#340 Charlie Viola – Transcript

Ben Nash
Hey guys, Ben Nash from the XY advisor team. And today I’m pumped to be here with Charlie Viola, Charlie’s partner and managing director at pitcher partners where he’s been since 2003. It became a partner there in 2005. And he’s just given me the bit of the download that he joined that business to start the wealth management arm. And it’s probably a pretty fair comment to say it’s grown pretty steadily since then, doing a bit of stalking in prep for this, I see that it’s grown from their assets under management from $50 million in 2001, to $3 billion in 2022. So a staggering amount of growth. And Charlie personally, looks after a bit over $2 billion in assets under management, Charlie, well, I didn’t have a it’s only a 30 minute podcast, I can’t list all of the accolades, but he’s been recognized in the Barron’s top 100 list for the last four years running one of the 50 most influential advisors in Australia for the last four years investment advisory, IFA awards, Partner of the Year, a whole bunch of other stuff. Charlie, thanks for joining us.

Charlie Viola
Thanks for having me, Ben. Much appreciated me. I’ve been watching on this xy advisor stuff that you guys are doing. And it’s always been great work. Very interesting. So yeah, delighted to be here.

Ben Nash
Well, hearing that I’m surprised he said yes. To talk to me if you’d probably be seeking my voice by fashion. But is it true? A little birdie told me that? Because I think if you look at that growth, 50 million to $3 billion, obviously staggering, but is it true that it all started from the phonebook?

Charlie Viola
Yeah, it’s exactly true. So whenever I tell this story, I was I actually did a presentation once for industry, and literally, the the name of the presentation was from a, from a desk and a phone book to this. So yeah, when I when I got here, you know, there was already there was already, you know, sort of a, like a burgeoning business, one advisor who was kind of doing everything, but really no infrastructure, no systems, no structure. But more importantly, there were no clients. So after sort of crying myself to sleep every night for the first couple of months, and you know, having no income and no clients, I thought, well, either I’m, I’m no good at this. And I’ll go back to the bank where I was, or I’ll give it a crack. And I remember sort of, I talked to my dad at the time, and he said, Oh, and my dad was a, you know, Orchard farmer, so orange and lemons. And he said to me, Well, you can you can come and pick oranges if you like. And I said, Well, I’m not gonna do that. I decided I decided I’d give it a crack. So I realized that I needed to find centers of influence, like I needed to find people who could actually send me work. So I literally sat down one day, open the Yellow Pages, and it was online, but you know, open the Yellow Pages online, and try to work out you know, who was who was it that would that would send me work. So I started ringing some accounting firms. And then I rang this guy from an outplacement agency. So and what he did for a living was when executives were made redundant, he would bring them in, talk them through why they were leaving their existing job, what sort of job they wanted, in the future, help them put together a kind of career plan going forward, you know, help them work out if they’re gonna go do any D roles. But he wasn’t getting any investment advice or any kind of financial advice. And I sort of jumped on it and said, well, mate, any of these guys who kind of need advice around what to do with the redundancy payment or the super and I don’t know, we built rapport straightaway, I think I was I was 22 or 23 years of age. He was this really kind of flamboyant guy who you come from Melbourne, and we were meeting in Sydney. And this meant nothing to me being from Sydney. But he said to me, I really like you, Charlie, because you’ve got you’ve got more front than Maya, which means nothing to somebody from Sydney, but you know, you go to Melbourne, Bourke Street Mall, which is this is grepping banner that’s buyer Meyer across. So we got on really well. He literally sent me one executive from one company, who I met went through a process that guy got a new job as part of his new job. A reasonable part of his remuneration was share base rim, I explained how the share base rim worked and then I have very few skills in life, but very few but making complex things seem simple is maybe one of them, which is probably an okay skill to have in in our world. So he, he said to me, Well, that was really simple. Why don’t you come along and explain it to the the whole of the executive team, which I did a triangle off and provided a whole bunch of Macquarie Bank is an explanation as to how their share base rep scheme worked. resonated with a few of them. A number of them then came and saw me as individuals, a couple of those guys then went off to other organizations where they got me involved, and then the HR manager from from one of those organizations went to another one. And after sort of about 18 months or two years, it happened pretty quickly, I had four or five listed companies where I was getting paid a consulting fee to come in and explain how the share base ran work. So you know, when they when they get stuck, when they’re allowed to sell it, what the minimum holding requirements are, how the taxing works, how to fit it into your broader portfolio. So it’s basically getting paid to virtually market to these executives. And, you know, just ended up building this kind of really good cohort of kind of C suite, kind of mid 40s, to early 50s, kind of clients with, with a great capacity to, to earn money and kind of fast forward. Those clients, which have still got now a much wealthier, you know, the guy that had two millions now got 15, or 20 kind of thing. And, you know, it allowed us to kind of transform the business from being very much a kind of financial planning or advisory business into an investment business, because that’s what’s important to those people now.

Ben Nash
Yeah, and talk to me a little bit more about that, because you did mention more, more chatting, just before we fired up the recording. But how did that come to pass? And then what did it actually look like practically inside your business?

Charlie Viola
So when I started the business, or when the business started, we were very much a retail financial planning business, you know, and we were doing all the things that you know, kind of retail financial planners, do, you go through a process of getting a fat fine and do the SOA and you’d kind of try and marry the client before you even met them. Where you, you know, you got every bit of detail, and then you tried to kind of model things out over a really long period of time. And that was always sort of fine in terms of onboarding, onboarding the clients. And it was a really important part of, you know, building rapport and getting to know the clients and onboarding them. But what we worked out over time, is that as the business grew, and as your relationship with the client grew over time, because you’re already done, the process of getting all the right money into all the right buckets, it very much became that the enduring value add, and the thing that they were most interested in, was actually producing good investment returns. So we started to spend more and more time just talking about the investment piece about asset allocation, about diversity, about different types of investments and generating your return in different ways. As the average client went from, you know, sort of one or two mil of investable monies to kind of 10, or 15, or 20 mil of investable monies. You know, there wasn’t there’s not like tax systems in Australia were really very simple. There’s only 444 tax buckets that you can kind of put money in, you know, personal company, trust or super. So the planning piece in reality is really simple, especially for high net worth people, the higher net worth somebody is, the easier the planning is, you know, just make sure you fill up a super bucket. And then really, you’ve only got the three other buckets that you that you use, it’s reasonably simple. So really, the enduring value add over time was making sure that the underlying assets were generating a good return and generating a return that that that we would be able to produce a better return that they can do themselves, and giving them access to product and an opportunities and deal flow that they otherwise couldn’t see. So just over time, as the clients got bigger, we realized that these clients will be stickier, and they will love us more. If we work really hard on making sure that we’re protecting their capital with generating revenue for them. We’re controlling the impairment risk within the within the portfolio, and we’re producing good outsized investment outcomes over a really long period of time. If all of your and you know, then, then just we sort of sprinkle that with the life advice as time goes on. And, you know, kids getting married, wanting to lend money to kids and protect it, you know, divorces, new cars, you know, whatever. But the overriding an engineering service was making sure the monies were well invested. So we just ended up spending more and more time worrying about how you know, how we access investments, how we deal with it, you know, how we put portfolios together, how we manage risk. So it sort of kind of needed the business to get to, like almost a critical mass point for that to occur. Because, you know, if all you’re doing is running around trying to find new clients every day, then you’re doing lots of the upfront planning, but as the business got bigger, it became much more about the clients we have and the investments we can hold, if that makes sense.

Ben Nash
Yes, and how did you build that that skill from coming in? Obviously, you know, as a planner, you’ve got the strategy piece, as you say, and then fast forward to today where you are, you know, man hedging seems like significantly more money, much bigger clients. How do you How did you and you, you guys, as a business go about building out that offering in that muscle over time? Or and particularly in the early days?

Charlie Viola
Yeah. So I think firstly, I’m really fortunate that my business partner here, the guy that I kind of started the business with Martin. He’s our CIO. So he’s excellent from an investment perspective. You know, he’s quietly spoken, he doesn’t sort of sing and dance very much, but his ability to kind of, you know, do the screens do the qual and quant and do the review of the assets has always been a really strong point, that’s been a really strong point of our business over time. In lots of ways, though, you learn on these you learn in the University of life, like you learn by osmosis. So one of the things that I’ve always done and I still do today, you can imagine embedded in the the number of fund managers and guys running their own money and you know, private capital guys who want to come and talk to you, because they see you as part of their distribution network. I kind of almost never say no to those things. Because I find myself, I find an ability to learn things from those people, by then they need to then apply that to the client situation, or the underlying portfolios that I have. But But I would say that I just love having the conversation. You know, I’m an investment guy at heart, I guess. And I’ve just learned over time by osmosis, you know, understanding how how risk assets work, you know, what, what drives them, you know, what the liquidity risk is, what the line of sight to money coming back is. So, it is something that, I think, kind of developed over time, you know, I would have said, back in 2003, when I started looking through the phone book that I’m a strategy guy. Now, today on absolutely an investment guy, because, because the strategy stuff is actually really simple. So, and the investment stuff is where we can genuinely add value to clients.

Ben Nash
Yeah, it’s interesting I, in my business have sought to do it. Well, we started a while ago, but dealing with clients that have got more and more money. And as you say that the strategic piece is complex. And certainly in the in the early stages in getting it all structured, that there is a lot that goes into that. But once you do get things up and running, that there is a level of simplicity that’s there around that. So does make a lot of sense. Charlie, what would you say what have been the the what’s been the biggest challenge or the biggest challenges on on your journey and pitch up?

Charlie Viola
The biggest challenges or I would say, we’re probably systems to be honest, I think we grew quicker than our systems. So back in back in 2003, when I got here, you know, we kind of had visie plan, we then turned vz, plan into x plan, you know, and so we, you know, we were cutting edge for about five minutes, the we are, we’re a completely bespoke business, which means that we’re off platform, in the main, so of our sort of 3.2 or 3.3 bill of capital that we have here, we’ve probably only got four or $500 million on on platform, the rest of it we hold directly. So, you know, come 2011 When we had this 2005 Cutting Edge business, we really started to struggle in terms of how we would report how we produce tax reporting to clients, the and then you know, and while we continue to kind of create greater efficiencies, and it was really us just kind of, you know, kind of sowing a spreadsheet to x plan and the next plan to another system, and then another spreadsheet to another spreadsheet, and the client outcomes were all about the investment outcomes, the clients didn’t care, but we just didn’t have the same functionality as other groups had. And we just didn’t have the same systems. In about 2017, we made, you know, a decision to go out and get, you know, a GM and a head of ops, and we just, you know, we spent a bucketload of money trying to drag the business into kind of the 21st century. You know, I’m pleased to say now that, you know, we’ve got absolute kind of leading systems, we’ve got great client portals, we’ve got great tax systems for clients to be able to pull their their stuff out. But there was a there was a real period in the middle there, where, you know, we had, I think we had at one stage like 11 people doing nothing but ticking and flicking x plan. And when I say ticking and flicking, you know, you’d have the clients bank statement, you’d have all the dividends statements, you’d had their, you know, holding statements for whatever unit trusts or private investments, and then making sure it kind of married to what was our next plan which the clients could see and would would drive our investment reporting. So we had this raft of people doing kind of manual data entry, and it was always is a real pain point in the business that you know that we just weren’t efficient. We’ve now got we’ve literally now got two people and the business is kind of twice the size So, the system stuff was a real challenge. The I think the other the other challenge, in fairness, from a business perspective is Martin and I started here, you know, Martin in sort of 2002 mean 2003. So there were two of us, even still, today, there are only four of us finding really good advisors that are, you know, have the investment capability have got the kind kind of client service ethic that we want. And, you know, I have a bit of a saying in here, and it’s kind of up on the walls do the right thing by the client, the rest will follow. We’ve probably had a little bit of an industry where some people in our industry are a bit kind of overpaid, and under smart. The so, you know, we’ve probably struggled to sort of grow beyond the sort of four main advisors that we have here. And, you know, we actively look and but it’s, it’s difficult in our world, you know, the, the bigger players, Kota, Crestone iscala, you know, Credit Suisse, you know, that they, they, you know, they pay more than what, then what we do. And, you know, we found that we found that growth trajectory, sort of difficult over a period of time. But, you know, it does sort of mean, though, that we can continue to provide these really kind of bespoke high value services and not commoditize it too much. So, it’s kind of wins and losses, and all that sort of stuff.

Ben Nash
Yeah, it’s an interesting one, we, I’m happy to report for anyone that’s been following along. For the last little while that we’ve been hiring for advisors for the last year, basically. And in that time, we brought on two new advisors into the business. And it’s been so frustrating. And on sort of you think about it, and particularly like in the in the early parts of that year, and I’m sort of thinking like, it can’t be that hard, because there’s 15,000 advisors out there, like, we’re in good business, it’s a good opportunity. But when you start going, well, you need someone that’s the right culture fit for the business, the right experience, set the right work ethic, the someone that wants to grow, or like in our case, grow, or in some cases not grow, like, you just start narrowing down. And the more I thought about it, I realized that actually, like you, and your business is very different to ours, like the advisors that will be suitable for us wouldn’t be suited for you, the advisors that will be suited for you probably wouldn’t be suitable for us, and vice versa, as well. So then, on top of that,

Charlie Viola
yeah, good advisors have already got good jobs. And that’s part that’s partly the problem. And the advisors, maybe you don’t want, you don’t have jobs, you don’t want sort of things. So the like, we hold the client piece really close to our heart, he, you know, you the reality is, is that, you know, we’re fee for service business, the client doesn’t pay, they pay their invoice. We don’t eat kind of thing. So, you know, protecting both the culture of the business, which, you know, we’ve spent a lot of time trying to build up. And you know, we’ve got really long tenure in our business, you know, we’ve got people who have been here with us for 15 and 16 years, and I think our average tenure here is about 10, or 11 years or something. So it’s quite long. So we probably feel like a nice place to work. We hold that close to our heart. But the client centric piece, you know, it’s really important that you find people who absolutely had the best interests of their clients at heart, and a willing to kind of build over a period of time because we are fee for service, we don’t charge for the initial proposal, we don’t charge for the original advice piece. We take that as acquisition cost, because we’re trying to build long term. We’re trying to build long term enduring relationships with clients, because even from a enterprise value point of view of our business, the more recurring revenue we have, the more valuable this business will be. And these are great businesses to run, right? Because you’ve got this scenario where you’ve got less people doing it, you’ve got people getting, you’ve got people getting richer and richer all the time, which means you kind of had this kind of asymmetric piece where as a result, there’s more there’s more wealthy people for less of us who are doing a good job sort of thing.

Ben Nash
Yeah, it’s it’s exciting. And I think it’s that’s playing across a lot of markets in financial advice that less less advisors, advice, advice, consumers more in basically every market segment, and then everyone sort of getting richer. So in my view, I think the next little while it’s a great time to to be in advice.

Charlie Viola
And there was a heap of there was like this massive kerfuffle, you know, post Royal Commission about, you know, education standards and having to do the phasor exam and all of those sorts of things, which like I really get, if you’re 55, and really experienced and good to your clients that you kind of don’t want to have to go through those things. But what we’ve seen as a result of those of those things, is the people now coming to the industry, a much better, a much better educated they see it As a professional service, they don’t see it as a sales process. So while that process that we went through with, you know, failure and code of conduct, and, you know, the Royal Commission on whatever was challenging and difficult, and there was a heap of upheaval and stuff about it, the reality is the outcome of it. And the consequence of it has actually meant that you’ve actually got better people who want to be part of the industry, they see it as a professional service, they see it as a long term career, they see it, as you know, something that they can kind of do over a really long period of time. So, you know, I think in some ways, and whether they expected this to occur, while it’s a bit like turning the big tanker around, it takes a while to turn around, you can actually see the value of it now turning around, because people are coming in having done stuff at university, they coming in, and they’re happy to be patient to learn about, you know, how to deal with clients are not wanting to come in and click the ticket immediately. So, you know, again, those things is a sort of 43 year old, some of those things were even challenging for me, I sort of wanted to tell people to bugger off when they said I had to go back and do other education, I’ve been doing this for 24 years. Now really see the value in that the young people that are coming through the industry are just better than what they ever were.

Ben Nash
Totally, yeah, I think that there’s definitely people negatively impacted that probably shouldn’t have been. And overall not perfect, but like you say that, that now new advisors that you have to be, you have to be pretty committed to become a financial advisor, because it’s you need the qualifications, you need to do the py, you need to do all of those things. And I think that’s got to be good for advice. It’s hard to imagine how could not be and then I think at the same time, and again, the legislation not perfect, but some of those changes, and the the emphasis on, you know, best interest duty breach reporting, like all of these things, it’s really putting a magnet, magnifying glass on advice, and it has uplifted the the quality, the clarity, the transparency, again, still not perfect, but I think all of those things are combined to consumers start getting better advice, outcomes, and they start telling their mates more, and then more people start getting advice, and it just keeps feeding the cycle. So they’re definitely the right direction.

Charlie Viola
And you know, we talk about this all the time, even you know, we’re talking about rent structures and stuff in here at the moment for advisors, like anything that creates the right behaviors is the right answer. So all that stuff around, you know, the regulatory, some of it is some of it is maybe a little bit painful, but it’s all about creating the right behaviors. And the better that you make those behaviors and the more innate you make those behaviors over time, the better it is fit for all of us, Jeremy?

Ben Nash
Absolutely. Charlie, what would you say? What’s been the most difficult skill that you’d have to master to that you’ve had to master to be the advisor you are today?

Charlie Viola
I don’t know. What’s the most difficult skill? I actually don’t know the answer to that. But I don’t think love I think I’m

Ben Nash
meeting minutes, is it fair to say meeting minutes?

Charlie Viola
I mean, you know, the admin is painful for everybody. But I actually get therapy out of doing the admin because it reminds me what conversations I’ve had, and all of those sorts of things, like nobody wants to do it. I think that I think that, to be honest, I think the most difficult thing, over time has been the delegation piece, and telling and telling clients that they’re not right for you. You’ve only got so many hours in the day. And you know, I wear two hats in this business, um, it’s on the MD as well as obviously, you know, probably its key advisor, I think the biggest difficulty has been telling clients who, you know, you have a conversation with you, they automatically, you know, you both automatically kind of fall in love. And then you realize, realize, from a commercial perspective, that that client maybe isn’t right for you or your business or, you know, and so I think that to me, is that that, for me, is still super challenging. You know, I’ve got a reasonable number of clients that I that I look after telling clients that they need to see somebody else and even existing clients when I’m sort of pushing it down to a couple of the associates and stuff. But I find the kind of breaking up stuff really, really hard to be honest. Because you have real relationships with these people, you know, you know, you know, you know their kids names, you know, their dog’s names, they tell you when the dogs died, like you have real relationships with these people. So I find that piece really challenging and something that I’m not actually very good at, to be honest. And even, you know, our stakeholders and our shareholders are always saying to me, you know, the key person risk in this business is unacceptable, because of the level of you know, the fact that run it the level of farm that I carry the amount of fees that I do, and they say you know, we want you to give 40 of your clients to the to young associates Is that you’ve been through, you know, sort of grooming and bringing through. But that’s really hard to do like that’s genuinely difficult to do.

Ben Nash
Yeah, it’s not I don’t think that transition is easy. No matter what your business is, and I think you build relationships, you build trust, you build comfort, people understand that. And as much as what we do is, you know, it’s numerical, and it’s objective, and it’s the there is that, but it’s some people get used to that comfort. And I think a big part of people getting great results from their money is taking action, to having confidence to do that, though, is a barrier. And I think that that relationship helps to build the confidence even though the advice might be the same no matter who’s saying it.

Charlie Viola
Yeah, trust is real, like trust that trust is a real emotion. And it’s a real, you know, trust is a is a big determinant in decision making. So love, could you can you can pass on the client, you can you know, that they can serve the client exactly the way that you do. But you can’t pass that trust on to me. So, I found that I found that challenging. You know, and like I say, the other piece that’s been challenging recently, is finding good advisors in the market come honest.

Ben Nash
Yeah. No doubt, we’ll look, when you crack the code on that first one, just if you could let me know that would be appreciated. Charlie, what, what are you guys focused on now? What’s coming up for you.

Charlie Viola
So we’d probably be believe we’d built you know, we’ve got a really good business. Now, we’ve got great resources in terms of, you know, our efficiency and the manner in which we kind of produce documents and produce outcomes for clients. You know, we’re one way same way, we’ve got great online portals for clients to to utilize that live data all of the time, you know, our ability to kind of produce our sort of wholesale proposal documents in our review documents, or what have you, we think is absolute market leading, we’ve got great access to product, you know, we’re really big in the private asset space, you know, we get great access to, to really good, interesting things that’s kind of fit in client portfolios. So we believe that you know, and we build sort of a good brand around that sort of stuff. So we believe that we’re a great business, what’s next for us really is, is to continue to grow, you know, if you look at the real, you know, the, if you look at the kind of relative success of, you know, business like coda, complete standing start sort of three or four years ago, to 10 mil of assets under advice and 30 advisors in three years, you know, their, their ability to scale quickly, was sort of phenomenal. And while they, you know, while I’m sure that of the 28 advisors, they’ve had 15, that have left, and we never wanted to make a mistake, right? You know, for us, now, it’s about trying to work out how we actually get to that scale, it’s about how we use the systems, the process, the brand, the opportunity, from an investment perspective that we’ve got for clients, and really start to scale that and start to grow that. And, you know, again, we really want to take that growth mindset from because we believe that we can add value, and we sort of believe, you know, sort of passionate believer of private wealth, I believe that we add value over time, I believe, we can kind of generate really good client outcomes. We just want kind of people to come in and come on the journey with us kind of thing. Because, like, it’s fun, like, you get the Hebron election to stimuli about talking to wealthy clients about their money. It’s the fun things to do. And, you know, most of us in this world kind of well paid to do it. So, like, kind of who wouldn’t want to work in these kind of these businesses in this industry?

Ben Nash
Yeah, totally. It’s interesting clients, they’re doing interesting things. And then when you look at the strategies and what you choose to do, then that’s all pretty interesting, as well. So I certainly see the appeal. Charlie, my last question for you is that if you could go back and do one thing differently, what would it be?

Charlie Viola
Oh, we would have, we would have fixed systems earlier. So I think we lost three or four years of, of, you know, growth, by, you know, having to reconcile things on spreadsheets, and tick and flick things and, you know, systems systems are really important. And really help from an efficiency point of view, and add to your service offering fairly significantly, and give you time back in the day. So when we had our, you know, 2005, cutting edge business in 2012, I wish we hadn’t waited until kind of 2015 to kind of, you know, start the process of kind of fixing those things with an assumption of kind of, she’ll be right. So, you know, we would have made sure that the underlying infrastructure and all those things were better, Alex, we still produce good outcomes. And at the end of the day, it was about investment outcomes. But it was hard work for a really long period of time. So but outside of that, you know, I’m, I’m really pleased with the journey that we’ve been on You know, we’ve been really fortunate with the client sort of cohort that we’ve been able to attract to our business. You know, I’m, we’ve worked really hard to be in the market looking for really good investment opportunities for clients. And we think we add value around, we add real value around all of that stuff. So. So yeah, there’s not heaps that we would that I would change. But yeah, having some better systems, I think is certainly one.

Ben Nash
I think the best time to fix your systems as always, five years ago, but I think it’s the biggest frustration for a lot of advisors, there’s so many moving parts, that it still blows my mind that there isn’t a system that could work. But I suppose that like, could work across all businesses that integrates the different things that you need. But, you know, here, here we are,

Charlie Viola
change is hard to look like if you continue to do something the same way for a long period of time. And it notionally works because clients don’t leave and you’re you’re getting on more clients. Change is hard. It’s that old, that old sort of saying, where I’m happy to change as long as it doesn’t affect me. We do that. We did that for a really long period of time. Like, where we went, Yeah, I’m happy to change but I don’t want to change what I do everyday kind of thing. Like yeah, and then it just got to the point where Oh, shit, you really have to change now. Or, you know, we’re just going to, we’re just going to stop adding value to clients, because we’re going to spend way too much time doing all these other rubbish.

Ben Nash
Yeah, it definitely helps. But it’s an investment to get there for sure. But Charlie, thank you so much. Really appreciate you sharing your story. Great to see you keeping those goals mates. I look forward to the next one.

Charlie Viola
Thank you very much. Appreciate it, mate. Yeah. Delighted to have been on.