Hi all, please see below for my notes from the Sydney Investor...

Hi all, please see below for my notes from the Sydney Investor Presentation - Tuesday 9th May 2017

The current percentage of staff in a Financial Planning Practice (FPP) is 50% advisors and 50% back office staff, such as paraplanners. This means the current ratio is 1:1.

IPAC WA about 5 years ago had 1.3 back office for every advisor, hence, 1.3:1. But, because of efficiencies from using Intiger’s services, IPAC WA is now 0.7:1, hence, a reduction in back office staff and a reduction in cost. (However, even though there is a reduction in back office staff here in Australia, I do not know if they are now more profitable as it they are paying for the use of Initger’s back office staff overseas.)

Argentina in presentation: Mark Fisher said the code for KLIP is finished, but needed someone who knew software, Regression Analysis in Maths, to work on the live feed they receive. He searched for 5 months and found woman in Russia and a woman in Argentina (Buenos Aires) that were able to do what he needed. Both places are in different time zones to what he preferred, but he picked the woman from Argentina, a lady by the name Maria, because Mark Fisher speaks Spanish. Maria has a Phd in Maths (I am assuming in Regression Analysis). KLIP is not the main software to generate revenue for IAM; it provides continuous feedback to the FPP of staff performance, as well as when it is best to advertise based on past results, etc.

PC was asked if IAM will hire an independent director soon for the sake of corporate governance. PC responded that would be nice, however, it is not a priority for the next few months and so they will not rush to get a new independent director.

Cost savings occured by opening at CEBU as it is much cheaper than Manila, as well as moving the office in Manila to an office with significantly less rent.

Concerning the number of practices in a recent IAM announcement, IPAC WA was counted as 1 FPP, whereas Sentry was counted as 6 FPP.

IPAC WA was using IAM services for about 12 months before they got the award. This was early stages for IAM, and the efficiencies that took 12 months for IPAC WA to benefit from would now take about 12 weeks if IPAC WA was to have started engaging IAM services now instead of back then. (Hence, depending on the size of the FPP, the benefits in using IAM are reasonably quick to improve the FPP profit margin). It would take about 12 weeks depending on how well the client engaged with IAM, being willing to quickly understand, be flexible and implement IAM services.

Individual practices are much harder to scale because, firstly, it takes many human hours to work with the client which is done by Mark Fisher and Charles Blake, as well as secondly, the portal requiring to be tweaked for the benefit of each practice (am not 100% certain if i understood this correctly). Some clients prefer to do things in a certain order the way they have always done it, for example, order A, then C, then D and finally B, whereas Mark would recommend to them to complete the steps in the order of A, then B, then D, then C. Hence, the portal standardises each step and allows the client to tweak it the way that suits their practice the most.

Mark Fisher said some licensees due to the size of their company can take a significant period of time in making a decision. Hence, it is better to offer an online solution that goes directly to each advisor, with a fixed price, available anytime, they come to IAM, and hence the portal is direct to the market.

Mark Fisher originally thought they would need prior approval from the licensee before the FPP aligned with that licensee would be allowed and be able to use IAM. However, they have realised they do not need to do this.

Also, Mark Fisher now realises that even if the licensee approves the use of IAM, some licensees have no way on making the FPPs under that licensee actually use IAM.

Has there been any concern expressed about Financial Planners having their back office processes conducted overseas? Mark answered at the bottom of the process that the FPP client receives, there are two sentences saying something along the lines that some or part of the work was completed offshore by IAM and it has a contact number. As yet, Mark is not aware of any concern shown by anyone with respect to this. Mark indicated that people in Australia are ok with having their information processed overseas since ANZ has 7,124 people in India processing loans.

The processes on the portal can be ordered anytime, very quickly and at a fixed cost.

The following paragraph is one of my main concerns.

Patrick said the banks work on commissions and hence the banks main concern is on the number of products and services sold. Hence, if I understood correctly, there primary source of income is not from efficiencies, but products and services sold. There is something i thought of today that i would like to be answered, if someone attending the Melbourne or Perth presentation could ask the question. When it comes to Financial Planning, if the banks primary source of revenue is not from efficiencies (although they would welcome any efficiencies from using IAM) but rather from the sale of their own products and services, then can the portal for each of the banks be tweaked in such a way that only the products and services of that bank are available for consideration? I would imagine a bank would not want a FPP under the bank’s licensee, having an IAM process recommending their client consider a product or service from another bank. It is a bit like a loan officer working for Bank A; they would be instructed not to recommend a loan provided by Bank B. Is this something I should be concerned about or have i misunderstood how this portal may work?

Because if that is a concern and has been expressed by one of the Top Tier firms, then that may have been a catalyst to develop the portal which can be used to reach the other 40% of the market that has no qualms as that mentioned in the previous paragraph.

Over time, the amount of human component to produce a process from the portal will reduce as the portal becomes more automated.

How easy or difficult is it for IAM to have competitors? Mark answered that the Technical and Human Resources to duplicate the portal will not happen because of the following:

Technically, it has taken 3 years to understand the needs of the industry and develop technologically accordingly. The portal uses technology that is at the ether, at the upper limit of what can be done now with the technology available today.

Human Resources, Mark Fisher has been working in this line of work for 20 years and the last 3 years has been the hardest thing he has ever done. The way IAM is developing requires human resources with left field thinking, that are crazy, with an imagination that is able to see something that the FP industry currently cannot. Mark has even considered using robotics which has never been considered by the industry (Patrick is rightly concerned at comments made on the internet and extrapolations that are incorrect and on several occasions wisely had correctives for some of Mark’s statements for the safety and good of IAM and so PC stopped Mark continuing to talk about robotics).

I asked for clarification between the difference in paraplanner numbers from the previous investor presentation in Sydney in November 2016 where Sharon mentioned they were recruiting staff at a rapid pace (about 10 - 12 persons per month), whereas this week’s investor presentation (on page 20) states India and Philippines each have about 25 paraplanners and so why is there a significant difference in the number of paraplanners now compared to what was expected (as this indicates to me a significant difference in demand). Patrick answered there are now about 25 paraplanners each in India and Philippines because the demand from the pilots was not as much as they thought it would be.

Concerning risks to IAM

It was asked is the software becoming independent of Mark Fisher or is the software and IAM 100% dependent on Mark? Mark Fisher answered by saying that when discussions were happening with Mathew Walker in the past, MW said that within 1 year MF will need to become redundant because of the key person risk and MF has been working towards this in the sense that MF keeps himself out of the day to day running of the business. MF only makes sure the other staff, TIm and Charles, know clearly what is expected of them, they do what they have to do but MF does not tell them how to complete the goals each of them is working on. MF gives them the boundaries, guidelines etc. For example, MF had said to Sharon, I want you to find a place that is secure, with less rent, and 5 staff and thats it. MF does not exercise further control than that.

MF said KLIP is built, they are doing no more programming on it, just the maths and maintenance of KLIP.

MF generates the ideas but the staff determine how to achieve them. MF states the goals and objectives and the staff comes up with solutions.

PC says on the internet, including hotcopper, 80-90% of the speculation is done by certain people for their own short term trading objectives. Customers and their employees, ASIC, ASX and FP’s read hotcopper and hence PC will no longer be naming customers, apart from those that have previously been named. (On this note, if anyone recalls more accurately anything that i have written, then please let me know as i don’t want to state anything incorrectly).

PC in an IAM announcement weeks ago stated that any announcement relating to a previously disclosed customer will be disclosed in any further update. Hence, based on this, investors could accurately conclude both Sentry and NAB that have been previously disclosed in past announcements were not the company involved in last weeks announcement since neither was mentioned.

Mark reminded all that the aim is the value of the company, the revenue it generates and hence the focus is on long term goals, not on the immediate short term. Hence, they will avoid announcements containing names as this results in share price volatility, whereas they prefer focusing on revenue growth.

Mark was asked concerning an 8.5 cents takeover price; his response was that right now he would not accept an 8.5 cents takeover price because right now IAM is worth a lot more.

Patrick said sometime in the near future, there will announcements along the following lines concerning Sentry and NAB (once again, if i have incorrectly written this down, can someone please correct me).

Regarding Sentry
Pilot completed successfully
There was no dissatisfaction by Sentry
Sentry practices have been approved to engage IAM if they want to do so
Discussions ongoing business relationship with Sentry office

Regarding NAB
Completed pilot work
Discussing future work

MOU 2, 3, 4, 5, 6 still talking. MOU 2 has completed their 19 steps; IAM in discussion with MOU 2 decision makers

Concerning last week’s announcement, PC said the pilot work was completed successfully and IAM is still in discussions with them.

PC said management has done projections past June 2019 and using metrics such as number of practices and the amount of activity measurements.

The portal is ready but being tested by over a dozen people. The portal will be the main driver for revenue.

MF said the maths portal shows the level of service to the client in the following way. The client orders a process and a stopwatch starts, showing how much time the process will take and how many seconds are left for the process to be completed. In the past month, there has not been even one process that took longer to complete than what was expected. Great client service requires great turnaround times with a live data feed to the client so they know immediately that they are getting great service from IAM.

Someone please ask the question concerning will the banks be reluctant to engage IAM’s services unless the portal is able to be tweaked to only recommend products and services offered by that bank.

Once again, i am open to being corrected on anything I have misunderstood and written, just please let me know.

I rarely post, because I think it is better if nothing is posted unless it is really worth saying, a practice that would improve these threads if exercised by more people, and that way also avoid the many incorrect conclusions and speculation that occurs on hotcopper that PC highlighted in the Sydney presentation.

I hope all of the above was helpful, in particular to those who could not make it to the presentations.

AI