Not the Roodt roadshow
The Efficient Group is one of those small caps that certainly adds some choice to the financial sector. It was known for many years as the home of economist Dawie Roodt. His appearance fees on TV and radio and his numerous columns must have kept the business going in its early days.
Then, in a classic example of the tail wagging the dog, Efficient absorbed the largest unit trust cobranding business in the country when Robert Walton left Metropolitan and took most of the whitelabel funds with him. Efficient CEO Heiko Weidhase is no slouch at sales — he marketed canned peas in a previous life. But next to his breeze Walton is a tornado. Rather like salesmen of the past such as Winky Ringo of Dashing Furniture and Sean Melnick of Peregrine, except he works late on Fridays. Even in the pampered fund management industry there is resentment about Walton’s pricey Italian sports cars. Quite a culture clash with the rest of Efficient, which prefers Sanlam middle management suits and cars.
Walton only joined Efficient once he had secured a profit share agreement which gave him two-thirds of the profit from Boutique Collective Investments and Boutique Investment Partners (BIP). Well, not all to him — his immediate colleagues could earn enough for the odd bouquet of flowers. The rest of Efficient at least is no longer just the Roodt roadshow. It has 233 financial advisers, and 65,000 clients in all nine provinces.
Assets under administration, the third-party or white-label funds, make up R110bn, and it is one of the 10 largest unit trust management companies in SA. BIP consults to R30bn of assets and holds R19.5bn in its multimanager operations. Though it is small for now, Efficient also offers fiduciary services, health-care consulting and employee benefits consulting. It isn’t looking at moving into more capital-intensive areas such as banking and insurance, but it undoubtedly has more scope to use its sales force to sell such products.
It can’t have been sustainable for Walton, through the profit share, to earn so much more than the rest of the Efficient executives and the agreement has now been cancelled at a cost of R480m, larger than Efficient’s market cap, with R430m going through the profit and loss account, though at least this will be considered a deductible expense.
Unique niche
Weidhase says this will not be a conventional integration; the businesses were already 100% owned and worked side by side with the rest of the group. Walton’s team will now run sales across the broader Efficient Group.
Walton has found a unique niche in the unit trust industry. Some competitors are happy to take on a few select white-label funds, mostly those run by smaller asset managers without the resources to administer unit trusts inhouse. But most are wary of broker funds which carry the brands of financial advisers; in many cases their cats have better investment skills than they do. Certainly Jeanette Marais, now responsible for Walton’s old business at MMI, is adamant that she will not allow her business to become a volume-driven unit trust puppy farm.
There are some sour grapes, of course, as Walton has taken a lot of business away from his old shop.
I groaned when I read that a business as small as Efficient is divided into clusters, and I was still more irritated to see that one of the clusters is called “solutions”. But to be fair, it does include ways to service real problems such as trusts and wills, deceased estates and share portfolios as well as multimanaged funds.
Walton’s immediate colleagues could earn enough for the odd bouquet of flowers