The SOFY acronym may not be as well known as its cousin EOFY but similar opportunities exist for thematic investors to capitalise on stocks that benefit from the Start of Financial Year festivities.
As a period dedicated to accountants that will be frantically logging receipts to fall within the FY21 reporting period, fintech provider Class Limited (ASX: CL1) can save those same accountants 67% of their time next year.
Class Trust was launched in October 2020 in response to demand for a cloud-based platform that could automate traditionally laborious tasks in Trust creation and administration. Until then, Microsoft Excel was the primary program used to administer Trusts where SMSF had been the primary vehicle for wealth management.
But with regulatory changes in recent years that introduced limitations to SMSFs, Trusts have become the fastest growing vehicle which is why accountants and financial advisors were screaming out for an automated platform, similar to what is available to SMSFs.
Since its launch, the 200 firms which were early adopters of Class Trust have reported time savings of up to 67%. And with SOFY around the corner, that number of firms could increase dramatically in the coming weeks as accountants look to start FY22 with a blank canvas, ideal for the adoption of new management platforms.
Presented at their May 25 Investor Day, Class has been consolidating its salesforce to be proficient across its entire suite of products where each software previously had its own dedicated sales team. Given the popularity amongst financial advisors and accountants to utilise Trusts for wealth management, Class now has the resources to cross-refer their products across more than 6,400 unique clients.
With a try-before-you-buy sales model, Class has not disclosed how many firms are trialling Class Trust but with the new financial year rolling over, July 1 (or SOFY) is likely to be the most effective time for firms to adopt the platform. This will eliminate double-handling of books mid-year with publicity around the 67% time savings likely to have attracted plenty of trial signups.
For the Half Year ended 31 December 2020, Class reported a 27% increase in revenue to $25.9m and are on track for a Full Year result of $54m with 40% EBITDA margins.
Growth in the Trust management market is highlighted by the $3.5 trillion of wealth to be transferred from the baby boomer generation to their beneficiaries over the next 20 years with Trusts acknowledged as the most effective vehicle. The annual market for Trust administration is valued at $117m where Class has a clear first-mover advantage.
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