Clime IM seeks advice and asset manager acquisitions in 'climate of chaos'
The “experiment” away from vertical integration has been a mistake, according to Clime’s Michael Baragwanath, and Clime is positioning to benefit via acquisitions in the “climate of chaos”.
Speaking to Money Management, managing director Baragwanath discussed the failure of Shield and First Guardian funds and the problems associated with the platforms and advisers that had knowledge of the fund and potentially had recommended them to clients.
This includes platforms Macquarie, which has agreed to pay $321 million to remediate affected superannuation fund members, and Equity Trustees.
He said: “Vertical integration is back, the whole experiment has been a failure. Everyone got what they wanted which was to be independent but now no one is responsible for anything.
“No one considered the cost of being hands-off which is it puts the onus on advisers which is failing consumers. If an adviser is recommending one of thousands of products, that’s a massively unrealistic expectation on them and they are blamed when something goes wrong.
“You are effectively telling advisers that they need to know every single product in the market and be able to find the best solution and know exactly how it works and that’s not realistic for any advice business.”
This onus on advisers had subsequently led to the rise of platforms, but they also lacked the ability to thoroughly research every single fund.
“People thought they were investing with Macquarie, they didn’t realise they were investing with Shield, they just thought it was a different investment option,” he said.
Earlier this year, Clime stated it was reviewing its approved product list and only recommending products that comply with its reporting framework.
Speaking at the time, he said: “I feel we have an obligation to know exactly what is happening with our clients’ money when it’s with another manager or product, so we’re investing in resources to make that happen.”
As for whether this presents an opportunity for Clime, Baragwanath said the firm is positioning itself to take advantage of the “climate of chaos” caused by this environment. This could come from acquiring smaller fund managers who find themselves removed from approved product lists at the major platforms or from smaller advice firms who are seeking greater resources.
“Chaos creates opportunity and we need to be positioned for that,” he told Money Management.
“Lots of advisers want to work with a partner who has greater resources, they don’t want to feel they are on their own and with the weight of the world on their shoulders so bigger groups then become appealing.
“When markets are good, people feel they can do it on their own but when issues strike, they realise they want to have a partner and those capabilities available to them.”
AUTHOR
Laura Dew
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