Some very positive as well as objective posts by the usual crowd here over the last 24 hours.
Now that I've time to reflect on the announcement, I have the following thoughts which I wanted to share. Of course, always open to alternative views (not alternative facts though). Most of these are rehashed or previously expressed views by others, so apologies for the repetition.
1. Let's not forget the major headline here...Australia's largest company (CBA) have decided to use the services of our little FinTech company. I think people need to absorb this first before jumping into the minutiae and details of contracts, terms, revenues etc (we'll get to that in a moment). A big congratulations to the team at IAM (Mark, Pat, Blake, Sharon, Nina, Tim all the whole team). This is a massive achievement to get in front of the relevant CBA Execs and staff to prove their concept. As many have stated, if this goes to plan, then it effectively validates IAMs service (i.e. quality and scale) and lays the foundations for a snowball effect across the industry with others wanting to take it up.
2. Yes, we are all aware that Sentry and NAB remain very much mysteries as to their progress. In my opinion, I don't think NAB has gained much traction (since nothing has been announced), however, I speculate that Sentry use IAM services intermittently on an ad hoc basis according to each practices needs. I don't think we can hand on heart say NAB or Sentry have done otherwise, since it would be reflected in the recent 4C. Its a shame we haven't heard further re: NAB, but Patrick and Mark did tell shareholders that they can't win them all...we must take the wins but there will be losses on the way (if that's the case).
3. My take on the share price action on Friday afternoon reflects a combination of holders who have been trapped for many months, wanting to get out and traders taking advantage of short term opportunities. A change in hands of the registry is probably a good thing and will likely continue over the coming weeks as the public absorbs the news and makes a decision to take/not take a position. Given the market traded for a couple of hours only (with huge volume), this still has a fair while to play out and settle. If it shoots up again, then great. If it retraces to <1.6c, I suspect many people will be topping up, 9Olives included.
4. For those who have been around a while, IAM hit 9.5 c just over 12 months ago (Dec 2016) based on news and speculation of huge MOUs. Given some shareholders would be turned off by the management and past mishaps, its unlikely it would hit this again base don CBA alone, but 2.1c is still large discount (compared to 9.5c high), purely based on sentiment and I would expect it to gradually move towards 3-4 cents in the short term.
5. As for contracts, terms and legalities...it is my opinion that nothing will be formally signed and binding between IAM and CBA any time soon (and did not even form part of my expectation). AMP from memory don't mandate FP software and different parts of their business use Xplan and others use Rubik. Westpac mandates software for internal employees, but not for other licensee practices. Even if CBA decided to move beyond pilot phase and implement it across their FP networks, is would be rare for any bank to mandate any Financial Planning and/or Admin service or agree to any sort of usage or revenue. Instead, they usually "approve" a piece of software for use within the organisation (e.g. as part of a vendor panel) and employees may/may not use it. Of course, I would love to be wrong and if I am, they could form part of the FP technology ecosystem and be integrated to existing CRM, Rubik, Midwinter, Xplan software (albeit unlikely and highly complex due to red tape and security). Personally, I don't think a MOU or revenue agreement is technically needed (although certainly would be welcome since it provides a level of comfort and security). The most important thing is CBA use IAMs services and pay for it on an ongoing basis (with or without a contract). Bear in mind that IAM is not Microsoft, Adobe, Salesforce or MS Dynamics...yet.
7. The Announcement also states a Deeds of Agreement has been entered into with Count and Fin Wiz. A Deed of Agreement is defined as: a special type of binding promise or commitment to do something. The substantial requirement of a deed is that it be intended by the executing party to be the most serious indication to the community that she or he really means to do what has been agreed between the parties. I think this is as close as we'll get to a binding agreement anytime soon and deserves credit. I do not expect we'll get any more details than this in future, but for those interested in the standard prices and rates for IAM, you can get a rough gauge here: https://boom.intiger.com.au/Home/Services
8. If CBA works out, this has the potential to increase the barriers of entry for others, since IAM will have first mover advantage on an institutional scale, and may discourage other smaller similar businesses from competing in the same arena. Similarly, other banks would be unlikely to develop in house capability when IAM provides this as their core offering, off the shelf.
9. Now, all this is dependent on CBA/IAM working out. So what are the odds of this happening? Well, we need to consider the following. Firstly, CBA FP are in a world of pain with inappropriate advice, remediation, ongoing regulatory change, competition amongst banks still fierce, efficiency and cost constraints. IAM presents one avenue of relief. Secondly, Mark Rantall is the Chairman of Total Financial Solutions. TFS is owned by Countplus. Countplus is owned by Count Financial. Count Financial is owned by CBA. Long story short, we have an insider who can lobby IAM and may have set the wheels in motion for this deal initially. Granted things may not have turned out well for the NAB scenario (which Mark was also affiliated with in the past), but I'm happy to take a punt on this working out well this time around. Thirdly, we need to consider why CBA WOULDN'T take up the service...for that to happen, IAM would seriously need to stuff things up, or CBA would need to run out of funding, or a better solution comes along, Black Swan event etc. These scenarios, whilst possible, are in the low probability (high consequence) bucket and are systemic risk inherent with any business.
10. To maintain a level of objectivity, yes, there are a number of risks ahead for IAM, but there is nothing we can do about this, except understand whether we, as investors are willing to accept this or not. For those that hold Lithium speccies, its analogous to the risk of poor assay results or soverign risk. IAM need to deliver, they need to get the basics right, they need to impress CBA, they need to manage market expectations, they need to evolve. I believe they will do this and I will divest the moment I get an indication they cannot do the above. Until then, play nice.
Some numbers for you all (at May 2017)
1. CBA FP = 690 Planners
2. Count = 601
3. Fin Wiz = 347 TOTAL = 1,638
Plus CBA Securities/Private = 81
Plus Total Financial Solutions (owned by Countplus) = 89
(20min delay)