Ambitious fund manager Income Asset Management (ASX: IAM) has flagged the prospect of positive cash flow thanks to a strategic partnership with Perpetual Corporate Trust, which will play a key role in helping IAM improve its underlying business.
Like many smaller financial service businesses, IAM carries high regulatory and operational expenses which meant that even with $2 billion of funds under administration (FUA), the Company still logged $7.5 million in operating cash outflow in FY24.
The partnership is expected to bring significant benefits to IAM. One of the most notable outcomes is the potential for over $4 million in cost savings per year. Previously, IAM used multiple platforms for various administrative tasks, such as technology, custody, and settlements. By consolidating these functions into a single platform through Perpetual, IAM expects to to reduce costs and simplify operations.
Achieving positive cashflow is a major milestone for IAM which has a stated vision to be a leading player in the Australian capital markets, providing innovative and client-focused solutions for investors. The immediate focus of positive cash flow would be a stepping stone for IAM which reported $14 million revenue for FY24, but also a $14.5 million net loss after tax.
The new Perpetual partnership will introduce a recurring revenue stream, starting in Q3 FY25, through a new administration fee that will be introduced to clients. This fee will directly contribute to IAM’s earnings, helping the Company achieve more stable, predictable income over time as an “annuity-style” revenue stream is crucial as it will support growth.
IAM’s clients paying this fee will benefit through improved services with a new platform provided by Perpetual to offer enhanced reporting features, including tax and cashflow reports, which will be accessible through a client portal. Additionally, clients’ assets will now be held in Perpetual’s custody, providing them with an extra layer of security and reducing risks related to errors and cybersecurity.
From an operational perspective, this partnership will allow IAM to focus more on growing its business and serving clients, as they will spend less time on administrative tasks. The improved efficiency will allow IAM’s team to concentrate on generating new sales and expanding their client base.
Overall, IAM’s partnership with Perpetual is expected to bring about significant improvements in cost management, client experience, and business efficiency.
“We have built the scale of our FUA through IAM Capital Markets to ~$2b and over ~2,000 clients in only three years and this scale enables us to utilise this game-changing external administration with Perpetual,” said IAM CEO, Jon Lechte.
“We take comfort in the capability of the Perpetual Corporate Trust business who have $1.2tn in FUA and ~$250bn FUA as an institutional custodian. Perpetual’s unique end-to-end product offering combines their custody business with middle office management and settlements, through to their innovation company Perpetual Digital, which provides their integrated SaaS platform for order management, deal facilitation and client reporting to enable our business growth objectives.”
Mitch Korver is a Business Writer focused on high-growth companies listed on the ASX in the small and medium cap space.
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