Transcript

Matt Heine (MH):

Isaac, welcome to the show.

Isaac Poole (IP):
Thanks for having me, Matt. Great to be here.

MH:

You've joined us in the Melbourne studio today, which is fantastic. It's really nice to be doing it in person again. So thanks for coming up from Tasmania.

IP:

Yeah, it's really good to be up here. I mean, I've been down in Tasmania now for the last few years. Haven't been able to get out very easily or very often. That's changed a little bit over the last six months or so, and it is fantastic to be out and about seeing people in person, catching up with clients and investors. It's really good.

MH:

Absolutely. Did you end up back in Tasmania as a result of COVID, or what were you doing back there?

IP:

Yeah, I think you could call me a COVID refugee in some ways. I was based in Hong Kong for almost seven years, and then in 2020 I just came down for a Chinese New Year visit to see the family. With my family, COVID was taking off in Hong Kong at the time. We could kind of see where things were going.

My wife and I have seen a lot of zombie films and we sort of got a bit worried. So we just extended our holiday, stayed a bit longer. Then we stayed another month and another month and by the time sort of July, August rolled around, I was having a chat with Luke Moore, my CEO, saying, "I don't think I'm going to go back. I'm going to stay in Burnie."

MH:

That's a big change to go from the hustle and bustle of Hong Kong back to Burnie.

IP:

It's about as big a change I think as you could make within our profession really. I mean, for those who don't know, and there's probably a lot, Burnie is a small town I'd call it on the Northwest of Tassie. We're looking at 18,000 people or so, mostly regional in industry there. The move from Hong Kong was a fairly big transition in a very short space of time.

MH:

Probably a good segue for those that aren't familiar with I guess your career, how did you end up in Hong Kong? And maybe if we go back even further, how did you end up in financial services?

IP:

Yeah, I studied economics at the University of Tasmania as a student. At that stage I didn't really know where that'd take me. It seemed like a good generalist course and I enjoyed it. It was mathematics, it was qualitative, and that suited me down to the ground.

At the end of that, after graduating with honours, I applied for a few jobs. One was in the public service and the other one was with Reserve Bank of Australia. The latter seemed a lot more interesting for me. I moved up there, took a role as a graduate analyst. Did that for a few years.

After that, my career just ended up being a matter of me being the right person in the right time at a string of lucky incidents in a way. I left the Reserve Bank, started a PhD in economics, and then nicked off to Oxford to study for a while.

In the middle of that, the GFC hit. That was one of those really great opportunities I think to go out and get a job in the middle of a recession. So I started working for Lloyds TSB in their risk area. They were after someone quantitative, someone who understood economics.

What I really did for them was help them build scenarios and stress tests of the GFC to try and gauge what that might do for their balance sheet. And of course, all of those scenarios ended up being wrong. They were never deep enough, the recession was never bad enough, but it gave me a sense about how the economy impacts markets, how it impacts risk.

I think from that point on, I was really interested in markets, but Lloyds TSB was not a market role, it was risk. So I was fortunate at the end of 2009, a role came up in Sydney for New South Wales Treasury Corporation. That's the debt issuance and asset management arm of the New South Wales government.

That role was a markets role doing on strategy economics. I stayed there for a while, and that was a great place to learn as much as I could about markets, a hands-on role from some great mentors who really gave me every opportunity to learn what I could in a pretty big shop. That I think could have been the end of my career. I could have stayed there forever, honestly.

Then my wife actually got a role in Hong Kong in 2013. She'd been looking for a chance to move to Asia. I was totally up for it and thought it'd be great. And so over we moved. I spent 10 months in Hong Kong finishing my PhD. And then a job came up with Willis Towers Watson and I ended up being the head of capital markets research for Towers for about four years in Asia.

Again, just a great opportunity to learn about governance, about investing, about consulting, and really looking after investments and assets for clients. That was a great opportunity. But in the end, another role came out with Oreana, where I am now, and I got a chance to shift into I guess you'd say the wealth profession, which I think has just been a fantastic move, a really, really enjoyable shift for me.

MH:

That's a great story. Certainly on a number of the podcasts I've lead, I'm always interested just to hear how people move through their careers, but more importantly I think the mindset that they had that allowed them to grab all these opportunities. What advice would you have for anyone that's listening and maybe just starting out on their career as far as progressing?

IP:

Great question. Maybe some of the advice that I've received through the years is helpful there. I'm sure it resonates with anyone who's built a career, but read a lot, read widely. Don't just rely on your degree if you've got a degree or your background.

Try and join the dots if you can, and then use that to ask as many questions as you can of as many people as you can. Anyone that will answer, just ask. It's a great way to learn. Also, the more you ask, maybe the more you keep your mouth shut and avoid making silly errors that could come back to haunt you making predictions that you eventually get wrong.

I think there are a couple of good ones, but perhaps the most important thing that I've found in my career, and I think this will resonate with a lot of people, is find mentors where you can. It doesn't need to be a formal mentor. It could be very informal. It could involve just a chat over a beer. It could involve something more formal around on-the-job training, but find someone who's willing to take you along for the ride, promote you where they can, and really help lift you up in the career or the company that you're working in.

MH:

That's fantastic feedback and advice. Thinking about the mentor relationships that you've had, what would a typical conversation go like?

IP:

I've had I'd say three very, very good mentors over the last decade. And each of those mentors were quite different. One was very job focused but ended up becoming a very close friend. The other was more around markets and spoke to me almost entirely about fixed income and the way bonds move and the way that might impact porter markets.

And then another mentor was perhaps very good at bringing me back down to earth, so focusing me in on being humble, learning as much as I could, and helping perhaps to direct me where my strengths were, but also very clearly highlighting my weaknesses and things that I could work on. It wasn't really a typical conversation, but I think you find people who challenge you and are willing to really help promote and identify where you could work on.

MH:

So many workplaces promote the concepts of a mentor programme, but it sounds like you've gone out and found your own. Had they mentored other people in their careers or was it something that you sort of convinced them to do?

IP:

It was I think a mixture. Two of them always talked about mentors that they had in early career, and I think that gave them an imperative to give something back. I was very willing to listen and learn from them. I think that's something I found as my careers progressed, that you've got to be willing to mentor.

If people approach, often they won't ask out outright. It's a bit uncomfortable going to someone saying, "Hey, Isaac, will you be my mentor?" That isn't necessarily the way it goes, but identifying that people are reaching out for help, being prepared to go the extra mile, give that extra conversation is the way to do it.

I think that's an important part of what is ultimately a profession. We are a professional group of wealth management, and it's a financial profession. I think the more those mentoring relationships come through, the better the profession will be in the long run.

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MH:

One of the things I've found very valuable is having a network or mentors outside of the industry. Have you worked with only people within the industry or have you also found connections and networks in other parallels or similar industries?

IP:

Yeah, I've found most of my work related mentors have been inside the industry, but then I've been fortunate to have some executive coaching, for example, which is a bit of a more formal relationship, but it was not directed at being a great finance professional. It was directed at being a better manager, a better mentor of itself. I think those can be very important.

Outside of that, I think moving back to Burnie, living in Hong Kong, I've had mentors in sport and I've had mentors through life, and they've been an important part of making my life perhaps feel a bit more rounded.

MH:

Going back to your time in Hong Kong, we had Jonathan Christie on the show I think maybe four or five episodes ago. Hopefully those that have listened to a few episodes will be familiar with who they are in Australia. Who is Oreana in Hong Kong or who is Oreana in Hong Kong?

IP:

Yes, Oreana in Hong Kong has had a pretty long history there, at least several years. It's a private wealth firm that manages money for expats and locals across Hong Kong. It was historically National Australia Bank Private Wealth. And Oreana went in and bought that out in the mid 2000 and teens.

From there, it's grown very well and now is a very established and well known private wealth firm through the region. That's really where the Oreana Financial services started. And then in 2018 there was an opportunity to move into Australia, and John Christie was instrumental in helping to build that. And that side of the business has obviously gone just from strength to strength.

MH:

It's been some time since we were over in Hong Kong for our last study tour, probably five or six years ago. At the time, a very different industry, very sales led. The investment programmes were relatively simple, a lot of managed funds. What was it like when you left? And more importantly, how have you found adapting to the Australian market, and what are the key differences?

IP:

There's some pretty significant differences. I think your comments there about historically Hong Kong and Asia in general has been very sales led. I've not been in the Australian industry long enough to be able to compare that to a certain era, but I think a lot of people who are listening would be able to recognise that as a historical part of the industry that we've moved on from here in Australia.

In Hong Kong, there's still a very transactional relationship to some extent. People like to trade, they like to buy momentum, they like to get in and out of managed funds. They trade managed funds like equities effectively. That is a challenge for someone like myself who's effectively an asset allocator, a multi-asset manager, trying to build diversified portfolios that are going to work through various cycles.

You have attention, you have attention with the advisors and clients who want to be far more active than we're used to here in Australia. And of course, another major difference is there's no capital gains tax for residents in Hong Kong. So if they want to buy and sell, they can. They don't have to worry about CGT. It's not something that comes up.

There are some key differences. That said, there are similarities. People there are looking to grow the wealth. There's a lot of money coming through. It's not quite like superannuation here where there's a mandated amount of money coming through each month, but it's a growing middle class. People are looking to save for their retirement, and they are looking more and more so for qualified professionals who can help them and slowly moving away from that trading mentality.

MH:

Your role in Hong Kong was client facing or was it still managing the portfolios doing asset allocation? How does that differ to what you're doing now?

IP:

It was a mixture of both. As now, I go out and see clients, end clients, and I love that about the job. It's one of the big attractions about moving from the institutional space where the clients were sovereign wealth funds, big pension funds, the stakeholders where the government, the risk was ending up on the front page of the newspaper.

That's very different when you move into the wealth profession and you're helping individuals save for their retirement. I think there's a lot of pressure to do that right. In Hong Kong, I would work with high net worth individuals, family officers, professional investors to both help build portfolios. I'd speak to them, give them comfort, let them know what we're doing.

It's not too dissimilar here in Australia. In Australia as an asset consultant at Oreana, we do speak a lot to advisors. We do build the portfolios, we do communicate as much as we can. And we want to give them everything they can use to speak to that end client. But ultimately, I'm happy to have a chat. We are quite comfortable doing that.

I think it's part of the profession being able to take all the skills and knowledge and thoughts about financial markets and breaking it down as simple as you can so that the end client enjoys the benefit of that communication. Otherwise, what are we here for?

MH:

One of the areas that you and the team have been very focused on and successful in is managed accounts. Again, not a product that was necessarily prevalent over in Hong Kong. So I'd love to get your thoughts on where you see the benefits.

IP:

That's right. Managed accounts were not common in Hong Kong. Interestingly, most of the money that we managed for clients in Hong Kong was under a discretionary portfolio, which is a managed account in effect. Where I was very comfortable with them as a structure coming from Hong Kong into Australia, I think probably what was unusual for me moving to Australia was I was only used to dealing with these discretionary products or discretionary solutions.

So coming here in 2020, I feel like that was sort of the nascent stages of what has become a big move towards managed accounts. And of course, Netwealth would be seeing the growth in that everywhere. We certainly are seeing it. There's the benefits of efficiency and the ability to really implement very quickly so it benefits all of the clients in one go and it's really in the client's best interest.

Coming over here in Australia, I was maybe surprised that that pickup in the early stages post commission during early GFC was slow. It's snowballed now. I think there's a real big move towards it, and I think that's only going to continue.

MH:

One of the key benefits that we see within the managed account is just that ability to take firm's investment philosophy and automate it. Love to hear how you've built up your investment philosophy over time and what it is.

IP:

Great question. We have a real focus on governance, I guess. If I was to say what's one of our key competitive advantages, it's that we go in to speak to clients, to practises, and we talk about governance first and foremost. I think without a really clear governance framework, you simply cannot manage money in an effective way or an efficient way or an optimal way.

We will always lead with a clear governance framework, and it's a framework that you can think of as a philosophy, but it is a really clear investment governance framework that I've been working with for more than a decade now. It comes out of my background with Willis Tower Watson, where we just had to have a very clear setup to be able to repeatedly and credibly manage money for clients.

When we speak to our clients, we lead with governance, we try and establish their investment beliefs. And that's not always easy. It's not always clear for an advisory practise what their beliefs are. Often they're not written down, they're up in the heads of the practitioners and the professionals. That's fine, but if you are going to move to a managed account and you're implementing in real time and markets move around and it's challenging, you need a really clear set of beliefs and a really clear philosophy to be able to implement within the managed account structure.

That's been a real focus of us. Every client that we work with, we talk to them about their beliefs, we document it, we show them our framework, we work with them on that. And then finally, when that's all embedded, you can implement. And you take the investment expertise. We can bring their understanding of investments and you can implement. Until that governance framework is in place, you're just better off waiting.

MH:

Given your comments there that there are so many different investment philosophies and only time will tell which one was right and which one was wrong, if we think about the core components of your portfolio asset allocation, how do you manage that?

IP:

Yeah, I mean, asset allocation is something that once upon a time I probably would've said is purely a quantitative exercise. That was when I was young and had really firm beliefs coming out of a quantitative degree. But of course it's not. And that sort of belief has been kicked out of me after 15 or so years in the markets.

It's more than quantitative, but it has quantitative underpinnings. We're talking about a set of assets that you have to blend together to achieve some sort of risk target, some sort of return target over a specified time. That's a quantitative problem you can solve quantitatively.

We do solve it quantitatively, but SAAs have a qualitative overlay, and I think that comes with experience, it comes with speaking to clients' practises about the constraints they face, whether that's price or liquidity or timeframe. And it comes from understanding what the end clients can stomach as well.

It is a rigorous process quantitatively driven, but there is a lot of room for qualitative discussion and debate, and I think that's an important part of that collaborative process you might have with an investor.

 

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MH:

A lot of discussion in the press at the moment, particularly coming out of the industry fund, communications around liquid or alternative assets.

IP:

Yes, there is. These big illiquid alternative real assets have been bread and butter for the big institutional investors for years and years. I remember working at TCorp. There was a significant allocation to illiquid assets there. Working at Willis Towers Watson with some of the biggest sovereign wealth funds globally, the majority of their portfolio were private assets, real assets, very illiquid alternatives. That suited their risk profile, their timeframes, effectively infinite timeframes.

I think when you look at the superannuation funds, they have the benefit of being able to one, have constant liquidity coming in and two, fairly long timeframes because their investors as a rule are not approaching retirement yet. That's a benefit. It obviously has helped their volatility through the last few years. It's also helped bolster returns.

You can rail against it for those of us who are not managing these big assets, but ultimately, there's a role for them to play within portfolios. I suspect over time there will be changes to the way that these types of assets are made available to the general populace.

We're talking about democratisation of private markets or illiquid assets. That's coming. It's already started. And I think that may be a very big feature of our profession over the next decade or so. We're not ready to do that yet. Perhaps the technology's not there, the access isn't there, but it will be. And I think we all have a role to play in that.

MH:

Perhaps as an extension of that theme, and given your institutional background, are there other types of investments or instruments that are lacking from the portfolios that you can build today for your retail or high net worth clients?

IP:

There are. I guess I would say this is perhaps an anachronism of the Australian marketplace where liquidity is prized over all else. We know that in many managed account structures, it is very difficult to cope with illiquid or less liquid assets if you like. That presents a lot of challenges for clients who would like alternative betas or access to alternative investments.

It presents challenges for myself as an asset allocator. It presents challenges for the research community out there. And there's a lot of great researchers throughout Australia who have been facing into this for we're not talking years, we're talking decades. I think this is something that will change over time. We're just not there yet. There's not enough availability for the general retail clientele to be able to access these.

MH:

Changing tack, you're back in Bernie, and not only that, you've gone back to where you started at UTAS and doing some great work there. Do you want to tell us a little bit about that?

IP:

Yeah, I'd love to. UTAS, for those who don't know, the University of Tasmania, it's my alma mater. I studied there for several years. Just recently they approached me to take on a role as a senior industry fellow for the School of Business and Economics. And I was of course very happy to. That is the place that I did my degree many, many, many years ago. It was interesting and great to see many familiar faces. My lecturers that taught me were still there.

But the opportunity to join as a senior industry fellow specifically in financial planning. That was something that I was very honoured but also very keen to help out where I could because I think honoured, because I'm not a financial planner, I'm an asset allocator who works very, very closely with the financial planning profession.

But I do see a real opportunity for places like the University of Tasmania, other educational groups, to help cement the view of general Australia that we are a profession, not an industry. I think that's something that happens with education, qualifications, and time. The University of Tasmania is really working hard to help promote that.

MH:

One of the issues, again, that I've explored with the number of the guests is clearly we've got a supply issue. There's no problem with demand at the moment. Advisor numbers or AR numbers have dropped by around 10,000 and are expected to go to 13,000. What is UTAS or the University of Tasmania doing to try and really promote it to the next generation of financial planners? And what was really their driving philosophy behind getting behind the profession?

IP:

Yeah, I'll take that last part first I guess. I think you are absolutely right. There is an issue with supply. When you see thousands of advisors leaving each year and an unmet demand for advisors, any other time you'd say, this is market failure, plain and simple. There's something going wrong that is creating this mismatch of supply and demand, disequilibrium, whatever you'd like to call it.

If you look at classical economics, you'd say, well, the government can step in and fix this, but they can't. They haven't. I think they're a fair way away from being able to do that meaningfully. So places like the University of Tasmania have a really, really important role in helping to bridge that gap, to bring that supply and demand back into equilibrium and fix that market failure.

I think the faculty down there, Dan Daugaard and Roger Colbeck, are practitioners, they're academics, they live and breathe the profession. And they could see that there was an issue there so they moved to create this graduate diploma of financial planning. I think that is a really important course, degree if you like, that can be offered very broadly. We see it as a great way to train, retain, attract client support staff, provide them a future, a pathway towards becoming a planner.

It's really the ability of the University of Tasmania to harness all these resources and direct it towards the profession I think that is so important. It happens in a way that the government is not going to be able to mandate this or force it. UTAS is doing a great job of this. Other groups out there are obviously doing this. I think that education is going to be a critical part of resolving that supply problem.

MH:

A lot of training's obviously gone online over the last couple of years for all the reasons that we know. How does UTAS really approach it now? Is it online courses? Is it a hybrid model?

IP:

It's a hybrid model. I think the beauty of UTAS, and I'll sort just broadly give a sense for many people who may not know and are probably thinking why you're talking about Tasmania, you can only go there if you Tasmanian. That's not the case. We do have, or they do have campuses across Tasmania, but there is one in Sydney. This course can be delivered online.

It's flexible, it can be delivered hybrid, in-person. It is aimed at people who are in the profession, want to get into the profession, who are already working. It's been done that way for a reason because it's professionals and academics who are driving this. So you get this great flexibility that allows you to work around your career.

You get the ability to accelerate the course. It can be done in five weeks, in 12 weeks. You can do two, three or four courses over a semester. It attracts HELP fees or what I used to call HECS so you can defer some of the payments. But I think that's the beauty of a university like that, 130-year-old university with great resources, the ability to mobilise them and support the profession is a really, I think, important social service that they're offering.

Of course, at the end of it, you're going to get this great supply of financial planners coming back into the profession, whether they're based in Tasmania, based up here in Melbourne or Sydney. There's a really great opportunity there.

MH:

Isaac, given your involvement across many aspects of the value chain, if you like, and particularly no doubt, the conversation's happening around the table at the faculty, what does the industry look like in five years?

IP:

I hope that it will be widely recognised as a profession, to be honest. I mean, I'm not pulling you up on calling it an industry because I think that's just how it's been thought of. But if you go to the definition of a profession, it's something that has a clear training and educational period with a qualification and a group of people applying a body of knowledge towards a common purpose. For me, I think that's where we're moving.

From 2018 when I joined the wealth management profession to 2020, moving to Australia, I can see that accelerating. Partly it's because of mandated requirements and the like. I think there's a real recognition at the advisor level that they want to be a profession. This is a vocation where people are out there looking after household wealth, helping them to retire comfortably. This is what we're all aiming at. If that's not a vocation, if that's not my profession, I don't know what is.

I think over the next five years there'll be a real shift towards recognising that. I think UTAS, other universities, other educational groups, whether that's tertiary or post tertiary, are going to have a really important role in that. Of course, it's going to take the advisors themselves, the licensees, the platforms, everyone, all the stakeholders in this profession to move towards that in a very clear way. It's happening. I think it will.

What does that mean for advisors, for people and myself, allocators and for of course, most importantly the end clients? I think it means that you have perhaps a more clear cut way of delivering great advice to clients, and they are feeling far more comfortable that it's always in best interest. These big conversations that are happening now, they'll be resolved to some extent, and that will be a great shift.

MH:

Is there more that you think that the profession should be doing to really raise the profile within the community?

IP:

I think that it's happening. I mean, you are seeing great professional associations, industry bodies as well, if you like to call them that, that are running courses. Of course, there's media that's out there helping. The challenge is, we talk about the imbalance between supply and demand, we can say it's a profession we want to help and there's great ways we can help, but of course there's not enough advisors to go around at the moment.

That's a real challenge and perhaps something that stands in the way and part of the reason why I think that educational component is so important. The more professional young, middle-aged, older advisors that we get out there beating this card, the better it's going to be for Australia as a whole and for our profession as a whole.

MH:

Isaac, we're unfortunately getting close to the end of our time, but two questions before you go. At the start of the podcast, you mentioned that one of your keys to success was reading everything you could. So interested to know what you're reading at the moment.

IP:

I've just finished actually yesterday reading a book called The Madness of Crowds by Charles Mackay. It's an absolute classic. It's a couple of hundred years old about delusions, mania, bubbles effectively in asset classes. It's a book that I've read before, but I like to bring it out every now and then and read it alongside William Bernstein's The Delusion of Crowds. They're kind of complimentary books.

It's such a good way to remind ourselves that bubbles happen all the time, that when you're caught up in it, you don't always recognise it. Very smart people get caught up in this. It happens often. For me, I sort of started reading this, rereading it, following the big crypto crash that we had. Not to sort of tell myself, oh, that was a bubble, I'm glad I avoided it. More so just to remind myself that there are hallmarks there. We should consider these things. And it is a great book. I cannot recommend it enough.

MH:

This is definitely not my second question, but the obvious one, what is your view on crypto?

IP:

I think its use case needs to be proved up again. I'll put it that way. We don't see it as an asset class yet in a sense. It's not throwing off a stream of cash flows that I can discount back. I'm not sure that it's being used broadly as a currency yet.

I mean, I'll be absolutely frank that I don't know enough about its ability to be used as such to say to prove up that case. I think there's perhaps a onus on Crypto Bros and those who follow it very closely to prove that up and show that it has a role in society over the next 10, 20 years.

MH:

There's probably a whole podcast in that conversation alone. My final question is, we've covered a lot of ground over the last little while, for those that are interested in reading more about your views on life and markets, do you have a blog or is there somewhere they can go?

IP:

I don't have a blog as such. You can always jump onto our website, the Oreana website. We have a lot of the content that I put out into the market on there. You can see various interviews, various monthly commentaries. And of course, just get in touch. I'll send you whatever you'd like or I'll have a chat, always happy to.

MH:

Email, LinkedIn, what's the best way?

IP:

LinkedIn's a great way to go nowadays. It feels like that's the way that most people are getting in contact, even more so than email. So look me up and reach out.

MH:

Fantastic. Isaac, really enjoyed the chat. Thanks for coming in.

IP:

Matt, thank you so much.