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Gareth Morgan describes his move into wholesale funds management as “typical Morgan anarchy again.”
The new firm, likely to be called Gareth Morgan Wholesale, has no clients yet but Mr Morgan has poached Trade Me head of commercial and regulatory affairs Mike O’Donnell as its head.
Mr Morgan says it is a natural extension of the current retail investment offering.
“For us it’s a no brainer,” he says, adding that Gareth Morgan Investment has some large accounts (including that of son and Trade Me founder Sam Morgan) which are basically wholesale anyway.
Mr Morgan also says the concept of dealing with trustees – as opposed to directly with investors – presents a whole new challenge.
“Trustees are quite often very well meaning people but shall we say, don’t have skin in the game. They tend to operate on a different set of criteria,” he says.
The new company will have a focus on less fees, more transparency, and smart use of technology with a strong online presence, according to Mr O’Donnell.
It will share much of the back end with Gareth Morgan Investments but with a specialised front end and web presence for wholesale clients.
Mr O’Donnell says it was a chance to get into something “right at ground zero” and that he has known Mr Morgan for 15 years as part of the “motorcycle malcontents” he hangs around with.
“I’ve ridden the Himalayas with him, I’ve ridden to the Arctic with him, and he and I did a study together about six years ago on retail managed funds, so I know him and his operation pretty well and I rate it.
“With that said I’ll tell you what – I will be sad to leave this place. It’s been fabulous and the people that we’ve got here are pretty good. Obviously it’s been a rollercoaster for the last five and half years. Despite our involvement in it, it seems to have gone alright!”
The 42 year old Mr O’Donnell has spent the last five years setting up, staffing, and running the property, motoring, jobs, and travel sections of Trade Me, and has previously worked for AMP Capital Investors as a distribution manager.
“I got pretty disillusioned with the industry” says Mr O’Donnell, “and wanted to do something different – disillusioned about the low amount of money actually getting back to investors, so I went and did things elsewhere.”
Mr Morgan is about to publish the results of a study on the wholesale funds management industry that he has been working on for the last five months, the results of which are “fairly shocking” according to Mr O’Donnell.
“I imagine it should result in a lot of trusts and trustees probably thinking again about what they do. It could well create a big gap in the market for us. So we’ll put together an offer that pivots around competency and transparency, and alignment of interests, and go to market with that and see how we go!”
Mr O’Donnell sees opportunity for a more consumer-based approach to wholesale funds management, and using technology as an enabler, citing key lessons learned at Trade Me that “access and user interface is everything.”