Platform performs through the crisis

Michael Heine thought he had seen it all — until he saw first-hand the ramifications of the market plunge in the third week of March.

Michael Heine, right, with his son Matt. Picture: Stuart McEvoy.

Michael Heine thought he had seen it all in one of the most diverse careers in corporate Australia, until he saw first-hand the ramifications of the market plunge in the third week of March.

On March 19, in the middle of stocks falling around the world as the COVID-19 lockdown started taking effect everywhere, his superannuation and wealth management platform Netwealth was also quickly trying to transition its entire workforce to working from home.

Heine says Netwealth, which has almost $30bn in funds under advice, experienced 20 times the usual volume of managers making changes to their client’s portfolios — the majority of which were sales of stocks that were quickly plunging.

“There were 42,000 trades that one day and that is a huge number,” Heine tells The Australian.

“Normally that would be hard. Client accounts had to be updated and people worked until they had finished, well beyond midnight.

“That was remarkable. Had they been in the office that would have been different.”

Heine has Netwealth well positioned to trade through and then hopefully emerge from the coronavirus pandemic.

Netwealth’s funds under administration have continued growing, with a big lift in money flowing its way from rich clients and financial advisers leaving the big four banks in the wake of the banking royal commission and other institutions exiting the wealth management industry.

So confident is Heine and his son and co-managing director Matt in their company’s future at the moment that they are hiring more staff.

“One of the first things we said was no one was going to lose their job as a result of COVID-19. That created a very positive atmosphere. So not only are we not reducing, we are probably putting on as many or even more people in the future as we planned.

“We are making sure we are taking this opportunity to invest heavily.

“Others are pulling out and so we want to make sure we are strong for the next five years, the next 10 years and so on.”

Netwealth earns fees from the users of its platform, which Heine says has held up well because the increase in transactions helped offset lower funds-under-administration income.

That recurring revenue is one of many strategies contained in the Heine family’s “Lessons from History” — a document passed down between generations that records the lessons learnt during the highs and lows of business, through credit crunches and high interest rate eras, recessions and downturns.

Netwealth was established in 1999, but even by then Heine had worked around the world, including bartering commodities behind the Iron Curtain, for his late father Walter’s trading business, before making and losing fortunes buying and selling radio stations and commercial property.

He says this downturn will have its differences to the past, but also believes the market was about to fall anyway given its long bull run of recent years.

“I have been through a few recessions — the older you get the more you’ve seen apparently — but this one has been different because it wasn’t directly driven by economic circumstances.

“Though I do believe the market was due a correction and chose the virus to bring that about. I’m not sure the stockmarket should be where it is; perhaps it is too high. The economy is not as good as the market has been suggesting.

“There has been the printing of money, which has kept asset prices inflated. And I don’t think that solves anything”

Some of Heine’s other lessons from the past include being careful about debt — neither Netwealth or he personally has debt, something that caught him out in the early 1990s — and also trying to predict what is coming in the future.

Heine has mostly worked from his holiday home on the Mornington Peninsula outside of Melbourne since March, and predicts workforces won’t quickly return to offices.

Netwealth itself has put a stop for now at least to shifting to bigger premises in Melbourne and Heine predicts the office will be a “collaborative space far more than a workspace where you go in and sit at your desk all day.”

He now holds most meetings via Microsoft Teams and predicts business travel will not return to previous levels for some time.

“You’d at a drop of a pin go to Sydney, Perth or wherever. We would be thinking about that a lot more and all those more efficient ways to be working.”