Steve Wilson’s light-bulb moment led way to Pinnacle

Pinnacle’s Steve Wilson recalls seeing a large US investment bank trading against positions held by its customers.

Steve Wilson. Picture: James Croucher

It was a trip to New York in the early 90s that prompted a “light-bulb moment” for funds management and stockbroking doyen Steve Wilson.

He had visited the trading floor of a large US investment bank and noticed that the bulk of markets trading was for the firm’s own account, and often occurred against positions held by customers. Well before so-called proprietary trading was banned, Mr Wilson — a fourth-generation stockbroker — saw a challenged model.

“I can’t believe this, they are trading against their clients,” he recalls saying after the visit.

“The old honour box system where you take your best ideas to an institution and they reward you … it was broken.”

That visit in many ways contributed to Mr Wilson’s decision to push Wilson & Co, started by his great grandfather, into funds management. Wilson the company started dipping into funds management in 1996 via a wholly owned manager called Hyperion. It was a four-year establishment phase and, after a few twists and turns and realising the funds management division was better operated at arm’s length, the division morphed into Pinnacle.

ASX-listed Pinnacle now has a market capitalisation just shy of $1 billion.

The company — which takes stakes in funds management firms and offers them administrative support and other services — has $47.2bn under management across 12 boutiques. The boutiques include Antipodes, Resolution Capital and Plato Investment Management.

“We realised that to a degree oil and water don’t mix and to a degree brokers and fund managers don’t mix,” Mr Wilson said of the decision to separate the businesses and for Hyperion staff to take majority ownership in the business.

Pinnacle the parent entity was formed in 2006 alongside an idea to push further into the incubator space to house a stable of minority stakes in boutiques.

Enter Ian Macoun, a co-founder of Perennial — which had also gone down the incubator path — and the Pinnacle building blocks were in place.

“We had one and wanted to do more and he (Mr Macoun) was a crusader in that field,” Mr Wilson said of hiring the founding Pinnacle managing director.

But the road ahead wasn’t without speed bumps.

Wilson listed on the ASX in 2007, just ahead of the onslaught of the global financial crisis, and the stockbroking and advisory arm navigated years of tough conditions.

The stock — when it was still Wilson — had slumped as low as 15c in 2012 and the following year saw the abrupt exit of chief Andrew Coppin.

In 2015, the stockbroking arm was spun off via a management-led buyout. It has since been rebranded as Wilsons.

Despite a few hurdles, Mr Wilson does not regret listing in 2007 or partnering with Deutsche Bank before that.

Pinnacle has gone from strength to strength after rerating as a funds manager.

Its shares are up 42.3 per cent this year and market cap stands at $954.6 million.

Mr Wilson is Pinnacle’s fourth-largest shareholder, according to Bloomberg, and stepped down as a non-executive director in October.

He still has a strong interest in funds management and stockbroking. Debate about broker pay has flared up again this year after Macquarie’s decision to move away from paying a share of revenue to advisers as a commission to a salary and bonus model.

“I don’t believe the evil is the commission, the evil is a reward system that is indifferent to client results,” Mr Wilson said, stressing the importance of measuring customer outcomes.

Mr Wilson spent the early part of his career in Sydney before moving to London to join London stockbroking firm Cazenove. He was head of Australian research and sales there before returning to Brisbane.

“I don’t believe the evil is the commission the evil is a reward system that is indifferent to client results,” Mr Wilson says, stressing the importance of measuring customer outcomes.

Mr Wilson spent the early part of his career in Sydney before moving to London to join London stockbroking firm Cazenove. He was head of Australian research and sales there before returning to Brisbane.