Building a Private Label

In officially opening this year’s Adviser Roadshow, IMAP Chair Toby Potter revealed the current state of managed accounts in Australia, with funds under management (FUM) now standing at $57.05 billion – an 18.9 per cent increase in the six months to 31 December 2017. For the 12 months ‘year on year’ period, this represents an annual growth rate of 45 per cent

or $17.87 billion.

This year’s roadshow featured a range of industry experts and panel discussions, which highlighted various aspects of the managed accounts sector.

In a panel session titled, ‘Building a Private Label’, three industry professionals – Nick Mitchell (Netwealth), Lukasz de Pourbaix (Lonsec) and Jonathan Kilborn (Cardena Private Wealth) – shared their perspectives on how they built a private label.

According to Netwealth Head of Distribution, Nick Mitchell, Netwealth got into managed accounts about 3.5 years ago, when it identified the move by many IFAs to rapidly transition their businesses to include managed accounts.

“Managed accounts is a rapidly growing sector of the industry and we expect 57 per cent of advisers will look to incorporate managed accounts into their offering by 2019,” Mitchell said, adding that managed accounts provided advisers with a “frictionless” client experience.

Mitchell believed there were a number of advantages for practices going down the private label path. They include:

• greater sophistication and customisation of service offering;
• access to broader asset classes, such as international equities, listed property, bonds and other fixed interest;
• model of models, enabling advisers to diversify manager risk and ensuring best of breed; and
• enhanced fee management and reporting.

Cardena Private Wealth is a non-institutionally owned, fee-for-service advice business based in Sydney. As a director of Cardena, Jonathan Kilborn said they started thinking about building a private label about three years ago. He admitted that the process of working out the business’s beliefs and investment philosophy took some time.

“When building our private label, we worked with a consultant, who helped us with our investment committee and asset consultants,” Kilborn said. “It’s important to work with people who are also on the same page as you, particularly with things such as your investment philosophy.”

Lonsec Chief Investment Officer, Lukasz de Pourbaix agreed that the investment philosophy was key to the success of any private label.

“Most advisers I speak to have an investment belief or philosophy. But they need to ensure that this belief or philosophy is properly documented, to ensure they remain true to it.”

He added that with the increasing level of compliance and due diligence in the sector, a lot of education around managed accounts was still required for advisers and dealer groups.

When asked what advice he had for any practice looking at rolling out a private label offering, Kilborn advised to take the time to do it well.

“When you start this journey, you need to realise it takes time and cost to do well,” he said. “And appoint a dedicated person, whether internally or externally, like a consultant, to undertake the due diligence and implement the strategy.

“And importantly, you need to remain reflective on your processes, which means asking yourself: Is this still the most efficient and cost-effective way of doing things.”

Serving HNW clients

In another session titled, ‘Serving HNW Clients – How Different Is It?’, Richard Sheargold from Stonebridge Capital provided his thoughts on servicing high-net-worth (HNW) clients. He believed the key to working with HNW clients was working with their accountants, or as he termed, the “gatekeepers”.

“The HNW clients referred to our practice primarily come from accountants,” he said. “Accountants are the gatekeepers. So, for our practice, it’s about getting the gatekeeper over the line, as they are the trusted professional of HNW clients.”

Sheargold added that it was often a contentious issue with HNW clients having their investment portfolio discretionally managed.

“These clients like to be in control, so moving them to a discretionary environment does require convincing and trust. We do this by managing their expectations and ensuring that we have structured monthly communication with them.”

Interestingly, Sheargold revealed that ultra HNW clients were drawn to ethical investing, and liked access to international equities and block trading.

He added: “When you have HNW clients you need to be aware that no one-size fits all. Different generations invest differently. This is particularly evident with generational wealth transfer.”