It’s slightly churlish to suggest that Andrew Forrest, who in May made the largest single philanthropic contribution by a living Australian, should have paid more tax instead of amassing a personal
fortune and giving $400 million of it away.
But former NSW premier Kristina Keneally suggested exactly that recently. Her view that “democracies cannot allow wealthy individuals and successful organisations to use philanthropy as a substitute for paying tax” is valid as far as it goes, but a subtext to her comment is that governments are inherently better at allocating capital than individuals are.
There are, in fact, few better allocators of capital in the world than Kerr Neilson, the co-founder and managing director of Platinum Asset Management. Neilson has built Platinum, from scratch, into a globally renowned, $24 billion funds management business. “We’re giving about $9.5 million a year,” Neilson says, to support projects in the arts and social inclusion. In recent years, they have also underwritten university scholarships for financial planning students.
Neilson is used to being judged, sometimes harshly, on results. Managing other people’s money demands a high degree of accountability. But when it comes to philanthropic activities, the measurements are often softer and harder to quantify.
It was Neilson’s idea to begin supporting financial planning through university scholarships, and today he is helping commit up to $300,000 a year to the development of as many as 20 students. The scholarships are funded equally by Platinum and Neilson’s personal foundation.
“We want to fund people, we want to fund the development of people,” Neilson says. “We got involved with the planners because we just felt here’s an industry going through massive change, and its reputation hasn’t been great, and all these revelations and so on haven’t exactly helped it. We thought it was the perfect time to come in and show that there is a profession developing here.”
Neilson also convinced Platinum to match the Neilson Foundation’s commitment dollar for dollar.
“The management team and I – we’re not formal,” he says. “It was, ‘Why wouldn’t we do this?’ This is important to this industry. It was particularly important at the time of FoFA to make a statement saying, sure, the industry is changing and we’re not just standing here doing nothing about it. We want to show some support for that.”
At a time when tertiary education funding is under pressure, and the cost of a university education is increasingly borne by graduates themselves, the Platinum scholarships offer a rebuke to the theory that governments know best where to direct funding, or that they can possibly fund all deserving causes. It is another example
of a successful and wealthy individual stepping in to fill what he perceives as a gap.
For the budding profession
Neilson says he firmly believes financial planning is on track to becoming a profession, and supporting its graduates is an important part of replacing financial planners who will leave the industry, either because they retire or because they simply don’t have the appetite to measure up to looming new standards.
Support for professionalising financial planning falls under the firm’s social inclusion focus, Neilson explains, because it enables more people to seek advice to achieve financial security, [by making them] more confident in the quality of the advice and the advisers.
“The [clients] who are mis-sold, and what have you, are just getting rogered,” he says. “There’s a hard core of people who crave the recognition of a profession. That’s your FPA types of guys, who are pushing hard for it. And there are always some chain-draggers who are closer to retirement and say, ‘Well, I’m not wanting to put in that extra effort.’ But what’s delighting is there’s a new group coming through…with higher education and much more awareness, and they have started in the business when there is a pay-for-advice approach.”
Generally, Neilson and Platinum offer only funding to causes and organisations, and avoid providing management input. Neilson says he could get involved at a management level, “but I’m too selfish”.
He has made exceptions. Platinum offers work experience for some of the scholarship winners,
and Neilson says it seems that this has been a real eye-opener for many of the students. He explains it’s not Platinum’s aim to recruit students into its own ranks – nor even into funds management – but to open a door to the possibilities of lifelong learning and development. He’s comfortable with the idea that not every scholarship winner will go on to a career in financial planning.
“You can’t demand that they follow through but that’s fine, because the way I see it, if you get more than $10,000 a year in a scholarship as a student, that’s pretty useful in terms of putting away one of the excuses that you might have had,” he says. “It’s just a help.”
Neilson says the feedback Platinum gets on its work experience programs is an “improbable delight. And it’s not them ingratiating themselves towards us – they have shown it in the real world. Constantly, the [students say they] have no idea as to the complexity and intensity of study [at Platinum, compared to] all these things that become formulaic in an education institution,” he says. “When they see what we do is fascinating because it involves new industries and new ideas, they suddenly work out that not only is this an incredibly interesting calling, it’s also a constant learning.”
Neilson says it overcomes a view that once university is done, an individual’s learning is completed “and that from then on you work, and work is not about learning and growing, it’s work”.
“I think the Millennials are more [likely] to think they should also be entitled to learn as they go,” he says. “But the really beautiful thing is they come here and they realise there’s a long path of learning ahead. I’ve not stopped and I suspect most people will find the same. But it means there’s no boredom – there’s no time for boredom – and that’s the thing we all dread when we leave university.”
New solutions for the industry
Constant learning may be more important than ever today, as the industry confronts the never-ending need for innovation.
Demand for financial advice can only increase over time, Neilson says, and the industry will develop new solutions to cater to individuals who otherwise would not seek advice, because they don’t see the value in it or because they believe they do not have enough money to make it worthwhile. He says Platinum itself investigated a robo-advice offering, but decided it was too complicated to be practical.
“You need personality profiling. [A seeker of advice needs] a very good and honest assessment of your income and expenditure and what have you; and [robo-advice] can become quite cumbersome when you ask for all the detail you need from people. [It’s hard] for the algos [algorithms] to work.”
He says standard robo-services also do not identify many of the issues that human planners deal with as a matter of course.
“You get anomalies; for example, people will have a huge overdraft in the form of a credit card,” he explains. “They’ll be playing around in the stockmarket when they’re paying 18 per cent a year [on the credit card], and they’re probably not going to earn 18 per cent through time on the stockmarket. You’ve got all these sorts of conflicts. A good adviser quickly picks up on all those sorts of things.”
Neilson says there will always be people who mistrust, or believe they have no need for, advice. But he adds that this attitude will soften “as this profession gets the image it deserves or should have”.
“There will still be people who want to do their own thing,” he says. “They don’t want to use lawyers and doctors either – they [feel they] don’t need them. This is an area where it’s your entire 30 or 40 years in retirement, and they don’t need them. It’s quite interesting.”
Neilson says he, himself, has “a pretty interesting accountant who thinks about these things” for him.
“Not just from a tax-planning view, but from the point of view of how much diversification you need,” he says. “Like any practitioner, you [think you] don’t need other people’s help. People who drown are often very good swimmers, and that’s the trouble.”
