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Andrew Rocks
Hi, my name is Andrew rocks and welcome to another edition of the engine room Podcast. Today, I’m really thrilled to be sitting down with David Haintz. David I have known for many years and I’ve admired from afar. Initially, when he ran quite a successful financial, holistic, and goals driven financial advice business, I met, I caught up with him overseas on a on a conference, and was really thrilled when it came out in the press recently that he was sort of the oversight for a large company coming into Australia. So without any further ado, welcome to the engine room podcast, David.

David Haintz
Well, thanks, Rocksy, I just want to make sure I’m able to call you, Rocksy and not Andrew, if that’s all right.

Andrew Rocks
Well, Andrew is what my mum, my wife and the magistrate uses. So unless you’re planning on being one of those three things, David and never say never. And we probably run with Rocksy, how’s that sound?

David Haintz
I’ll take that as permission Good to be here.

Andrew Rocks
So I was, you know, I was having a bit of a, you know, we’ve been doing his engine room for a while, and we’ve been talking about the best practice and, and over the course of it, we’ve noticed that the way in which financial planning has arranged itself from a licensing tech stack, you know, COVID drove quite a lot of innovations has changed. And I had to change because legislation went really fast. And I feel that we’re on our heels for a while. So I’m really interested in, first of all, learning a bit about and my listeners would love to learn a bit about your backstory, because you genuinely are from our side, the coal face side of financial services in Australia, and then parlaying into the exciting venture that you’re with, as we speak with the merchant group,

David Haintz
Rocksy, thank you, as I say, great to be here. And obviously, my objective is to add some value to the listeners. So that’s, that’s certainly the intent. Look, probably my least favorite subjects talking about myself, but I think to set the scene and give us some context. On 33 years in wealth management, I started my own firm in 89. And I’ll talk about a couple of the epiphanies along that journey in a moment. But, you know, we grew a good firm, we won a couple of awards, which we’re very proud of our financial planning Business of the Year in 2004. As an example, we then merged to create shadforth Financial Group in 2008. Now, I don’t want to say that too quickly because it was a 30 way simultaneous merger. On the second of April 2008, we took 13 firms, three in Brisbane, three in Sydney, three in Melbourne, one in Tassie, and two in Perth, and merge them together in April 2008, that day one, that was 80 million revenue 45 million EBIT. We grew that firm from 2008 through 2014 to 160 million revenue, and 58 million EBIT and got taken over by IWF in late 2014. Since that time, I have been so I was 42, when we merged to create shared board 48, when we got taken over, I didn’t want my kids aching, I was a lazy bum. So I consulted from 2015. And I’d be working with advice firms around the world. Because I was based in Melbourne, Australia, 27 years running an advice firm, I wanted to do something that was global in nature, I wanted to do something that was a lot of a better term wholesale, not Rhys retail sort of dealing with two or three or four clients, not with 100 or 200 clients. And I wanted to help advisors to understand the real value that they bring to the table other than the stock picking, market timing data, throwing more around the above the line outcome, sort of goals and client experience, etc, etc.

Andrew Rocks
And curiously, you know, having that international perspective when you went so you had your kit bag you’re obviously very well versed in, in the Australian Financial Planning landscape when you went overseas, what were a couple of the real, I suppose differences and learnings that you had and from which countries,

David Haintz
so in 2017, I was in 19 countries as far and wide as Germany, Norway, Africa, etc. I think there’s a hell of a lot that we should be proud of as an industry in Australia. If we are not the leading advice firm, we are one of the leading advice firms in the world unquestionably in my mind, and I do hear and see, you know, a lot of negativity around royal commissions, etc, etc. And I get that because we have a superannuation system that is the envy of the world with in excess of $4 trillion, where we’re highly regulated, but we are doing so many things right in this country, that in many cases, you know, I was in Hong Kong two weeks ago, Singapore two months ago, we’re probably, you know, respectfully 20 years in front of some of those countries with our value proposition and our professionalism. Now, are we there yet? Are we perfect? Not by any stretch? And we’ve got some way to go. But we’re, we’re doing a lot of things. Right. And I think as an advisory group, we should be very proud.

Andrew Rocks
So is it fair to say that your children think you’ve got a job? Now, David, you’re not you’re not lazy? Or? Or is that just the biggest throwaway line considering I know, just how driven you are? Yeah, look,

David Haintz
you know, as an aside, Rocksy, if you love what you do, you never work another day in your life that and I love what I do. I love the industry, I had a chance to pivot in 2015, to do something different and chose because I just love this industry, this emerging profession so much, it’s great to be playing active role in that.

Andrew Rocks
Which brings me to, you know, the the next question was, so you were consulting around the world and give your form the opinion. And I imagine, with some pride when you’re in other countries, you would realize what’s happening back in, you know, your motherland, Australia. At what stage did you get the inkling that

David Haintz
other countries were interested in not just sort of our learnings, but actually investing into us? Well, when you think So firstly, study quite closely some of the more advanced markets in the world, which would be the UK and the US, looking at the multiples that are being paid for practices or businesses in those countries. If you take the US as an example, there’s some 35, private equity firms that are set or looking to get set within wealth management, because of the high regulation because of the annuity income stream. Because there’s a natural tailwind called the stock market. And if you overlay that with Australia, with our compulsory superannuation system, you know, moving through 11 12%, it is an incredible industry, not only from a client perspective, and we need to make it a great industry for our team members and staff members as well. But if shareholders get it right, it can be an incredibly rewarding investment to run an advisory firm as well. So I guess watching particularly rock, see what was happening in the US with m&a. Not just with private equity, but with m&a as well, was an obvious area that I looked at, but also seeing the multiples that were being paid in those countries. And you know, we can perhaps talk about that a little bit later on. But it is a highly sought after industry to partner with a high growth firm.

Andrew Rocks
And I know you don’t like talking about yourself, but you know, you did spend 25 years to become an overnight success. When you when you did that transaction. Throughout those years, what were the what were the moments or the aha moments for you at the coalface is that I suppose form the way you think about investing in the way you think about financial advice. Practice, it’s,

David Haintz
well, look, firstly, I want to make it crystal clear that notwithstanding, we sold shadforth, or just under 700 million Aussie dollars, I had a lot of incredibly skilled and talented partners and team members. You know, I played a small role in that, just like any premiership football team does, but we had a lot of great people. And so I think if there was, you know, I’d love to come out with some people least for the listeners today, but perhaps just to remind them of some of the key points that if you’re looking for success, surround yourself with great people, and and certainly shed for Financial Group was not married at first sight. You know, most of those firms knew each other for eight or 10 or 12 years were networked together, you know, perhaps starting off with copies moving to red wines, and, and ultimately saying that the sum of the parts can equal the individual components. And that’s why we pull that together. So I think epiphany is would be get yourself surrounded by great people. Focus on the client focus on the client outcome. You know, I ask a lot of financial advisors, are we crystal clear on the problem that that we are trying to solve for our prospective clients? I think who often we have a preordained solution being assets under management or risk insurance or mortgages or whatever it might be, rather than asking the right questions, working out what their goals and aspirations are and delivering on that. So great people client experience. I think there was a couple of key pivots for me, recognizing from the UK in the mid 90s. You know, the godfather of lifelong cashflow modelling was a guy called Paul Etheridge, who passed away 12 months ago but I would regard him as the Uh, as the, you know, the grandfather of you know, true real lifelong cashflow and 100%

Andrew Rocks
I actually in the 90s had a CD of him talking, and I would listen to it. Absolutely keep going poor leverage. What we might do sound guys, we might put a poor leverage link arm is one of the assets and what are the nuggets out of here as well. So I totally agree so. So what what took you with poor leverages philosophy?

David Haintz
What what took me was that it of course, if people had a choice to get an 8% return or a 10% return or a 12% return? Of course, they’d all take the 12%. But is that what they need? Is that enough? Is it not enough? Is it too much? And and, you know, what you learned from Paul was, money is just a means to an end, you know, what’s important to you in your life, you know, what’s important about money? What are your goals and aspirations. And what I learned from Paul was that there’s only three possible scenarios when you model every possible permutation and combination. One is that you’re going to die with way too much money. One is that you are going to run out of money well, before you die, or that or the other one is the Goldilocks scenario, that’s just right. And your money expires just after you expire. And now a lot of people say, well, modeling our goals and aspirations, it’s built on a whole bunch of assumptions. Well, better to work on some basic assumptions than not to work on any assumptions at all would be my view.

Andrew Rocks
Yeah, look, if you’ve net that’s very much that, that coach very much that that planning mentality, which, which I think, has, as you’ve intimated, you know, the birthplace of financial advice was quite product based in this country. And, and we’ve lost our way and and we’ve had a big reset over the last 10 years. And I believe, as I’m heading up to its we’re talking that we’ve we’ve come full circle, and the client is genuinely the center of the universe. As far as Australian Financial Services, businesses, yeah, just changing gears a second, your observation of both the UK and the USA markets? What’s the difference of the licensing regimes in both of those compared to Australia, just just to give some context, before we go into what you’re doing now?

David Haintz
Look, I think the key difference that I would see, particularly in the US is if someone engaged as a financial adviser, there is no requirement to do a statement of advice. And the advisor has discretion over the money. So you know, what does that mean, in an efficiency perspective? You’re in Australia, if you divide any firm’s revenue to an over by their full time equivalents, their headcount, you know, typically the answer is going to be around $200,000 of revenue per full time equivalent in the US, because of the efficiencies that they have with discretion, and no SLAs. They’re running at nearly double that throughout our VP $1,000 of revenue, per full time equivalents. So they’re way more efficient. Because they’ve got, I guess, an easier proposition. But they’re nowhere near as comprehensive and holistic as we are in Australia looking at really be a coach, mentor, advisor and project manager for our clients, like many advisors in Australia.

Andrew Rocks
So if you’re saying that Australians give a better outcome, but it’s harder to make a buck. Do you think that America is, for instance, USA is going to have high regulation? Or do you think that we’re going to have sort of a slight deregulation or even even just create genuine efficiencies, so that we can get those that sort of revenue per FTE up? Well,

David Haintz
look, in Australia, anecdotally, 50% of fees being charged now, flat dollar fees, fixed fees in the US, that would be 99%, Aum fees. So I think what you’ll see, you know, one of my favorite sayings, Rocksy, you’ll hear me say many times is that cost is only an issue in the absence of value. You know, I think the Australian financial advisors have become very good, not perfect, but very good at adding value and articulating their value, we need to get better and better at that. But I think we are a mile in front of other advisors, US advisors that are very much an investment based proposition and not necessarily looking at things comprehensively and holistically. And as they start to get margin squeeze, I mean, you got a population and three out of 60 million people. So there’s not the same pressures on the advisors as there is in Australia. But as those pressures come, I think you’ll see them doing more and more for their value proposition and for their margins.

Andrew Rocks
So we spoke a couple of weeks ago, and you kind of gave me the overview that I knew that you would, you would teamed up with merch and I think they hit the press maybe about six months ago. I knew things were coming. But it looks like that that you’re actually about to or you have already pulled the trigger. So I’ve done a bit of research on the overall nurturing group and and they’ve got six guiding principles, which is integrity, collaboration, entrepreneurship, alignment, vision and purpose. I severence which do resonate with what I know you are as a person, but I’m pretty sure that you could have picked many partners to work with, as an ambassador in this country. Why did you specifically choose this particular organization? In our Rocksy looks a great question I Well, firstly, you know, we

David Haintz
got a great outcome was shared fall 2014, I was very happy consulting the last eight years, you know, very busy, it wasn’t broke, it was really only looking for a solution for one of my Sydney based clients that I became really clear on the multiples in the US. And I looked at some of the models in Australia that were typically buying majority controlling positions, and saw a different model I saw a model at took significant minority positions. And, and I think the significant minority, you know, one of the things that I believe is that you don’t want to turn entrepreneurs into employees, if you’ve got great businesses that are growing, and you remove the entrepreneurs from those businesses, that can be highly problematic. So the significant minority position typically 20 25% tick the really big box for me, the other big box that got ticked was looking at us multiples compared to Australia multiples. And with that 20 to 25%. Partnership stake that gets taken merchant offers a tag along which is the right but not the obligation to tag into a future liquidity event at US multiples. And so I thought, gee whiz, you know, they’re, they’re a couple of really key, for instance, the other big difference was, whilst merchant is private in nature, and merchant takes an equity positions. So one might, you know, assets a merchant is a PE firm, it’s not a traditional PE firm, like a fund where there’s a seven year window, Chevron seven years shot clock, the PE firms got to come in and strip out expenses, gear it up, and try and flip it. It’s long term patient capital, taking a 1015 year view, there’s no shot clock. And so that combination combined Rocksy of the significant minority, not turning entrepreneurs to employees, a tag along provision and offering the partners a second or third bite of the cherry, when you look at some of the models around out there. If there is any upside, it’s for the it’s for the private equity firm. And good luck to them. But in the merchant model, there’s a second bite of the cherry when there’s an IPO where the partner firm has the chance to tag into the IPO at US multiples. But they’re also still there for some script, running the company. And so looking for some successful internally with gen two, and Gen three is important as well. So to answer your question, what why, why am I doing this? Because I saw such a different and unique model, that I was very keen to bring it to Australia and get involved in it.

Andrew Rocks
And And when we’re in discussions, you’ve been talking about big companies that you’ve been involved with, but ultimately they started as small companies your own business, which I believe was which suburban Melbourne, where you based? David from memory?

David Haintz
Well, oh, Collins Street, Melbourne, Australia, right in the middle.

Andrew Rocks
So so your business started there, you’d be kicked off many years ago? What are the types and you mentioned that, you know, the genesis of Reg, of learning about merging was one of your Australian based clients, you were looking for a solution? First question is having this particular mean are a minority, non controlling strategic and collaborative equity capital partnership structure? If you had your time again, would that be something that would have appealed to you back in the tender days when you were in your early 40s? Or is that kind of part of your motivation?

David Haintz
It’s a great question. You know, I think the the shadforth group had me at hello, because of the great people at and with any business, you need to design, whatever solution you’re looking for around what your goals and aspirations are for that business. Now with shadforth, I was the youngest of the village elders 42, when we had 48, when we sold that most of my partners were sort of early mid late 50s. And so, you know, if you divide 80 million revenue and 25 million EBIT by 13 firms, you know, the average firm was six or 7,000,002 or 3 million EBIT. And so the valuation of those firms was typically in the sort of 12 to $20 million range. And they didn’t really like they left their internal succession too long to get a gen two and Gen three coming through. It was too expensive. They couldn’t borrow enough money. So shadforth was always designed as a liquidity event. To answer your question, what I’ve done things differently, maybe, maybe, I think the merchant model definitely is best suited to a young Due to ultra bitter with runway, not an older entrepreneur, for those reasons, not overlooked.

Andrew Rocks
And that was a self serving question as well as you know, I exited a business and roughly the same age at about 44. And, and because back then there was an absence of this now. So tell me, you know, we’re throwing up minority noncontrolling what kind of business you’re looking for, let’s get down to the engineering or the coalface. If I’m an advice, practice, that’s, that’s doing, you know, 6 million turnover and to me, but is that is that in the ballpark? Are you looking for something bigger? Are you looking for specialists? If you can give us a feel for what floats your boat at the coalface then a lot of people are listening and one might go, You know what, I’ve got runway, I’m don’t really need, you know, I’ve got myself in a good financial position. But maybe I need my need some custom credit solutions, as you pertain to offering as an example. So what are the types of businesses David,

David Haintz
so Rocksy, if I could just maybe back up the truck for a couple of minutes. And they help to set the seed because it’s really important to get the macro right, before we get the micro, you know, it’s my view as a business person for 27 years and advisor to advisors the last eight years that any ad principle or business should have what I call a VCP, or a value creation plan. And that value creation plan has got four key levers, you know, the first lever everyone’s trying to achieve it, that is to increase revenue, well, we all get that. The second one is to maintain or decrease expenses, we all get that world doing that you’ve had strive to deliver at enhanced EBIT with higher revenue or the same or lower costs. Lever three is to get some reasonable and appropriate balance sheet leverage. So if you can borrow money a year or two years ago, at 4%, or even to die up, you can borrow money at 8%. But buy a book or buy a business at the right price. You the cost of capital is today 8%, but your return on investment is closer to 15%. So the third lever is getting appropriate leverage, you know, this, the best business people are saying, you know, it’s pretty simple math, Rocksy, say, hey, I can borrow money at eight or get a 50% ROI, I’ll do that every day of the week, until I run out of runway, you know, the bank’s not going to lend me any more money or I feel uncomfortable putting my head on a pillow. The fourth, the fourth lever is what I call crude multiple expansion. Now, my small business pre shadforth was probably worth, you know, five or six or seven times EBIT, we were able to double the EBIT from 25 million to 58 million. And we ended up getting taken over. Or let’s just round the figures out to 12 times EBIT. So we essentially got a greater than 2420 times multiplier on our, on our business, as opposed to a five or a six or seven times that was a four time multiplier, because we had a very clear value creation PLAN strategy around those four levers, including the fourth lever of prudent multiple expansion. So they’re part of part of my coaching to my advice business clients is, what’s your value creation plan, let’s get a value creation plan in place. And that’s where our bet really led me to the merchant model was that, you know, we were looking for that solution. And at and here we are now made. So, you know, perhaps I pivot to say, you know, what are the types of firms we’re looking for? Well, you know, it first and foremost, it would be entrepreneurs, you know, we are looking for entrepreneurs that want to grow. I have no issue with people want to play golf, or go fishing, or do whatever they want to do in their own time. But if they don’t have growth, focus and vision, they’re probably not going to be the right partner for us. Why would they take on a capital partner? If they’re not looking to grow?

Andrew Rocks
Yeah, and, and you’ve mentioned you’ve got with the four levers, you know, most people get sort of stuck on lever one and two, some people go out there and buy, you know, leverage their balance sheet, but historically, that was done in such a poor way, especially with large licenses. And printable version multiple expansion. As you intimated, you get that right, it actually doubles the outcome, that at the very last, you know, the last sort of 20 meters of the 100 meter race. So,

David Haintz
right, right, why

Andrew Rocks
do you think people haven’t embraced that? And maybe, as they’re just been? Is it just been totally sort of Australian licensee based in the past?

David Haintz
I think typically, the view in the past has been the only way to get that multiple expansion was either to merge and get bigger or to list on the ASX. At any you do see a number of relatively small firms that are listed on the ASX with market caps and 2030 40 million I mean, like they it’s a tough space, you know, it’s costing you 2 million to 5 million bucks a year to run a listed company. And, and so I think people you know, the concept of value creation plan may be simply and effectively articulated by me today, but it’s not rocket science, Rocksy, when people have been out looking for that multiple expansion, but I think they’ve typically tried to achieve that by merging and growing or by listing and and I think there’s another way to tap into offshore models,

Andrew Rocks
and how long so you started working with merchant? What in a consulting capacity until both parties were comfortable with the process? And when did you start deploying? Or co investing, as you say, what actually, what’s the terminology that you use? Because it is you do take a minority non controlling state, what’s the languaging that you like to use?

David Haintz
So for us, we’re very, very clear their partnerships, right? They’re not, they’re not deals, they’re not transactions, they are partnerships, we are taking a long term partnership approach, we don’t need or what a board seat, but we want our phone numbers to be on speed dial, and we want to roll our sleeves up and get our feet under the desk and help that firm to grow. So partnerships is what we do. We would like to think we’re bringing in all this amount more to the table, other than just writing out a check.

Andrew Rocks
Right. And interestingly, you did mention something that had piqued my interest in as you mentioned, you don’t like to take a board seat is that all part of the philosophy of backing the entrepreneurial, because, you know, historically, anyone who’s put money into anything wanted to be able to have their hands on the control wheel. Yeah, look, we would

David Haintz
have bad entrepreneurs and get out of their way. I’m not suggesting we don’t want minority protection. So we want to agree on a budget. And we’ll give some, some some, you know, some barriers around that, you know, otherwise, we’ll give some barriers around, you know, m&a, expenditure, etc, etc. But we want to help you ideally as a as a as an expansion capital partner, more often than not, we’re going to be issuing more shares, there won’t be a sell down more often than not, it’ll be issuing more shares, money goes on the balance sheet money goes in the bank account, and they’ve got some dry powder to go and make some further acquisitions, we get out of their way. So that’s the plan. Now we’re open to what the US called secondary, where there’s some vendor or sell down, or a combination of expansion, capital, and vendors sell down. But ultimately, you’re right, Rocksy, we’re backing Ultra bitters, and we want to get out of their way. So so we’re happy to take a board seat, but it’s not a requirement. What we’re more interested in doing is helping our partner firms to grow.

Andrew Rocks
And I suppose one of the segways, where I was actually interviewing drew from MBAs only a couple of weeks ago. And he, he kind of revealed that you guys were in discussions, and I believe, I’m not sure if that’s been consummated yet, but and I know him personally and Chris, in the team there personally, and they’ve got no intention of taking the foot off the pedal, is that the kind of firm that that appeals to you? Or is that? Or how did you come to make that sort of relationship?

David Haintz
Well, if I just perhaps bang out sort of four or five key points as to what we’re looking for, and then come back to MBs? And talk about why MBAs. So yeah, we were looking for entrepreneurs that want to grow, not what the US would call white flag businesses where 64, half year old puts up the white flag and says, you know, on Donald, out and up so as as a result of that sort of entrepreneurs looking at growth, typically, we’re talking to entrepreneurs in that sort of 35 to 55 range, that I’ve got some runway and I’ve got some vision, you know, the people that we’re talking to, are either at a sort of enterprise Scout stage or emerging at a price stage. They’ve got some scale, typically, they’ve been active in inorganic growth. So they’re doing okay, organically, but they’re also doing some inorganic growth, they’ve got a C suite that’s capable to execute on merger and acquisition, to extract the synergies as a result of doing that. Typically, the firm’s we’re talking to have got some debt on their balance sheets, in some cases, quite a lot of debt. But the overriding point is we invest in people and character. Yeah, we want people with the right mindset, the right vision, and at aligned values. So if we if we then pivot and say why MBAs, well, that entrepreneurs focused on growth, Ido drew Drew and Chris and the team didn’t want to sell that any shares, they wanted to double down on their expansion. So we’ve issued them with expansion capital, they’ve already got some significant size and scale, but they’re getting bigger. We actually consummated that partnership about eight or nine weeks ago. But the team quite understandably, because they have so many joint venture partners wanted to get around and talk to all those partners first before it was announced. Now in that time, because we’ve given them some dry powder. In that time, they’ve made a further two acquisitions. And so we we want to help firms that I did that key and and focused on expanding and so they are the perfect candidate to tick all the boxes, right people very proud to be their partner. And we would like to think we can help them to grow for the next five to 15 years.

Andrew Rocks
And what I’ve taken out of that is I love the term white flag. Yes. And there’s simply a small axiom there. Now, you mentioned that you’re interested in in firms that are, quote, unquote, enterprise scale. So does that is that function of their existing EBIT or revenue or headcount, just to give me a bit of a feel, because there’ll be people listening here who sort of, you know, start drinking the Kool Aid and get Yep, we want to run away, we want that. I wonder what the enterprise scale definition in normal and would bake,

David Haintz
it was my Firstly, I’d love I’d love our phone to be ringing off the hook with people wanting to, you know, just have a chat with merchant. But what I would say if you look at those four levers, the third lever, you let’s not disregard that third lever, and that’s appropriate balance sheet leverage, you know, if if some of the listeners out there, haven’t exercised m&a them, you know, if they’re genuinely entrepreneurial and growth focused, yet working on the assumption that, well, let’s go back a step, top quartile firms are growing at 50% compound, right? 50% compound means that a firm is going to be doubling every five or six years. Yep. So if you look at that 50% compound growth, you know, it doesn’t really matter whether that’s coming organically or in organically, but the bigger you get, the harder it is to maintain that 50% growth organically, right? So I’d be saying to the listeners, think about your growth rates, think about how you’re going to relate to those growth rates, the bigger you get, the more you might need to look at m&a to help you with that inorganic kick along towards that 10 or 15% compound growth. So, a couple of points there, Rocksy, I probably didn’t answer your question.

Andrew Rocks
No, no, not at all. And record of what I’m just jumping on now is, you know, you want people to potentially have some balance sheet leverage, but there’s been such a narrow offering of credit providers to financial services over the last 20 years and and if they are listening, we appreciate you having a go but are you saying that when you come in you also assist with with that that credit or do you work with the Australian counter counterparts of traditional offering banks like Macquarie Judo Dabiq cetera.

David Haintz
So what I’m saying is our typical target partner has excellent executed on m&a and as a result has some debt that we would obviously help where we can in that space as well. With exactly the people you mentioned, you’re the Macquarie’s, the Geno’s, the NABS the West packs of the world or the West back, sorry,

Andrew Rocks
sorry. I’m sure I’ll get it not from the west back at him. But anyway, hopefully I sorry, make your

David Haintz
question a few moments ago was what what does enterprise and emerging enterprise look like? Well, you know, it’s it’s an open conversation, we don’t really want to be pushed on $1 figure. But you go to I know, so I’ll give you $1 fee. But, you know, broadly, what’s more important for us is entrepreneurs, people character, you know, the very first firm that merchant partnered with in Austin, Texas in 2016, was $400 million of assets under management. Seven years ago today, that firm’s $8 billion of assets under management. So they can be small with the right entrepreneurial nature and get great outcomes. But again, Rocksy, if you pushed us on a number would probably say, a million dollars EBIT to make it worth the while of the of the due diligence, the analysis, the conversations, recognizing that true partnerships can take anywhere the order of six to nine months to compromise, there’s a lot of a lot of work to be done. So I guess there needs to be a reasonable outcome for all parties.

Andrew Rocks
Agreed. When you’re talking about the people, and you know, I’ve always got essentially my my engineroom about people and culture and, and at the end of the day, you’re investing in in people and you’re investing in the leaders vision, and you’re enhancing that. What what are the kinds of attributes so the personal attributes that you personally identify in the CEO of firms that you would like to partner with?

David Haintz
I think they’ve got a clear vision. They’re not necessarily coming in cold in agreed fields, they’ve got some experience. They’ve got a track record, you know, whether it was in a previous business, or whether it’s in an existing business. You take the late great Tony Finnegan there was the CEO of shadforth Financial Group, you know, when I knew that Tony was coming in to run shadforth You know, that was a massive tick for me to be backing him as an entrepreneur that had taken time to Mackenzie the great heights. Were coming into spring racing carnival time, Rocksy and so when you do the fall, not that I’m a bit a betting man, but you do the form and you look at a horse that’s what in the right stable, it’s got the right jockey, it’s run over the distance. It’s won in the wet and the dry under If that’s what you’re looking for, you’re looking for the entrepreneur. That’s, that’s got a track record.

Andrew Rocks
And with that, no, I opened up the conversation with sort of the new wave of financial advice models in relation to licensing, which used to be, you know, the Rosetta Stone or the governing principle of all financial services in Australia. Can I am I right in assuming that you’re completely agnostic? Or do you have a preference for self licensed or? Or what’s kind of, because that informs me as to in a roundabout way of asking you what your vision for the future is? To be honest.

David Haintz
Yeah. So the merchant model is agnostic on, you know, custodian platform investment model. You know, we’re talking to firms that are pure Erec equity that are passive that are active, some a platform, some our platform, in relation to licensing, again, we’re agnostic on that the only thing we’re not agnostic on is vision entrepreneurialship, and growth aspirations. Right? So you can you can take any of those boxes, as long as that’s what you’re looking for. Now, it just so happens that a lot of the firms were talking to, you know, enterprises or emerging enterprises, and as a result of that, many of them are north of 3 million, 5 million, 10 million, 20 million, 30 million $50 million in revenue. And so if we look through our conversations, the overwhelming majority are self license, but this excellent firms that we’re talking to, that are under licensee models, as well, so agnostic at all of that, Rocksy.

Andrew Rocks
And what about the notion of specialists where you obviously are investing in specialists because we disclose the NBS in partnership, but what about the notion of a one stop shop or a multi discipline practice? And and is that something that is common in United States? Which is the I suppose the birthplace of virtue?

David Haintz
Yeah, well, I firstly, I’ve only been doing this for 33 years. And and I’ll say that, you know, partially tongue in cheek, I thought I knew many of the advice firms around and every week would be connected with a firm that I haven’t met, or that I haven’t heard of. And so there’s a lot of great firms out there. And it doesn’t matter whether you’re active passive platform, non platformed. There are different models out there that are doing extremely well. I mean, NBS is a risk insurance pure play. And as more and more advisors are saying, it’s too hard underwriting is too hard. You know, I can’t I can’t get stopped through the system, or I don’t want to be receiving any commissions, because I want to be independent, impartial, there now, you know, enterprise style risk only. So we would talk to mortgage only, we would talk to you about wealth, only that integrated tax accounting of wealth. And we’re starting to have a chat to some pure tax and accounting plays as well. So I think the issue is not so much was not an issue at all, you know, we’re agnostic on the model, Rocksy, but what we’re not agnostic on is the vision, the entrepreneurial nature and the growth of growth aspirations.

Andrew Rocks
And look, it would be absolutely remiss of me, given our previous conversations over the years, as far as you know, leveraging technology, not just in advice production process, but to give the client’s a real user experience. Is there any green shoots from your travels abroad, that can be utilized in Australia? Or alternatively, is there any home grind, sort of great user pieces of technology that you’re seeing currently?

David Haintz
Firstly, I’d say green shoots. Yes. You know, we discussed earlier in the in the conversation around the emerging professionalism of financial advisors, particularly in Australia, and I think it’s worth reflecting that our emerging profession has only been going 20 3040 years, you know, culminating from risk insurance, you know, solicitors, accountants, you know, stock broking, etc. So, this emerging present profession is slowly but surely getting there. And it’s the same with technology as a tech not perfect. My advice to any firm out there is, you know, don’t don’t waste too much on trying to find the ideal tech, you know, the firm’s that we’re talking to whether they’re lending only risk only wealth only integrated wealth, tax and county, whatever they might be. There are firms out there that are growing at 50% compound. There are firms out there running at 40 to 50% EBIT margins. Now, some of those firms have good tech, some of those firms don’t have good tech, they just have great systems and processes. So broadly, the industry and the emerging professionals heading in the right direction. But whilst whilst I think we should be all explore and take, ideally through study groups and communities where we can swap and share ideas quite quickly, rather than jumping on planes and spending too much time and money, trying to uncover stones all around the world. I think it’s important to keep considering tech but not to spend too much time in doing that,

Andrew Rocks
No problems. And so whilst I’m also I’m sort of absorbing the merchant philosophy, and indeed, what you’ve intimated. And you mentioned about people with long runway, I’m gonna put to you another thing, because this is Ensembl. This is the positive evolution of financial advice. And we’re gonna have listeners here, who are all stages of their development, they could be the people who are talking to you that they could also be the the future employer, I’m sorry, employees of those companies. When you co partner with businesses, do you encourage things like employee share schemes for future talent? Or what’s what’s kind of the guiding principles to make sure that your current 45 year olds don’t become the white flag? It’s in 10. Yet?

David Haintz
Yeah, so we are massive believers in growth, we want to, I’m a huge believer in what I refer to as the three legged stool. And that is the CO relationship between the clients, between the team members, you know, I don’t like calling the staff, their team members. And between the shareholders, you know, the minute you’ve got a three legged stool where one of the legs get cuts off gets cut off, that everyone loses. And so they need to cohabitate, it needs to be a great outcome for all of those. So broadly, Rocksy, anything that we can do to help the boat go faster, to give a greater experience for clients, to give a greater experience for team members. And to give a great experience for shareholders, collectively, not for one over the other. Is is everything that we stand for that merchant and everything that I’ve been trying to achieve in 33 years in my in my career to date,

Andrew Rocks
are you ever changed you ever you ever changed quite a lot in your career to date, and you mentioned, you don’t like talking about yourself, but I wanted to thank you for coming on the podcast, this is the engine room. I’m trying to get a real feel for where the development of the industry. But I’d also like to acknowledge that the you’re one of the few people to receive the Member of the Order of Australia for your services to financial planning as part of our Australia Day, honors. So congratulations. It’s just wonderful to actually have positive, positive recognition from from the government. And when you receive that a couple of years ago, did it come as a shock? And how does it make you feel to hold that? Because we don’t have that many in our industry, mate?

David Haintz
Well, thanks, Rocksy. Look, again, it’s not something I necessarily like to talk about. But I’m incredibly proud. It came as a huge surprise, at email out of the blue from the Governor General’s office, probably nine months ahead of the awards, saying that I’d been nominated. And when I consider it. Of course, I was back to them in about three seconds, say yes. But you’re lucky, you look at some of the people, you know, this 12,000 Australians, since the awards have been going in the late 70s that have achieved an Order of Australia. And it makes you just feel incredibly proud, incredibly humbled, and incredibly grateful. I think

Andrew Rocks
why I wanted to sort of put that as a as a book, or as a bookmark in this particular recording is that you went to great lengths to talk about, you know, the normal PE style firms or even even, you know, the stereotype and, and, you know, it’s fair to say that you as a person are very much a you know, one in all in when it comes to working with these practices to achieve their goals. You’ve done that before you’ve got a track record, you even identified, basically, people in you who you invest in a very much people that you would you would also want to work for as well. As far as the vision for the future of financial advice in Australia and the role of the engine room or the people around the advisors. Are you? Are you really bullish on it growing? Or do you think we’re just gonna have a more narrow range of people dealing with a larger client base? Look, I think what

David Haintz
you’re always going to have your I don’t mean this to be derogatory, but you’re always going to have your quarter milkbar In Your Corner hardware store, where people are running lifestyle businesses, two, three staff. They’re happy not growing. But in those situations, and they can be incredibly profitable businesses. Unless you’re offering a career for some of your team members, you will get stopped turnover. And so then you look at the mid tier or the larger tier. And, you know, I think the local color wheel bars becoming more of the Coles and Woolies and so you’re now in Australia today, you’re probably seeing pardon me, you’re probably seeing around 10 firms in Australia today that have got revenue north of $100 million. Now, you know, you wouldn’t have seen that five years. Seven years ago. So we’re now starting to see this sort of mid tier and large tier, what I would say is, there’s no right or wrong, I believe in growth, growth creates opportunities for all three of those stakeholders that three legged stool I spoke about. So I would say growth is the key growth is going to get you great outcomes for all three of those stakeholders. And I’d be encouraging people to try to focus on that sage advice.

Andrew Rocks
Indeed, David, what we’re going to do is we’re going to put up a bunch of links for anyone who’s, who’s interested in this learning more, obviously, dangering had David’s find him night and day. He’s not he’s not going to be prepared for that. But, but if you if anything that we’ve said today resonates with you, please reach out. And, you know, from, from my perspective, from my personal perspective, thank you for spending some time today from the perspective of ensemble while I got involved with ensemble was, it’s a sort of place that I would have loved to have when I was in my first 15 years. And and just having access, to have honest conversations with people that have been there and done. That is fantastic. And you’ve definitely one of those people, David. So I’d like to thank you very much for the podcast and I look forward to watching the progress of merchant in Australia. Cheers mate.

David Haintz
Rocksy thanks for having me and thank you for everything you do and enabled us to help the industry get better quicker. It’s great. Cheers mate.



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