4 September 2018

KARREN VERGARA

In Koda Capital's Sydney office, a large elephant sculpture greets you in the foyer while figurines of different colours and sizes are positioned neatly in each boardroom.

It's to remind the firm of 60 people to speak up, be open and 'address the elephant in the room.' When a problem unfolds, the partners take a proactive and zero-tolerance approach to resolve it.

This commitment to inspire staff and offer something different to other private wealth firms has helped propel Koda Capital's success after four years in operation.

The investment team is buoyed by a similar ethos. The team of four is encouraged to be intellectually curious and think outside the square when it comes to presenting investment strategies and products for clients.

Head of research and partner Jason Coggins joined Koda in 2014, shortly after it was established by founders Paul Heath (chief executive), Quentin Reeve (chief of staff), Steve Tucker (chair) and Andrew Rutherford (chief operating officer). In January 2015, the firm launched its investment offering.

Today, Koda teams up with a maximum of 40 advisers (we currently have 25) with a small high-touch client base and offers four key offerings: tax advice and structuring, investment strategies, philanthropy and family succession planning.

"When you're a partner of our firm there's a lot more accountability and there's very little tolerance for poor behaviour. You're closer to the client and that's what keeps you up at night - you want to be number one and deliver the best outcomes to clients," Coggins says.

His appointment came about after a conversation with Heath, who shared his vision for the firm. They also talked about the changes needed so clients could trust an industry that faced too many conflicts.

Even worse, there were "too many vague interpretations of independence," Coggins says.

"We are big believers that there are diseconomies of scale in the advice industry. The larger you get, the more commoditised and scaled your offering is, and the worse the client outcomes."

By way of showcasing its independence, the partners forge their interests with client interests. It's what Coggins describes as a "back-to-basics" approach.

"We invest alongside our clients. This is critical," he says.

"We meet the requirement under the Corporations Act to call ourselves independent. Very few firms can say this."

Independence is one of Koda's key strengths that gives it a competitive edge, Coggins says. It's free of conflicts in terms of "funky" rebates or partnerships with respect to fee sharing with product providers.

Other groups have strategic partnerships with a specific manager where they share revenue, he says. Koda, on the other hand, fights for favourable terms - that is, lower fees - and "passes this back to clients 100%."

"The revenue we earn as a firm is the advice fee clients pay us," Coggins says.

The investment team's role is to give clients access to a range of asset classes and strategies across the globe to achieve superior diversification, he adds.

"To be able to do that effectively and successfully as a firm, we have to spend the money on research - but most importantly, it goes back to being independent. When we talk to clients that resonates really well," he says.

Coggins' love of economics, finance and the markets led him to study economics and management at the University of Queensland. After his studies, he moved to Sydney.

He worked in small companies and was at ANZ's advice research division prior to joining Koda.

While he learnt a lot at ANZ and made some lifelong friends, Coggins prefers the small to medium-sized companies. This is where his heart is.

Smaller companies give the opportunity to know clients and genuinely look after their interests, he says, and Koda's partnership structure facilitates that.

Apart from its independence, what drew him to Koda was the significant investment it made in its research capabilities in terms of the people, travel budget and dedication to finding the best ideas.

Coggins and his team don't take it upon themselves to look at every product and strategy in the world.

Instead, they take a disciplined and focused approach and filter out ideas that aren't relevant for clients. It involves figuring out if an asset class is attractive and then to look for the best strategies in that space.

Over the years, they've become good at cutting through the noise and saying, 'no' to what isn't relevant.

"We like being contrarian and we're not chasing 'what's hot' or 'what works.' We look for down-and-out asset classes and strategies," Coggins says.

Koda's clients, he says, are not interested in a cookie-cutter approach that offers only traditional liquid asset classes.

"This contrarian approach can be difficult to digest for clients, but the outcomes speak for themselves over the longer term," he adds.

More recently, Koda introduced a conservative Munich-based manager that shies away from financial leverage and undertakes a level of activism and interaction with boards that goes beyond holding a shareholder certificate.

The diversity of managers is something Koda is proud of and pushes quite hard, he notes.

Coggins first participated in the Best of Breed Global Research and Investment Programs (BOB) in 2009.

It gave him the impression that Australia tends to be a small place on a global scale.

"Australia is a very small market, so having the ability to go out and talk to people, understand risks and new ideas, attend conferences and talk to fund managers is absolutely critical to what we do," he says.

If portfolio managers were only based in Sydney or Melbourne for example, there would be groupthink in how they view risk, and similarities in how they operate, he notes.

The networks and friendships Coggins forged as a result of participating in the BOB tours have also been highlights.

"I've known some of the people on the BOB trip for 10 years. If there is a problem that you have or a problem they want to share - it's not competitive - we can actually call each other - and that's a great thing," he says.

"That's what I would suggest to people entering the industry. Foster these relationships."

The people or mentors he's admired over the years are the type who'd challenge the status quo - to that extent that they could be called "rebellious or disruptors." They've taught Coggins how important it is to be client-centric.

About three months ago, Koda launched an ESG offering via its philanthropy team in response to clients demanding next-level ethical investments beyond screening and exclusions.

Clients want to quantify the social good that comes from their long-term portfolio and this offering can also link an impact investment more closely to a specific cause, he says.

"We think this has a much more measurable outcome than an old school ethical fund."

Read more at financialstandard.com.au