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

High Performance In and Out of the Pool

From Olympic gold to the ASX 200, Generation Development CEO Grant Hackett joins Steve Johnson for a special episode of Stocks Neat.

They discuss Grant’s journey from elite sport to business leadership, the importance of purpose beyond success, and how lessons from swimming translate into building a $3 billion company.

As Grant shares: “You’re retired to something, not from something.”

The conversation also dives into Generation Development’s core businesses, from investment bonds and annuities to Lonsec and the rise of managed accounts, and how the company is navigating growth, regulation, and leadership under pressure.

Make sure to stick around to the end of the podcast, for a candid talk between Steve and Grant.

Transcript

EPISODE 39

[INTRODUCTION]

[0:00:02]ANNOUNCER: Just a quick reminder, this podcast may contain general advice, but it doesn't take into account your personal circumstances, needs or objectives. The scenarios and stocks mentioned in this podcast are for illustrative purposes only and do not constitute a recommendation to buy, hold, or sell any financial products. Read the relevant PDFs, assess whether that information is appropriate for you, and consider speaking to a financial advisor before making investment decisions. Past performance is no indicator of future performance.

[INTERVIEW]

[0:00:39]SJ: Hi, everyone, and welcome to a special episode of Stocks Neat. I'm Steve Johnson, Chief Investment Officer here at Forager Funds. I've got a very special guest today. I'm going to go out on a limb and say, he is Australia's best-known CEO of Australia's least-known ASX 200 company. Welcome, Grant Hackett, former Olympian and now CEO of Generation Development.

[0:01:03]GH: Thanks very much for having me, Steve. Much appreciated. What a kind introduction, too.

[0:01:07]SJ: I know. I didn't know whether you'd take offense to the listed company, but it's really been an amazing story. I was just saying before we started recording this, that we've been in and around this stock and looking at it since the share price was $0.70 or so, five years ago. Last night, it ended up being 80 million dollars’ worth of shares, traded at north of $7 a share. The line clean really quickly. We get brokers from email saying, there's a big line of stock out there. It got upsized. There's a huge amount of demand for the stock. It's in the ASX 200 today. Been a great success story. We're going to talk about that today and get our heads around the business.

I don't want to spend too much time talking about swimming. You've done a great podcast on the Howie Games, if people want to learn about all of your experiences, I'd recommend going and listening to that. Maybe for people that are unfamiliar, though, can you just paint us a quick picture of from the pool to the CEO of a 3-billion-dollar ASX-listed company?

[0:02:02]GH: Yeah, it's a really interesting journey, Steve. One, when we're all 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 since I was a very young kid. It's something I enjoyed 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. 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 all works, I've put a lot of effort into 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 I see 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 start to move forward relatively quick? I got a lot of good guidance, did the work. Started right at the very bottom, like everybody else, and which is a challenging thing for your ego at first, I think.

I soon realized I've gone from being the best of the world in something to not being the best at the table. The sooner you eat that humble pie and go, “Okay, now I've got to work really hard, pay my dues here,” within a few years post that, you're in a pretty good position. Yeah, for me, I always have 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, and certainly in finance. 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. It's been a really fun journey. Learned heaps along the way. Yeah, certainly looking forward to seeing what the next decade for this business holds.

[0:03:46]SJ: You made some really interesting comments on that Howie Games podcast about purpose. I think it's true of elite sportspeople these days that make a lot of money out of their sport. I think interestingly, there's a lot of the population in Australia that's going through a similar transition as they hit retirement. Some people even way earlier than retirement, where they've got enough money that they don't need to work anymore. I thought some of those comments around the importance of purpose in life were really, really interesting. It's not just for elite sportspeople. I think there's a lot of people go through that transition from a career and from a necessity in a lot of ways, into having choice. But that purpose that you've been able to recreate in your life sounds like it's been really important.

[0:04:27]GH: Oh, 100%. That is the most important thing, to be honest. 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. I feel better within myself. It's just something that, I don't know, it really drives me. I enjoy having some responsibility and something to be focused on. You're right. I did that a few years ago, the Howie Games Podcast. But sometimes making too much money can be a bad thing. It can be such a thing, because it can give you too much choice. Sometimes the choice can be to do nothing, because you're in such a privileged position. Then you end up not feeling great about yourself. You're not improving yourself. You're not growing. You're not developing.

I see that in a lot of athletes, because they've had so much financial success in their career. 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 first job, because they're still making a lot of money, probably at the sponsorships and speaking gigs. But they've lost that deep sense of purpose that they probably have with their sport. To be in the checkout lounge for 50 years, that's a very difficult position to be in. I'm pretty fortunate. I had really good parenting as well. My dad always said, “You're retired to something, not from something.” For me, I always had that ambition beyond sport. Yeah, sometimes I think having too much of any one thing, like money can not necessarily be a positive thing in your life.

[0:05:50]SJ: You also talk about Eliud Kipchoge, the marathon runner, breaking two hours, and most people are not realizing how otherworldly that is. I like running marathons, I actually realized. It's one of the few sports where you can go out and actually compete against the best in the world. I ran, I think it was 256 for the Sydney marathon a few weeks back now. That's not a bad marathon time. You're in the top 3% or 4% of the population. I worked out. I am the same distance from Eliud Kipchoge as I am from the middle of the pack. It's a bell curve, and you can be a 220-marathon runner and you're still not on the same, in the same stratosphere as this guy.

I'm really interested in, I guess, what's worked for you from the world of elite sport, but also, what you've had to change when you're trying to motivate the rest of the bell curve, really. Because when you run a business, it's not all about the best in the world. There's a lot of people that have families and kids and other things they want to do with their life. I was interested, now you've been running this business for quite some time. Leadership's clearly very, very important to you. What's been useful for you and what have you had to let go?

[0:06:53]GH: 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 contributing to what you're doing. I think that's the first thing. I just 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.

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. For me, I made a decision super early on in my corporate career. This is going back about 17 years. I remember, I was a few days in a Westpac and all of a sudden, it was 5 or 5.30. It was like the school bell went. Within a few minutes, there was two or three people out of a hundred of people on that floor gone.

Thought to myself, geez, people are really here just for a means to pay bills, to their mortgage, 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 in something that you're not really into, or driving yourself around. 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. I took the decision, I want to try and lift as many people up. I got into a position of leadership pretty quickly there.

Always trying to create clarity in a business, trying to set goals, and 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. We try and create a high-performance environment. 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. 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. That's a constant.

We've done it pretty well in our business, but it all starts with getting like-minded people in the first place. If you can get as many like-minded people as possible, the better. 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.

[0:09:21]SJ: All right. Let's jump into the business. You've got three, I guess, divisions, or businesses at the moment. Maybe we'll kick off here. We've got the investment bonds business. We've got Lonsec, and then we've got the more recently purchased Evidentia. Let's start with our investment bonds business. That's where you cut your teeth. Can you kick off by explaining exactly what the products are there and how they work?

[0:09:44]GH: Yeah. That was the first business that we had. When I joined the group back in 2017, and we had a product called an investment bond. An investment bond is effectively just another legal structure to invest through. 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 products, but it's not that at all. You have a 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.

An investment bond pays a maximum tax rate of 30%. But because we have nuanced tax rules like any structure, and we work on revenue account, means we can do things like offset capital losses against income. Therefore, our effective tax rate sits generally between 10% to 15%. It's a very tax-effective product. Probably, the other two reasons you would use our product is estate planning, because it's an investment-linked life insurance contract. You get all the benefits of a life act. You can have 100% binding nominations. If you wanted to go to someone outside the family, not one of these have ever been overturned. It's a great vehicle to be able to do that. You can also determine how and when those funds are distributed. It's also 100% tax-free upon death. It doesn't matter who the beneficiary is, either. A lot of a great, probably that I personally think the best estate planning vehicle out there.

Then, the last part is under the bankruptcy act, it's actually credited protected. Asset protections and other things. Tax arbitrage, estate planning, and credit protection is the core foundations of why you utilize an investment bond. We've been taking over 50% market share in that particular space and really grow on 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. That's why you don't see it everywhere. You can't just open up a corner shop and distribute an investment bond.

[0:11:31]SJ: Why do the regulators, what is the connection here to a life-type product? If you're going and investing in equities funds, or fixed interest funds underneath this, and the returns of the underlying assets are the same. What's the connection here to an annuity style or lifestyle product?

[0:11:46]GH: It's just been, I mean, it's been governed under the life act for probably four or five, maybe even longer, maybe even five or six decades. It forms part of the Life Act and part of the Tax Act. Therefore, the way it works it's an investment-linked life insurance policy. 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. As a life insurance business, or a friendly society.

Therefore, our standards in terms of the way we have to run our business, like IT security, operational risk, capital requirements. 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 will make another life company, actually just take over running that portfolio. It really is good for so many different reasons. A 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. 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. 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, the investment return is guaranteed. The longevity is guaranteed, so it doesn't matter how long you live for. Usually, the return on that's going to be around a fixed interest return. 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.

If you want to take on a bit more risk and be exposed to equity markets, or have a lot of equities, global equities, fixed interests, a mixture of each, 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. Obviously, if you've got to be retired for 20 or 30 years, you wanted to have some link to investment markets, because it's going to provide a lot more value in the product. You're going to get a much higher return, and you're not going to have to be solely dependent on your account-based pension.

We started distributing that product to about three years ago. You can see, there is a big push towards these types of products, 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 is going into retirement. Over that same period, we've got to see post-retirement assets grow by a trillion dollars. That's the reason we've gone into that space.

Again, it's got to comply with the innovative income streams legislation. 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. They're the two core products that we have in the life company.

[0:14:59]SJ: Tax and pension. People seem to be willing to forego more than they benefit from, just to access it. I think it's a really interesting space. I see in my own business that the Australian culture is equities, housing, and cash. Often, there's too much of all three of those things. I want to look at other places around the world. There's lots of in-between type investment products. That longevity that you touched on is a really big one. For people in this country, we've got a defined contribution super scheme. A lot of people are getting 300, 400 grand at retirement age, which, if you're going to live for 10 years, you can live an okay life. If you're going to live for 40, you've got problems. I think that fixing that longevity issue is a really big opportunity for someone. They get to write in that part of your business is growing very rapidly. We might move on to Lonsec. I think you bought a stake in that business back in 2020.

[0:15:48]GH: Yup. That's right.

[0:15:49]SJ: Was that last year?

[0:15:51]GH: Yeah, last year. I think it was the 3rd of June, we actually announced that capital raising 2024. Yeah, it was quite interesting. We bought 37% of Lonsec Research and Ratings business back in, I think, September, we finalized that capital raise of 20.

[0:16:08]SJ: Every advisor listening will know what that business is, but maybe for a lot of our clients, are just direct and don't go through advisors, and they might not know the brand as well.

[0:16:17]GH: 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 research, or rating. Basically, what Lonsec does is it – when you think of a credit rating, you think of S&P or Moody's. When you think of a fund manager rating, or in their particular underlying products, think of Lonsec, think of Zenith, think of Morningstar, they're the type of brands that you would probably come into contact with when you're looking at it.

What they do is they provide research to financial advisors to be able to discuss the investment strategy. They then rate that strategy. Usually, the research rating holds a lot of power, holds a lot of gravity. It'll determine if it gets on an approved product list for a particular dealer group or maybe a particular large financial advice practice. Therefore, those advisors 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 it's redeemed, or those funds or someone stops getting their research rating for a year, a lot of the time, a practice might be compliant with their PI, or of their insurances, because there's no research rating attached to that particular investment.

Lonsec is a critical part of that whole fabric of financial services to making sure that these products are sound. What's on the label is inside the tin of that particular investment product. It's an ecosystem that's really, really important in financial services. Lonsec doesn't just do it for product manufacturers or fund managers. We also do super ratings. 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 one of the largest super funds got super ratings fund of the year. That's one of our brands that sits in the Lonsec group.

The other part of that business is Lonsec Investment Solutions. That's basically a managed account solution. 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 from one of the platforms. There's a single financial advisor 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-worth, or ultra-high-net-worth. That business, we've actually separated since we did another acquisition of another managed account business, Evidentia, and we've put those two together.

Now, Lonsec is a standalone business around the research and rating side. 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. To completely separate those businesses, of course, we had all the necessary walls in place to manage that conflict, but it's, I think it's been a good strategic decision to separate those two brands.

[BREAK]

[0:19:01]ANNOUNCER: Stay tuned. We'll be back in just a sec.

Are you a long-term investor with a passion for unloved bargains? So are we. Forager Funds is a contemporary value fund manager with a proven track record for finding opportunities in unlikely places. Through our Australian and international shares funds, investors have access to small and mid-sized investments not accessible to many fund managers, in businesses that many investors likely haven't heard of. We have serious skin in the game, too. Meaning, we invest right alongside our investors. For more information about our investments, visit foragerfunds.com. If you like what you're hearing and what we're drinking, please like, subscribe, and pass it on. Thanks for tuning in. Now back to the chat.

[INTERVIEW CONTINUED]

[0:19:45]SJ: Evidentia’s business, this is the most recent acquisition that you've done. It was a fairly significant one. It is basically all that part of Lonsec that you were talking about. That's where you've put the two together. I'll maybe just describe it really quickly, but this managed accounts concept. I think if you went back 20 years, most financial advisors were putting together their own portfolios of investments for their clients for a bunch of reasons that we can come to, mostly around risk for them on their business, and expertise. They are outsourcing that actual portfolio management decision. They are choosing to invest in a portfolio that has been constructed by a firm. Lonsec used to do part of that, but that is Evidentia’s main business, as I understand it. Is that right?

[0:20:26]GH: Yeah, that's correct. Yeah. Effectively, it's like an unbundled multi-manager in a way. Financial advice practices would spend a lot of time depending on the risk profile of the individual client. They would then sit there, put the various investment strategies together. A lot of time, they'll use a diversified fund and have a course satellite overlay. Then, managed accounts came along as a new legal structure. What this has 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. The business has got so much additional administration and touch points around a unitized structure when they're putting that together for a client. Also, when they need to shift those investments, too. When you think back to situations like March 20, when COVID hit, and markets were having really wide swings. Intra-day trading was going down 6% or 7% sometimes. I think we have about 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 advisor. Then you've got to get all those signatures back. 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. 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. 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 as more transparency of the fees, because obviously, we bring a lot of scale to those fund managers, so we often get more preferred pricing. The other aspect to that, too, is you get your own cost base going in. 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. That's why at 30th 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 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. That doesn't happen to you inside managed account. 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. Yeah, the evidentiary acquisition was great, because that's where we probably weren't as strong in our offering with Lonsec 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. When we bought it, they were close to 13 billion dollars of assets under management there. Incredibly good team, different value proposition to what we had, and really filled a gap in our business. 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. We're over 30 billion in total assets under management. The next biggest competitor is 7 billion. We've got quite an advantage there that we want to make sure that we leverage as a business.

[0:23:45]SJ: How does the business model work in that part of it? Is that a percentage of assets under management in those managed accounts?

[0:23:52]GH: Yeah, correct. Often enough, an advice practice that comes to us, they'll end up paying a lot less fees for their clients. Then, the way that we actually generate our revenue within that business is basis points in that. 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. That's the way that we drive our margin and revenue in that part of the business.

[0:24:25]GH: It's been a pretty seismic change from where I sit over the past decade in that advice space from really being at a plan, a level to asset consultants and these model portfolios sitting above all of that. Where do you see those trends going from here? I guess, do you have all the things that you need to take advantage of that? Or are there more facets of the business that you'd like to add over time?

[0:24:48]GH: There’s definitely more we want to add, just to answer the last question there. 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 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 Coombe, we were talking about some of the changes that we saw, because we worked at Westpac BT together for a number of years and then went off, did different things, and then came back to run this business.

He was going out seeing advice practices. I was. We're just hearing SMAs, SMAs. I'm like, this thing has got leaks. This is a big structural shift, it actually feels like. It was probably about circa 50 billion in terms of the sector size at that particular point in time. You're fast forward to today, 2025, it's about 256 billion. It's had over 20% CGR growth for seven years. It's set to double over the next four or five years. There's a huge amount of structural shift, and it's just making advisors' lives a lot easier.

It's interesting, a lot of the platforms they provide the insights around this, but the inquiries from the advice sector in terms of, should I be using managed accounts when markets are extremely volatile? Like Liberation Day that we had this year with Trump, a lot of advisors were those big swings throughout the course of March again this year. Now, thinking, geez, it'd be great if I was operating in a more efficient structure that will allow me to operate my business with a lot more ease and deliver better outcomes for clients. I think that shift is here to stay and it's going to grow a lot more than 500 bill over time.

The other aspect to this, too, it's just there's the constant evolution of financial services when we see master trust, rat platforms, now managed accounts, and you really just need to look to the US. The US always seems like they're five to seven years ahead of the Australian market. That's exactly what's happened over there. Their managed account sector would be close to 13 trillion now. I think they've had around 17% CGR growth for about 12 or 13 years. That trend is certainly happening here in Australia as well.

[0:27:01]SJ: The regulatory backdrop to all of this, we've seen some high-profile disasters in the advice space over the past couple of months, front pages of newspapers, and some of this ecosystem caught up in that in terms of research ratings and platforms. How do you see all of that playing into, I guess, some tailwinds and maybe some risks for your business as well?

[0:27:22]GH: We're quite fortunate. Firstly, we weren't caught up in any of that as a business. It's because we invest a lot back into our business, whether it's our governance process, whether it's our technology stack, whether it's our cybersecurity. We're pretty fortunate that we've got a P&L to be able to support, I guess, the risk side of the business to the extent that we need to. Look, a lot of those funds that you're alluding to around your first guardians, your shields of the world, come to us. They don't make it through the first conversation, just because they don't have the right governance in place and risk management in place, independent ICs, etc., related party issues, all that stuff that we go through as part of the research rating process. If they don't have that, they get struck out.

An example I use around that, when we developed our lifetime annuity, we actually owned 49% of Lonsec at the time. We were very well-known business, have billions of funds under management, very much trusted by the financial advice space. We went to them in our life company for a research rating on our lifetime annuity called life income. They said, “No. You don't have a track record, hasn’t been going for three years. You can come back and speak to us in three years.”

It was quite remarkable that we own half of it. Yet, they still really hold firm around that position, which I really, really like. Clearly, we don't influence anything around that. We want to make sure that we're doing the right things. When you see situations that we've seen recently with some researchers' platforms, and obviously, it's horrible, some clients and their life savings to get mixed up in this stuff. You've got to make sure that your governance, your integrity of your business, always comes first before making revenue and generating profitability. Often enough, that works hand in glove anyway. If you do the right things and you don't take any shortcuts, over time, you deliver much better outcomes for the business and its shareholders.

Look, there are emerging risks, the regulator clearly given the situation is looking at every single business. We are no different. We feel we're in a good position to be able to manage that. Look, if there are some changes, and we obviously encourage regulatory change to deliver better outcomes for investors. At the same time, you don't want to make sure that you don't create so much red tape and bureaucracy where you don't innovate as well, because that can lead to negative outcomes for clients.

We've seen that a bit, too. I think, post the Royal Commission, that the pendulum always seems to swing too far. Seeing advisor numbers go from 29,000 down to under 16,000 that we see it today, that's not a good outcome for the average Australian. We're a very wealthy country. We've got a lot of people going to retirement. We're a very complex system amongst tax around any government entitlements, around estate planning, around leaving a legacy for kids. There's so many different factors, and so many different permutations and structures that you can use that financial advice is critical to deliver the best outcome, so people don't fall into some pitfall when they go through these different shifts in lives, or moments of truth and transitioning into phases, like retirement.

I think it's really important that the regulator is very, very considered on all this stuff and make sure that they deliver the right outcome and really think through the unintended consequences that can happen. We've seen financial fraud go up. We see people jumping online to look at investment advice and then go invest in things, but not really understand the risk around that. Yeah, hopefully. the regulator does make some decisions, but their decisions pro-advice, pro-supporting the industry, and allow the end investor, the end Aussies who's utilizing businesses like ours, or others in financial services, to get a much stronger outcome.

[0:30:58]SJ: Yeah, I think the trend, certainly from our perspective anyway, has been more and more regulation over time, and it hasn't stopped this thing happening. Generally, the people that were already doing the right thing take the new regulation the most seriously and put the most everything to complying with it, and the people that, yeah, want to get away would feel they get away.

[0:31:15]GH: You want to be ahead of the curve on this stuff, too. We're always anticipating some of these changes. We make sure we're building a business that can absorb the change with relative ease. I think when you're resistant to change, and I've found this in life full stop, the longer you resist change, the more difficult it gets. I always like to bring the pain of change forward earlier, and then you can absorb it, and almost take advantage of it, because you can be a market leader when it comes to that. We all know, there's one thing you've got to be guaranteed of is it's got to be constant change in the industry around you, and you've got to have a bit of foresight around that, too.

[0:31:45]SJ: If we look at the GDG stock itself, you've used the words capital light in terms of where you want to go. What is the algorithm that you're working towards here? What are some of the key objectives you've got for the business in terms of the actual financial performance of it over the coming years? I'd like you to work the capital allocation plans into that as well. If the core business is capital light, what is the intention here as the business grows and becomes more profitable?

[0:32:09]GH: Yeah. There's a few ways that we approach business and even M&A, I'll feed into that. The things that we actually look for is one, other legislative tailwind. Obviously, constant tax reforms, obviously, super being changed all the time, and the discussion around that is great for the investment bond, because we become part of the solution. Structural tailwinds is the other piece, and I've already touched on managed accounts and what we saw there. Also, we look for businesses that are a disruptor and probably a sleepy space of financial services, where there's a few incumbents, maybe some big instos, someone bringing in some new technology, or different way of doing things to be able to really take some significant market share of some of those players.

Then the last bit, in terms of the financial profile, we want to see 20%-plus five-year CGR earnings for that business. We're obviously a high PE stock. It's important that anything that we're looking at, it can't be just a creative; it's actually got to have a strong growth profile, or an opportunity to grow something that could be a bit sleepy, but might have a great product, but just hasn't been driven quite right from a distribution and marketing perspective. That's the investment thesis.

Look, I run the group, we've got the three separate businesses. We'll probably have more verticals over time. Look, in terms of capital allocation, we reinvest a lot back into our businesses. I've touched on the risk management and the tech side. We make sure that we get that right, and we've got some really great people around the table supporting that part of our business. But also, the product innovation as well. That's building our new product features with existing products, or it's looking at new products. We touched on the capital light side of things there. We're always looking in the annuity space, given this whole trend into retirement and the need for these products. We can see a few gaps in the market. We're always looking at different opportunities like that, particularly with our BlackRock partnership. We're in fact developing two products at the moment.

Really, when we think about capital allocation is, is there a big growth opportunity there? Yes. All right, let's invest in that. Have we got the right product? No, not quite. We need to make some adjustments. Okay, let's make sure we invest there. People often think, or comment, will you guys lift your dividend? I'm sure over time we will lift our dividend. But if we see a lot of big growth opportunities and we think that's going to be another 50 cents or a dollar in the share price, you would rather that than another one or two cents in the dividend as well.

Capital allocation, the return on investment capital really has to stack up within that subsidiary business. When we're looking at M&A as well, that's really got to stack up. We're in a fortunate position now where we are generating a lot of cash from our assets. You even look at the cash flow profile of something like Lonsec research and ratings, you have to pay for your research rating upfront, before we even start that work. It's great from a cash flow perspective. We're in a really strong financial position, but we're always looking at what is the best ways to be able to utilize that capital, continue to grow the business, continue to invest in the value proposition that we have, so we continue to take the market share that we're doing, and investment bonds will grow that market even more. If we run out of ideas on that, we'll, of course, return that capital to shareholders.

[0:35:17]SJ: You touched on it being a high PE stock today. There's a lot more expectation in that share price than there was five years ago, just in terms of evaluation. How much attention do you pay to that? I guess, internally inside the business, what do you say to people in terms of the message that that share price is sending? Do they care about it, or not care about it?

[0:35:37]GH: I think the nice part about a high share price is everyone's backing your business. They believe in what you're doing. They understand the strategy, and they're supporting how you're allocating your capital. I think that's the good part of it. The other side of that is there's an expectation, and you've got to deliver and you've got to deliver consistently. I’m probably fortunate enough from my experience in sport, I know what that pressure is like, and I know how to deal with it and probably use it to drive the outcome that I'm looking for, the business is looking for. I think we enjoy it, to be honest. We like that pressure. We like the expectation. It keeps you on.

The part I love about a listed business, and I know a lot of people don't like the thought of running a listed business, you've got your quarterly updates and all eyes are on you, but there's the exposure of that brings a certain pressure that makes sure you're thinking of everything. You're on the whole time. You're not leaving any stone unturned. You're always thinking through, how can I deliver a bit of outcome for the business and the shareholders? We also really believe in what we do, too. The values of our organization are really strong. The integrity, the respect that we have for each other, the way we support each other, the ideas that people throw around. I feel like we've got a really good environment around innovation and the ability for people to be able to talk up and not be shut down around their ideas. I think that's why I've been able to consistently deliver over many years now, but also, innovate both with our products and with our systems and processes and everything else that we do internally here as a business.

What's the message internally? I think the message internally is, hey, we're doing a good job. We can do a better job. There's always more we can do. Yes, there is expectation around the share price, but I think everyone really enjoys being part of a winning team. The last part that I'll touch on around is if there ever feels there's negative pressure coming from that, markets are looking a little bit shaky, and people start to get a little bit tense, I always go back to just focus on what you can control. Even if there's expectation out there of what we're going to deliver, or there's something in the market that's not entirely accurate or true, or whatever it might be, you can't control that, but you can control your own performance. You can control what we're doing here. You can control what you're delivering.

I often feel like, once you get back to focusing on the things you can control and letting go of the worries of the things that you really can't, you start to produce much, much better outcomes. I think that's really important. I used to think of this in sport, is I look at my competitors for motivation. I hear about Ian Thorpe's training sets or Michael Phelps' training sets, but I don't focus on it. I just use it to go, okay, I've really got to be focused. I've got to absolutely nail it. Then you get back to focusing on what you do well, on where your weaknesses are, what's required as part of your training. I think like that in business, too.

Yeah, we can see what our competitors do. We know they want to be this. We know that they're coming after us. Everyone tells me all the time. That's great. I'll use that as motivation. But I'm really just going to focus on myself and make sure that I'm delivering what we think is the best strategy and best outcome for our clients, and not get distracted by that. You've got to get that balance right. Yeah, we're in a good spot. But I feel like we've got three years of ideas across each of our businesses that if we execute well, we'll continue to grow at a pretty strong rate.

[0:38:48]SJ: I think that's a fantastic place for us to wrap things up, Grant. It's been fantastic spending some time with you today. For the listeners, can they sign up for investor relations, or where's the place to go to get more information about the business for potential shareholders? I guess, customers as well.

[0:39:03]GH: Yup, absolutely. Customers, you can jump online, be direct, and have a look at our business, and yeah, speak to some of our client services team.

[0:39:11]SJ: Fantastic. As always, get on the Forager website, sign up for our quarterly reports. All that stuff's coming out at the moment for the September quarter. Grant, thanks again for your time. We really appreciate it. I know you're a busy man. Yeah, thanks for joining us at Stocks Neat.

[0:39:25]GH: My pleasure. Thanks for having me, Steve. Cheers.

[END OF EPISODE]

[0:39:32]SJ: Awesome. Thanks, Grant. That was great.

[0:39:34]GH: No worries. Cool.

[0:39:35]SJ: I had, got other questions. I thought that was a great place to wrap it up. I think all of that stuff about just focusing on what you can control is the best message that anyone can get. So, great.

[0:39:42]GH: Yeah, it's so true. It's even when markets go bad as well, too. People get worried about, well, we can't control what's going on there, but let's focus on what we can control, like messaging to clients, making sure that we're looking at the P&L here and managing it tightly. There's no loose expenditure, all that stuff. It's funny. You see it constantly, right, like that bit of pressure that comes in from the outside, and people can get a bit rattled by it. It's, I don't know, probably fortunate enough that I've been in enough pressure environments that you understand the thinking that's required to not let it compromise your performance, really.

[0:40:19]SJ: Yeah. It's so true in this business as well, right? Is the market going to crash? Is it a bubble? Is it not a bubble? I think, what is your process here? Are you executing that process well? If you've got that process right, then everything else is going to look after itself. We know everyone sits there and says, ‘You can't predict what the market's going to do.’ Then they turn around and try and do exactly that.

[0:40:37]GH: Exactly. Yeah.

[0:40:38]SJ: It's very, very similar across all sorts of different businesses.

[0:40:41]GH: You're going to get stuff wrong, too. You've just got to accept that. Fall on your sword, and then learn from it, move on. That's the part. It's almost as a bit of a perfectionist nature, sometimes that can happen, particularly when you're in a position like ours with a high PE. It's like, oh, we've got to be really conscious about getting everything right. It's like, well, no, we've got to make sure that we're quick, we're agile, and we're making decisions. If we're getting the balance of those decisions correct, it's going to lead to a good outcome. But you don't need to get all of them correct, because otherwise, you don't do anything.

[0:41:11]SJ: Yeah. I even think I'm noticing in even in elite sport, I think there's more attention to sustainability and training in a way that is sustainable over a long period of time, rather than you need to flog yourself to death, and that's the only way of getting the top.

[0:41:26]GH: You’re so right. I actually think about that a lot. Because I think about it even in this role, that sustainability. I don't miss my gym sessions training, my diet, what I eat, I don't drink or anything. I'm always looking at that exact, like the longevity of what you're doing to sustain really high tempo. Then, to go, okay, how am I recovering, too. I try and go every six months with having at least two weeks off, because a week's not long enough to unwind properly. You've got to go for two weeks. I find it hard because I'm naturally a worker. Yeah, all those things really matter. Sports, got so much better at that recovery side now as well. You see, athletes are going longer, right? Like, in really intense sports.

[0:42:07]SJ: I was running around Centennial before Sydney Marathon, and Kipchoge and all of his Kenyan mates were in there. They were running our speed around the park. I don't know, it's just a recovery run for them before marathon and things. This whole, we're going to do a lot of our mileage here, really low intensity. Then we're going to hit 10% to 20% of our effort is going to be really good quality effort. I actually think there's a lot of lessons in that for the rest of life as well.

[0:42:31]GH: Oh, I totally agree. I totally agree. It's almost like, instead of sitting here and plateauing at that 70% or 80%, it's like, we'll do it down here, but then we're going to be up here for a bit. Overall, that's going to be a much better outcome. Yeah. No, it definitely works. When I got my recovery right, it was so much better. Athens in 2004, I trained myself sick, went to hospital with pneumonia, had a partially collapsed lung, because I was so blocked here. I was sitting in a ball. Then the next year, anytime I got a bit of a sore throat, and then, because I'd get sick of fear, because I'm allergic to dust. You're always on that red line with the type of training you're doing. I was like, if I get a bit sick or a bit injured, you have a session off. Talk to the coach. We could do a recovery session. It was funny. I then got world swimmer of the year over Michael Phelps in '05, because I just had a different approach to it. And I was so much quicker as well.

[END]