Produced in partnership with BlackRock Australia.
Investment platform Netwealth is an Australian success story. Established by entrepreneur Michael Heine in 1999, and today led by his son, Matt, the business has grown exponentially to employ over 600 people and administers over $95 billion on behalf of 145,000 clients.
Addressing advisers at the recent BlackRock Wealth Symposium, the younger Heine, attributed the success of Netwealth to good timing, a bit of luck and continuous, incremental improvements.
“Being in the right place at the right time is incredibly important but also starting something with a vision and working towards that vision,” Heine said.
“There is no secret sauce and that’s the magic. It has been an evolution not a revolution.”
He likened the group’s rise to compounding interest.
“We’ve been making small improvements over and over again, year-after-year for 25 years, based on client feedback.”
LGT Crestone, the private wealth firm backed by the Princely Family of Liechtenstein spun out of UBS Wealth Management in 2015, believes the group’s investment in technology has enabled it to efficiently scale operations and deliver tailored client outcomes.
“We invested in technology very early on and that has proven to bear fruit for us,” the firm’s chief operating officer Michelle Inns said.
“We invested in [our customised version of] the Avaloq platform, which we control, and we’re able to build our capability as the business grows.
“For example, we were about $14 billion [in 2015] and this year we’re on track to be $40 billion, and our platform is able to scale with us.”
For Merchant Investment Management Australian partner David Haintz, successful businesses are usually led by entrepreneurs that want to grow their business more than they want to play golf.
“It’s not illegal to run a lifestyle practice and it’s not illegal to play golf a couple of times a week but we’re looking to partner with super entrepreneurial [business leaders] who are looking to grow and have, what we call, a value creation plan, which is about creating value for all three stakeholders being clients, team members and shareholders,” he said.
Haintz leads the Australian arm of the New York-based capital partner firm, which has now partnered with several advice firms since establishing a local presence in 2022.
Speaking on a panel at the BlackRock Wealth Symposium, titled Perspectives on pathways to profitable growth, Heine, Inns and Haintz all agreed that businesses that truly understood their clients and had the ability to identify opportunities early and act decisively, stood to win in a crowded market.
According to Heine, Netwealth was the first of the major retail platforms to integrate managed accounts into its platform and investment menu, after listening to adviser feedback. It was also one of the first platforms to facilitate access to alternative asset classes.
“We spend a huge amount of time with our customers, trying to understand the problems they’re dealing with in their business,” he said.
“We’re constantly looking for opportunities to solve their problems, and we also take educated bets on what we think the next big trends are, which we’ve been pretty successful at looking back.
“It’s just about understanding your customers and, rather than trying to go big bang and win overnight, just grinding away and doing the right things over and over and over again.”
Similarly, LGT Crestone was early to give its high-net-worth (HNW) and ultra HNW clients access to private market opportunities including private credit and private equity.
The group’s platform enabled it to deliver highly personalised advice and build tailored client portfolios.
“If, for example, there’s a unique, timely [investment] opportunity, perhaps in the private market space, and a prospective client comes to us to invest, we can prioritise that client and open an account in a couple of hours,” Inns said.
“There are a couple of great things about that. Firstly, we can delight our clients and then they become advocates for us, which has been a key driver of our growth.
“Secondly, taking a long-term perspective, we’ve been able to take our clients on the private markets journey. From the outset, we knew that it was important for clients to have exposure to private markets but, at the time, there were still a lot of opportunities on the listed side, so they weren’t all ready. We’ve been able to take a long-term view and educate them.”
Today, LGT Crestone’s average client has around 20 per cent of their portfolio in alternatives, namely private markets. Some clients have as much as 40 per cent of their portfolio in alternatives.
Merchant was one of the first capital partners to see real value in the advice component of the financial services value chain, back in 2017. Historically, institutions and other capital partners have focused on product manufacturers and licensees, evidenced by the level of M&A activity in those areas.
It’s only recently that capital, both domestic and offshore, has flowed to advice.
“Well run advice firms are fantastic businesses to invest in for a whole range of reasons including the low capital required upfront, they’re typically highly profitable, [pay] good dividends, and have active tailwinds in the share market,” Haintz said.
“Superannuation is another natural tailwind, and offshore investors love the fact that Australia is a highly regulated market. Advisers might have a different view on that and perhaps it’s overregulated but capital coming from overseas loves it.”
When pursuing growth through M&A, Heine said the most important question buyers need to consider is, “Where are you heading in the next 12-24 months?”
Netwealth has traditionally pursued an organic growth strategy, with a preference to build proprietary systems and technology rather than buy, although it recently acquired data and customer relationship management platform, Xeppo.
“For many years, we’ve had a real bias towards building our own tech stack,” Heine said.
“As we grow and get bigger, we’ve started to understand that it makes sense, in many cases, to partner with the best people in the industry to deliver the things that our clients want.
“Managed accounts are a prime example. We don’t have in-house asset management capabilities and we don’t want to build that capability. There are plenty of fantastic asset consultants in the market and we would much rather partner with them.”
LGT Crestone’s Inns added that there had to be a strong strategic rationale and cultural fit for M&A to make sense.
“M&A has to align with a business’ vision and goals but it’s also important to remember that [M&A] is about people coming together to create value for clients and shareholders, so there has to be alignment on multiple levels.”
