managers, both from Australia as well as in overseas, and the results are put on the table. But essentially, as I touched upon before, our target is to produce above-average returns. And if you look at 7-year returns in capital stable, these are our diversified funds, capital stable, 50 out of 88, slightly outside top half. But if you go to balanced, 10 out of 73, almost top decile. Growth 33 out of 128, very comfortably sitting within the top half. Ultra growth also very comfortably sitting in the top half. With that, Indy, I can't shy away if I look at the first column. And first column, Indy, looking at capital stable, balanced, our short-term returns has taken a little bit of a hit compared to the 7-year returns. Indy, what's your thoughts on that? Have you been getting any questions from our clients or advisers on this, Indy?

No, I haven't had any questions from clients. Some advisers have asked how this has happened, and that's obvious, that over the last 3 to 4 years, index funds have done exceptionally well. People have been scared and just moved to index and active fund managers that we use predominantly, active fund managers, to select security based on the value that they offer, that they are not overpriced, that they have -- can produce good returns. And these stocks haven't really done so well. For example, I mean, when you compare Commonwealth Bank, which has an earning of about 3% growth -- earnings per share growth, but selling at a price to earnings of over 27 to 28x when the rest of the market is at below 15x earnings, then Commonwealth Bank is certainly overvalued. But people have been throwing money at it. By the same token, NVIDIA, which is in the U.S., which is probably bigger than the entire stock market here, has got a 50% earnings per share growth, and that's selling at much lower price to earnings. So the valuations will change, since April around this year, we could see the switch taking place. And you see from April, May, June, July, our even short-term returns have been significantly better right up to second and third for the month, that sort of thing, out of 80 to 100 managers. And that will catch up. But the main point is that our clients are invested in superannuation funds, which are long term, and so are the ones they invest in our investment service, long-term investments. And what we really want to do is to make sure that between 7, 8, 10 years, we are always consistently productive and giving good results. And you can see that when you look at the balanced fund where most of our money is, 4 out of 63 fund managers and the growth fund is 14 out of 117 managers. And this statistic is continuing. You can go back 10 years to 2016, '17, '18 up to '26. And the returns over 10 years will be exceptionally good, which is what we aim to do for our clients. Rahul?

So what's the benefit of multi-manager? If an adviser can go directly to their fund managers, why would they come to Fiducian and go through the multi-manager process? What we feel is that the multi-manager funds that we have is a highly defensive product for the advisers because as an adviser, taking the example of Australian share fund, they probably need to research maybe 20, 30 Australian share funds and they need to find which one is the right one for their clients. Now how do you find which one is the right one? Because last year's, the best performing fund manager is not necessarily going to be the best performing fund manager this year. So an adviser has to research, has to appropriately diversify the clients' holding, and that's the value addition that an adviser can get through the Fiducian funds. Australian share, again, as an example, has got 6 underlying managers and the investment team in here puts all the different styles, depending on the growth, value and also the economic cycle and really doing the work for the advisers. Now from a client's perspective, if they go to the -- directly to a fund manager, are they going to get a lower fee or Fiducian is going to charge higher? Now in reality, what happens is because Fiducian is a wholesale fund manager, we will be able to negotiate much lower fees with the underlying managers and charge the client the same fees that they would have got if they had gone directly. So from a client's perspective, they are no worse off coming to Fiducian because they are paying the same fees but also getting the diversification. So essentially, through the multi-manager process, we have been able to create a product which works very well for the advisers. They can get the diversification as well as the clients. The clients are paying the same fees that they would be paying elsewhere. And from a shareholder perspective, from a company's perspective, we are able to generate that margin through the multi-manager process. And our margin currently sits about 49 basis points. Our fees are roughly about 95 to 100 basis points on an average, and we are able to carve out that margin of 49 basis points for the company. Fintech capabilities, as I touched upon before, so all of the business lines, which is the Platform Administration, the Funds Management as well as the Financial Planning are being brought together by our fintech capabilities. We are possibly the only provider in all of Australia, which has got own in-house platform capabilities. The financial planning software -- we have, again, an in-house financial planning software and also the online reporting, which is the Fiducian Online that the clients and -- the front end for the advisers. So all are sitting under one house, one development team and all fully integrated. We have also recently launched, recently being maybe 1, 1.5 years back, our Fiducian mobile app and very pleased to confirm that 1 out of 5 of our clients are already using that mobile app. Let's talk about the Financial Planning division next. Financial planning is our enablement division. You know how I talked about the client model, the client journey. So the way a client is walking into Fiducian is really through that enablement division of our financial planners. As I mentioned earlier, we are about holistic financial advice. And what that means is when a client comes in, the actual investment recommendation is probably last among all of the discussions that will happen. We more want to know what the client's individual circumstances are, whether they have got an insurance need, whether they have got a handicapped child, whether they need to have their estate sorted out, and all of those advisers they are getting from under one roof through our financial advisers. We have been able to open 2 new offices in the last financial year. We opened up a new franchise in our Brisbane office and also a new franchisee at Norwest office. Currently, we have got about 75 financial advisers across 45 offices all across Australia. And we have also provided a revenue target uplift of 10% to 20%, which we'll see a little bit more on the segment results. But I want to expand that point slightly more in here. Indy, as you might recall, if I look around the Australian industry, the clients are paying advice fee roughly of $4,600 to $4,800 as an average client. Our financial advisers, they are charging a fee of $3,200. So there appears to be a huge gap, Indy. And I just wanted to test your views on that. First of all, why are we charging lower compared to the industry? And secondly, what is the message you have given to the financial advisers, and ahead of our financial planning, Indy?

Yes. What we said to them is that they should at least come up to the industry standard, if not fully, but at least just under it. In the past, we used to have advisers who looked after clients, the best fees were coming through the platforms, and the lowest were coming through advisers. Some of the pendulum has now switched and it's swung the other way where the advisers are able to charge a higher fee and platform fees are reducing. So we've got a bit of a legacy here, but the advisers have understood that our fees for the platform have already come down and their fees can go up. And the services they provide are second to none. In fact, they provide a lot more services than many other large financial planning groups who would just look at investments. Ours are fully holistic financial advice. And therefore, I think the advisers are now going to start going back to their clients to say, look, this is what I believe is the value I'm adding for you, and this is my fee and the adviser and client work out what the fee should be. So we think there will be some increase in the fees that our advisers are charging.

Thank you, Indy. On the next slide, we can see a breakdown of the funds under advice that we have got, about $5.5 billion, end of June. Of that, 2/3 to 70% is sitting in our platform and about $1.7 million (sic) [ $1.7 billion ] is sitting in external platform. We have seen this number ticking up a little bit in the last half/last financial year, and that was mainly due to the new acquisitions that we have brought into the business where the clients are sitting in the external platforms until such time where they see one of our financial advisers and if it's right for the clients, they may get recommended and transition across to Fiducian platform and Fiducian funds. As we have updated to you guys before, we also have roughly about $400 million sitting in both internal as well as external platforms where we are not earning a fee from the clients. These are mainly legacy clients, and we are trying to either reengage with them. The clients might have been a grandfathered client, which -- from whom we earned a commission about 10 years back, 15 years back, but we haven't been giving advice, neither we are charging any fees, but either we are trying to reengage those clients or disengage those clients from our books. So essentially, the main message is this $400 million that's sitting in there, even if that goes, it doesn't impact our revenue earning capabilities. Staffing. Staff remains one of our core resources, very valuable resources in Fiducian. We have got about 177 staff, end of June, and we remain committed to make sure that they are getting the right remuneration framework, right support, right career development and so on and so forth. In Indy's reporting team, as I mentioned, I've been almost about 15 years, I'm still one of the newcomers, as Indy keeps on reminding me, and that's the depth of the staff and the longevity that we have got in Fiducian. I wanted to give a quick update on a couple of regulatory matters, the first one is the ASIC, the next one is the APRA, before we move on to the financials. A quick recap on ASIC case. Roughly about October 2025, ASIC came to us, and they looked at one of our funds, which is what we call DSAF or Diversified Social Aspirations Fund. This was an ESG-style fund. And like all the multi-manager-style funds, this fund invested on 2 other multi-managers. Now ASIC had raised some points with the court. And ASIC alleged that Fiducian was not monitoring the underlying funds as well as their disclosures in the PDS. Now a point to make -- point to reiterate here is that ASIC did not have any issues, did not make any allegations that our underlying funds was investing in any non-ESG products. Their issue was more of a disconnect between the funds that we offered, which is the DSAF versus the actual underlying funds, which ASIC did not have any issues with. And those funds even today operate in the industry as it was operating last 10 or 15 years. As Indy mentioned in the AGM when we met last year in October that we have got very little appetite to take on the regulators, we have always worked very closely with the regulators, and our intention was always -- has been to resolve this case with discussions with ASIC, and we have been able to resolve this case. And as an outcome of that, we had to pay -- we had to agree to pay a penalty of $7.3 million and also $650,000 ASIC's cost that we picked up. And this case has now been resolved with the court as of 11th of August. In addition to paying the fine and penalty, we also have to send a notice to all of our members, which had invested in DSAF, and mind you, each of the members have been paid back in full. All of the members made roughly about 7.62% annualized return, almost about 83% return since inception, but we will need to send a notice to them. Otherwise, the court dismissed the action that ASIC had brought in. Indy, if you would like to add anything to what I said?

Well, while we are all pretty shocked about this decision, we were really confused why it actually happened, and I can only apologize to all our shareholders. But if you see the third bullet point, even the judge said that there's no evidence of any direct financial loss suffered by retail investors and the contravening conduct was not deliberate. Now how it came about was that some of the text in the product disclosure statement of this Diversified Social Aspirations Fund was not consistent with the wordings of the underlying fund managers, which were Perpetual and Candriam International. And the difference arose because some of the wording we had used, which said that, look, some of the companies don't unnecessarily pollute land, water and environment.

I'm sorry, Indy, it looks like you have been muted. We have lost your audio.

So do I have to do something?

No, Indy, you're back now. Sorry. Continue, please.

Okay. So where the contravention, or they say, was that our product disclosure statement wasn't consistent with what the 2 underlying fund managers were saying in their product disclosure statement. And one of the comments that was made in our disclosure statement was that the companies that we use or we attempt to get don't pollute land, water and environment unnecessarily. Now being a metallurgical engineer, I know that when you produce steel and you have to make coking coal, the amount of pollution that comes out of cyanides and sulfur dioxide and phosphorus dioxide, nitrous oxide and all these polluting elements, but they don't do it unnecessarily. However, one of the points the regulator took up who said that, well, you've got BHP. Now we don't have BHP. It's the 2 underlying fund managers who hold certain percentages of BHP or Shell plc. We don't choose the stocks. We can't change the stocks. However, APRA alleged that we should have been able to change the stocks, which we can't because they were trust funds. And we were just one in the line of 1,000 other unitholders who couldn't do anything. However, look, you may take on the regulator as we were told. You have a very strong case. But I'll tell you what, if you fight the regulator and you win in the end, you will lose. So the best solution for us was to bite the bullet. We refused to take on the regulator. We accept what the regulator says, and the best was for us to pay them a penalty and move on with the business. In fact, the Chief Justice of the High Court -- a retired Chief Justice said -- asked me, "Indy, do you want to take them on and keep going to court for 2.5 years, or do you want to run your business?" Obviously, we want to run the business. So we just said that's fine. We'll pay and move on. I think that's about it from me on this. I'm glad this is something that's passed. And we have checked all our other product disclosure statements. We got Ernst & Young to check and there was really nothing that they could find. Rahul?

Thank you. I think the key point is that, yes, we have resolved the court case now. The penalty is payable in 14 days. Now personally, I would like to hold on to the money as long as I can, $1,000 interest every day we earn, I'd rather that go to shareholders than ASIC. So we will make the payment most likely on next Monday, which is still within the due dates. But from a company's perspective, unfortunately, it takes away $8 million. It's about 1/2 dividend payments. But in terms of our future earning capabilities, there's no concerns. It doesn't impact our future earning capabilities. ASIC made the announcement a couple of days back, 11th or whenever it was, and we checked whether there has been any concerns from clients or advisers, but very pleased to report that we have got 0 questions from clients coming through or any advisers as well.

I might just add that the 2 underlying funds are still offered on the platform. 75% of the investors previously stayed in both of them, 20% chose other Fiducian funds. And those 2 fund managers who are supposed to be managing for us are still managing money for all Australians.

Next, I would like to give an update on our -- on APRA license condition. But before understanding the APRA's license condition, we need to go back as to what happened in Australia funds management industry last year. There were 3 funds. The first one was Shield. The next one was First Guardian and the third one was Australian Capital Trustees. And combined, people lost roughly about $1.6 billion because those funds were full of conflicts. Now unfortunately, some of the platforms offered these products and some of the advisers and adviser groups recommended these products. Those products came to Fiducian and given the stringent process and controls that we have before we offer any one of them either through advisers or in the platform, all of those products got rejected. So we are very proud to say that none of these products were offered through our platform, and we were able to reject those. Having said that, because there's a $1.6 billion impact, APRA and the other regulators took it on very seriously. And APRA started doing a thematic review amongst all the platforms in Australia. So there's about 9 platforms they reached out and Fiducian was part of that thematic review as well. Last year, about October, November, APRA came up with the results of thematic review, and they made some general observations to the industry and also specific observations to us roughly early in this calendar year. Now as -- again, as a reaction, as an outcome of the thematic review, APRA straight away put license conditions to a few of the platforms and/or took them to court. And today, I think 5 or 6 platforms, including Fiducian, has got license conditions and the conversation is underway for the others. And as part of the license conditions, we really need to do 3 things. So the first thing is we needed to look at all of the investment options that we have offered in our platform. Second one, we needed to appoint an external expert to do a review of our investment governance framework. And the third thing is, again, an independent expert to review our Board framework. We are very pleased to report that we are progressing well in meeting the APRA deadlines and the requirements, and we have just completed reviewing all of the platform investment options that we had as of last week, which was what was due, and we have gone through a very stringent process. We are also working through with our external advisers to complete the review on the investment governance framework as well as Board framework. Now do we expect those reviews to have 0 recommendations? Absolutely not. We are fully expecting there will be some recommendations to improve our processes that we have. But again, I can't reiterate any less that our existing processes prevented products like Shield, like First Guardian, like Australian Capital Trustees. Having said that, we will work with the external experts and APRA to make sure that we are able to uplift our processes and any recommendations we are able to put in place. Indy, again [indiscernible], if you would like to add?

Yes. Could I just add that it's been a very drawn out long process. None of the products we have offered have ever failed or caused damage to investors like these First Guardian and Shield and others. None of the products we have offered ever done that. It was a lot of work, and I must thank all the staff and people who worked on this project and including the additional staff and especially for Mr. Drew Vaughan, who's Chairman of Fiducian superannuation, who's done an absolutely marvelous job in getting all this sorted out and worked out. And as Rahul said, we've submitted our documents. Any other work that has to be done will also be done within schedule. But we can't see any issues, maybe the regulator might. And if they come back with some issues, we'll adopt them too. So there's no -- nothing to worry about.

Thank you, Indy. Let's look at the financials now. The best thing I like about this slide is the triangle, the way the triangles are pointing. So as you can see, I'm not going to go through each line items. But if I look at the 5-year performance, revenue growth, 63% up, underlying NPAT growth, dividends, what we are paying today at $0.53, it's double compared to what we were paying 5 years back. In this financial year, our FUMAA grew by about 7 percentage. The main line, which is the underlying EBITDA and underlying net profit, which is the cash profit that the company generates, which the management looks at very closely, is about 15% and 16%. The only line that's pointing downwards is the statutory NPAT, the way we need to produce the results as per the accounting standards. And needless to say, the $8 million -- $7.95 million fine and penalty, so that impacted that line. So it's a one-off item. And hopefully, that's behind us, but that's really impacting the statutory impact decline of 28% in this financial year. But the main point, again, if I can reiterate, it's not a 1-year wonder. It's looking at last 5 years, that's a trend. If you're looking at one of the slides, you'll see if you're looking at all the years that we have been listed, and we have consistently produced double-digit returns in majority of those years.