Transcript

 

01:24

In this episode, we reflect on some of the most impactful moments from our conversations. You'll hear Matt Heine, CEO and Managing Director of Netwealth in conversation with a wonderful lineup of guests offering their learnings, insights and advice for financial advisors. We start with Phil prior founder and CEO of Family Business Central, who highlights the importance of financial advisors in providing financial literacy to the next generation, including through presentations and workshops. Something that we're very passionate and big on at net wealth is around next generation financial literacy, but also capabilities, so teaching them the basics. How have you seen that effectively done? Is that in conjunction with the parents, financial advisor or wealth manager, or is it something that you do independent? So this is where the financial advisors are really important, because in that first level of next generation development, they need a level of financial literacy. I mean, they don't have to be gurus at it, but they do need to, you know, they need to know how to read a P and L and understand investing and so on. And the financial advisors are, I think, really important in that, whether that is working directly with, say, the group, the next generation group, and doing presentations. And I know some financial advisors who will actually run small workshops, you know, for the next generation, and go through without their parents there, and go through, okay? These are the investments. This is what we're doing. These are the types of returns. This is how we manage it, and so on and so on. And again, you might have different levels. You might have a broad overview for everybody. So everybody's, you know, understands where they're coming from, and those who really want to dig into it. It might be a separate program for that. That financial literacy is critical. Sometimes. That's why, well, it's why we often get them sitting in as observers to the board, particularly if they're on the board you're looking at, you know, upcoming investments, how they analyse that, diversification strategies, that sort of thing. And while they're not directors and they are purely observers, so we don't get into that whole shadow directorship side of things, it's phenomenal learning for them. Yeah, I know some big family businesses that are getting 18 year olds sitting in observing. A lot of families will balk at that one. But actually, I'm generally in favour of the start earlier rather than later. Yeah, the stats are quite terrifying, actually, for financial planners. It's currently suggesting that out of nine clients, only one of them will stay with their parents. Financial Advisors, yeah, there's a lot of work there and a lot of potential upside to build those relationships. I do know a couple of financial advisors that have done really some brilliant work, you know, building those relationships with that next generation, and in our work, I mean, I certainly know for me, my biggest asset is trust. And so if you build that trusted relationship with that next generation, then again, all sorts of really cool things can happen.

 

04:19

Shachar Kariv and Bernard Del Rey, co-founders of capital preferences talk about how their interactive tool can transform client profiling offer deeper insights into their risk preferences, values and decision making priorities in just 90 seconds when using the capital preferences tool, I guess the power is really in its simplicity. So perhaps for those that haven't seen at all, trying to attempt to describe it as best you can. I'll take the first shot Shahar, but first is open your mind to the multiple dimensions of things you as an advisor or someone in the industry, would want to know about a client. And just let's go through those quickly. You have your how does this client make the trade off between risk versus reward?

 

05:00

Forward. How do they make trade offs between consumption today and consumption tomorrow? How do they make trade offs between themselves and the environment or social justice or values based elements? How do they prioritize their goals? These are all things that our conversation can't uncover precisely. So instead, we're going to put you in a wind tunnel, an interactive game where, let's say you have a million dollars to invest. I'm going to say, okay, in the following scenarios, show me how much of that million dollars you would put at risk in each of these scenarios, given a varying set of opportunities or positive gains that are available. And the client moves the slider, and then they're exposed to a few different scenarios that allow us to stress test. It takes the client, normally about 60 to 90 seconds to complete, and in that 60 to 90 seconds, let's just say, in the domain of risk, we're recovering. You know, what's their willingness to take risk? How sensitive are they to losses? So different from taking risk. What were the reactions likely be when the markets are volatile or they have downside experiences, and I guess, very, very importantly, what and how consistent is this decision maker, this client, in this area of risk taking at all, like, are they even advisable? And then from that, we're able to use that very, very short client interaction to be able to look at the available investment options and say, given what we've just learned about you and your spouse or partner, or if that exists, this is what would be the best fit for you as a household. Now, that could be a portfolio. It could be a portfolio and an annuitization strategy, and then we can look at that compared to the client's goals.

 

06:49

Danielle press, ex asset commissioner and consultant at IAM, explains how small parcel bonds provide investors with greater control and predictability, delivering steady income and capital returns an ideal option for those focused on cash flow management, as you know, and hopefully many of our listeners now know, we recently launched a small bond parcel service with IAM, which has been really successful, and we're great take up. Why would an investor look at going direct into these single names rather than buying a bond portfolio or an ETF? Yeah. So, so the direct name, I think, gives you some a control over who you're investing in. It also gives you a control over your income, so you know what your coupon is going to be, you know, and you know what your capital is going to be at the end, pretty much as well, right? So that, for me, is really important. I think when you buy a portfolio of bonds, the yield is going to shift. You know what you get in income is going to shift. You can't necessarily plan for that. Whereas, if you've got a bond that earns a five and a half percent coupon, you know that every six months, you are going to receive five and a half percent of that capital back, right? So you can plan and you can budget for that in a bond fund, you can't do that right. Your yield to maturity will change. The investment managers will be doing a great job sitting underneath managing that portfolio to give you the best possible return. But it doesn't necessarily mean you're going to get income. And I think at the moment, there is a need for products that provides good income flow and cash flow so that people can manage their cash flow management.

 

08:28

Founder and principal of effortless engagement, Dean Lombardo, emphasizes the power of showing people the problem to drive meaningful change by involving teams in a collaborative test and learn approach. He fosters innovation, ensures buy in and deliver sustainable solutions that are built on real experiences and proven success. Then you've touched on it a couple of times now, and we're going to go back to a change management everything that you're talking about is going to potentially tip a business model on its head and require not only the principal to get on board, but clearly, all of their staff as well. What's important to you, and what would you suggest when thinking about a change management plan and making a huge change such as this, or just implementing any change across the business, I'd say this is with any change that firstly, people need to see the problem. There's no point. If I go back 15 years ago,

 

09:18

what would typically happen is the solution would be presented, and people would have to move into that solution, and that creates all sorts of angst, and people don't feel like they've been listened to and validated. And the reality is, you know, with all aspects of adult learning theory, one of the first ingredients of success is you've got to actually embrace the experiences that people have had. So the easiest part of change, or, sorry, no, change management is easy, but one of the easiest ways of commencing that process is for people to actually see the problem. And sometimes people are really aware of what where they fit in the system or what they do, but they're not really aware of where everyone else fits in that system and what they do. So if you can actually show people the issue is if they can see.

 

10:00

With their own eyes that in can't unsee it, which then creates, well, really one of two options. You either live with that problem or you try and fix the problem. So the experiences that we've that we've had, are showing people the problem is important, but then also letting the business and the people form become part of solving the solution. So what we'll tend to do is provide the skeleton or the straw man, and actually build that up with the experiences of the people in the business. So we use the term test and learn. So we'll commence a program for work. Let's say we were re engineering or reimagining a review process. For example, we would actually trial that with a handful of clients, getting the people involved, helping them see again, the difference in work, and then they advocate for the work and actually help roll in more and more team members. So it's a it's a reasonably simple process,

 

10:50

but the complexity comes from getting people to actually see the issue, and getting the right people involved early on, in terms of being willing to try new ways of work. So definitely the old way of just here it is, off you go, go and do it. It's the fastest way to failure, going slowly, testing and learning, iterating, and then once you know it's working, and you've got

 

11:13

back to your point, you've got demonstration of success and real figures and real data, then you invest in the build underneath. It saves a lot of time, a lot of effort, and normally gives a much greater chance of success.

 

11:29

Matt asked Steven Sheila, co founder of omniscient neuro technology and former Facebook CEO, about the impact of brain technology on various industries, including wealth management, given the audience this podcast, sort of wealth management, there's a lot of second, third, fourth order effects or impacts of what you're doing. Have you started to think through the positive benefits of whether it's solving mental health, providing better ability to do brain surgery? Where does this all end up? To answer your question the two ways. One, at the macro level, what is AI going to do to the economy, to competition, to different sectors, massive question. And I think everyone who's investing putting dollars into different markets needs to understand, how is AI going to change the competitive landscape in that part of the world where we're putting dollars for us? Just to take one example is mental health. If you read recent reports, there was one a productivity commission report that Australian government did last Australian government did last year, there's been others from the UN and others, they show that the tragedy of mental illness is obviously a human tragedy. You know, one in five people in every country on earth will have a diagnosable mental illness every single year. It's a COVID every year, every single year. That's what mental illness is, and it's only getting worse. But beyond that's the economic impact. So the different reports, they estimate that between three and 10% of GDP is basically lost because of mental illness, and that's not treatment costs. It's lost productivity. It's people who can't work or aren't effective at working because they're depressed or they're mentally ill. And so solving mental illness has a massive economic impact on In fact, if you could cut the rate of mental illness in half in the world, it would probably give you the biggest increase in GDP in 100 years. It would be the biggest economic sort of growth hit that we could have in a century. That's how important solving mental illness is. Beyond just the human element, there's a huge economic element. Small as our company is new, as our technology is, if it starts to scale, we could see massive economic benefits from the fact that we just people are just the brains are healthier and they're more productive. And that, to me, is another dividend of what we're doing. Could be, you know, the next Mark Zuckerberg, next Elon Musk, the next Matt Heine is out there. May be plagued by mental illness that well, let's, let's turn that off. Let's, let's, let's make that person healthy, and then they can do the amazing things that they're capable of, because every advance on this planet comes from human beings. And the more human beings we have, you know, doing their best work, the more the planet, more everything will advance. And we can then solve all these other problems we've got. Them from climate change to war and peace on the planet.

 

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14:06

Hugh Humphrey, CEO of count, highlights the growing demand for financial advice and the challenges of meeting clients' needs amidst limited capacity. He emphasizes the transformative role of technology in streamlining processes, improving efficiency and expanding advisors reach, paving the way for a more accessible and effective financial advice ecosystem. You touched on one of the key drivers, clearly being resources, particularly in some of the regional areas. The statistic that I find fascinating at the moment is that nine and a half million Australians are looking to retire in the next 10 years, at which point or five years prior, they'll go to see a financial planner. The circa 10,000 active financial planners. How do we start to address that issue? Because at the end of the day, you can outsource a lot of the back office, but most planners I'm speaking to are actually really struggling with how do I onboard the number of clients that are wanting to see me? And in some cases, it's taking 234, months to get back to a prospect, just because they're so busy with the new business, definitely and.

 

15:00

Issue and an opportunity. And I think, yeah, our financial advice businesses have never been busier. I think that's a good thing in a lot of ways. You know, it's taken a while for, I think, people to really understand and appreciate the role that financial advice plays. And of course, now we've got, as you said, big group of people who are approaching a stage where they need to make some big decisions. I'd love to think that in time, actually, it won't just be those people that are focused on retirement, younger generation. In order for that to happen, I think a few things there, whilst we've seen a big drop off in the number of financial advisors, not every kind of authorized rep on a on the far is credit equal, and in fact, in count, with a license called merit wealth, which has a lot of limited authorized reps or accountants who might, from time to time give some advice in sort of establishing an SMSF or something, and that's very different to a financial advisor who's got a couple of 100 ongoing financial advice clients. So whilst we've seen a big reduction in the number of authorized representatives, I don't think we've seen the same sort of reduction in terms of number of advised clients, which is important. But as you point out, there isn't enough capacity in the system to continue to service everybody. I'm personally very excited about the fact that we have this opportunity and or problem, because, you know, the inverse would be a much darker place if there wasn't the, you know, the people or the interest, but it isn't yet resolved. Keen to see and good, the government sort of talking about making some changes. But, you know, that's, that's a long journey, and that's been a particularly slow one. We're not kind of waiting for anything to happen there, but we think that there's sort of some that the conversation is kind of in the right space around making it easier for advisors. Do you think technology is going to play a big role you and I were touching on earlier. The financial advice process is not the easiest process, and the reason that the whole profession exists is to declutter and simplify and communicate to client and that people want to outsource the complexity of they may have had a terrific career in their profession, but they're just not experts at all the complications around money and what to do with it and managing risk. I think ultimately people will need support, but with technology that can support advisors and clients, I think the role of superannuation funds and platforms in terms of being able to help people make better decisions, will be key, getting more people into the profession, but that takes time and won't solve the problem quickly. But I think probably the most important thing that we're seeing is through technology, process, efficiency, outsourcing, creating an ecosystem where advisors can serve more clients, if the average advisor instead of, you know, 100 and something, is 200 something clients, you've doubled the capacity of the system. And I think that's very possible, particularly when you look at some of the inefficiency in these businesses, but also the opportunity that new technology is providing.

 

17:35

Jean Oelwang, CEO of Virgin Unite, shares how her experiences shaped her belief in the power of businesses to drive large scale, systematic change, highlighting that purpose driven companies not only transform lives, but also thrive financially by putting purpose at the forefront. You've obviously written a book about this, and you moved from the telco industry into Virgin Unite. How did that happen? And at what point did you realize that maybe you need something more with purpose, yeah. And it was interesting, because when I was in the telco sector, my first kind of major job, GTE and I had a chance to become a VISTA volunteer, which is like a domestic Peace Corps volunteer. So working in America, and I ended up in Centre City, Chicago, working with homeless teens and with refugees from Vietnam. And, you know, that was a massive turning point for me in my life. It was only I was there for about a year and a half, and but it was such an awakening call Matt, that our systems are so broken, like we were letting the kids that I was working with in that shelter, they were as young as 13 years old, 17 years old. And it was, you know, government failing them. It was business failing them. It was a not for profit sector. They were just falling through the cracks. And we had hundreds of them living with us in the shelter. And so for me, that was this moment of, Wow, how do we change these systems? And that's when I became really passionate about going back into the business world to really understand how business can play a major role. And I was fortunate at that stage to have a chance to work in South Africa helping start up a mobile phone company. And this is going to tell you how ancient I am, but it was one of the first prepaid services. But we launched, we were all excited, and we launched our first prepaid service in South Africa, and we made our annual sales target in one month, and we went into the townships and realized that people had taken these prepaid phones and they started businesses out of a trailer selling phone calls out of a briefcase on the street corner. And it was again, this light bulb moment around the power we have as companies to really drive scale change in the world, and there's no way that we're going to drive the change we need to unless businesses play a great role in that. And the good news is, is that research companies, like just capital and others, have really proven that it's also fantastic for our bottom line to have that purpose front and centre.

 

20:00

Chairman and CEO of iCapital, Lawrence Calcano, explains I capital's goal to provide advisors with access to the best alternative managers and an operating system to support their clients. We've recently launched a new partnership with iCapital, so we're out talking to a lot of people, but I thought, what better way to explain the story and what you're doing than yourself. Yeah, thanks. I'm happy to and obviously very, very excited about our partnership and together accessing the Australian market. But maybe I'll start, if it makes sense, with just an overview of what we're building at iCapital and what we've been working on, really, for the last 11 years. We really looked at this space, and this space being sort of the alternative marketplace, and we looked at the number of advisors that had been leaving the wirehouse platforms going back, you know, to a decade ago. What was interesting to us is, you know, a lot of those advisors really didn't have access to alternatives in a really scaled way. When they left their wire house platforms. Were really giving up that access, and not only the access, but all the operational support that their bank provided, and we thought that we could build an automated solution to give clients, to give advisors and their clients access to the best alternative managers across all the strategies, and at the same time give them an operating system or a technology platform to enable the education, transaction processing and all the aftermarket activities in a technical way, so that the experience that they would experience and their clients would have would be, would be terrific. And so we've been building that, as I said, for the last decade. And one of the interesting things is we realized as we went through time, that, you know, a lot of the wire houses, you know, had built tremendous access and outstanding relationships with leading general partners, but didn't really have a technical platform. And so circa 2016

 

21:53

we started working with a number of the banks. We now work with almost all the major banks in the US, in addition to all the independent broker dealers and independent RIAs to provide, as I said, both product access, structuring, education, and then the operating system or technology platform to run the business. And one of the things that we've really tried to do is really meet people where they are and recognize that, you know, in the case of the wire houses of the largest banks, they have all the access that they need. And so for them, it's really providing the operating system the technology to allow them to really scale that business and to create a great advisor experience. Whereas in the case of some of the independent RIAs, our product access and structuring would be very, very helpful to them. We provide the system on a modular basis and let people use the pieces that they need to be successful in their business.

 

 

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22:49

Sue Viskovic, General Manager of VBP, highlights the transformative potential of ethical outsourcing, emphasizing how building a global team integrates skilled and trained professionals into a business's DNA, offering seamless collaboration, cost efficiency and enhanced service capabilities. What are some of the objections that you're still seeing in the marketplace, I think? And well, look, there's also, there's lots of different types of outsourcing too, right? So most advisors are quite familiar with outsourcing. SOS with power planning. They might do it, do them and pay per SOA, and people have their views around whether they prefer on or offshore to do that. The one I love is, is

 

23:30

I've tried outsourcing before, and it took me just as much time to actually get the instructions ready. I might as well have done it myself. That is a really good example of a failed execution of an outsourcing strategy. And it doesn't have to be that

 

23:44

way. You know, the, certainly, the way that VBP provides staff is that they provide full time team members, and they really become part of the business's DNA. They work closely with their onshore team. They learn your systems and processes and so forth. So, I guess the one that one element of Oh, it's just as quick for me to do it myself. I don't have time to train somebody.

 

24:08

VBP is great in getting around that, because every group of new team members that come on board are put through a training course. And in fact, power planners get the Australian accreditation. We train them up there. We've got a brilliant training team, admin, support, people. They go through a course to understand what is super and I'm actually still working on bringing that out to Australia, because that course is fantastic. And onshore Aussie staff, admin staff, benefit greatly from it, but they also structure it in a way, that they've got a team manager over there, or a CSM that works with sort of 1520, team members. So even if a firm here has only got one or two team members, they work closely, they train them up in how they want things done, but they've also got somebody on the ground up there to take care of them. And I think that makes a huge difference. I think the language barrier with the country that you're working in.

 

25:00

Is a is a difference as well. You know, I've had a lot of people say, Oh, that we've had to do a lot of rework, because English is a second language, and that's difficult. I think we're quite fortunate that with the Philippines, most people learn English at school. They do their schooling in English. So, you know, some of their diction and elocution is better than them Australians and they are really willing and able to learn. So all of our people, I think they're university educated, so we're not necessarily talking about cheap labour that is not very educated. That's not just the lowest common denominator task that they need to do. I think quite often, people are surprised by the level of skill that their people can, you know, can develop.

 

25:45

But I think also the security thing and rightly so, is a big challenge for people around obviously, you know, advisors manage really sensitive data. They are a high risk firm. So whatever outsourcing you have, it's really imperative that you're comfortable that the security measures are going to be adhered to. And you know, there's ways around that, as in not to avoid it, but ways to be secure.

 

26:13

And that's working with a reputable provider that's got all of that infrastructure in place. I think the biggest we talk about ethical outsourcing, one of the biggest challenges to that is where people hire direct in any offshore country, because they just don't know what is happening over there. They don't know the security protocols that their team members having. So it's really important to protect that data very fiercely.

 

26:36

And I think to managing team members the same way that you would manage your onshore team member. We sort of train our firms. They have daily huddles. They follow the Rockefeller habits with their team members. So they've got daily huddles where they know what they're working on. They're in contact with them all the time. It's just like team members working from home here in Australia. They're really part of the DNA and the culture of the firm, and if you do it that way, then it's not really outsourcing. So I like the language of you know, you're building a global team. You're not outsourcing anything. You've got a team member that just happens to be based in another country and happens to cost about a third of what it's going to cost you here in Australia, and it enables you to reach more people. Because here, I mean the number of times I have people talking to me saying, I need this person. I just can't find them. We've been advertising for this long in Australia. I'm still really concerned, Matt, I don't know where all of the trained admin people for all the advices that we've lost over the last few years, what happened to all their trained admin people? Because they don't seem to be on the market.

27:39

Tane Hunter and Dara Simkin of future crunch emphasize the importance of self awareness, emotional intelligence and a diversified knowledge base in financial advising, they advocate for building genuine relationships, embracing new technologies and fostering empathy to navigate the delicate intersection of people and money in an ever evolving world. Every industry, including our own, has been subject to groupthink for far too long. Yeah, so you mentioned before, though that it's an innate capability, and yet we've met, you know, we've all met and have people in our businesses that have fixed mindsets. So how do we really go about changing that? You've talked about a few other things. What should we be working with our colleagues on to help them flex that muscle and grow that muscle. Well, getting outside of groupthink, I really think diversification of knowledge is really important. We were talking about an information diet before really expanding your information and knowledge base is really important, because group think happens by siloed thinking. As far as financial advice, I would start looking at AI, climate change, solving technologies and quantum computing, if you want to get into that sort of diversity of portfolios. I think also a fixed mindset is learned. You know, you're not born with a fixed mindset. So based on your own experiences and your own you know that nature nurture piece as well. I think it takes a lot of self awareness to be able to realize that you do have a fixed mindset. And we talk about, in the AQ, talk about how being wrong is painful and uncomfortable and we don't like it, and so how do we start to acknowledge those parts of ourselves. And, you know, sometimes it just means going to therapy. You know, if you want to be a better financial advisor, get a therapist,

 

29:30

exactly. So it's not rocket science, you know, we have to look inward. And I'm not trying to be Woo and all spiritual, but it's like, you know, you talked about, everyone knows about EQ, like emotional intelligence is so important, especially when you're in a space where you're dealing with people and money, like money is a challenging space for most people. Like, I'm getting divorced right now, and it is horrendous because of the financial side of things. So when you're in this very delicate space of helping people trying to plan their lives and their future, you know, like the.

 

30:00

More, you can drop into your own self awareness and emotional intelligence and be able to support people and empathize like that. Those are the people who are going to supersede the ones that are, you know, going to get you the best financial outcome. You know, a lot, a lot of people want to stick with the same person and build a relationship. And, you know, find that camaraderie in those people who are supporting them in all different parts of their life. You know, to get a good dentist, you're going to stick with that dentist for a long time. So same thing speaks with financial advising. You know, if you can maintain a relationship and engage in people and ask them how they are and what about their family and really understand them as a whole person, not just as like their bank account, then those are the people who are really going to shine and prevail in this technology. Age