Sydney-based financial services firm Tranzact has announced its intention to exit the financial advice space, citing the compliance burden of the Future of Financial Advice reforms.
In August Transact announced a $384,000 loss for the financial year (down from a $1.065 million profit in the prior corresponding period) as well as a strategic review of the business.
The outcome of the board’s strategic review was announced yesterday, and revealed the company’s intention to sell its interests in the Australian advice firm Templetons as well as its stake in New Zealand-based Camelot NZ.
In an ASX announcement released yesterday, the company highlighted the impact FOFA has had on its compliance costs as well as “the degree of synergy that can be extracted through the various businesses within the group”.
“An outcome of the strategic review is that the Board believes there is now little synergy achieved from Tranzact’s ownership interest in financial advisory businesses and that this is unlikely to change in the future,” said the statement.
As a consequence of the board’s decision, the operating principal of Templetons has made an offer of approximately $3.5 million (which is in line with the company’s 30 June 2013 financial statements) to acquire Tranzact’s interest in Templetons.
Tranzact’s stake in Camelot NZ is set to be sold to the majority shareholder, Grosvenor Financial Services, according to the Tranzact statement.
“The [Tranzact] Board also intends to close the Investor Directed Portfolio Service business as the Company does not have sufficient scale to compete in a market dominated by much larger rivals,” said the statement.
“The $5 million (increasing to $10m under regulatory changes) of capital required to support the business cannot be justified,” it said.
Tranzact will now devote its energy into becoming a “smaller but more tightly focused superannuation services provider”, according to the statement.
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