Al Gore-backed FNZ says Australia’s wealth, super sectors ‘ripe for disruption’

FNZ, a global wealth technology and services player, is highlighting Australia as a top-three growth area for the firm as it identifies this market as ripe for disruption.

FNZ is a private company that is backed by investors including Al Gore’s Generation Investment Management. Picture: Glenn Hunt

FNZ, a global wealth technology and services player backed by former US vice-president Al Gore, is highlighting Australia as a top-three growth area, identifying the market as ripe for disruption.

FNZ’s Asia-Pacific chief Tim Neville believes sections of the Australian market are inefficient, in part because the wealth management and superannuation administration sectors are over­priced compared to global counterparts.

“We would say the average admin cost at a wholesale level in Australia is twice the cost of the UK, which is twice the cost of the US,” he said in an interview. “The Australian market, it needs to be disrupted.

“You think of longevity risk that Australia faces, not as much as a Japan or US, but reducing fees is the most certain way to extend the retirement income of a person.”

Mr Neville noted the higher costs at wealth firms and super funds were inevitably passed on in some form to consumers via fees, and said many activities in the sector were now “completely commoditised”.

FNZ – which has employees in 30 locations around the world and provides technology, operations and servicing to financial services companies – has identified its top growth markets as Australia, the US and middle Europe over the medium term.

In this region, Mr Neville said Japan and particularly Australia were key markets for FNZ.

“You’re seeing industry funds start to merge at a rapid rate (in Australia) due to regulatory pressure, you’re seeing we think local service providers under extreme balance sheet pressure … all of those things can provide the right settings for someone like an FNZ to really move fast,” he added.

“Wealth transformations are extremely complicated pieces of work and I think Australia has suffered from a failure on ­execution.”

Australia’s $3.4 trillion superannuation pool, and its broader wealth and investment sector, have long been attractive to players based offshore. But this market has proven difficult for many to make inroads into.

KKR and Commonwealth Bank owned-Colonial First State last year appointed FNZ as a new wrap platform provider, as it moved to replace legacy technology and invest in its systems. FNZ company also has UBS Australia as a post-trade processing customer, and advisory and ­accounting services firm Findex used the firm to deliver an investor-directed portfolio service.

Tim Neville, FNZ APAC chief executive.

The big four domestic banks have largely retreated from the wealth sector due to regulatory issues canvassed at the Hayne royal commission, with CBA retaining exposure through Colonial and Westpac still owning its investment platform unit, which is slated for divestment.

Reforms being considered by the federal government to make compliance less onerous in financial advice may see banks start to wade back into the sector.

Mr Neville said FNZ was supportive of Allens partner Michelle Levy’s proposed reforms to financial advice regulations.

“The more financial advice delivered in an appropriate way, the better, would be our view … (that’s) better for the consumer,” he said. “In most markets that we see, Australia included, it’s probably underserved if you think about people hitting their goals and particularly their transition to retirement.”

Asked whether demand for outsourcing may be curtailed amid heightened levels of cyber and data attacks on companies, sometimes through third-party service providers, Mr Neville said: “Cyber is a key risk for our clients in Australia and globally, hence a critical focus for FNZ.

“Our infrastructure and information security is gold standard and proven with the largest financial institutions in the world, but it is an area that requires ­continuous investment, assessment and forward-looking design/­development.”

Globally, FNZ counts Barclays, Vanguard and Aviva among its financial services customers and administers about $2 trillion in assets. The Asia-Pacific region accounts for about 12 per cent of that, growing more quickly than most other regions for FNZ.

Credit Suisse, which is being taken over by UBS in a transaction forced by Swiss regulators, is also an FNZ customer.

Mr Neville said that if the takeover meant a discontinuation of the relationship, it would have a “very negligible financial impact” on FNZ’s accounts.

That’s “assuming that relationship were to not continue, but we think the opposite: the upside and the expansion of the relationship will be significant,” he added.

FNZ is a private company that is backed by investors including Mr Gore’s Generation Investment Management, Canadian pension fund Caisse de Depot et Placement du Quebec and Singapore’s Temasek. CPP Investments and Motive Partners committed $US1.4bn ($2.1bn) in new capital to FNZ last year, in a raising that valued it at more than $US20bn.

Mr Neville said FNZ had well over $US1bn in revenue and was profitable, even in a tougher environment for financial technology firms.

FNZ has over the past four years enjoyed a busy period for mergers and acquisitions around the world. It snapped up ASX-listed GBST in 2019 and offloaded the wealth part of the business to Anchorage Capital Partners, largely because of competition concerns.

FNZ has also been linked to separate potential interest in software and services firm Bravura, and financial technology group IRESS. In 2022, FNZ made a $1.5bn tilt for Link Administration’s retirement and superannuation solutions unit.

Mr Neville declined to comment on specific takeover interest in Australia, but said FNZ was open to acquisitions across the region, should opportunities emerge.

“We always look at inorganic (growth) or M&A where it makes sense,” he added. “We’ve always got a pipeline. We are constantly looking and running rulers over things … Acquisitions for the sake of scale we probably don’t need.”

Mr Neville noted that in markets like Australia, FNZ also looked at bolt-on acquisitions that could emanate from specific technology or services, or providing the company a product or service it could export across its platform.

“There’s a reluctance for most good businesses to want to sell in this market, because they know they won’t get the best price. But some of them might be forced sellers,” he said.