Building a rare beast

Andrew Barnes, managing director of trustee company Perpetual Guardian, concedes he’s “more a leader than a manager”. He can now reasonably extend his credentials to include entrepreneur, given that he was a finalist in New Zealand’s 2015 Ernst & Young Entrepreneur of the Year Awards. Reg Birchfield talked to the English-born Barnes about his rise to the top of his adopted country’s fiduciary services sector and the importance of philanthropy. 

New Zealand’s trustee companies were in a parlous state in 2012 when the then London-based financial services investor Andrew Barnes struck. The 56-year-old Englishman with a penchant for estate planning wanted to buy a trust company, a trophy he calls “a rare beast”. When he sighted New Zealand’s Perpetual Trust in 2012, Barnes hot-footed it down under determined to make his mark. He had worked in Australia for almost 20 years from 1987 so he was familiar with the local financial terrain.

By April 2013 he had spent $12 million to buy Perpetual from its South Island asset management parent company, Pyne Gould Corporation. He immediately began the work that turned the 130 plus year old, loss-making institution into a sprightly, profitable and growth-fuelled fiduciary services enterprise.

Eight months later Barnes’ investment company, Complectus, bought the equally aged New Zealand Guardian Trust (NZGT) from Australian-owned Perpetual Limited, which was unrelated to Perpetual NZ, and merged the two companies.

In August 2014 he rebranded the group Perpetual Guardian, then added Covenant Trustee Services in April 2015, Foundation Corporate Trust in August of the same year, and New Zealand Trustee Services shortly before last Christmas.

“I like trustee companies,” says Barnes. “But you have to understand them.”

Barnes earned his finance sector stripes in the United Kingdom and Australia. He worked for County NatWest Bank in both countries. He then spent 10 years with Macquarie Group also in Australia, before joining Citibank and then Tower Australia, where he established and listed Australian Wealth Management. He returned to the UK in 2006 to become CEO of Bestinvest, a $5.7 billion investment management and advisory company. Three years later he founded Just Wills Holdings, a will-writing and estate planning business.

Then up popped Perpetual. “Although I’d lived and worked in Australia all those years, New Zealand was not on my radar of places to live,” he admits. “Now I’m happy here,” he says settling back in his pleasant, open plan office 14 floors up in Auckland’s downtown Queen Street. And why wouldn’t he be? It’s given him a great lifestyle, made him more successful and allowed him to practice his philanthropic philosophies.

Barnes’ trust companies provide both corporate and private client services. The reputation of New Zealand’s trust companies was, Barnes concedes, seriously sullied by the demise of some finance companies between 2007 and 2009.

The corporate side of the trustee business struggles, according to Barnes, when the economy or corporate performance falters for one reason or another. Corporate trustees must be careful about the company they keep.

“Thankfully, the Guardian Trust business we bought had been fairly carefully selective. Still, the first thing we did after buying NZGT was increase the headcount by 20 percent to involve more people in the prudential side of the business to meet our obligations under the new 2013 Financial Markets Conduct Act (FMCA),” says Barnes.
Though not required to do so, he appointed experienced trust industry independent directors to the board and insists they unanimously agree on the corporate clients they accept. One dissenting director means they don’t accept the business.

“Bad appointments invariably cost somewhere down the track,” says Barnes. Despite his reservations Perpetual Guardian has, according to Barnes, a
57 percent share of the corporate trust market.

Barnes’s capture of Perpetual Trust came with a bit of legal baggage that illustrates his point about the difficulties that can attach to the corporate side of the trustee business. The receivers of failed former finance company C+M Finance are suing Perpetual Trust and law firm Stace Hammond in an attempt to recover money for C+M investors.

“We thought we’d settled this dispute more than a year ago,” says Barnes. “The claim relates to the time when Perpetual Trust was owned by Pyne Gould Corporation, and of course we’ll continue to try to resolve it.”

Perpetual Guardian’s corporate business is obviously important but two-thirds of the company’s revenue comes from what Barnes calls “the significantly more interesting private client business” of writing wills, providing estate planning advice and creating trusts.

“Everybody needs our product and will use our offerings at least once in their life – when they die.”

Statistically the game is working in his favour. “Our population is aging fast. By 2051, 25 percent of us will be 65 or over. The number of people who die every year will double in the next 15 to 20 years. The amount of money transferred from one generation to the next will increase tenfold in this same period. The baby boom generation is the most affluent ever – the next generation probably will not be so well off and are less based around the nuclear family – and so they need competent estate planning and asset management advice,” says Barnes.

“Ours is the next really big growth industry,” says Barnes. “But it will take great management and leadership to ensure its success. On the plus side, it’s a business with built-in 40 to 50 year cash flows. Properly managed, trust companies are fantastic businesses. What makes them great is the perception that they’re deadly boring and unfashionable,” he adds.

“We use the term, but we’re not actually in the financial services business. We supervise clients’ assets and wealth. Ours is a fiduciary service and we do not, therefore, compete with other financial institutions. We can effectively partner with anyone.”

What, then, is the Barnes’ personal management and leadership style? “Well, it’s open, collegial and delegation-driven,” he says. And he had committed to deploying new communication technologies to turn an archaic business model into a fast-moving, interactive, service-driven and globally focused enterprise.

He communicates constantly to get his management message across the organisation. “I walk the talk. I do not just lecture, I do the stuff. I immerse myself in the business to get into people’s hearts and build a collegiate culture,” he says. “And I have no time for organisational politics.

“I lead. I make the rounds of the offices, meet clients and hold large and small staff briefings and morning teas. I talk constantly about our collective mission, about my vision of the future and about what we can accomplish. I deliberately wear jeans and casual clothes to the office because I am trying to convey the message that we are traditional but also modern and new. I am the face, the change agent and the leader of the organisation.”

Buying more trust companies to grow his business is not an option for Barnes. “We have bought all that is available.” His growth strategy is embedded in his belief that every Kiwi should have a will. “Our five-year objective is to write 50,000 wills a year.” Guardian Trust wrote just 91 wills in the year before Barnes bought the business.
“A will is a good surrogate for growth. Writing a will generally leads to writing an associated enduring power of attorney or creating a trust. We will write between 5,000 and 7,000 wills this year.”

Barnes needs motivated people to deliver a performance turnaround of this magnitude; he also needs a paradigm shift in public attitudes toward estate planning. And, he needs a revolutionary change in the use of new technologies to make the process of writing a will simpler and faster.

In April last year Barnes bought high-profile lawyer Mai Chen’s online wills platform, My Bucket List, to enhance his own online will service (e-wills) and his digital vault (Wills plus). Two months later he launched Perpetual Guardian’s client portal Kowhiri, which pulled the company’s digital development teams together “so we can innovate faster and, simultaneously, sell some of our developments to the industry here and globally,” he adds.

“We are using the technologies we’re developing to go global. Companies in the UK, Australia and the US are negotiating to trial our systems. Anything to do with innovation in our industry must have our fingerprint on it,” says Barnes.

Philanthropy is the third leg of the Barnes business model (and, incidentally, core to Coulthard Barnes, the holding company for the many entities in which he has an interest. Barnes’ personal fascination with art, archaeology and oenology has driven his emergence as a notable art and wine collector, and the establishment of his own Waiheke Island-based wine label, Postage Stamp).

“We look after 650 charitable foundations,” he says. “We supervise handing out about $40 million in charitable grants a year. I love New Zealand but I understand that governments cannot possibly fund all the things we need to make society and life what we want and need it to be. We must help change New Zealanders’ mindset about leaving legacies to support philanthropy. We must lift our level of giving to reach comparable international levels.

“The first business we launched after buying Perpetual back in 2013 was Perpetual Giving, now rebranding as Giving@Perpetual Guardian. It is designed to help charities establish their own legacy campaigns,” says Barnes.

The company has now established the Perpetual Guardian Foundation which allows for sub foundations, eliminating the cost to individuals wanting to establish their own giving entities. “I want to help ordinary New Zealanders be everyday philanthropists.”

Barnes claims a 30 to 40 percent market share of this market activity which, he says, aligns with his personal philosophy about the need for, and importance of, philanthropy in today’s society and economy. “The philanthropic sector will have to do some heavy lifting in future. And I find the social bonds issue very interesting and will be watching it very closely to see where I can add value.”

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