Charlot Zahra speaks to Jean P. Gaffiero from Altas Investments Limited and Jesmond Mizzi from Jesmond Mizzi Financial Services Limited about the merger between the two financial services companies that was announced last week
What led the two companies to merge? Was it a matter of consolidation or was it also a question of downsizing the company? Jean P. Gaffiero (JPG): Definitely not downsizing – it was a matter of consolidation. Basically, we felt that by bringing forces together, we could specialise further and in a faster way, bring our clients together who will benefit from different services that the two companies offer.
What services will the merged company offer? JPG: Whilst JMFS focused more on offering investment services to its clients in the form of Investment Funds and products, we structured clients portfolios by selecting individual securities. The major reason for our different approach is due to the different clients we targeted; JMFS targeted a wider spread of clients while we focused more on high-net-worth individuals.
By bringing the two companies together we think that we can give both types of clients a high quality service.
At what time did you start considering the merger with Atlas Investments?
Jesmond Mizzi (JM): We have been in discussions for quite some time, reason being that some three years ago, we had acquired the client base of another company, one of the founding stockbrokers in Malta which decided to close the business, which we in turn took over.
It was always our strategy to grow by either acquisition or merger, as we are doing now.
Therefore the process was quite long in the sense that, first of all, we had to take up the client base of this company. Then, almost immediately afterwards, this possibility of a merger with Atlas came about.
There were a lot of considerations one had to consider prior to the merger. Our primary concern was always that while this is happening, we need to continue to give the same standard of service to our clients. This took us some time to finalise.
Then in September last year there was the market crash, and we therefore had to deal with that while the demands from clients was big at that time.
We said this should not stall us – we had planned it much before; therefore we announced in the last week or so.
Now it’s a matter of going forward with the legal procedures that one has to go through.
How will the merged company be operating and what kind of financial services will it be offering?
JM: As Jean said, although we operate in the same sector, I would say that the mix of services that we offered was quite different.
For example, we offered since inception seven years ago, product-based services where we advocated a lot the fund management business and also discretionary portfolios both for high-net-worth clients and retail clients. Therefore we packaged products that were in the past only offered to high-net-worth clients also to retail clients.
Obviously, we will continue to do that too, however we will also endeavour to offer services which we have not concentrated on as yet, primarily that we’re seeing more business coming from abroad.
The operations departments and the finance departments of the two companies will be merged for synergy advantages, and from there, consolidate on the discretionary portfolio and on services.
We also have a license to give advice to fund management companies, so these are areas we, as JMFS, did not have enough time to expand on. We hope that together with the Atlas personnel and the strengths of the company, we will target these new areas of business.
When is the merger expected to be completed?
JPG: Hopefully within the next three months. I think that’s a realistic expectation, but it all depends on the regulatory procedures – possibly that could stall us a bit longer. JM: However clients of both companies have already been informed of this merger, and we are obviously getting their authorisation for them to now be clients of the merged company.
From then on, it’s a matter of regulatory procedure – the MSFA is obviously aware of what we’re doing, and therefore it’s now more of a Registrar of Companies and an MFSA procedure, which every company has to go through.
Do you actually require permission from the MFSA to merge?
JPG: As companies licensed under the Investment Services Act, we are subject to certain requirements. Furthermore there are certain procedures that one must follow with the Registrar of companies. Needless to say, we shall do things as required. On the other hand it is fair to add that the MFSA has been most helpful throughout this phase.
What value added services will the merged company provide to its clients?
JM: First of all, at the moment we’re operating from two offices, one in Ta’ Xbiex and the other one in Valletta. We have always tried to be close to the client. Obviously, nowadays one of the attractions of the merger is to have more clients and be more visible.
One of the ways in which we can make ourselves more visible will be through new branch offices.
The idea would be to try and offer a one-stop shop where clients of the newly merged company, Atlas JMFS and Atlas Insurance would be able to obtain both insurance and investment services from within the same offices.
We’re expanding our exposure of where we’re going to be placed.
Also, we believe that with both companies putting their resources together, we will be able to offer more targeted advice to our clients. Not that we do not do that today, but a larger team can provide better services, better focus.
We are also aware of the fact that in the financial services’ business it is difficult to engage staff.
JPG: One of the biggest difficulties in growing as two individual firms was always due to human resources – finding the right people to grow with.
Pooling in the human resources that we have within these two combined companies gives us a great advantage in moving forward and in specialising in certain services.
For instance, now we can have one individual specialising on one type of security, an individual specialising on just bonds, another person specialising on just equities. Before, due to the smaller pool of human resources, this was not possible.
How large will the merged company be in terms of employees?
JPG: Fourteen.
JM: We’ve already added some new staff, because the idea is to grow – that together, we can produce more. That is the main focus of our merger – giving a better service to our clients and growing the business through more areas of specialisation which we can offer.
Initially, that will be our target but we are sure that as we grow along, the staff will grow to give the services available to the growing client base.
What are the initial plans of the merged company?
JM: First of all, as Jean said, to segregate and create areas of specialisation within the company. We have always emphasised on being of service to our clients, and not just on the first day when they come to invest with us.
Our clients are clients in their own right with their own requirements; hence we will enhance that service through the new branches, through the existing staff together with the new staff that will be coming on board, so that we are close to our clients.
One of the ways in which we have always felt we are close to our clients is through the media. We have always participated in informative programmes, both on television as well as on radio, where we have created programmes together with other providers in the financial services’ industry, so we are not on our own.
We have also kept our clients and the public informed through the media, not only through the daily reports in the papers, but also through weekly articles and regular slots on television and radio.
We try to educate people who want to invest for the first time, as well as those who have already invested because these need to keep informed.
Today there’s more information coming in through television and newspapers, and we realise that one of the best ways to keep clients informed is by communicating through the media.
There is a lot of financial news coming in from international sources, but Maltese people prefer to have something which is more in tune with their way of thinking, therefore a local advisor can give them a better service than somebody who is miles and miles away.
Are there any plans for the merged company to enter into the insurance and banking sectors?
JPG: With regard to the insurance sector, we are part of a group which is insurance-based, so as they will continue specialising on insurance, we will continue specialising on investment services. With regard to banking, I think it’s a bit too early to discuss the issue. JM: Although we provided clients of JMFS mostly on the life insurance sector, one of the most attractive ideas is to have a one-stop shop providing life insurance, health insurance and general insurance. The idea would be that from one office, clients would be able to get financial advice together with any related insurance services that may be required. JPG: Needless to say, in no way will the two companies compete for the same business.
How has the recession affected the financial markets in Malta? JPG: We can refer to our personal experience. This year, both companies are going through the best year in the last thee years. We believe that whenever there is a crisis, there is always an opportunity.
Last year, when income from certain types of investment services suffered, there was a strong demand for very safe investments. That compensated for the loss of business on high-risk investments.
A personal view is that this global downturn has not hit Malta in as bad a way as it has hit the world. Hopefully, we can get through this quicker than most countries. JM: The crisis created an opportunity which came by coincidence as people were looking more for financial advice that is closer to home.
That has certainly created for us a market which we had not anticipated. When people are uncertain and worried about their investments, they turn to financial advisers probably more than they did before.
When everything’s going well, then your investment is doing well, you don’t need advice and you probably are going to invest because you’re making money.
When people are worried, they are more concerned about their investments. Interestingly, interest rates came down, so banks were offering lower income on their deposits.
When the income of people is hit, they turn to other investment products which would give them a better income but at the same time, remaining on the security and good quality.
When do you expect the financial markets in Malta to start rebounding again?
JPG: I think it’s already happening. If one were to look at our stock market, especially our bank shares, after hitting lows around March, today they are significantly above those prices.
In fact, in the case of the two major bank shares, their share price has come up by around 50 per cent since they touched their year-low in March. JM: In fact the MSE index year-to-date turned positive for the first time this year last week after it was in negative territory. Clearly the investor is starting possibly to look again at the equity markets.
We also have to remember that during the last six months there were a lot of bond issues, so the confidence in the local market certainly has not died down.
Maybe because of income, people were concentrating on income-generating investments.
The turn-around in the local markets came later than the March turn-around date for the international markets.
From the lows of March, we also had a couple of weeks in June where the international markers also fell, but now both internationally and locally, investors seem to be coming in again, both on the bonds as well as the equity markets.
