Company Interview / Fiducian boosts profit by more than 20%

Key insights:

Fiducian's (ASX: FID) growth strategy involves enhancing auxiliary areas of the business and encouraging inflow from financial advisorsTheir approach to acquisitions focuses on high performing businesses to strengthen the companyThe company remains committed to shareholders by striving to increase annual earnings per share, thus paying healthy dividends

Indy Singh, CEO of Fiducian (ASX: FID) shares his perspective on the company's performance and outlook. Despite encountering market challenges such as speculation over interest rate cuts, Fiducian (ASX: FID) has made commendable progress, with a 10% increase in funds under administration. While maintaining constant growth is a staple in their business model, expanding auxiliary areas of the business and increased inflow from financial advisors could supplement their progress even further. Indy remains cautiously optimistic about future interest rates, expecting them to remain high while the potential for inflation subsides.

Crossing into the realm of strategic growth, Fiducian (ASX: FID) has adopted a proactive approach in acquiring performing businesses as opposed to underperforming ones. With recent acquisitions in Victoria and a supposed large one in the pipeline, Indy confirms that they are keen on growth through consolidation. Training young individuals to become advisors is an integral part of Fiducian’s (ASX: FID) ecosystem of growth.

On the subject of dividends and shareholders, Indy affirms the company's primary objective is to increase earnings per share annually whilst making lucrative dividend payments to shareholders. The application of Artificial Intelligence (AI) within their strategy remains uncertain, as its efficacy in the sector is still being explored. Conclusively, Fiducian's strategy for the full year 25 is founded on acquisitions, improved inflows, expanded networks, and wise business decisions. Indy finishes by referencing the surging Fiducian share price, which he attributes to their continued focus on growing earnings per share.

Full unedited transcript below:

0:00

Well, I think Juliet, you just said all of them. It's been a rather interesting year.

0:07

Um, and, uh, there were headwinds in terms of whether there'd be interest rate cuts or not and whether there'll be more problems in the world. But I think the markets have rolled on and we're going ahead. And the results have been quite pleasing in terms of, I guess, some of the the details, as we said, funds under administration up by about 10%. What sort of growth do you think you can see in full year 25? Is that sort of growth sustainable? I'd say yes, if the markets hold. Definitely.

0:36

Um, maybe more if we can get auxiliaries going the way we're thinking. And, uh, we have lifted the expectations from our advisers, uh, to raise, uh, to increase their inflows, and that's already starting to happen. So, yes, I think we should be able to do it. How much has the interest rate picture with rates, um, at or near these highs either assisted or hindered your business. And what are you expecting? If we do start to see rate cuts from the beginning of 25?

1:12

Uh, um, our house view has always been that the rates are going to stay higher for longer.

1:19

Um, unless the governments are quite happy about inflation coming down within the requisite band. I don't think they're going to do anything, uh, very quickly. So we expected higher interest rates for longer. Yes. The money that we've held in cash has given us a higher return in terms of earnings. But, um, the jury's out in two areas. One says that there could be a recession in the US. The other says that there's no reason because they're not enough people to employ. So who are you going to cause? Are you going to cause unemployment?

1:57

Um, so we're setting neutral, basically

2:01

cautiously optimistic, as they say, in terms of employees. I mean, your network played a crucial role in your growth. Just talk about how much some of these advisors contribute to to net inflows.

2:15

Well, our advisors contribute 100% to our net inflows. And they're generally affiliated to federation through Fiduciary Financial Services. And as you would have known already, Julie, a number of platforms, in fact, most of the larger platforms are showing negative inflows. We're one of the few that has consistently shown positive inflows. And we have a good captive audience who are happy with the product, who are happy with the fees that we are charging and happy with the performance of the funds. So inflows keep rolling in. Are there any potentially underperforming competitors that you would have your eye on for potential merging or growth?

2:57

Well, it's not necessarily underperforming because underperforming then brings and stains the waters here too. Generally, we are happy to acquire good performing businesses. And we've just made two small acquisitions in Victoria. Uh, we got another one out in the marketplace, a big one, and we're constantly on the lookout to acquire, merge, bring them on, bring new advisors on as franchises or salaries, uh, train young people to become advisors. Uh, so the ecosystem for growth is quite, quite exciting. All right. Let's talk about, um, your payment to shareholders. I increased a, I mentioned, rather an increase of around 30%. That's quite impressive. Do you think it's kind of sustainable as well going forward, that kind of growth. Well, look, as a businessman, I, I strongly believe that making acquisitions for the sake of acquisition is not the way to go. You generally do that and waste shareholders money.

3:57

As I said before, if a person had invested about $1,000 and production, say, 2012 or 20 2012 13. Today they will be getting $400 of a fully franked dividend.

4:13

So in two years they get whatever they invested back. And this has been continuously going on. So our objective is to increase earnings per share every year and pay good dividends to shareholders particularly, which is particularly beneficial for retirees because they get this payment, um, fully franked.

4:35

Let's have a look as well, in terms of your platform or your planning software, any plans to, I guess, change that or how are you using AI as well?

4:46

Well, you see, I, um, is still in a in a nascent infant stage, and those who say they're using it probably just use ChatGPT to write poems or something. Um, it's it's open architecture. It'll come with the ability to use AI. Will come.

5:06

Um, Um, but to say that I'm actually using it to build my business. Generally, people are coming out with policies on how to use it and how not to use it. So we're alert to I very much. Um, it's pretty much on the cards, but, you know, you got to use it the right time. When, when, for example, when we were giving people, uh, reports online on their assets, uh, overnight, um, the market was already saying that they're doing it, but no one really was.

5:44

So

5:45

you take whatever with about I with a pinch of salt with your time and it'll come. Okay. Well, what I guess is the in the pipeline for full year 25. What are you working on?

5:56

Well, we're working on acquisitions. We're working on higher inflows from the advisors. We're working on continuing with the good performance of the funds um, spreading our network, bringing on more franchises, just generally growing the business steadily, carefully, and no crazy acquisitions, which, um, you know, your share price falls by half and none of that stuff. Well, let's just have a quick word then. Andy, on your share price done pretty well over the past five years. And if you've held it for a year, even you must be impressed with that. I know you can't control the market, but, um, what is fair value given where your competitors are? Well, there are competitors are valued at ten times of what we are.

6:40

Um. We're more. Well, I did some presentation with stockbrokers and fund managers this morning,

6:48

and they said, Andy, we can understand why your share prices at above $12. And I said, well, look what the share price is, what the shareholders and investors wanted. My role is basically to continue growing earnings per share, continue every year. Increase that. And the share price should look after itself.