Rich relations: how Macquarie keeps them happy

A chance meeting with Macquarie’s head of financial services, Peter Maher, at a lunch hosted by some rugby celebrities in 2002 opened up a new job opportunity for Guy Hedley.

Hedley, who had been running BNP Paribas’ equity division for two years after being headhunt­ed from a similar role for JBWere in New Zealand, hit it off with Maher – and not just because he is a fellow Kiwi.

“We had a conversation about private banking – which is a subject pretty close to my heart – and he said ‘I’ve got the potential to build the best private bank in Australia. My vision is to have 500 of the key relationships in the Australian market – build it and put the closed sign on the door’, ” Hedley says. “He wanted to build something pretty special that fitted how Macquarie views the importance of high quality relationships.”

Over five years down the track and, while the ‘closed sign’ hasn’t yet gone up on Macquarie Private Bank, he says the business is “well on the way” to its 500 target.

“We run several billion dollars under direct advice and more in total financial assets,” Hedley says. “We’re leading in the private bank space in Australia.”

Not surprisingly for a group that is known col­loquially as “the millionaires factory”, Macquarie has over the years developed close relationships with the country’s wealthier individuals who form the natural client pool for the Private Bank.

According to Hedley, the Private Bank deals only with the “very high net worth” and “ultra high net worth” clients. To meet the “very” grade, indi­viduals must have at least $5 million of investable financial assets while the “ultra” class can boast a minimum of $30 million to invest.

“We’re not geared to cope with clients under that level,” Hedley says. “These clients have different needs.

“That magnitude of wealth creates an enor­mous range of issues, where you’ve got to have really good wealth management capabilities.”

The vast majority of the population might find it hard to sympathise with the problems of the ultra-wealthy – indeed most people might welcome such issues in their own lives – but Hedley says financial advisers dealing in such a stratosphere need to be specialists.

“If you were extremely wealthy you’d expect that it would bring with it the answer to all your prayers. Technically life should get very easy, but the problem is the reverse tends to happen,” he says.

Wealth, extreme wealth, brings with it com­plexity that demands high-level solutions in areas such as investment structure, tax efficiency, estate planning and “a myriad of other issues”.

For example, Hedley says a common problem amongst the Macquarie Private Bank clients – many of whom fit the entrepreneur mould that the bank attracts – is that wealth tends to be concentrated in their businesses.

“They have a lot of risk on the table,” he says. “Our skill is to partner with them and take some of that concentrated risk off the table.”

The group’s investment universe is large but Hedley says its links with Macquarie do open up specific opportunities that the private bank client base can access.

Macquarie’s $20 billion purchase of Thames Water in 2006, for instance, was packaged up for investors in various ways, mainly through fund structures, but private bank clients were offered direct ownership parcels.

Deals like that ensure such elite clients are happy to part with the annual fee of 1 per cent of assets under management (with a minimum fee of $50,000 pa).

Hedley says an advice-based fee provides the “more open and transparent disclosure” wealthy clients demand.

He says the private bank is structured like a “professional partnership”, with three layers: partner, associates and client services. The group currently houses six senior partners based in the Macquarie heartlands of Sydney and Melbourne.

“We recognise that in retail financial services the team-based approach brings the best outcomes for clients,” he says. “There’s a big problem relying on a single adviser – one person can’t know every­thing or deliver consistent service.”

Last year the private bank exported itself to Asia – based in Singapore – and is on the cusp of signing on advisers to service the region’s growing bevy of successful entrepreneurs.

The Asian advice model won’t be identical to the Australian model but the financial needs of the ultra-rich are probably the same the world over.

Hedley says a private bank anywhere requires a “quality advice proposition”.

“It’s got to be built on a rock-solid founda­tion and once that’s done you become the trusted adviser for the client.”