The CEO’s address at FoxPlan’s 20th Birthday celebration – 8 July 2016
Like the Hurricanes, it has been an exciting journey – but one in which neither of us has captured the major prize – in 20 years
For us the major prize is – public awareness and context for what we do. For the Hurricanes – it’s winning the competition. For both of us – it’s being the best at what we do and being recognised as good people whilst doing it.
We both have loyal fans and believers but we don’t fill the stadium or the offices every week with raving advocates. Sometimes we are criticised, sometimes we deserve it.
We can both lift our game – consistency would be handy – I can assure you that the new young management team at FoxPlan certainly intend to push the boundaries, work on the culture and deliver a more technologically driven product of excellence – and we (the elder shareholders) want to assist them in doing so.
I’m sure Steve Symonds (Professional Development Manager – Hurricanes) will give us some insights as to how the Hurricanes intend to build on their culture, execute a winning game plan and thus retain key people and attract more just like them, we have a similar vision and desire. Other business owners in the room will have similar expectations. Our man from Taranaki is not an All Black but he does steer our team around. A special thanks to Paul Barnes, his efforts over the last couple of years have exemplified commitment and innovation. Regulation has driven compliance and compliance combined with technology drives constant change – too often drivers of change in business suffer the wrath of those who crave for the status quo. The world is moving rapidly in a digital age. Our business will need to adapt, not follow the transformation. Paul will lead our management team in the new era of advice based automation and digital communication. And digital communication is changing our world – for good and for evil. From Brexit referendum manipulation through social media, Bernie Sanders and Donald Trump in American politics and Isis recruitment and atrocity sensationalism – for us it’s Robo communication and online information.
As financial advisers, our role is to Smooth the Road to ensure our client’s financial affairs are in order and there are no surprises. For our clients to experience a purposeful life – with wellness and meaning. We will continue to practice ‘face to face’ and service through technology. The banks have captured all markets and all products – from insurance, to lending to KiwiSaver – they hold the major percentages. But we now boast 10,000 clients, $120 million of investment funds and our lending division is growing rapidly – $80 million this year.
We are 20 years in business – in that time much has occurred to test our resolve. A number of our clients have lost their health or their life. We deliver more than sympathy to grieving families. We too have lost staff, close family members and dear friends. None of us are immune to the vagaries of life or the reality of ill health or mortality or the behavioural reactions to volatility in gyrating capital markets. We haven’t saved all investors that have jumped off the ark in stormy seas. But clients that keep their discipline to the plan and even continue to accumulate through those turbulent times or patient investors who remained steadfast through market volatility they have come through with healthy returns.
We are more than insurance brokers, mortgage brokers and investment advisers – we are financial planners – with more than a passing interest in your health, your wealth and your relationships. We attempt to educate, advise and provide lifeboat drills – because being purposeful for what you want in life, passionate about achieving it and planned with how you go about it, will ultimately determine your enjoyment and the length of journey.
But don’t think obstacles and roadblocks will not continue. I don’t like looking in the rear vision mirror but I want to emphasise just some of those potential hazards ahead – by looking back – Two years after we opened the doors for business – that was:-
In 1998 the Asian crisis shaved nearly 20% off international capital markets pricing. We call that a ‘bear’ market – the media calls it an apocalypse, a recession so intense we are unlikely to recover. We know that price and value are inversely related. The current property enthusiasm in Wellington is an example however of classic supply and demand economics. You all know the best to time buy – it’s not what happens – with stocks or property. The herd mentality is pervasive.
In 2000 technology stocks crashed and three years of negative markets followed. America experienced a most horrific act of international terrorism and the world observed with anxiety and real trepidation – was this the final hour? The index declined from 1500 to 770 (49%). You couldn’t buy a newspaper or read the financial pages without some talking head trying to convince you that this time it was different to the 12 previous recessions since the second world war.
In 2008 Lehman Brothers were bankrupted, largely sparked by the subprime mortgage crisis. Lehman was the fourth largest investment bank in the US, it sparked the greatest decline in capital markets since the depression in 1929. Over a 50% price decline. In Wellington it happened to coincide with hundreds of public service job losses and the launch of KiwiSaver. Hundreds of millions of dollars in wages and salaries were lost to our city; due to redundancies. Of the 6% of income going into locked in super funds, and that represented $200 million per annum, over half went into Australasian banks and it’s growing. The restaurants, bars, retailers and service providers of Wellington suffered accordingly. It is only now recovering – nearly a decade of financial concerns for consumers and businesses alike exacerbated by earthquakes and media driven negative sensationalism.
The property market crabbed sideways for 10 years. Prior to 2007 Wellington had enjoyed both a residential and commercial growth of around 7% per annum. Earthquakes, insurance premiums, strengthening costs and the GFC put paid to that. Commercial property declined by 33% and bottomed in 2011 – it’s still not back to peak. A note of interest with current bank lending. 30 years ago we saw the start of the financial market institutional changes in New Zealand. Bank assets were around 5.0 billion. 10% was housing debt, 50% was farming and manufacturing. Today – bank assets in New Zealand are 407 billion – that reflects personal and business debt – 52% of that is personal – housing – mortgages. Only 15% in agriculture, 2.8% manufacturing. You don’t need to be a rocket scientist to determine the link between lending and property escalation. When I commenced my career in banking in 1967 – we did no lending for housing. Solicitors trust funds and Building Societies were the major sources of property lending.
In the last 20 years we’ve had wars in Iraq, Afghanistan, Libya, Syria and the Ukraine – in the plane that was shot down by the trigger happy Russian military – was Howard Horder and his wife, good friends of mine and Sally’s. Howard was the Australian National Sales Manager for Prudential NZ in 1995 – my direct boss of the time. It was he who helped Sally and me to set up the company in our original premises at Investment House in 1995.
Since the Al Qaeda attack on the World Trade Centre we have seen a substantial escalation of Islamic fundamentalism and the horrific atrocities accompanying it. New York, Boston, London, Brussels, Ankara Daka – the middle east as a whole. These people are in-human and need to be eliminated – quickly. We cannot pussyfoot around liberal decencies – Chamberlain did that prior to the second world war.
Back in New Zealand from 2006 to 2012, 67 finance companies collapsed – shredding millions from baby boomer direct fixed income investments. Investors looking for higher returns than term deposits available from banks.
Through these apocalypse de jour the S&P 500 grew on average 10% per annum.
From 620 on the 1st of April 1996 – our opening day
To 2036 last week – after the Brexit referendum
20 years of volatility – but permanent growth
Equity markets experience temporary declines – but growth is always permanent
In my lifetime the market index has grown from 19 in 1949 to a peak of over 2100 – not including dividends. And experienced 14 recessions – bear markets of 20% or more. Your financial behaviour through these testing times is our number 1 raison detre – when providing investment advice.
What about the future? At home the company will be in good hands. Dean Blair, Thivakar Pushparaj, Stephen Jagers, Ian Owen, Paul Barnes, Warren Smith, Lesley Mildenhall. These are good people. They are leaders in the company and client centric in purpose.
As Sally and I go out to pasture our original partners Steve Baker and Warwick Walker will continue to contribute in a governance role. We have specific growth strategies marked out to 2020 and beyond.
In my opinion you (our clients) will need to continue to take advice with planning, budgeting, investing, insuring and borrowing and growing businesses. These areas will remain volatile and constantly in need of review as economic, political and financial events escalate. The future will belong to those that are purposeful, passionate and planned – as a company we certainly intend to own that advice space in Wellington – and over the next few years expand slowly – in a controlled manner into provincial New Zealand. A small team under Paul Loo’s guidance will be developed in Auckland.
We want to remain at the forefront of ethics and standards in our profession and continue to place the interest of our clients as equal to those of our suppliers, staff and shareholders. Whilst the regulatory environment is firing up the media, and quite rightly putting pressure on questionable business practices, we intend to maintain a level of excellence and improve it. We are determined to exceed, not to follow legislation and regulation with regard Best Business Practice.
As mentioned, Sally and I intend to be around for a couple of years yet – Steve and Warwick will remain on our Board and obviously supporting their own clients and working in unison with their professional associates – accounting and legal firms in Wellington and Auckland.
This year we are strengthening our back office with technical expertise in the investment and lending areas of our business. I can assure you the company will be in good hands – but I must admit to looking forward to more time on the farm, and following the All Blacks and Black Caps around the world.
When opening I mentioned – awareness – awareness of what we do. When you depart this evening – you will receive a gift – it’s all about what we do. If you would like additional copies – in time – for your schools or other family or friends – let us know, we would be happy to send you a PDF or additional A5. We also do it in A4 for those more visibly impaired.
If I beat the actuarial averages I’ve got another 20 years – I hope to enjoy them as much as the last 20. The quality of the legacy we directors leave is important to us – we know it may be only the start of the future for many. For those who have been on this journey with us for some time - It has been a pleasure to serve you – enjoy the evening
Thank you and kind wish
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