Special Episode | GDG's Grant Hackett on Purpose, Pressure and Leadership

Thanks very much for having me, Steve. Much appreciated. What a kind introduction, too.

Yeah, it's a really interesting journey, Steve. And one like when we're all sort of setting out to achieve our goals and ambitions, it's not always the path that you expect to get to this point. I always wanted to go into business. I always wanted to go into finance, you know, since I was a very young kid. It's something I enjoy just as much as swimming, if not more, which I know surprises a lot of people. But I probably have a deeper passion for what I do now than even sport. And I really love the sport, but I really love the Olympics. That was the big thing that really drove me to push myself in swimming. I think for me, the transition and how that sort of all works, I put a lot of effort into kind of doing the work throughout my sporting career. I was studying commerce law. I've done my MBA. I met up with my now chairman five years out from retirement, and Tim Bishop, who is the two IC at Macquarie Bank at the time, and really asked what do I need to do now to put myself in a position to be able to transfer into finance and, you know, start to move forward relatively quick. And so I got a lot of good guidance, did the work, you know, started right at the very bottom like everybody else, you know, and which is a challenging thing for your ego at first. I think, you know, I soon realized I've gone from being the best in the world in something to not being the best at the table, and the sooner you sort of, you know, eat that humble pie and go, 'Okay, now I've got to work really hard, pay my dues here.' You know, within a few years post that, you're in a pretty good position. So, yeah, for me, I always had that ambition in terms of getting there and getting to this particular point in time. I mean, I always wanted to run a business. I did have that my own personal ambition when certainly in finance, but this particular business, always liked it. It was funny. I was working with Rob, my chairman, at Westpac, and we were talking about this business because we knew there'd be changes to superannuation. So yeah, it's been a really fun journey. Learned heaps along the way and yeah, certainly looking forward to seeing what the next decade for this business holds.

Oh, 100%. That is the most important thing, to be honest, and I realize I'm going, I'm more of an individual that will need purpose until the day I die. It's just the way I operate and I get more fulfillment out of my life and, you know, I feel better within myself. So it's just something that I don't know really drives me. I enjoy having some responsibility and something to be focused on. And you're right, I probably, you know, I did that a few years ago, the Howie Games podcast, but sometimes making too much money can be a bad thing. There can be such a thing because it can give you too much choice and sometimes the choice can be to do nothing because you're in such a privileged position and then you end up, you know, not feeling great about yourself, you're not improving yourself, you're not growing, you're not developing, and, you know, I see that in a lot of athletes because they've had so much financial success in their career and then all of a sudden they don't need to do anything. They don't need to go to a $80,000 or $90,000 paying, you know, first job because they're still making a lot of money probably out of sponsorships and speaking gigs, but, you know, they've lost that deep sense of purpose that they probably have with their sport. And, you know, to be in the checkout lounge for 50 years, you know, that's a very difficult position to be in. So, I'm pretty fortunate. I had really good parenting as well. My dad always said, you retire to something, not from something. So, for me, I always had that ambition beyond sport. But yeah, sometimes I think, you know, having too much of any one thing like money can, you know, not necessarily be a positive thing in your life.

And that's not a bad marathon time. You're in the top three or four percent of the population.

So it's a bell curve and you can be a 2:20 marathon runner and you're still not in the same stratosphere as this guy.

Firstly, you have to appreciate that not everyone thinks like you. Not everyone's trying to be the best in the world at what they do. They might have that level of ambition. Doesn't mean they're not talented people. Doesn't mean they're not capable people. Doesn't mean they're not, you know, contributing to what you're doing. So, I think that's the first thing, I just sort of part my own psychology with everybody else's because as you get older, you realize that everybody else doesn't necessarily think like you or have the same degree of focus. And then it gets to the next part. Well, what's the right style of leadership to help that bell curve shift to the right side and making sure that you lift the population to perform better and outperform other businesses. We're in a competitive environment and that's what we're all trying to achieve. So, you know, for me, I made a decision super early on in my corporate career, and this is going back about 17 years, and I remember I was a few days in at Westpac and, you know, all of a sudden it was like 5:00 or 5:30 and, you know, it was like the school bell went. You know, within a few minutes there was kind of two or three people out of a hundred odd people on that floor gone, and I thought to myself, geez, people are really here just to, you know, for a means to pay bills, to pay their mortgage, you know, send their kids to school, which are all admirable things, don't get me wrong, but they're not a deep driver to success and wanting to be here and spending so many hours on something that you're not really into or driving yourself around. And so I thought to myself, I can either sink down to that bell curve to being more mediocre in my approach or I can try and lift as many people as I can up. And I took the decision, I want to try and lift as many people up. And I got into a position of leadership pretty quickly there. And, you know, always trying to create clarity in a business, trying to set goals and, you know, building integrity around all of that I think is really important. If you say if you achieve X you get Y, you make sure you deliver Y, you make sure that that incentive is there. And so we try and create a high performance environment and we try and create an environment also of support too. That's really critical. You can't have super good performance without having support in there from your leaders. So for me, that's always refining all of that, trying to do it better, trying to get the right people on board, trying to lift the population, and that's a constant. And, you know, we've done it pretty well in our business, but it all starts with getting like-minded people in the first place. So if you can get as many like-minded people as possible, the better. But probably the number one thing that I really had to do was understand that my thinking is not everybody else's thinking and have some appreciation for that, which probably early on I didn't, to be totally frank.

Yeah, so that was the first business that we had. So when I joined the group back in 2017, and we had a product called an investment bond. So an investment bond is effectively just another legal structure to invest through, like when you think of your own name, a company, a trust, superannuation, it's just another legal structure. People think of the word bond, they think fixed interest product, but it's not that at all. You have selection of any asset class, multiple options within each. You've got diversified funds in there. We've got 77 options that sit on our investment platform. So an investment bond pays a maximum tax rate of 30%. But because we have, you know, sort of nuanced tax rules like any structure, and we work on revenue account, it means we can do things like offset capital losses against income. So therefore our effective tax rate sits generally between 10 to 15%. So it's a very tax effective product. Probably the other two reasons you would use that product is estate planning because it's an investment-linked life insurance contract. You get all the benefits of a life act. So you can have 100% binding nominations. So if you wanted to go to someone outside the family, not one of these have ever been overturned. So it's a great vehicle to be able to do that. And you can also determine how and when those funds are distributed. And it's also 100% tax-free upon death. So it doesn't matter who the beneficiary is either. So a lot of, a great, probably the, I personally think the best estate planning vehicle out there. And the last part is under the Bankruptcy Act it's actually creditor protected. So asset protection and other things. So, you know, tax arbitrage, estate planning, and creditor protection are sort of the core foundations of why you utilize an investment bond. We've been taking over 50% market share in that particular space and really growing the market there. It's high barriers to entry for a provider to do it because you need a life license to be able to distribute the product. So that's why you don't see it everywhere. You can't just open up a corner shop and distribute an investment bond.

So it's just been, I mean, it's been governed under the Life Act for probably four, five, maybe even longer, maybe even five or six decades. So, and it forms part of the Life Act and part of the Tax Act. And so therefore, the way it works, it's an investment-linked life insurance policy. So therefore, it's set up. You have the maximum tax rate. You can have binding nominations because of the Life Act. You've also got to make sure that you have a certain amount of capital as a business because under the Life Act you're governed by APRA. So as a life insurance business or a friendly society. So therefore, our standards in terms of the way we have to run our business, like IT security, operational risk, capital requirements. So it's probably a bit more reassuring for an investor to be able to invest with a business like ours because if something goes wrong with the business, there's nothing that's going to happen to your funds. Merely APRA just take over running that portfolio. So it really is good for so many different reasons. Bit more expensive for us as a business to run obviously when you've got to meet all those standards and requirements and have the technology to support and drive and deliver all of that. So yeah, it's been around for a long time. The other product given the life company is an investment-linked lifetime annuity. Now, lifetime annuities, they've been around for a long time but not investment-linked ones. So that's quite different. Challenger has been the preeminent business in that space. Their main products have been a fixed annuity or a traditional lifetime annuity where basically, you know, the investment return is guaranteed, the longevity is guaranteed. So it doesn't matter how long you live for. And so usually the return on that's going to be around a fixed interest return. So it's either flat or CPI-linked. For us, you can invest in our product. You get the same benefits of you're always going to be guaranteed income for the rest of your life. However, you get to choose your investment that that's linked to. So if you want to take on a bit more risk and be exposed to equity markets or, you know, have Aussie equities, global equities, fixed interest, a mixture of each, and you want to change at any point in time. So you've got the flexibility to be able to change asset classes, you can do that. And obviously if you're going to be retired for 20 or 30 years, you want to have some sort of link to investment markets because it's going to provide a lot more value in the product. You're going to get much higher return and you're not going to have to be solely dependent on your account-based pension. So we started distributing that product about three years ago and you can see there is a big push towards these types of products, you know, from the government in particular because people are living much longer. We've got a huge amount of the population, in fact about 2.5 million people over the next 10 years going to retirement, and over that same period we're going to see post-retirement assets grow by a trillion dollars. So that's the reason we've gone into that space. But again, it's got to comply with the innovative income streams legislation. And what that allows you to do as an individual taking out the product, depending on your financial circumstances, you get a discount on the assets and income test, which allows most Australians to access some or more of the age pension, which any Australian in retirement, they want more of the age pension, which I totally understand when they've been paying taxes for 40 years. And so they're the two core products that we have in the life company.

Yeah, the last year. I think it was the 3rd of June we actually announced that capital raising, 2024. So yeah, it was quite interesting. So we bought 37% of Lonsec, research and ratings business, back in, I think September we finalized that capital raise of 20.

Yeah, it's actually a really important part of the financial services landscape and really helps access to distribution for most fund managers and products that require any sort of research or rating. So basically what Lonsec does is, you know, when you think of a credit rating, you think of S&P or Moody's. When you think of a fund manager rating and their particular underlying products, think of Lonsec, think of Zenith, think of Morningstar. They're the type of brands that you would sort of probably come into contact with when you're looking at it. And what they do is they provide research, you know, to financial advisers to be able to, you know, discuss the investment strategy. They then rate that strategy. Usually the research rating holds a lot of power, holds a lot of gravity. So it'll determine if it gets on an approved product list for a particular dealer group or maybe a particular, you know, large financial advice practice, and therefore those advisers then for their clients can then utilize those products. When the research rating changes and it's downgraded and it gets to a point where, you know, it's redeem or, you know, those funds or someone stops getting their research rating for a year, a lot of the time a practice might be non-compliant with their PI, all of their insurances, because there's no research rating attached to that particular investment. And so Lonsec is a critical part of that sort of whole fabric of financial services to making sure that, you know, these products are sound, what's on the label is inside the tin of that particular investment product. So it's an ecosystem that's really, really important in financial services. And Lonsec doesn't just do it for, you know, product manufacturers or fund managers. We also do super ratings. So a lot of the time you'll see on TV, this is where probably the mass market comes into contact of Lonsec. They'll see, you know, one of the largest super funds got Super Ratings Fund of the Year. That's one of our brands that sits within the Lonsec group. The other part of that business is Lonsec Investment Solutions. So that's basically a managed account solution, so like an asset management business. It does that for financial advice practices. Does it for dealer groups. Does it for ready-made solutions that you can basically buy off one of the platforms as a single financial adviser, and also does a strategy around managed discretionary accounts, which is a high level of investment tailoring for an individual client that might be high net wealth or ultra-high net wealth. That business we've actually separated since we did another acquisition of another managed account business, Evidentia, and we've put those two together. So now Lonsec is a standalone business around the research and rating side, and we thought that's important because when you think about that business, it's obviously doing research on fund managers that it's putting inside as its managed account strategy as part of the asset allocation there. So to completely separate those businesses, you know, of course we had all the necessary walls in place to manage that conflict, but I think it's been a good strategic decision to separate those two brands.

Yeah, that's correct. So yeah, effectively it's like the old sort of, it's like an unbundled multi-manager in a way. So financial advice practices would spend a lot of time depending on the risk profile of the individual client. They would then sit there, put their various investment strategies together. A lot of time they'll use a diversified fund and have a, you know, sort of core satellite overlay, and then, you know, managed accounts came along as a new legal structure. And what this is allowed to do, just so people understand the benefits and why is the investment management of those financial advice firms shifting from a unitized structure over now to a managed account structure. Well, firstly, it allows you to have a lot more time back because there's a lot more operational efficiency in that. So, you know, the business has got so much additional administration and touch points around a unitized structure when they're putting that together for a client and also when they need to shift those investments too. You know, when you think back to situations like March 20 when COVID hit and markets were, you know, having really wide swings, you know, intraday trading was, you know, kind of going down, you know, six or 7% sometimes. I think we had what, seven out of the top 20 worst days in March 20. Now, if you need to update a statement of advice, get that out to all of your clients, you might have 140 clients in your portfolio as a financial adviser, and then you've got to get all those signatures back, and then you implement the investment strategy, which can take a little bit of time as well. That could be weeks. Now, markets change very quickly in a few hours or a few days. So, you know, to be able to do that with a lot more ease and create better client outcomes and less administration and operational inefficiency in business is great. And that's an average of about one day a week that an advice practice will get back. The other part too for the...

investor is they probably get cheaper fee load as well. There's more transparency of the fees because obviously we bring a lot of scale to those fund managers. So we often get more preferred pricing. And the other aspect to that too is you get your own cost base going in. And this is really important and not many people understand this. When you buy into a unitized structure, often there's an embedded tax liability sitting in there. And that's why at 30 June, you often get a distribution and you've got to pay tax on that. Even though your investment return might be great, that's the fund manager obviously, you know, removing some of the tax liability that's sitting in the particular bunch of assets that they've got there that have grown over X amount of time. You get your own cost base going in so that doesn't happen to you inside managed account. And I think that's a really important part because the after tax performance is so critical because that's what you actually get to keep as an investor.

So yeah, the Evidential acquisition was great because that's where we probably weren't as strong in our offering with LSE investment solutions. They had over 40 clients that were self-licensed financial advice practices adopting managed accounts and they were growing incredibly quick. This was a business that only came into market probably six, six and a half years ago and when we bought it they were close to $13 billion of assets under management there. So incredibly good team, different value proposition to what we had and really filled the gap in our business and it was a real opportunity to be able to put the number one and number two managed account players together and really have a more dominant market position there. So we're, you know, over $30 billion in total assets under management and the next biggest competitor is 7 billion. So we've got quite an advantage there that we want to make sure that we leverage as a business.

Yeah, correct. So often enough, you know, an advice practice that comes to us, they'll end up paying a lot less fees for their clients and then the way that we actually generate our revenue within that business is, you know, basis points in that. So depending on the size of the portfolio in there and depending on the product mix as well because there's three distinct offerings in our managed account business, it can be anywhere from 15, 16 basis points up as high as when it's a super high level of tailoring as high as 40 basis points. So that's the way that we drive our margin and revenue in that part of the business. It's been a pretty seismic change from where I sit over the past decade in that advice space from, you know, really being at a planner level to asset consultants and these model portfolios sitting above all of that.

There's definitely more we want to add just to answer the last question there. So, we've got a really clear three-year strategy of some of the things that we want to build out as part of that offering to, you know, obviously create a stronger value proposition for our clients and deliver better outcomes for our clients. That's what we're here to do at the end of the day. Look, it was a trend that we saw a few years ago back in 2018 when my chairman and I, Rob Kum, we were talking about, you know, some of the changes that we saw because we worked at Westpac BT together for a number of years and then kind of went off, did different things and then came back to run this business and, you know, he was going out seeing advice practices. I was and we're just hearing SMAs, SMAs and I'm like, this thing has got legs, like this is a big structural shift it actually feels like. And it was probably about circa 50 billion in terms of, you know, the sector size at that particular point in time. You fast forward to today, 2025, it's about 256 billion. So, you know, it's had over 20% CAGR growth for 7 years. It's set to double over the next, you know, four or five years. So there's a huge amount of structural shift and it's just making advisers' life a lot easier.

And it's interesting, a lot of the platforms they provide the insights around this but the inquiries from the advice sector in terms of, you know, should I be using managed accounts when markets are extremely volatile like Liberation Day that we had this year with Trump, a lot of advisers were, you know, there was big swings throughout the course of March again this year and they were thinking, geez, it would be great if I was operating in a more efficient structure that would allow me to operate my business with a lot more ease and deliver better outcomes for clients. So I think that shift is here to stay and it's got to grow, you know, a lot more than 500 bill over time. And the other aspect to this too, it's just, you know, there's the constant evolution of financial services, you know, when we see master trust wrap platforms now managed accounts and you really just need to look to the US. The US always seems like they're sort of five to seven years ahead of the Australian market and that's exactly what's happened over there. Their managed account sector would be close to 13 trillion now and I think they've had around 17% CAGR growth for about 12 or 13 years. So that trend is certainly happening here in Australia as well.