How Netwealth’s Heine family intend to get succession right

Michael Heine is about to step away from a management role. He would have sold out years ago if his son Matt hadn’t shown he was up to running the show.

Matt Heine, left, will take sole control of Netwealth when his father Michael steps down as joint managing director on Friday. Picture: Stuart McEvoy

Matt Heine’s friends have been joking that he is a “$300m man” as that is how much Netwealth’s market capitalisation rose when his billionaire father Michael announced he was stepping down as joint managing director.

That transition will happen on Friday, when Michael Heine, 73, becomes an executive director of the $3bn wealth management firm he started in 1999 – 43-year-old Matt became the fifth employee soon after.

But the elder Heine admits he might have sold the business years ago, or sold off his stake more recently, had son Matt not shown he had the acumen to take over.

“Look, Matt got the job for one reason: because he’s bloody good at it. Jobs for the boys, or for the kids, is a lousy idea if you want to hold a business together,” he says.

“If Matt hadn’t been capable and passionate about it, I may well have sold. It is not a part-time job. It is a complex business, and we’re managing a lot of other people’s money.”

Father and son together have built up a business that had about $17.4bn funds under management and advice when it floated on the ASX in late 2017 into one that has a $73.4bn FUMA today.

Netwealth now has market capitalisation of about $3bn, and while its share price is down about 30 per cent this year, Matt Heine notes with a laugh that the market pushed it up almost 10 per cent on the day in late August when Netwealth released its annual results and announced his father would step back from his day-to-day role.

Michael Heine says it’s time for Matt to take a full-time responsibility, though he is staying on the board, helping where he thinks he can still add value and trying to stay out of his son’s way.

All while not becoming chairman, as many long-serving CEOs or founders seem to do.

This may not be the easiest move to make; looking through the ranks of The List – Australia’s Richest 250 reveals that many patriarchs are still firmly in charge in their 70s and 80s with no firm succession plans in place.

“Egos are probably one of the most dangerous things that can kill a business. And I think that’s the problem with many family businesses,” Michael Heine tells The Australian. “The letting go is not easy. But for the sake of the business, for the sake of everybody, it’s really important to do that.”

Says Michael Heine, right, of his son Matt: ‘If Matt hadn’t been capable and passionate about it, I may well have sold. It is not a part-time job.’ Picture: Stuart McEvoy

Netwealth has been one of the better ASX floats in recent years, having risen almost 130 per cent since its late 2017 listing. The Heine family own more than 50 per cent of the shares, so Michael Heine says it is natural that he would stay on the board to at least keep on eye on his investment.

But he is adamant he does not want to be Netwealth chairman, believing it to be unhealthy from both corporate governance and family points of view.

“I don’t think it’s good for a major shareholder to be chairman, and I don’t think it’s good for a CEO to go from that role to chairman. We have a very capable, competent chairman (Tim Antonie) who does the job very well.

“But it’s not just about corporate governance. I know there’s plenty that don’t agree with it. But also when a CEO has moved to chairman it is hard for the (new) CEO.”

The elder Heine intends to be less conspicuous around Netwealth’s Melbourne headquarters and wants to give his son room to grow into the job by himself, though both are trying to set an example by attending the office in person, more than working from home.

“That is the sort of culture we have. Whereas Matt has got carriage of everything that a managing director has and should have, I will only poke my nose into places that I might be able to help with – as long as I don’t get in his way too often.”

Matt Heine says the pair have already been working alongside each other for a good 20 years and have “organically ended up with different responsibilities” over the time.

“I’m probably a big picture thinker, very focused on technology and product. They’re absolutely my passions. While I can get into the detail when I need to get into the detail, it’s not always my natural go-to.

“So it’s very important that we have a road map and strategy, and to make sure that the board and executive have realised where my blind spots are and have good people there to support me.”

The younger Heine says in reality his father has been a mentor and someone to learn from for 22 years – “though we often say for 43 years, because it has been from day one” – and the lessons he has absorbed are how to deal with people and treat people, be it in board meetings, dealings with executives or client meetings.

‘It is how you deliver messages, how you take a team along for the journey. There’s a lot of lessons, but the way I do business is a reflection of how Dad has shown me to do business.”

Those lessons will be needed as Netwealth tries to balance the need and opportunity for growth with having enough people to capitalise on favourable market conditions.

Netwealth has about 5.8 per cent of the funds under management in the Australian market among wealth management platforms, but is getting more net fund inflows than its rivals.

Matt Heine wants to keep that growth up, though like just about any other industry, Netwealth is grappling with the vexed issue of not only attracting new staff to facilitate growth but also retaining the employees it already has.

“People are definitely the major focus for us, making sure we retain talent, can recruit and find talent.

“I think unfortunately for the first time in my career we’re seeing a huge spike in mental health issues as a result of the last couple of years of isolation too.

“There’s always regulatory change too, but that could create opportunities for us as well.”

Otherwise, Matt Heine says he is still young – he jokes he has a young family to support – and intends to be in the job for a long time yet.

His father will watch on ­intently.

“It’s been a dream run. We’ve been a great partnership and Matt will keep carrying that on.”