Clime’s ‘strategic pivot’ impacts balance sheet

Publicly-listed financial services business Clime Investment Management has confirmed what it is describing as a “strategic pivot” from its existing business model towards a full-service private wealth business.

In doing so, Clime which is parent to financial planning business Madison, said that its September quarter results had been negatively impacted by the pivot but argued that it would lead to growth in the future.

In the meantime, Clime’s relationship with the Godfrey Pembroke-related Practice Development Group remains the subject of ongoing discussions.

This transition requires the rationalisation of non-core services and systems,” it told the Australian Securities Exchange (ASX). “Consequently, the September quarter results were negatively affected by elevated operating and project consultant costs.”

“The company continues to both undertake (and expense) its investment into new finance and client database systems to support ongoing client and adviser engagement,” it said. “We expect to see the continued shift in the flow of new business revenue into our managed account and bespoke investment solutions over coming months.”

It said that the transition to a full-service Private Wealth model would see growth in advisory fee revenue against a decline in funds management revenue until funds under management (FUM) was sustainably generated.

“A review of all business operations is underway which will see a reduction in expenses before the 2023 calendar year end. The major part of the investment in new systems will be completed by the end of November and will result in significant cost reductions in the second half of FY24,” the ASX update said.

Dealing with the Madison business, Clime said the focus was on generating operating productivity improvements for its licensed advisors noting that “therefore, we see the developments in client engagement and managed account solutions as directly benefitting the Madison network”.

“As previously advised (late August), we are continuing in our discussions to negotiate a joint services venture with PDG. We will update shareholders as we progress in our discussions,” the update said.