HUB24 acquires Paragem.

HUB24  is pleased to announce it has executed an agreement to acquire the independently owned financial planning licensee Paragem Pty Ltd (Paragem).

Paragem is a leading boutique dealer group, founded by Ian Knox and Charlie Haynes that has grown strongly to license 20 high quality financial advisory practices across Australia, which advise on more than $2.5 billion of client funds.

HUB24 and Paragem are highly complementary with minimal overlap and share a common goal to create strong financial advice practices and a platform group not aligned to product manufacturers. With over 40 years of combined industry experience, Mr Knox and Mr Haynes will continue to grow the Paragem business and add significant depth of experience to the HUB24 executive team.

Transaction highlights

• HUB24 has executed an agreement to acquire 100% of the shares in Paragem.
• Completion is planned to occur over the next few weeks subject to satisfaction of conditions precedent including that acquisition arrangements are agreed between Paragem advisers and HUB24 to the satisfaction of the parties.
• Cash consideration of $1m at completion with a deferred cash payment at 12 months of up to $1m (subject to customary adjustments) to be funded from existing cash resources.
• Capped earnout consideration of up to an additional $6m subject to financial performance measured over 3 years and paid in HUB24 ordinary shares no later than 30 September 2017 (with the number of shares determined by reference to the 60 day VWAP until today’s announcement of 92.47 cents).
• Paragem is currently self-funding and has been cashflow positive over the past two financial years.
• The Paragem business had gross revenues (inclusive of payments to advisers) of $20.2m in FY14, has operated on a break even basis and is in a strong growth phase.
• Ian Knox and Charlie Haynes will enter into executive service agreements – remuneration and performance incentives will be similar to existing HUB24 executives.

The acquisition of Paragem is consistent with HUB24’s strategy to pursue significant growth by partnering with quality independently minded financial advisers (IFAs).  Working together with Paragem and HUB24’s existing highly valued advice licensees, the company will continue to develop solutions for the benefit of the IFA market and consumers. Given the level of industry consolidation occurring in the licensee space, HUB24 is pleased to be able to work with Paragem, whilst continuing to strengthen existing relationships. Together we will provide a compelling home for like-minded financial advisers who value choice and the ability to freely run their own business, while working with HUB24 to develop better, more cost effective client outcomes.

Both HUB24 and Paragem will retain their existing brands and will continue to operate independently. Importantly, Paragem will retain its open architecture approach to approved products and platforms and HUB24 will maintain its focus on supporting the growth and prosperity of its existing licensee clients and pursuing new client opportunities with its market-leading platform solution.

HUB24 CEO Andrew Alcock stated, “We see this acquisition as being consistent with HUB24’s core proposition of providing high value services to licensees and advisers. We were also determined to ensure any entry into the advice space would result in a further enhancement of HUB24’s rapid growth, diversification of the company’s revenue stream and continued improvements to platform functionality, which will be highly valued by the broader IFA market. In addition to providing our HUB24 retail products to advisers, we will continue to focus on our core business providing white labels to financial planning groups, accountants and stockbrokers whilst also developing and supporting the Paragem business”.

He added, “HUB24’s platform will enable Paragem advisers to act in the best interests of their clients. We offer a pathway to a broad investment universe, free of product issuer conflict, utilising direct securities, managed accounts, traditional managed funds as well as multiple term deposit and insurance providers. We are not aligned with product manufacturers and therefore not constrained in the products we offer.”

Paragem Managing Director, Ian Knox, agreed saying “Paragem’s client base is well suited to Separately Managed Account (SMAs) investments that are professionally constructed and managed and we reviewed the entire market before determining HUB24 was the most suitable partner. We wanted to embrace an independent technology-based product provider at the forefront of SMAs and managed accounts, not one that was just thinking about the concept.”

An important consideration in acquiring Paragem is the cultural alignment between the two businesses. The fusion of advice and technology supports the ability to deliver exceptional customer service outcomes and adviser practice efficiency. In addition, both Paragem and HUB24 understand the importance of existing relationships and the acquisition is not expected to alter these in any way.

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A former Hillross practice, Affinity obtained its own AFSL with Paragem earlier this year and is now one of the fastest growing private client firms in NSW with $250 million funds under advice on behalf of 300 clients.

Paragem Managing Director, Ian Knox, said Model Office provided planning practices with process improvements which lowered compliance and back office costs.

“The growing list of clients now using Model Office reflects growing demand from planners to streamline their businesses with simple and effective practice management tools,” Mr Knox said.

Managing partner of Affinity Wealth Services Keith Jones said the partnership with Paragem was a complement to Affinity’s independent and professional advice offering.

“We wanted to make sure our strong advice and investment service offering was supported by reliable operational systems and it was important that those systems enabled us to focus on the part of the business that is most important, providing advice and managing risk for clients,” said Mr Jones.

Advisers focus on risk management support
Melbourne-based, Carnbrea and Co. Limited has appointed Paragem to implement and maintain its risk management and compliance needs for its wealth management arm with a focus on governance and process improvement.

Carnbrea Chief Executive Officer, Robert Lyon said risk management had been a priority for the wealth manager, which has a well established presence dealing with family offices.

“Having previously used Paragem for our licence review, they were the natural choice to meet our broader compliance requirements. We’re looking forward to growing our business with the support of Paragem and the experience it brings dealing with complex and compliant advice models,” said Mr Lyon.

Mr Knox said Paragem was well placed to support Carnbrea as the practice sought to capture a slice of the rapidly growing family office sector in Australia.

“Outsourcing part of the compliance programme but linking it to internal requirements enables Carnbrea to access independent, high quality support and establish the necessary level of governance it demands,” concluded Mr Knox.

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