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Analysis: A closer look at the eChoice model

lost trail ta

lost trail ta
James Mitchell 3 minute read

The troubled aggregator has said that its third-party business and broker trail payments will not be affected by the appointment of administrators. But how much is secured creditor Tony Wales actually trying to recoup?

The BRW Rich Lister calling in a debt on the boutique aggregator has been keeping it alive for quite some time. Tony Wales is the man behind Welas Pty Ltd, the secured creditor that this week decided it can no longer continue to support eChoice.

Mr Wales made the bulk of his wealth with ASX-listed global stock transfer company Computershare, which he joined in 1981, three years after the company was founded. Today, the group has a market cap of around $9 billion. Mr Wales is still one of the top 20 shareholders and owns around 3 per cent of the company, a shareholding worth close to $270 million. Last year, he was reportedly worth $403 million and ranked 162 on the BRW Rich List, according to The Australian.

Some sources say that Mr Wales has more than $60 million invested in eChoice, which rebranded in 2015. Firstfolio Capital was the group Mr Wales originally became involved with, and in July 2014 he acquired $29 million of its debt from CBA. 

At the time, Mr Wales said that he was “a committed long-term shareholder and financier of Firstfolio”.

“Given the ongoing consolidation and evolution of the financial services sector,” the millionaire said at that time, “I believe the company is well financed to build on its market position and support its customers by delivering innovative financial service solutions.”

Following the appointment of current eChoice CEO Peter Andronicos in October 2014, the aggregator restructured its leadership team, broadened its lender panel and announced numerous partnerships to boost lead generation and diversify revenue, most notably with real estate portal Domain.

FY2015 was a difficult year for eChoice. The group recorded a $20 million loss. Mr Andronicos said that result should be seen in the context of setting the business on a new growth path and the significant investment associated with it.

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More partnerships were formed throughout 2016, particularly with Movinghub and beforeyoubid.com.au, while its lender panel was broadened to include Mildura Finance and Resicom.

The company’s half-year results for the six months to 31 December 2016 showed that losses had been reduced significantly to $1.6 million, thanks to a $3.1 million cut to operating costs.

Its decision to exit the mortgage securitisation business in October 2015 also helped. The sale of the non-core Firstfolio Capital book netted $7.8 million, made up of sale proceeds before costs of $2.0 million and the release of $5.8 million in cash collateral.

Proceeds from the Firstfolio Capital transaction and strong operating cash flows enabled the company to reduce corporate net debt by $10.5 million in the first quarter of 2015–16 to $47.7 million.

But the company has been on life support for years and this week Tony Wales decided to pull the plug.

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The group confirmed that Geoffrey Reidy and Andrew Barnden of Rodgers Reidy have been appointed as voluntary administrators of eChoice Limited and 13 subsidiary companies, pursuant to Section 436C of the Corporations Act.

In a statement provided to The Adviser, eChoice explained that Welas took the step to appoint the voluntary administrators to enable eChoice to assess its options on how to secure and sustain the future viability of the business.

“The voluntary administrators have not been appointed over any group companies with existing contracts with brokers or lenders,” the aggregator said.

“Accordingly, the administration will not affect ongoing third-party stakeholder contractual obligations, such as trail payments by lenders to these companies and payments of trail by these companies to brokers.”

 

[Related: Aggregator confirms voluntary administration]

Analysis: A closer look at the eChoice model
lost trail ta
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lost trail ta
James Mitchell

James Mitchell

James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.

He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.

He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.

James holds a BA (Hons) in English Literature and an MA in Journalism.

 

 

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