Most of the disruption occurring in funds management has to do with the SMSF market. But this has a potentially massive knock-on impact for industry and retail super funds. Incumbent systems providers and administrators are not standing idly by.
AMP has cemented its number one position as an administrator in the SMSF market with last week’s announcement that it had acquired all the shares it did not already own in SuperIQ and SuperCorp.
The disruption this caused was mainly to one of the two big SMSF systems companies, Class Super, which had to amend its IPO prospectus. SuperIQ, which has 11,000 of AMP’s 17,000 SMSF accounts, is Class’s biggest customer.
Class is a disruptor itself, however, having gained market share against the leading systems company, BGL, over the past two years because it was the first to use cloud technology, which enables a cheaper direct-to-investor service. The key clients for these established admin systems companies are still advisors and accountants, but the direct market is growing rapidly.
One of the founding shareholders in Class was also the founder of SuperIQ, Andrew Bloore, perhaps the most successful businessman among the many who have carved out profitable positions for themselves in SMSF technologies.
Bloore had to sell his Class holding when he started SuperIQ with partner AMP, to avoid conflicts, and will miss out on the IPO action. But we shouldn’t feel sorry for him.
The purchase price for neither the outstanding 49 per cent of SuperIQ nor the 80 per cent of Supercorp which AMP has now bought was not revealed by AMP last week, although one report put the total at “less than $30 million”. Whatever his share, Bloore is a winner.
He has spent the best part of 25 years in super and super admin. Prior to SuperIQ, he built and sold to Perpetual his previous business, Smartsuper, in 2008 for a reputed $16 million, and then got his Alan Bond moment. Perpetual decided to shut Smartsuper down and Bloore talked AMP into partnering with him to buy back the system for, reputedly, less than $1 million two years later. Bloore then launched SuperIQ in October 2011 and now has more than 100 staff in its North Sydney headquarters and Glen Waverley office.
At the same time, he became a key advisor to AMP on its SMSF quest. He sits on an AMP strategy board and has been involved in several regulatory committees, such as the Simple Super legislative committee and Jeremy Cooper’s Industry Review Panel.
But despite its purchase of Cavendish in 2012 and its SuperIQ and Supercorp investments, AMP still has only 7 per cent of the fragmented SMSF admin market. Whether or not the firm can sell its investment products into this potential distribution stream remains unknown.
Bloore built SuperIQ as a best-of-breed, hi-tech offering. It represents, both in technology and in its business proposition, the absolute best that anyone trying for scale in the SMSF market could achieve. And he has done well for himself in the process.
However, the SMSF market is like gossamer. Can anyone, however stealth-like, sell product to the SMSF market simply because of distribution coverage? SMSF trustees are not like the other investor groups. They want what they want.
Meanwhile, notwithstanding the annoyance of a slight amendment to its prospectus, Class Super will raise the relatively modest sum of between $5-10 million. It is being backed by chairman Barry Lambert, who has previously listed Count and Countplus and whose original company, Count Financial, he sold to Commonwealth Bank.
The next round of disruption for Class Super could well be internal. Dealing with a listed company, where senior executives can cash out at any time and everyone is keeping an eye on the daily share price, is very different from being a fintech startup.
– Greg Bright
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