If he knew then what he knows now, Paul Barrett might have thought twice about setting up AZ NGA.
But despite creating a $700 million advice powerhouse, Barrett told the Professional Planner Shape of Advice Podcast that like most successful businesses, he benefitted from luck and timing.
“There’s so many learnings and I think about when we started, we had a decent element of luck and timing,” Barrett said.
“I’ve been involved in other businesses in different industries where timing has played a role. We tend to underestimate the role of luck and timing.
“There’s a lot in that for us. If I knew how difficult it was going to be to build a company like this, it might have scared me away actually.”
Barrett founded the company with Paul Brain in 2014 and in those early years the pair had a “don’t look up” mentality to avoid being weighed down by the prevailing headwinds at the time that could blow out a startup. One of those headwinds was the Hayne royal commission.
“People talk about… looking to the future where that is actually bloody scary,” Barrett said.
“We just looked down, we looked at our feet and we put one foot in front of the other for about three or four years and we just kept going.”
Barrett said he could see the profession was in good health a couple of years after the conclusion of the royal commission.
“We could see these businesses – there’s one business in particular I’m thinking of – I remember going to a board meeting and I saw their recovery and numbers and I actually shed a tear… I was just so emotional, and I was just delighted for the people in this company,” Barrett said.
“I remember thinking ‘we’re through it, it’s time to look up’. When we started looking up, we realised not only have we survived this potential crisis, but we’ve become a better, stronger company for it.”
The other key learning for Barrett was the distinction and varying value propositions of different types of capital partners.
Azimut Group, from Milan, Italy, was the original investor in AZ NGA which Barrett describes as the company’s strategic investor.
“Strategic investors tend to be more long term in their thinking,” Barrett said.
“I hear the term permanent capital talked about in the market. You can consider strategic investors as permanent capital and that was great for us for the first eight or nine years because we had this reliable source of capital and they were patient. When things like the royal commission happened, they weren’t breathing down my neck.”
This is opposed to the application of the shorter-term capital as is the case of the $240 million private equity injection from Oaktree Capital last year.
“We made a conscience decision, about three or four years ago, to approach Azimut and say we want to dilute you and bring in private equity because we don’t just want permanent capital sitting in our capital stack,” Barrett said.
“We want to blend it with the excitement of a private equity investor who comes in for a medium term, five years or so.
“We wanted the blend of permanent capital sitting alongside the private equity capital because we wanted to create two things. We want to increase the pace at which we were growing and do larger transactions which meant we needed more capital but I didn’t want it from strategic sources at the time because that would further entrench what I was talking about before.”
But as for what happens when the private equity shot clock ends, Barrett said the private equity cycle is in its early stages and it’s highly likely that new players will come in place.
“We are a young profession, we’re a young industry so there is a lot of time to run,” Barrett said.
“Our market share is low. People might argue we’re one of the larger financial planning companies in Australia. Notwithstanding that, our market share is still really low… so there is a long way to run way, there’s a lot of wealth to be created for everyone in the value chain.”
