It's hard to shake up a successful business model at any point - but perhaps even harder when said business has been operating for 130 years.
Perpetual Private's general manager private clients, Andrew Baker, said at an adviser roadshow that most people don't know his business is actually the oldest part of Perpetual, having been established by a committee including John Fairfax and first Australian Prime Minister Edmund Barton.
“They needed trustees to act on behalf of their assets while they travelled back to England,” he explained, “which wasn't as short a journey as it is now.” He added that in a remarkable early display of non-partisanship, the chair of the company was elected based on which of the directors weighed the most.
Given the incredible history behind the company, you might be surprised to learn Baker doesn't believe it underwent a significant transformation until around 2011. This was when Perpetual Private “decommissioned” its internal platform, moved to Macquarie and implemented an MDA structure.
“Moving to an MDA was critical,” he said, “because we realised there was an average leakage of 1% between the time our portfolio managers made a decision and implementation.” It was a “historical” problem the company didn't need to deal with anymore.
Even more dramatic, though, was the realisation that if administration and stock selection was the sole justification for the costs charged to clients, the business wouldn't work going forward. To that end, Baker said advisers needed to be thoroughly retrained.
“The adviser team was comfortable talking stocks,” he said, “and that wasn't their fault - that's just how it had worked up until that point.”
From now on, Baker explained, clients’ emotional states and belief systems, wills and families would also be discussed and regularly reviewed. It's created a far more holistic service where the adviser is a key contact for a client's entire financial circumstances.
“I'm not going to say it wasn't painful,” he joked, “but it's so much better on the other side.”
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“I think running a successful business with over 400 happy clients shows we know what we are doing.”