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Three years ago this week, Six Park launched with the aim of giving consumers a solution to major problems in the investment management industry: high fees, poor transparency for consumers, and conflicts of interest from providers.
I co-founded Six Park with Brian Watson AO, the former chairman of JP Morgan Australia and a founding member of the Future Fund’s Board of Guardians. We’d been working together for about 20 years, including at JP Morgan in New York, and had talked many times about the difficulty that most people had to access trustworthy professional investment management at a reasonable cost. I had many friends who were confused and frustrated by this problem in the market.
For me personally, when my father died in 1997, I took over the management of his investments to make sure my mom was okay financially. I learned very quickly about the importance of investment diversification, getting the risk/reward profile of the overall portfolio right for my mom, and how ETFs can be great investment vehicles in portfolio construction. “Robo-advice” didn’t exist at this point, and even though I was trained in the financial services industry, I learned that building and managing an investment portfolio can be stressful and time-consuming.
When I moved to Australia from the US in 2001, I recall headlines in the papers about high fees, conflicts of interest and poor performance within financial advice and investment industry. But there was not much real action being taken to benefit consumers. So, in 2014, Brian and I decided to build a service to address this problem.
I was fortunate to have a uniquely qualified co-founder who could assemble a world-class Investment Advisory Committee to help guide the investment philosophy we offer clients. Also, since the need and opportunity were clear, we were able to assemble an incredibly supportive group of shareholders (who would become our beta clients) and build a uniquely talented and passionate management team.
I’ve never been involved in a business endeavour that has resonated with people the way Six Park has – people just wanted to be involved. I think it’s because there’s an altruism to the business – we help people live better lives. There is a very purposeful directive to what we’re doing that can have an enormous impact on people’s quality of life. I’ve seen it play out with many clients.
I'm incredibly proud of the company we're building and our achievements so far. Our balanced and growth portfolios have delivered total returns between 26.7% and 35.7% over the three years to the end of April 2019, and we've also created new products such as Six Park Global and SMSF to address problems we know our clients experience.
We've brought online investment management into mainstream conversations about money, achieving coverage in an enormous number of publications including The Age, AFR, news.com.au, The Australian, Channel Nine and ABC Online just to name a few.
The future is bright for Six Park and, as we celebrate our third “birthday”, I wanted to share some key lessons learned as we've been laying the foundations for a sustainable and successful business.
Most start-ups fail, for a slew of reasons, but a great idea truly comes to life when all of those involved (including advisers, board members, staff and vendors) are uniquely talented and totally buy into the mission and vision of the task at hand.
My co-founder has assembled what I truly believe to be the most capable investment committee in Australia that helps advise our investment management strategy. This has helped Six Park produce strong risk-adjusted returns for our clients.
I’m also surrounded by a management team whose diverse skills are matched by their passion, intensity and commitment to delivering the best service possible for our clients. Do we make periodic mistakes? Of course, but the measure of success is how the entire team manages its way through occasional challenges, and we learn and grow in the process.
This also applies to our shareholders and directors. We’ve been fortunate to assemble a phenomenal group of backers, and we have been careful to make sure that they share our vision. We knew from our venture capital days that start-ups go through ups and downs, and being totally transparent with a strong group of supporters who have “mission buy-in” is essential to manage and grow the business.
This was the mantra of the late Paul Costello, who was a founding member of our IAC. Paul was one of the most talented, decent men I’ve ever had the good fortune to learn from. Paul knew that Six Park is in the “trust” business. Paul’s message aligned with what Brian taught me when we worked together at JP Morgan in New York in the 1990s: It’s a privilege for someone to hand you their money, no matter how much, to manage. Paul knew that our imperative was to delight customers and build trust, and to continuously earn and retain that trust, not to just talk a big game or put other priorities ahead of the clients who are the foundation of our business.
I recall our first client who invested more than $1 million with Six Park. She was feeling wary about how to invest her funds after a couple of expensive encounters with advisers who had failed to win her trust. She was attracted to our offering, but wanted to meet first. Inspired by Paul’s words, I was crystal clear about how and why our service might not be right for her depending on what she wanted. Perhaps ironically, it was this honesty and transparency that won her trust. Online investment management may not be right for every individual, but Six Park has solutions that are right for most investors and we will always do the right thing for our clients.
Our online service is predicated on NOT needing to sit face to face with each and every client (which can be daunting for people who are more accustomed to face-to-face advice). While we meet as many clients as we can, we also put an enormous amount of energy into using a variety of ways to educate and engage with prospective and existing clients.It is the personal connection that is created in doing so that builds the trust noted above, and also informs how we continue to develop the service and invest time and money into future enhancements based on what people want (not what we THINK people want), which leads to…
I had heard of “product fit” from IT and sales professionals, but I didn't really appreciate the importance of what they meant. Simply put, product fit means developing a product that addresses a specific need. It requires a deep understanding of the problem you want to solve, confirming demand and then creating the right solution, targeting the right audience, selling effectively and being able to measure success (and then tweaking where needed).
We know that self-managed super fund (SMSF) trustees tend to be poorly diversified and pay high fees, so we targeted that market through a partnership with industry-leading administration service Heffron. We learned that many investors want improved diversification while holding onto their Australian shares, so we created our “Global” offering (currently for wholesale investors) that excludes Australian shares from the portfolio construction. We learned that a lot of clients wanted to invest for their kids’ future, so we are giving them a helping hand.
And we know that the accounting and financial advice industries are undergoing profound changes, and the availability of a service like ours for their clients would benefit their competitive position in the market, so we have developed a service for accountants and (soon) for financial advisers.
We also listen to our clients, so we will develop an ethical/ESG option, simpler pension drawdown features and more in the coming months.
We have aggressive ambitions – there’s no point swinging the bat half-heartedly. We’ve missed some targets at times but exceeded others with great effort and joy. Given the work and sacrifices involved, it’s essential to pause and celebrate the wins to remind ourselves why such effort is being expended.
Some readers might be familiar with Theodore Roosevelt’s speech “The Man in the Arena” from 1910. There’s a reason Nelson Mandela gave a copy to the captain of the South African rugby team before they beat the All Blacks in the 1995 World Cup.
In a start-up, adversity and testing times are inevitable. This is when individual and team strength is critical, and from my lens, we are succeeding in part because our whole team works as if they are “in the arena”. From Roosevelt’s speech:
It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming.
Importantly, wins are not just “sales”. For example, a recent problem with a vendor connection was picked up by our operations team (on a Sunday), conveyed to our IT team for an immediate fix, discussed with our head of communication in case it became a material issue (it didn’t) and was quickly addressed. This is as important a win as any for a business like ours. There were high fives on Monday to celebrate how well everyone responded.
A great business concept before its time will struggle (think Netscape or Pets.com).Timing is one of the most important variables in a start-up’s success.When we launched Six Park, the fintech industry was in its infancy, ETFs were just taking off, and consumers in Australia were certainly not aware of robo-advice.
So, we’ve balanced an ambitious push into the market with careful spending of our shareholders’ money as the market matures and awareness of the benefits of robo-advice grows.
It’s a tad ironic that we have “timed the market” in this way (not really part of our investment philosophy), but over the past six months, we’ve seen a dramatic increase in the awareness of robo-advice, and consumers’ willingness to seek alternatives to the “traditional” way of investment management (the Banking Royal Commission was helpful in this regard, for all the wrong reasons).
We have a lot of hard work ahead, but it’s a very exciting time for Six Park. Client funds under management grew 40% overall in the first four months of 2019 against the prior 31 months since launch – an amazing trajectory for our company, and a validation of the vision we saw in 2014. We’ve developed a compelling, scalable service with an amazing team, and substantial opportunities ahead of us as we are now working with accountants and financial advisors to help broaden the reach of the service we provide.
Thanks for being part of our journey – and thanks for letting us be a part of yours.
The commentary in this article is general advice only. It has been prepared without considering your objectives, financial situation or needs. It is no substitute for financial advice. Where quoted, past performance is not indicative of future performance and may not be repeated.
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