When they were kids, Tim and Claire Mackay sat around the kitchen table of their family home at Pymble on Sydney’s upper North Shore and discussed the ins and outs of running a financial advice business with their parents.
Their father Bill and mother Virginia had established Quantum Financial in 1994. The shop talk triggered a love of finance in the brother and sister, and it might have seemed natural they would join the family business.
But Bill wouldn’t take them on. He had a rule: they both had to prove themselves professionally elsewhere before they could join the business.
Tim and Claire launched high-flying accounting, legal and investment banking careers, before returning to join Quantum.
The Mackays are typical of second-generation advisers, which are set to increase as older advisers look to hand over the reins to their children.
Second generation of planners
While having a parent in the industry creates advantages, being the next generation of advisers doesn’t mean a career is handed to them on a silver platter.
It creates its own unique challenges, including managing the important relationship with the first generation. And at the end of the day, they must forge their own path.
After his father’s knockback, Tim went off and became an equity analyst at Deutsche Bank in London and New York, and with HSBC in London. Claire worked in tax and structured finance at PwC and Macquarie Bank.
But despite Tim’s global success, there was still something missing. He was advising on transactions sometimes worth billions. “But I never had a sense I was making a difference in peoples’ lives,” he says.
From an early age he had seen his father make a real impact on people’s lives. “Bill could take a situation and make it far better for real people.”
Tim and Claire’s natural home was back with their father. Tim joined Quantum in 2005, and Claire in 2009.
Changing the industry from the inside
But they hit another obstacle – the poor reputation of the planning industry. They were both Chartered Accountants. “A number of people said, ‘don’t tell people you’re a financial planner, say you’re CAs.”
Their father had wise advice: if you’re not happy with how the industry is perceived, change it. They wrote down on paper how they wanted the industry to behave. They’ve become public activists for those principles and integrated them into the business.
Tim says that having an established and experienced mentor has been invaluable. “If we had to pay an external party for that advice it would have cost a fortune,” he says.
But after high-flying careers there was a natural tension when the brother and sister joined the family business.
“When you come into a business and you’re second-generation, you think you know it all and you think ‘well, there’s better ways of doing it’,” Tim says. “And there were better ways of doing it, but there was a lot of things that Bill was doing that perhaps we should have spent more time appreciating and learning.
“It’s those two complementary different styles, and if you can get the best out of both of them in that transfer period, then perhaps that’s a winning strategy.”
Different strokes for different folks
Unlike the Mackays, James Goodman’s father, John, didn’t send him off to gain experience elsewhere. James, senior adviser and director of Brisbane-based Goodman Private Wealth, had just finished his accounting professional year exams back in 1999 and was about to head overseas when his father told him he was planning to retire from his financial advisory business that he’d started in 1987.
His dad asked him if he wanted to look at joining the business and that it was ‘now or never’. James decided that after a shorter break he would join his father, and they started working together at the start of 2000.
Goodman says, like the Mackays, there is no doubt being a second-generation adviser had its benefits.
“I was very fortunate to have been handed an opportunity to come into a business and a role that was established,” he says. “The business was not handed to me on a platter by any means, but in some respects I had an armchair ride in.”
But, as Goodman says, that armchair ride created its own challenges. “It probably meant I was lacking in some skills which I might normally have developed if I’d come in via a more traditional method. It followed that my missing skills meant some mistakes made for very hard lessons learnt.”
Goodman remembers when his father handed over the firms’ clients to him. One day his father was with him in meetings, the next he wasn’t. Fortunately, the clients were accepting of him and his ‘greenness’.
“On reflection, this was because they felt they could rely on my handed-down family values,” he says. “The client trust was portable across a generation.”
John Goodman still retains 10 per cent of the firm, but retired fully in 2014.
Always have a ‘Plan B’
James says working with his father and being business partners hasn’t damaged their relationship. They still talk work and his father still plays a mentoring role.
But James says it could have been different if things didn’t work out, which has led to his key advice for second-generation advisers thinking of taking over – have a plan for things if they don’t work.
“Our situation worked out really well, but there a couple of times where maybe it wasn’t going to,” he says. “If it hadn’t [worked out], I wonder if it would have just been really bad and created a real schism in the relationship.”
Goodman says that the first and second generation need to have a plan that includes not just how the succession will work, but a contingency in case it doesn’t work out. Because if that isn’t planned for it could be “terrible”.
Steven King, a director of the Yarra Valley’s YV Financial Services, knocked back his father Les’s approach to join his financial advice business.
Les started his firm 1975. When he wanted Steven to join YV, Steven was managing a school camp and conference centre, and he was planning on becoming a PE teacher.
“I was having too much fun,” Steven said.
But things changed.
Steven was working thirteen hour days which wasn’t healthy for this family life. “I approached him and asked if the job offer was still there,” he says.
Les was rapt. “Maybe in the back of his mind he was hopeful that would happen [me joining the business],” Steven says.
Steven began in April 2011, starting slowly and joining his father at appointments. He became fully qualified in July 2012.
He, too, says there were advantages to being a second-generation adviser. “It’s been a really good platform to come into,” he says. “You’re not trying to prove yourself to a new employer. Dad knows me and my work ethic. He basically said ‘go and do it’.”
Divergent goals
But Steven was determined to prove himself.
“Right from the start I was pretty determined to pay my own way. I was conscious of not costing dad anything. That’s the main reason it has worked out well.”
He started with no clients and after less than five years in the business he now has 137 and $22 million of funds under management. He’s in the process of purchasing another book of 150 clients.
But the biggest challenge for the Kings has been managing their increasingly divergent goals. “He [Les] is getting closer to retirement and looking to slow down,” Steven says.
“I’m still young and keen and eager and want to expand the business. The biggest challenge has been managing that over the last few years. He’s not really in that frame of mind.”
11-year-old may be next generation planner
There is now a third generation of Mackays coming behind Tim and Claire.
Tim says the third generation is only 11 years old, so they’re not yet talking about another generation of Mackays joining the business.
But would he want his daughter to become a third-generation planner?
If she wanted to join Quantum, he would have the same advice his father gave him: go elsewhere first; get qualifications and education and make your mistakes.
It’s the same advice George Soros handed out at one of Tim’s graduation ceremonies in London. The great hedge fund investor was asked what he would do if he was graduating then. He said he would go and work for a big financial institution, and then go and do what he wanted to do.
That big insto experience meant “you’re then an industry insider, and you know how the system works,” Soros said.
When Tim heard Soros give the same advice as his father Bill, Tim thought, “that’s what dad said, maybe he does know something!”
