Stewart, Nicholas Lockhart (Nick) Interview

Erica Tenquist recording Nick Stewart from the Stewart Group, and the date is 4th of May 2017. Okay; over to you, Nick.

My full name is Nicholas Lockhart Stewart, born in 1976. I was born in Hastings at the Hastings Hospital but we at the time were living just across the road from the Whakatu turnoff in Clive, at a place called ‘The Prickle Patch’. So I was schooled here in Hawke’s Bay, actually firstly at Mangateretere; then we moved to Havelock and I was at Te Mata for a couple of years before … the teacher that I had there, I understand, later had a mental breakdown so a number of us from the class were moved to Havelock North Primary School. So I spent a few years there, then went on to Hereworth for five years, then on to Lindisfarne College in Hastings. I then spent a year in the United Kingdom working as a gap student at one of the great nine schools of England called Merchant Taylors, which is a school founded – I think it’s … ooh, 1654 I think – on two hundred and fifty acres inside the M25. So I spent just under a year there, then came back to Massey University and did a BBS, [Bachelor of Business Studies] majoring in property; and then spent some time in Wellington working for an investment bank; and then had the opportunity to move back and work in the family business, which was a unique opportunity, and one which I always craved to do at some time in my life. It just came up that that opportunity presented itself about a decade earlier than I had forecast.

Is this because perhaps somebody in the firm had shifted or moved?

Well, actually what it was – I was coming up for an end of a contract period with the investment bank, and Mum and Dad were wanting to take an extended trip to Europe. And Dad said, “Hey … well why don’t you come up and work for me on a temporary basis while I go away” – little bit like a locum?” So I did effectively locum cover for a month, and when Dad came back he said, “Oh, what do you want to do?” And I said, “I’m not leaving. This has been a heck of a lot of fun, so w about we arrange a contact for myself?” And so he and I negotiated that on commercial terms, and a couple of years later I asked if I could buy into the business.

And what year was that, please?

That was … I moved back to Hawke’s Bay in the year 2000, in about July – just after – and I moved back then. And there were a number of projects that I wanted to complete with the business at that point, which we did – you know, we became a fee only business; so on the investment side we look after people’s wealth and insurance, and now Kiwisaver; but on the wealth management side we moved to what’s called ‘fee only’, and that’s where we are only paid by the client so that the compensation we receive, or the remuneration, is one hundred percent disclosed, transparent and thus tax deductible. So that was one of the first projects that I wanted to put in place.

Was that new in the world of business at that stage?

That’s a really good question – it was certainly new here. I’ve always been fortunate that I’ve spent a lot of time overseas. And at the time I was dating a Canadian lass whose father had a financial advisor in Toronto, Canada. And I was very fortunate to have an hour and a half with that advisor, and she told me that there was a better way than we were running our business in terms of what we were doing with our clients’ investment capital. So she gave me a piece of paper with two names on it, and she said, “You’re good at what you do Nick, I can see that.” She said, “You’re very passionate, and you’re driven to help the client, but I reckon you can change gear and you can do it even better.” So she gave me two names; and those two names, those firms that we now work with, have been the bedrock to what we’ve done in the business over the last sixteen years.

So it’s proved itself?

Very, very much so. And I would say that you know, as a family business that’s independent – we’re not owned by anyone else, we paddle our own waka; we are our own firm. So you know, we can be quite nimble in terms of our thinking. But we’ve started helping other advisors around New Zealand now.

How much difference has it made with this world of technology now?

Well effectively, it’s kind of the bedrock of what we do now in terms of the technology and the systems and the processes that we have in place in the business; things that weren’t there when I arrived. I mean, for example, when I was at university it was only in the last year of university that I was issued with an email address … an email account.

And that would be ‘84 or ‘85?

No – no, no – I was given that in … 1998 they issued me with an email account at Massey University. This is not very long ago, and when you consider that ,when I was working in my first job, I had a cellular phone that could send a text message and make a phone call, and that was it.

Yes.

Because the iPhone was released in – what, 2003. So I mean, this is how fast the growth curve is. So the systems and technology that we have in the business today – they cost a lot of money and time and effort to develop; and that’s why a lot of advisors and business people get together and utilise one another’s technology and services. And that’s what we’ve found. So we were asked by a couple of advisors three years ago if we would mind sharing with them for a fee our technology suite, and our services and portfolio models; the underlying engineering and technology that runs a financial services business.

So you could use other people’s expertise as well as your own, but keeping it within your own realm?

Yes.

That’s the most important thing?

Yeah, it is, and I don’t believe you know, anyone that ever says you know, they’ve reached the holy grail, you know – they’ve completed a marathon etcetera, and they’ve done it. I just don’t believe that’s the case, because you know, there’s a really neat saying, you know – ‘Moss doesn’t gather on a rolling stone’. Well, it’s a little bit like that with technology and the way that we run our business; you’re never ever complete. One, we’ll always be moving.

How long would it take you to process one client’s business portfolio?

So I’ll give you an example of what we’ve got coming up. So at the moment, if we were to re-balance all of the portfolios for our Hawke’s Bay office – we have two offices, one in Wellington, one in Hawke’s Bay; if we were to process all the portfolios it would take us about a week to re-balance back to benchmark all the portfolios. Now that is just standard, and that’s pretty good … that’s common. From the 1st of July this year, with the new technology platform that we spent most of last year building, we’ll be able to re-balance all of the portfolios in a morning – one morning. And we will be able to offer that service to other advisory businesses that we support – there are five other advisory businesses that we support now, who utilise all of that technology. So we can run that from Hastings, in Karamu Road; we can run that technology suite and that support service for those other advisors who operate in some really expensive cost centres … you know, Tauranga, Hamilton, Auckland. They’re expensive places to …

To operate out of …

Yeah, they are. You know, I mean I’m not saying that it’s not the greatest thing to be a place that fights it for second or third bottom of the ladder; wages in New Zealand – you know, what are we? The lowest wages are in Northland, you know. and the second and third, we toss it up between Marlborough and Hawke’s Bay. But the fact is, the competitive advantage that we have in doing that is that we can have people working here; they get you know, amazing wine, food, fruit; they can surf great surf beaches; and we’re well located, and they can have a great life here. but it’s not the same cost of living as Tauranga or Auckland. Hamilton’s not so bad, but those other two – I mean they’ve got some major infrastructure problems; it’s expensive to live there.

Do you keep up to date with the market on a day to day basis, or do you try and anticipate what is happening?

We have an evidence based philosophy in the way we run investments, so we need evidence to back up what we’re going to do. So we’re not prepared to act on gut emotion or instinct when it comes to making a call on what we should buy or sell. We actually need some evidence that it’s robust; there’s data. So for us, we have an investment committee. We have the Associate Professor of Business from Auckland University who flies down to join us for a full day, every quarter – in fact he flew down yesterday. So we have some really robust discussions about the way that we run portfolios, and as an independent party, Alistair would very much like to see that there’s some absolutely robust evidence on why we’re going to make a decision. It’s not gut instinct, emotion … we’re not throwing grass into the air to see which way the wind blows. You know, you’re managing people’s capital, and it’s absolutely sacrosanct.

And it’s for, on average, twenty years or forty years?

It depends on the age group you’re managing client capital for. Typically, the relationships that we have … we will form a relationship with someone in their twenties – that’s normally around Kiwisaver and risk management, and a small accumulation portfolio. And then as a person moves through their life their needs and wants change. And so typically, you know, the relationships that my father has with people – these relationships can be up to forty-three years old.

In other words, covering two, or into the third generation really?

Yes. Absolutely. Well, often a lot of the planning we’re doing is inter-generational; so you’re thinking about how will the assets be transferred; but also, not just the investment capital, how will the knowledge be transferred? Because governance is huge.

With the Knowledge Bank, we have all the data online digitally; three different places in case there’s a [an] earthquake or a volcanic eruption. Have you got provision for that?

Yes. Yeah, we have. So for a start, things like you know, the building, what type of code – National Building Standard is our office, our basic core infrastructure – so it starts with that; where are we located, etcetera. And central Hastings is effectively built on a dome; so the water in mass flooding goes around the community, which is very different than where I grew up at Whakatu, where during my first five years living there we had two floods which washed across … I remember standing at the door, the glass sliding door and watching my dad and my grandad in a row boat, checking the bee hives that they had put one metre above the ground.

To see if they were going to get washed away?

Yeah – and the water was lapping at the sill of the sliding door. So the reason I share that story is that in central Hastings we don’t have that issue, which is nice. But in terms of the backing up of the data, well things like our client relationship management tool, all of our trading technology, the custody of our client assets – that’s all cloud based, it’s not reliant on our server here in Hastings. And shortly we’re about to migrate entirely to the cloud so that we won’t have a physical server present in Hastings.

That is the way it’s got to go …

Yes it is, and when you have offices across the country – we only have one at the moment but I think in time there’ll be others – we would want everything to be centrally located, in the cloud. But I certainly wouldn’t want it to be reliant on a dusty computer sitting in the corner of our office in the server room in Hastings.

So Nick, when you went on your gap year, how did that come about? Did you win a scholarship or something?

No, what it was is that at Hereworth and Lindisfarne there were always gap students, and I always really enjoyed talking with the English and Scottish young men that they were then – eighteen, nineteen years of age – and they always had colourful backgrounds, and you know, foreign accent, and they’d tell you about what they did in their world. So I always set that as a goal that I wanted to do that when I was older, you know. And when I mean older- you know, eighteen – boy! They look like children today, but [chuckle] … when I look back. [Chuckle] But you know, when I was at Hereworth these were people that were ten years older than myself. So I always wanted to do that. Now the opportunity came up in fifth Form – I’m not even sure what the years are these days at school; I’m a slow learner with these new things.

Yes. Year 10, I think, or 11.

Yes. I’ll learn those things as our children get older. But I had the opportunity at Lindisfarne College. There were probably … I don’t know, maybe ten of us applied for these roles offshore and I was fortunate to … I guess the school wrote an accompanying letter with it, and I sent in my CV [curriculum vitae] and I was accepted as the sole student to go to this prestigious school called Merchant Taylors. It was an amazing – you know, very, very affluent school. It was a real eye opener on the way things worked. Seventy percent of the school were either current or ex-military officers – the teachers were. The school is you know, predominantly expat [expatriate] – Pakistani, Indian, Arabic, as well as British nationals. But [a] massive melting pot. And it was interesting; all the different cultures and the things that I got to see; and I was very privileged to go …

And so it gave an exposure within this college without even going anywhere else, in a way?

That’s right. It was a little bit like … the boarding house where I lived was very much like something that one would expect to’ve seen a hundred years ago, you know – something of the British Empire.

Did you have to wear a uniform that you found uncomfortable?

No, I was fortunate that I could wear a blazer and tie or if I was taking the boys out for sporting activity that I could wear you know, a pair of Canterbury track pants and a rugby jersey. That was good.

Yes, so that didn’t cramp your style, as it were?

Not at all.

And did you come across anybody from the Blue Schools that were in London at one time?

The Blue Schools? No – no, I didn’t.

Blue Coat Schools. They were set up by one of the Kings; I think King George VI.

No, no. No, I don’t remember that. But I do know … so you would’ve heard the term, ‘being at sixes and sevens’?

Yes.

Well so, Merchant Taylors is actually owned by the Merchant Taylors Livery Company of London, and the term ‘being at sixes and sevens’ is … Merchant Taylors would alternate year on year on who would follow the Queen in procession. One would be six and one would be seven. So I have a school tie which is a black tie with yellow or gold numbers on it – numerals – of sixes and sevens. And that’s the term – being at sixes and sevens. Interesting isn’t it?

Yes. I had a couple of great uncles from England who went to the Blue Coat Schools; that’s why I wondered if it was allied to it.

Yeah – it’s not a term that I’ve heard before. But you know, there are a few of those very prestigious old schools.

And in that year, were you still getting ready to be part of the company, or banking world?

Yes – yeah, that’s been my objective since I was a child, to do that. You know, when I was at Hereworth I had a stock portfolio that I would trade myself. And Mum and Dad were very good at encouraging us in that area, so I would follow stocks and I would do my own transactions; and that was my dream. I mean, I still have my … we called them ‘Thoughts and Goals Books’. Every year Mum and Dad in January would … we had a bonus payment system; so that whatever you had saved in your bank account through your own hard effort and work, they would double what was in your bank account. Now I know that sounds incredibly generous …

Oh, yes!

… but we didn’t earn very much. [Chuckles] And we were little children, so you know, the scheme stopped once we got into our teenage years, rest assured. But we had this ‘Thoughts and Goals Book’, and I’ve looked at my old ‘Thoughts and Goals Book’; I’d lay down my finances, my budgets, what my aspirations were for the year, and my aspirations were long term. And I always wanted to be a merchant banker. I haven’t quite done the merchant banking, ‘cause you know, I actually probably enjoy helping people on the ground more than … say, the actual banking side. But it’s been a real privilege to live in our you know, amazing community, and have the opportunity to work with my father; but also to be given at what I would say is a really young age, a free hand. I mean I was the CEO [Chief Executive Office] of the company at age … ooh, what would’ve I been? I would’ve been about twenty-seven years of age.

Very young. ‘Cause most people at that stage – for merchant banking particularly – would’ve been perhaps being a cadet for seven years or something like that.

Yes. Yeah.

So to go back to your early life … did you marry the one from Canada?

No. No, I didn’t.

But you’ve got a wife and children?

Oh yeah, yeah. No – again I feel very blessed to have met a local girl; so my wife Jenny is a therapeutic optometrist. She grew up in Puketitiri, way up by Bull’s Clearing. So we have two optometry practices – one in Havelock, one in Hastings – called Grant and Douglas, that we bought off [from] Hugh Douglas about a decade ago. And yeah, we live in Havelock North, and we have two cute little kids; we have Montgomery, or Monty – he’s eight and a half; and we’ve got Beatrice … or we call her Bea … and Bea’s six and a half. Two little children …

Pigeon pair.

Yeah, pigeon pair, that’s it.

Did you have brothers or sisters that wanted to not do anything like that?

We’re a mixed bunch in that regard, that we’re all quite diverse. So I’ve got two younger sisters, Annabelle and Sophie, but none of them … it’s never really come up that they wanted to be directly in the business; whereas you know, I was absolutely adamant that was going to be my future and my home. And I love the concept of stewardship and inter-generational wealth transfer. I mean our family name … you know, the Stewarts weren’t … our name is actually Fitzalan. And the Fitzalans came across with William the Conqueror from Normandy to England, and they slowly migrated their way up to Scotland and became the financial stewards to the Kings of Scotland.

And that’s where the Stewart came from?

That is where it came from.

So when did the family come out to New Zealand?

So the Stewarts … Alexander William Stewart came out to New Zealand – I think it was like 1873, so relatively late compared to my Mum’s family which [who] were on the early boats into Canterbury. But there’s some colourful history around Alexander William Stewart. He married a South Island girl of Ngāi Tahu descent. We didn’t know this until I completed some genealogy work recently – in the last three years. So it turns out that my fifth great-grandfather is a prominent Chief; during the wars against Te Rauparaha, and at the time of the signing of the Treaty. And he was the Chief for the Arowhenua hapu down at Temuka, just on the coast there. Yeah. So I have slightly red hair, strawberry blonde hair, and quite white skin, so I’m always puzzled about where the little bit of Māori blood is. But it is there, ‘cause I was curious.

The sense of humour …

The sense of humour. Yeah it’s interesting. But that’s where the Stewarts came from, and we’ve been back and seen where the family burial stones are in – the place is called Alberfeldy and Grandtully, which is in Perthshire. So – think most people call that the Highlands; I wouldn’t call it the Highlands – they were just rolling hills.

So if your mother’s family came out and landed in Canterbury, do you know what the ship was?

Yes – I have a painting of that at home. It’s either the first or the second ship into Canterbury, I just can’t remember. Oh, if you said the name of the ship I’d know it. Yeah, they were the Galloways; so the Galloways are good Scottish lowlanders from around Fife.

So if you can just touch on your father’s background – did he start off with a single idea of doing portfolios ..?

Yeah, he took a different track. So Don’s father was a fitter and turner … engine mechanic … and his mum was a home-maker, after being a – is it the term being a ‘Wren’ during the war?

Yes.

Yeah – on the wireless. So she did that; and they lived in Palmerston North. And Don’s aunty on the Stewart side – they had a farm at Hunterville, and Dad used to spend all his school holidays out at this farm, at the Kilmisters, in Hunterville. And Don always wanted to be on the land; that was always his sole ambition.

Yet it didn’t happen that way?

He tried; and he was in the first intake for the first year of the sheep farming diploma at Massey University. So he did that and he became a shepherd and managed some farms in Taranaki, around Palmerston North and also on the Takapau Plains.

So if you had it all again, what would you do? Would you still do the same?

Yeah, sure … would I do it again? I don’t think there’s anything that I would change. Yeah, I’ve … you know, got a couple of grazed knuckles and skinned knees from, you know, experiences in the past around the way that we ran investments historically. But a lot of the things just weren’t there – I mean, we’ve pioneered the development of a number of new funds into New Zealand that give us access on a global basis to things like short-dated global credit that’s hedged to New Zealand dollars; we’ve recently seeded a global property fund hedged to New Zealand dollars; I mean, they’re really hard to find, a hedged New Zealand variant.

Can you explain for people, ‘hedged’?

Hedged … hedged back to New Zealand dollars. So you are deploying and buying something offshore in, say, American dollars. But you actually want it expressed to you in Kiwi … in New Zealand dollars, and you want no currency volatility at all. So that’s what we do, so we put a hedging overlay on to it and we hedge it back to New Zealand. So it doesn’t matter what happens between the Kiwi and the US cross rate – it doesn’t matter, that’s off the table. But we’ve got you the exposure to all that real estate in the United States and Europe with no currency risk … or we’ve taken the currency off the table; it’s in New Zealand dollars.

And does it mean you still have to pay tax on it?

Very much. Absolutely – yep.

And would the firm pay tax as well?

Well, what it is is that you’re issued with units in a fund and the fund pays the tax on your behalf, depending on you know, the number of units you have, etcetera. And it’s all calculated on an individual basis.

And if you were buying on the market today, would you still be buying American – with Mr Trump?

[Chuckle]

Or incidentally with England, with …

Oh, the Brexit, yeah. Well – hey look, if there’s one thing that’s a certainty in life is that there will always be volatility and there will always be things that …

Go up or down?

Yeah, but also things that are unexpected and not forecast; I mean, that is the world. It’s just that we, the current generation, always believe it’s more volatile than the past; but if you have a look through history, you know, things are incredible volatile. In fact, in the world today you know, we actually live in very, very peaceful times. Things are relatively smooth; we have very good free flow of information that didn’t happen in the past.

No. And because of the technology now, you’ve got far more flow quickly, [rather] than waiting months for a letter or a toll call that still needs the proof in writing.

Yes.

Say Mr G comes to you and he wants to open a portfolio, he wants you to look after it, and he’s from South Africa for instance; how do you get on with a situation like that?

Sure. We deal with clients all around the globe; and after 9/11 [September 11th 2001] there was the anti-money laundering provisions came in, which are led by the United States; you know, when the world’s largest economy asks for something to be done it gets done by smaller players. So look – the legislation was pushed on to all of us and we meet the US requirements, which is the anti-money laundering provisions. So we have to go through a very onerous process to identify a client, you know … are you who you say you are? Your multiple forms of ID [identification]; we also need proof of address; confirmation of a bank account which is in your name; oh, and we also need to know if you’re a politically exposed person. So you use the case point about, say, South Africa; what would happen if you were … you know … a dictator from the African continent trying to come to New Zealand? You know, you would be a PEP – a politically exposed person. We’d have a major problem. We’d then have to do enhanced due diligence, and then when we found out what you’d been up to historically, we wouldn’t be able to touch you.

You would have to set a barrier … a level … wouldn’t you?

Yeah, well what happens is that the legislation pushes the responsibility onto the financial advisor and the financial advice firm, which then falls back on my team and our operations and compliance team. But ultimately the responsibility sits with me as director and CEO. [Chuckle] So, the definition of moving to what’s called enhanced due diligence – so if we believe someone is politically exposed, it’s up to us to do the homework on it. We moved away from helping out a European bank the other day who wanted to utilise our new technology … our new custodial platform … and when a couple of the directors’ names appeared in the Panama Papers, the tax papers, we told them we were not …

Unable to help them.

Yep. And we were stopping our due diligence process, and they needed to find someone else who could help them ‘cause we weren’t prepared to.

‘Cause it could lead on to something you didn’t want to be involved in?

Absolutely.

Yes. It surprises me in everyday society, and it must have been proven to you lots of times that you think you’ve got this picture clear and then all of a sudden there’s one little dot on the horizon that doesn’t fit.

You’re dead right.

How often would you think that would happen?

It’s extremely rare. Like, that one that I gave you the case study of before, that’s the first time that’s ever happened, and we’ve been doing this since the legislation was introduced.

Would your due diligence only be looking at the safety of the funds?

No … well what it is is the anti-money laundering provisions are all about where the cash has come from, and so you know, for example – has the cash …

Been generated …

… through an illegal means. I mean it could be through munitions, theft, embezzlement; wow!

Murdering somebody?

You name it – extortion … and that’s what it’s all about. I mean that was – it was there to stop the laundering of money to support terrorist groups. So effectively, you know, you could say banks, financial advisors and financial institutions are the frontline of policing, and the legislative framework’s very onerous, I can tell you.

Now there’s one thing that occurred to me. You’ve got a raft of people that are dealing with the same software etcetera. Your access for information – I want to know how you would deal with something like that?

Okay. Well, what happens, it’s system generated, and we can programme into the system how frequently it will tell you you need to change. So one day you’ll log in – it might be after three months – you log in and it says, you know, ‘It’s password refresh time’.

That’s all built into the system?

That’s correct. Yeah, we use … it’s all the you know, military grade encryption …

You’re still Monday to Friday?

[Chuckle] We are very much Monday to Friday, touch wood, we’re fortunate to have that. You know, people come to Hawke’s Bay to have a life, and … and when I say have a life, it’s about having a lifestyle where everything’s not about money. A lot of people would say, “Well, you know, surely you guys are … you’re capitalists; you are financial advisors; you invest people’s money to generate a return whether that be capital or income.” But I would say, “Look – we’re actually here because of the fact we want to have a life where there’s balance; we want to have a place that has good schooling, a clean environment, a safe environment; very …

All of which is here.

All of which is here, and it’s very much that New Zealand lifestyle. And I honestly say that I’m very blessed that we’re able to run a business on a national basis, from Hastings.

And do you want to do travelling more?

I do a lot of travel. I think … you know, I spend a lot of time in the United States, Australia. I’m off to Israel on a cyber security tour at the end of June. And put it this way – it is fine to be based in Hawke’s Bay or New Zealand; fine in the sense that you can operate a global business from here. But you have to stay in touch with people, and with that comes the need for travel. So you know, I choose to be at the bottom of the world in this beautiful environment … a very special place … rather isolated though. But the way you get around that is you make friends with incredibly kind and generous people in other areas. I mean I’ve got great friends in London, Singapore, Hong Kong, Sydney, Melbourne and many US cities, and I catch up with them a lot. I mean these people – it’s like … when we’re catching up it’s like clicking your finger and it was yesterday, you know – it’s like the conversation never stopped.

And the US – I know that a lot of Kiwis bag the US; I guess just ‘cause they’re the big guy; I mean people used to bag Britain back in the day too. But the fact is that they are ahead of us in many things, particularly in the finance and technology area. So they’re great people to hang out with and I find that they’re incredibly generous people with their time … very generous.

The only thing I don’t like is they put ice in their red wine.

[Chuckle] I get to the States this weekend, and I’ll be up in Napa seeing a couple of people and I checked the forecast and it’s going to be about thirty-two degrees [celcius] each day, so I guess if you’re drinking wine that was thirty-two degrees, you might have ice in it. But their wine is so robust and strong with the cabernet dominant wines there that they can handle an ice cube without being diluted too much, I guess.

When you pack to go away, how big a suitcase do you take?

Despite travelling a lot, I still overpack. Yeah, I just do. I always like to be prepared, just for the ‘what if’. But I can pack pretty much within … oh, I could go home now, … yeah, I would only need about twenty minutes at home to pack for a trip of a week, because my business satchel is ready to go at all times. I’ve got all the chargers; I just grab it and I can walk out.

So you’re travelling continuously; you haven’t got sick of it, and that’s after how many years?

Oh, I’ve been doing this kind of schedule since ‘bout … probably started in 2001.

Sixteen years.

Yeah, I got my feet under the desk at work for the first six months, I needed to put through some restructure at work in terms of what we were doing and then pretty much went from there from early 2001. It’s been a lot of fun. You meet a lot of people – I love meeting good people offshore.

Now, we‘re going to talk about six subjects that we haven’t covered, sort of …

Okay, well the first one is on food. So one little thing we haven’t talked about is that growing up – beehives; actually I didn’t mention the beehives. So when we lived in Durham Drive, Mum and Dad sold the Durham Drive property where they’d been for thirty-four years. And with Jenny and I having already built our house we didn’t want to buy it off Mum and Dad – we had our own property, so it was sold. But as a child at Durham Drive we had some beehives, and then as I got older those beehives … actually the beehives were robbed out by wasps; and I always said to myself when I had kids that I wanted the children to have that connection with nature. So yeah, we’ve got beehives; and we’ve produced a little label and we give it to our clients as gifts. We typically get between eighty and about two hundred and ten jars of honey a year. It’s all hand harvested, and I think there’s no greater reflection of your natural environment than honey, because … now, unlike an apple or a pear or grapes, you know, don’t spray the bees for treatment. What is in your garden is what will come through in the honey. So our honey … and a friend of mine who’s a commercial beekeeper, he’s tasted our honey. And he said. “Nick”, he said, “there’s almost no clover.” He said, “There’s lots of native plants”, which is true. He hadn’t been on our property by the way, for a while – he couldn’t remember what was there. And he said, “There’s lavender”, and there’s huge lavender beds at our place. So he said, “Boy, they like the lavender!” And he said, “There’s eucalypt; you’ve got lots of gums, haven’t you?” And I said, “Yeah, lots of flowering gums.” And it’s the most amazing honey! Now I love what Arataki do, but my honey’s better. [Laughter] And when I give it to people, they love it! [Chuckle] Yeah, so you know, I love our bees and what we do with them, and I love giving away that. And I take it offshore and give it to people. It’s a special treat.

And that’s something nice to give people, too.

Oh, it is … it is. But you know, it’s been interesting to look at what we have here in Hawke’s Bay. I don’t mean to keep going on about Hawke’s Bay, but I’m very passionate about Hawke’s Bay and what we have, both in New Zealand but also globally. And I’m reminded of that fact, that when friends come to visit us in Hawke’s Bay from offshore or around New Zealand, how much they love our food and our wine and our fresh produce. Wow! It’s very special.

On our advisory board we have a Tasmanian gentleman, Peter Mancell, and Peter loves coming here. It’s a slightly warmer climate, and we’ve got better restaurants, more wineries and great food; he loves it. He ticks off a few restaurants each time; he comes over every six months, so a lot of fun.

I don’t know if you can take honey overseas now?

To some countries you can, but yeah, it is difficult; like, I certainly wouldn’t carry it on my person to Australia – I’d be in huge trouble.

You’d be stung …

Oh – yeah, stung … yeah. It would be awful [chuckle] – I just wouldn’t do it.

Another thing that we were just talking about earlier, is that on the basis of education … and I look at what’s happened in the community over the period that I’ve been fortunate to be schooled locally; and it’s amazing to watch the schools develop. But one of the things that does … yeah, kind of worries me a little bit … that with a lot of the people that I see in the community – the young ones – there is no financial literacy at all.

No, not at all.

I find it really scary. Now the reason I say I find it scary is that, you know, you don’t send someone out with the keys of a car to go driving without a licence and training. You don’t give someone a firearm and take them duck shooting without a licence and training and serious supervision. But you allow someone to go and borrow a truckload of money, like a student loan or a credit card debt. Now I’m not saying you need a licence to do those things, but surely it should be in the curriculum at school. It just breaks my heart occasionally when I see the holes that people have to dig themselves out of because they didn’t have basic financial literacy, or the understanding of things like credit cards, insurance, mortgages. Wow!

Even if they were paying a dollar a week, that would cover them for something …

Well depending on their age they could be part of a group scheme. That’s one of the things we introduced at work; we’ve got a group health scheme because I wanted everyone to have a base load of cover. Now for the firm, the reason we did that – once we clocked up to fifteen staff and we’ve got a group scheme, there’s no health evidence. So in other words, if you were working with us and you had Type 1 diabetes, you would be included in the group health scheme as though you were – the industry term is ‘cleanskin’; in other words, fit, young, able – bullet proof.

So that’s something we did; but it just reminds me of something that we did back in 2011. In 2011 I wrote a white paper to the CEO of Fidelity Life. Now Fidelity at the time – and it still is – it’s actually bigger now; it’s New Zealand’s largest independent insurer. Now New Zealand’s largest insurer is Sovereign, but it’s owned by ASB [Auckland Savings Bank] who [which] is in turn owned by CBA [Commonwealth Bank of Australia]. So Fidelity Life’s independent; it’s owned by the original founding principal’s family, and a couple of institutions that are not Australian. Now I wrote a paper to him that I was wanting us to have the ability to manage our own Kiwisaver but using their scheme, ‘cause Fidelity Life were …

One of the ones …

Yes, one of the …

… the government …

Yeah. And Milton said, you know, “I like your concept”; he said, “you guys are independent financial advisors”, he said, “you have a following and a network that’s different than ours.” So he said, “We’ll help you launch those two funds and you can be the consultant who runs it.” So we launched those funds on the 29th of December 2012, with zero money in them; from the ground up. And we’ve now got, as of today it’s $57.2million we manage across about … ooh, three and a half thousand people across New Zealand. Now the reason I share that story is that Kiwisaver is a savings mechanism for the masses and anyone that doesn’t have it who’s below the age of sixty-five needs to really think, ‘Why am I not doing this? This is crazy!’ You know, they should be involved. But the reason I was talking about Kiwisaver is that, you know, we process a lot of hardship claims every month. This is where people … often through no fault of their own, but … you know, quite often it is; they’ve just spent more than they earn and got themselves into a pickle. We process hardship claims, and we get to see all these hardship claims and we get to see that people have no insurance, no knowledge or understanding that this is the second hardship claim we’ve processed for that person. And Kiwisaver’s only been going since 2007; ours has only been going since 2012, and we’ve processed two hardship claims. It’s so sad! Because as you get older your ability to recover – much like health, by the way – from your financial health – very difficult to recover from making a mistake, because you simply don’t have enough …

You never earn enough to …

Correct.

… to back you up.

Yeah. So you know, a twenty-five year old can make a mistake and – hey, no problem, you’ve got another forty years; whereas you know if you’re fifty-five and you make a mistake, then you’ve got a major problem. The term that I like is – using an aeroplane analogy – that there’s no more runway left. You physically can’t get the plane to lift off.

You just have to guard that they don’t do it again?

Correct; yeah. So around education, that’s something that does make me really sad. And hey – there was no financial literacy training when I was at school either, and there certainly isn’t any now. But I say that I’m you know, fortunate that my parents instilled that into me; and also the fact that I was blessed that my dad, Don, would encourage me to have mentors. Now these were mentors that were friends of his. So I would go around and have a chat as a young man of you know, like, age twelve. I’d go round and have a chat with businessmen who I idolised about what they did in the community and I would pick their brains and ask them questions. I mean, it was free! And you could ask these people the most amazing things, and they could tell you things, and you could share ideas.

So the reason I talk about that is that, you know, I was blessed to have that; and I would encourage more people to do that. And that would be something that I will encourage my children to do, ‘cause if it’s not in the curriculum they’re not going to be given it at school, therefore it must be given at the home and after hours.

I’m appalled at the number of people who can’t cook …

[Chuckle]

… you know, or don’t have a garden.

Yes. I love … the garden’s great. I must say, though, my carrots – I always plant them too close together and they get all tangled up; they look like they’re something out of Chernobyl. But yeah, it’s fun having a garden, and the bees, fresh fruit … we are very lucky.

Oh – now one of the other ones you wanted me to talk about …

Cars.

Well … yeah, it’s interesting, ‘cause when I think about cars I have two things on my mind: one is the passion for a lovely automobile that’s well crafted, makes you feel good and it smells nice, and it rides well; and then the other side of me is the financial side, which is that they’re probably one of the worst things to own, second to a boat. And I’ve got three cars and a boat. [Chuckle] It’s interesting though, one of the cars that I’ve got, which I hope that we’ll hold in the family for a very long time, is a 1951 Series 1 Landrover, you know the old …

Yes.

In fact when Landrover had their anniversary a couple of years ago – what anniversary would that be? Oh, I can’t remember – it might‘ve been the eighty-fifth anniversary, or whatever it was; the Landrover Series 1 shape is the most recognised car shape on the planet, and it’s just that cute little jeep. So I’ve got this little thing that you know, uses a lot of gas, takes a lot of repairs and maintenance, but boy! Is it fun to drive.

You haven’t tried driving it without a battery yet? Where you have to park it on the side of a hill?

No! I haven’t done that yet. I’ve been having fuel pump issues [chuckle] rather than battery issues, touch wood. That’s one thing that I haven’t had an issue with yet. [Chuckle] But thanks for the tip. It’s actually got a new canvas cover coming from the UK at the moment which is on the water; so it will look one hundred percent. It has soul, that car. There is something to be said for vintage motor vehicles I must say.

Would you hire a vehicle to get yourself around, or would you go by taxis?

Yeah, okay. Okay – I’m a good traveller. And I travel a lot, but one thing that I do get nervous … after a long flight, like twenty-three hours flying into London, and I’m going to pick up a rental car and then have a six hour drive. It’s just …

It doesn’t make sense.

No, well it just gets the heart rate going, ‘cause you know you’re going to have … you know, you don’t just get in a cab and then head to the hotel. You know, you’ve actually got to be thinking and on your game; you don’t want to have a crash or dent the car or anything like that. So my personal preference is that when I fly in to these places after a long flight such as my flight to San Fran [San Francisco] this coming weekend – the last thing I want to do is get off the plane and drive from central San Fran on the other side of the road; and you know, be a cat with nine lives and by the time I reach the destination I’ve got two lives left. That’s not what I like to do, so I prefer to get an Uber, or a taxi or a limousine; particularly in the countries where my instinctive ability to drive on the British side of the road isn’t there. So you know, you’ve got to stay on your game when you’re driving in a country where you’re on the wrong side of the road – on the other side of the road, should I say.

So within the Stewart Group, you wouldn’t diversify into education, if I can put it like that? Or be doing something other than money?

No, well in the business we have diversified; we’ve kept everything that we do to a listed nature. In other words it must be on a listed exchange, and therefore it is liquid – we can sell it, but we don’t actually hold the physical goods.

One thing, I thought where you were heading with that when you started the question was … you know, how do we help more people? Have we looked at education, etcetera? And I think that was the key thing with Kiwisaver. I mean we’re probably … in reality, after five years we are at about break even.

You would be, totally.

So for five years we have lost money running this business that helps out a lot of people with a small amount of money. That’s … you can only do that when you’ve got scale, you know, – it is a commitment.

So I think coming up, one of the pieces that we could help people with is around what we’ve done with Kiwisaver; is rolling out a framework for education around that, and giving some collateral. And then I also think off the back of that – here’s a futuristic prediction – I think off the back of Kiwisaver a significant number of group insurance schemes will be launched. So that would be – let’s say you were a member of our Kiwisaver scheme; you were automatically granted $35,000 of life cover irrespective of your health. In Australia that’s very much the case. The framework’s not there for New Zealand at the moment for it to be built within the scheme, but I believe that innovative firms – and I’d like to include us in that mix – that we could wrap around the Kiwisaver funds, that type of product. And I think that will happen. I mean, I don’t think it will be a profit generator for businesses like ourselves, but I think it would be an absolute mainstay, and it would be a game changer on the way that people think. Because not everything we do … I like to think that we think socially before we think about profitability. Now, the reason I think that is when you’re an inter-generational business owner, and we’re in this for the long term, I’m not thinking about how I can make a quick dollar. And it leads on to … I think about the way that, as a CEO, the way that we work with staff. I mean, I don’t necessarily go out and look for skill. I go out and we recruit based on values, because someone that has our values … and those values are that they love helping other people; they love to be a steward; to respect others, to nurture their capital, nurture and respect their ideas and their goals in life, and what they desire. And it’s a two way street ‘cause the clients need to be the same. But when you have that mix, amazing things happen. So the way that we’ve recruited for staff and our team, over … probably over the duration as CEO. We used to recruit for skill in the first half of my tenure; in the second half of my tenure we’ve recruited based on values. And it’s been a lot of fun. Now that’s counter-think to what a lot of people want; lot of people go, “We need to recruit for skill” whereas – no, you know – harmony in the office and the culture and the way that we treat the clients, is just absolutely paramount.

If they’ve got that built in skill, that must add to what the clients are willing to let you do?

True. Now the thing that I like to think about is that you can train for skill but you can’t train for values. So Erica, if you’re naturally a people person and you enjoy spending time with people, your skill set in helping them can be trained, because you can train people to do amazing things. But you know what? If your personality type is you actually prefer to work alone and you don’t like working with people, then if I get you to help a whole lot of people you’re going to not really enjoy it.

You know, I look at my wife’s business; we presently hold the diabetic retinal screening contract with another couple of other optometrists, so we service thousands of diabetics each year. And it’s really sad to say that it’s a growing portion of the population; it’s sad. ‘Cause diabetes is bloody debilitating; it’s awful … leads to so many other issues. I feel so sorry for the people. So through your eyes and the checking of your eyes you can find out where your diabetes is at, and it’s all reported through to the DHB. [District Health Board] But you know, to run that role, and I know I talked to Jenny about this, is that you need to really care about people, ‘cause you’re seeing thousands of people. Whereas if you didn’t particularly enjoy … if you’re more a solo person who enjoyed your own company, how are you going to help thousands of people who are ill? Because … I use word[s] ‘cyclic rate’ – the amount of people that come in and out of Jenny’s practice when a diabetic retinal screening session is on – there’s a lot of people that come in and out, so you need people that are absolutely stewardship driven; that really care; they’re customer-centric. It’s really important.

It can be very debilitating if not managed. And it reminded me of a really good friend of ours who lost her leg at Lake Rotoma. Lake Rotoma is in the Bay of Plenty; and we were there, and that was a Māori lease community. And we then moved to another Māori lease community at Hatepe, which is halfway between Taupō and Tūrangi. And it’s interesting; the reason I was just thinking about that is that it’s a really interesting case of … it’s almost like seeing the Treaty of Waitangi in living practice. So this is where the lease is in perpetuity; so so long as you are paying your rent each year, which is broken down into quarterly payments, you have a lease forever, so long as the sun rises and the stars are in the sky at night, you have a lease. Now that’s very different than [from] most peoples’ expectations around a Māori lease property. So the Māori lease property we had in Lake Rotoma was a twenty by twenty lease, and that was it. Whereas Hatepe is free of it.

But then you need the cultural values; so we have regular meetings with the incorporation, that is, the iwi. We have regular meetings with them about the harmony of the community; we have regular functions together; we have a bi-annual Easter hangi where we lay down a hangi for two days; we have these sports competitions between one another – tennis and Seagull … you know the old Seagull boat engines? We have a Seagull race every year, and it’s been really interesting. And you know, I find myself very blessed that I did that piece of genealogy work …

To find that it’s part of your life?

Oh … it was epic! It was amazing. Seriously, when you’ve got strawberry blonde hair and you’re covered in freckles [chuckle] and you’ve got no family photos with anyone with any dark hair, it’s rather interesting, and … I’ll just dive into that story. So Dad loves history; Mum loves history; but I’m very, very passionate about it. Dad did the original work going back about four generations, pre the internet, so I took all of Don’s work; it was very expensive for him to do back in the day I remember he was saying, “Look, I’ve laid down the groundwork. This is where I think we’re from.” So I took all of that work two decades later and I gave it to a Scotsman in Dunfermline, just on the other side of Carlisle, just over the bridge. Is it the Forth Bridge? Is that what’s it’s called?

Yes.

Just over the …

Forth of Fife. [Firth of Forth]

[Chuckle] Always gets me confused. And so I gave the data to him and it was amazing because with the internet … and this is where people’s family trees, these things that are gathering dust all rolled up in a scroll … the internet brings it to life, and it’s amazing the connectivity. And well, that’s what happened to us. So I got an email from Dave Ravey, who was the genealogist, who I spent a lot of money with over … oh, I think I had him on a fixed fee retainer for eighteen months – I think it was costing me $800 a month – but it was a major project. We went back to the 1400s; like, I really wanted to nail this – like, “Let’s make it happen.” And about two weeks in he emailed me and he said, “Hey, someone’s reached out to me from New Zealand.” And he said, “If we find that you’ve got any Māori blood, would you like to know about it?” And I was like – ‘what a strange question to ask.’ So I emailed him back immediately – I happened to be at my desk; he was late at night, I was early in the morning. So I emailed him back and said, “Absolutely!” And I joked – I did a quip at the end and said, “Mate, I’m basically translucent under a lamp, I’m so fair – there is no Māori blood. But whatever there is, there is; you let me know. I’m keen – if we’re pirates, whatever.” One minute later – bang; it came through, full genealogy, all the way back to Te Rehe, all the stories from him fighting Te Rauparaha. I was just absolutely floored! [Chuckle] Actually it brought a tear to my eye ‘cause it was like … when you find out something like that … I use the word ‘colourful’, because life is a rich tapestry; and that adds so much colour to your life. When something you didn’t know comes up in your life … it’s amazing.

So then I reached out to Ngāi Tahu; and I phoned them and I said, “I’d like to speak to the whakapapa unit.” I said, “Oh, hi – I’d like to talk about what I believe is my fifth great-grandfather”, and I said, “how do I get connected and become a member of the tribe so I can get some newsletters and find out about what you guys do? And also, how can I get more historical information on Te Rehe?” And they said, “Oh, Mr Stewart – here’s the application form. You need to find your ancestor’s name in the Blue Book.” And I was like …”What’s the Blue Book?” And they said, “The census of 1848.” And I was like … “Oh, I really hope he was around that day” [chuckle] “when the census was done.” And anyway, you know, I was looking through all the pages – page after page after page – and what do you know? There he was, looking out at [from] the page from [at] me, as was his wife, our ancestors; so, what … my fifth great-grandmother?  And there they were. So I sent off the form, phoned the whakapapa unit again and said, “Hey, you’ve got my details?” And they said, “Oh yeah, we know who you are; we know who everyone is, but you need to reach out to us, we don’t reach out to you.”

There’s one piece of land in Gisborne area – there used to be four owners and now there’s four hundred and eighty owners. That’s what’s causing real problems in that area.

At a governance level, when the pie is not growing but you’re having to cut the pie up into smaller pieces – that is darn difficult. Look, governance skill within the Māori population is growing at an exorbitant rate – I mean, they have put a lot of resource … And I look at Ngāi Tahu or, as they say Kāi Tahu – I look at Kāi Tahu and what they have done in terms of putting in place the next generation of business leaders with skills and financial literacy.

[Speaking together] That’s what it needs though …

‘Cause I get the newsletters; I get the magazines; I mean, they are doing this stuff.

Okay, so the other night I was at Hatepe where we have our little lake house; and it’s a little fishing cottage, it’s nothing glamorous. The garage is bigger than the house; it’s tiny, [chuckle] it’s old school; it’s so cute, very quaint, very old school. And that night an email came through from Ngāi Tahu saying that they were issuing scholarships to Yale for people that [who] wanted to advance their knowledge and governance skills. Wow! I mean …

[Speaking together] That’s an amazing thing.  Yes.

… bravo! Bravo to them. And so I get to see that and see what they’re doing.

Your son might grow up and go and get a Yale scholarship and go with that …

Wouldn’t that be an amazing gift from what would be his sixth great-grandfather, to him? I’m very, very passionate about history, so it means a lot to me those things.

But the financial literacy side … because Ngāi Tahu – of course I never knew any of this stuff – Ngāi Tahu have their own Kiwisaver scheme. So my wife and I and the children are all in Kiwisaver, and it’s in the funds that we manage; but then the children and I are also members of the savings scheme with Ngāi Tahu which is called Wharewa, and there’s a whole financial literacy framework built around that. I love what they’re doing. They’re really trying.

But they’ve learnt that as the tribe grows and the numbers of beneficiaries grow, you have to keep growing the pie, because otherwise it’s not growing enough. And a couple of the tribal groups, or the smaller hapu groups that I see – their number of beneficiaries has gone from a dozen to in the hundreds. And it’s creating some major issues because the distributions haven’t kept up with the growth and the beneficiary numbers, or hasn’t kept up with inflation. And what was a meaningful payment in the 1960s, the dividend does not now … And yet the administrative burden is huge on the way that these things need to be done.

Erica was just telling me a cool little story … why don’t you tell me the story about your Instant Kiwi?

Oh the Instant Kiwi … once a fortnight I buy one ticket for a dollar, and at the moment, having been buying it since Christmas actually, so it’s nearly four months; I’m $3 up.

[Chuckles] That’s a good story. You know, it’s interesting ‘cause it made me think, the reason I was going to talk about that is that, you know … there are a lot of people that if they put into Kiwisaver – and I use the Kiwisaver because it’s so simple, and it’s all built into the tax system. It’s easy. From your bank account, if you know your IRD [Inland Revenue Department] number you can put money into your Kiwisaver just with a click; enter the dollar amount, enter the IRD number and send. If they were to save per week what they spend on Lotto, they would have a sizeable nest egg when they retire. But Erica, the money people are spending on, say something like Lotto on a weekly basis, some people are spending $50 a week!

Yes.

Streuth!

Well, going back to the business – one thing that I look at is that, you know, the regulatory bar to do what my father did in setting up a business over thirty years ago – we celebrated our thirty year anniversary as a limited liability company last October; and for someone to do what my father did back then would be very, very difficult to do today, because of the regulatory bar and what you have to do to actually set up a business. You’d be bleeding money for years; no one would do it. And I look at it and I go – okay, so if no one’s joining the industry, and people are selling their businesses or closing them down as they retire and get older – I look at it and I go, ‘you know, there won’t be that many that are like us.’ So we’re an inter-generational financial services business running global best practice from the regions. And I think that’s something that is to be cherished. And you know, we’re phoned once a year with people wanting to buy our business. Predominantly they’re people out of Australia, and we’re just not for sale. Just not interested. The firm the other day that phoned and asked – they said, “Well, don’t you want to know the price?” And we said, “Why would I want to know the price when we’re not for sale?” They couldn’t get it. Well if you’re not for sale, you’re not for sale; and you’re doing it for a much more altruistic reason than making a dollar.  And you know, I hope that our business and what we’re doing with our succession planning – that we are something that Hawke’s Bay people will be proud of in the future, because you know, I love dealing with businesses where I know that the person that I’m dealing with has skin in the game; their name’s on the door and that they take pride in what they do. And you know, that’s what Hawke’s Bay’s about. And it’s always been that way, and I would like to see that continue into the future. The social fabric of Hawke’s Bay is very special.

The business is here, the whole living is here, and the future is here but being spread out worldwide.

Yep. Yeah, I used to talk to the former Prime Minister, John Key, about it quite a lot. John came and presented to clients, and we had a private lunch out at the Te Awa Farm Winery many years ago; it was about six weeks before he became Don Brash’s right hand man. So Don was the leader, and he said to John – John Key became his, like, finance shadow spokesperson, and of course John eventually took the role off Don. But I remember, you know, John talking to me, and he said, “Nick, I’ve been offshore”, and he said, “we can do some amazing things here.” He said, “You know, we’ve got basically a low cost centre, but we’ve got an amazing lifestyle that comes with that, ‘cause traditionally you don’t need a lot of money to have a nice life here.” Whereas he said, “You go to California, you go to New York, you go to London,” he said, “Sydney!” He said, “To have a nice life you need a lot of money.” You know … very, very blessed. And with that comes some pressures in time, where when you’re a popular place on the planet, people want to be. And so you know, there’ll be a few more people. I remember when I was at school in Third Form, the first time I did economics; my economics teacher was Ross Barry; he was also our hockey coach. I recall New Zealand only had like, 3.3 or 3.4 million people then. Well you know, it’ll be five shortly.

Now I’ve just got to ask you, have you got any papers or photos, or ..?

Absolutely. We actually keep a little folder of things at the office, of special photos that we’ve had over time as a family business, and they’ve all been printed in a good format for you. And there’s some photos of us with notable global economists; Prime Minister opening our office; yeah, you name it – there’s all sorts of things there. And there’s a little bit about the photo of Don and I – this is a cool little story, you’ll like this one. There’s a photo of us here that will be posted and it’s of me sitting on a motorbike with Don’s arm on my shoulder. That motorbike was my grandfather’s motorbike from the dairy farm in Norsewood, [chuckle] and it lives in the foyer of our office, and it’s … it’s like a grounding thing; whenever I see it I always have a smile, because it’s a cute little Villiers James 1948 motorcycle. And it’s kind of on display, and it reminds us of our ancestors that came from the land – people of the land, simple folk, good Scottish values. You know, nice people that liked helping people. And I think that’s pretty special.

Thank you.

My pleasure.

So on that note we’ll sign off.

Perfect. That was great to have a chat with you.