Iress outlines plan to cater to millennials and ‘digital natives’

Iress chief executive officer Marcus Price has pledged to make improvements to the firm’s Xplan software to make it “world class”, on top of plans to develop the “next generation of advice software”.

Speaking with ifa following the release of a refreshed strategy for Iress last week, Mr Price said that these two areas would be central to the company’s future plans in the advice space.

“We really want to improve the performance of Xplan in terms of helping advisers be more efficient in their business and practices. We really do see Xplan itself as an evergreen application, we’ve got a lot invested in it,” he explained.

“A lot of people have built their businesses around it, and we need to come to the party and keep that absolutely at world class, and there’s a bit of catch up needed there. So, the first thing is, we’re really going to be focusing on making sure that Xplan is absolutely up to standard and actually start to generate new value for planners.”

Iress noted in its refreshed strategy that more needed to be done to reinvest in its core software and service to deliver value to clients. The firm also indicated that it was committed to leading the development of the next generation of advice software.

“We do recognise that digital advice journeys, the millennials that are coming through, those who are going to be needing wealth in the next 10 to 15 years, have got a very different way of entering wealth and very different requirements, and we want to build a platform that’s going to be potentially internationally transportable, but also one that actually caters to the needs of digital natives,” said Mr Price.

As advice firms seek greater scale and profitability, Iress also said that its digital advice and next-gen advice software would “drive scale and accessibility across multiple segments”.

Iress has ‘a lot more growth left’

According to Mr Price, who joined as CEO last October and has overseen a strategic review of the firm over the past six months, Iress has got “a lot more growth left in Australia”.

“A lot more growth left in wealth, even in the trading industries, which are growing, and they continue to grow year on year,” he added.

Part of Iress’ new strategy is to achieve the “rule of 40” benchmark for leading software companies, where revenue growth and EBITDA margin add up to 40 per cent or more.

“There’s enough growth for us to be an absolutely genuine ‘rule of 40’ company, in the same areas as Salesforce and those sorts of companies,” said Mr Price.

“So, we’ve got the capacity just with what we can see in front of us, never mind what we might be able to achieve with new wealth platforms and other initiatives, and even the growth we can get out of superannuation. It’s a very positive picture for Iress, I think,” he said.

Iress’ analysis has determined that its core businesses, namely wealth, trading and market data, and superannuation, are already at or close to the rule of 40 benchmark.

Meanwhile, other parts of Iress are performing below the benchmark, including its MFA and platforms businesses which will be sold off to position the firm for “the next growth horizon”.

“It’s really about focusing on our core strengths in our wealth businesses, in our trading business in Australia and in our superannuation business in Australia,” Mr Price explained.

“It’s really about diverting or refocusing attention away from markets and services products that we don’t believe are going to drive growth into those that are. It’s really doubling down on where we are strong strategically.”

The refreshed strategy also includes a cost-efficiency program, which is expected to deliver annualised savings of $32 million representing 10 per cent of the firm’s headcount.

“We think there is probably more efficiency to come in the organisation through the restructure, but that will probably be later this year or early next year,” Mr Price said.

“So, it really was just — we hadn’t addressed the cost structure for a long time and it was really just almost, I wouldn’t quite say housekeeping, but certainly it was a process of just looking at operational efficiency, organisational efficiency.”

As part of its update, Iress reaffirmed its guidance for segment profit on a constant currency basis, which is expected to be in the range of $166–171 million, while underlying EBITDA on a constant currency basis is expected to be in the range of $144–149 million.

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.