Ambitious Australian trustee firm makes kiwi push

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Aussie upstart Sargon, best known in this market for its row with Perpetual Guardian owner Completus, is attempting another foray into the local trustee market.

Thursday, August 29th 2019, 8:16AM 1 Comment

by BusinessDesk

Sargon, which made headlines after its deal to buy Completus soured in 2017, has laid out its plans following the takeover of Auckland headquartered Heritage Trustees last year.

The company has $50 billion in assets under management and supervision and pitches itself as a trustee cloud infrastructure provider.

It was previously known as Trustee Partners.

Phillip Kingston, the company’s chief executive, told BusinessDesk it paid $10 million for Heritage and will invest $20-$25 million within 18 months to get the company to turn a profit within a year.

Its financial statements to March 2019 reveal a $2.9 million loss, up from a $1.6 million loss the year prior. Revenue had improved by 31 percent from $252,366 to $330,879.

Since taking over Heritage late last year, Sargon has cut staff numbers by 10, including its New Zealand chief executive Stuart Howard, who was appointed just last year.

Kingston said most of the staff were contractors, but they had to go along with five offices across the country, as Sargon exits the personal trustee business to focus on corporates. 

Last year, Sargon had also appointed former Public Trust senior manager Lloyd Wong in a senior supervisory/business development role, but he will finish up in the next month.

Kingston would not comment on individual staff, but said “we have a lighter traditional relationship manager layer and it is now more about tech support and onboarding.”

In order to boost its corporate trustee offering, Sargon expects office headcount to grow from 14 to about 25 within 12 months. Heritage will rebrand to Sargon within a month, and says it is on track to be the third Financial Markets Authority licensed robo-advisor in a few months time. It has held a supervisor licence since 2017.

Sargon pitches itself as a fintech and, while it has products to help manage accounts, its launch in New Zealand this week is pitching its compliance software which is meant to help managers navigate tricky regulations more easily.  

“We have a very differentiated strategy. We are a software company doing something which has been very paper-based,” Kingston said.

Kingston said while there is a well-established big three of Guardian Trust, Trustees Executors and Public Trust, the market is ripe for disruption.

“They don’t have a mandate for innovation...technology is either in your DNA or it isn’t. We want to bring the price down and quality up, driven by quality and scale."

Kingston said that the company, which recently purchased ASX-listed OneVue’s trustee business for AU$45 million, has a lot of relationships outside New Zealand and can offer strategies to enter new markets.

In New Zealand, Sargon does not need to grow through acquisition as clients aren’t that attached to their supervisors, Kingston said, adding it would take advantage of highly competitive KiwiSaver funds and growth in that industry.

“There is a time to strike now when the market is dislocated, it is just about to happen. The new KiwiSaver entrants are doing a really good job and are putting it to the banks to see if they will complete.”

Sargon has had a colourful history - the Financial Review reported a brief A$50 million investment from US billionaire Peter Thiel - and, while there had been reports of an ASX listing, Kingston said that is not a priority.

Kingston has played down the messy attempt to purchase Andrew Barnes’ Completus for $200 million, which was headed to court before a resolution November 2017, but is clear it didn’t fall over due to lack of funding. 

“We have been in the market spending that money buying other things - it was not a financial issue, M&A falls over all the time. It was quite uneventful. There was nothing fundamentally wrong with the business, these things have many factors, we’re philosophical about it… [Barnes] is a difficult personality.”

“I won’t comment on Andrew [further], but we came to an arrangement, which we were comfortable with, but we did waste a lot of time on it and we did lose money. So did they. It was a bad outcome.”

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