Getting to Know: Nick Stewart

A family connection got this adviser into the industry but now he'd like to see some changes.

Friday, February 16th 2018, 10:30AM

Nick Stewart (left) enjoys a bit of water fowl hunting outside of work

Who are you and what you do?

I am an AFA and CEO of Stewart Group and Boutique Advisers Alliance (BAA). Stewart Group is the Hawkes Bay-owned and operated independent financial planning firm, based in Hastings and in Wellington. BAA provides investment research services to like-minded, fee only, independent financial advisers as well as owning their own custodial platform and supporting advisers through back office administration. Stewart Group is also the asset consultant to the Asset Class KiwiSaver funds, administered by Booster.

How did you get into the industry?

My father, Don Stewart, started in financial services in 1974 and he was instrumental during my upbringing in sparking my interest in financial services. He gave me the opportunity in my teenage years of working over the school holidays with the firm and to ultimately take a term contract with Stewart Group in July 2000 and after three months I decided that rather than again heading offshore and then coming back to the firm permanently in five years’ time, I would get my feet under the desk and get started. I loved it and three years later I bought and paid for a cornerstone stake in the business.

If there is one thing you would like to change about the financial advice industry, what would it be?

Seeing greater transparency remuneration structures and the perverse negative client outcomes that occur as the result. The iceberg analogy is alive and well.

What's the best advice you have ever received?

During the first two years at Stewart Group I was fortunate to meet a Toronto-based fee only independent adviser, who recommended that we touch base with USA-based Dimensional Fund Advisers and learn more about their factor-driven investment strategy. Furthermore, we've partnered with other successful advisers globally. What was initially a study group and is now a Geneva-based association called the Global Alliance of Independent Advisers to increase our knowledge and share and gather ideas that help our clients through their financial life journey.

What could financial advisers learn from other industries?

When I talk with many advisers, it's evident that many have created good lifestyle businesses, sound earnings streams and flexible hours and days of work. In other service industries they reinvest some of their earnings into creating a solid core within the business whether that be service and administrative teams or systems. We could learn a lot more from other industries in this regard, particularly with a substantial regulatory reform due in the years ahead. Not as they have been in the past at an adviser level, but these regulations focus on the entity that employs financial advisers.

What do you think the FMA has done well? What could it do better?

I think the FMA has done a great job in creating a collegial approach with industry participants, for the most part, against the backdrop of an adversarial approach as seen in other jurisdictions. In terms of what it could do better - the regulatory reforms could be slowed somewhat, so that the FMA’s ability to implement the legislation has the least distraction possible. When I reflect at the changes brought in place with the DIMS regime and the policy work and implementation was being created as the advisers were having to embrace this new regulation was difficult, meaning that some of the early applicants had a far difference experience than those who were late to the piece.

What could be done to improve KiwiSaver?

Reinstate and lift the incentive to join and increase tax member credit substantially from its current base of $520 for the member saving of $1040. I look with envy at other jurisdictions globally, who have been far more embracing of consumer saving, and transferring the responsibility of retirement from the state on to the individual. This has natural flow-on effect that many unsophisticated investors that I meet globally are far more financially aware than the average Kiwi. Furthermore, policing the substantial number of transfers that occur and that are predominantly initiated through the banks where investors are transferring purely on the basis of online visibility and where KiwiSaver is seen as an ancillary service.

What role do you see for adviser groups under the new rules?

I see much like the Australian dealer group regime that the new rules and regulations will allow a significant cohort of advisers to partner with the adviser groups by providing collegiality, systems and technology that are otherwise unobtainable to the individual adviser. This will extend the adviser's career tenure and create an opportunity for advisers to create long-term sustainable businesses that create a better platform for the delivery of client advice and therefore better client outcomes.

What have been the benefits of regulation?

With historical regulation, advisers, certainly authorised financial advisers, have had to treat their profession seriously, although I personally don’t see a significant benefit from regulation in the area of the QFEs or RFAs. The original legislation was far better in the draft form, but as we are all aware of the benefit of the hindsight, the regulations were substantially changed at the 11th hour and the acronyms AFA, RFA, and QFE were born, sadly as the result, we saw a distorted and complicated system evolve. I can only hope that the new reforms that are currently before the parliament, clean up some of these anomalies and lift all advisers to a similar bar in terms of accountability, fee remuneration disclosure, and the delivery of truly client-centric financial advice.

What has been the most rewarding part of your career?

The creation of the Booster Asset Class KiwiSaver funds through what was then Fidelity Life KiwiSaver scheme, would have to be one of the highlights. Fidelity Life was at the time led by CEO Milton Jennings who is now sits on our advisory board alongside Dr. Don Brash and Tasmanian adviser Peter Mancell. We launched the funds in the ghost period of Christmas break in 2012, not an easy thing to do as all of the service partners and the IRD were running skeleton teams. We started with 12 seed members comprising of close family and friends. It's pleasing to see so many advisers throughout NZ utilising the funds as part of their advice offering and the funds approaching $80 million utilising the Dimensional Fund Advisers factor-driven strategies.

What’s the biggest threat to financial advisers?

The under investment in systems and technology. Many advisers have invested little into their firms, many of the fundamental platforms for the delivery of financial services under a regulated environment haven't been built and there isn't profitability within the adviser’s firm without substantial investment from the advisers, or a large drop in take-home pay, whether that be salary or drawings.

What do you wish the public knew about financial advisers?

That financial advisers are here to help and that it’s not about asset gathering and sales. Perhaps, with a little luck, the new regulation will iron these issues out.

Are you a KiwiSaver member?

Yes, absolutely. My wife, my two children, and my extended family are all members of the Asset Class KiwiSaver funds, administered by Booster.

What’s your investment strategy?

The investment strategy is allocated to the Asset Class Growth fund, which is 90% equity weighting and 10% in bonds to reduce volatility. Our children particularly enjoy seeing their balance grow on quarterly basis via the text messaging we send out quarterly via our BAA CRM system.

Outside of work what do you do?

Other than spending time with my wife, Jenny, and our two children, Monty and Bea, I'm an enthusiastic wine connoisseur and collector, a keen follower of history, especially my Scottish and Ngai-Tahu ancestry, as well as keeping my own beehives. We have two beehives in our home garden and we give our honey away to clients during the year. I also enjoy scuba diving, skiing and waterfowl and upland game hunting. We are blessed in Hawkes Bay that I’m able to enjoy these past times as many are within a 20-minute drive.

What would you say if one of your kids told you they wanted to be a financial adviser?

Having been in this position, I would encourage the kids to be well read, be educated royally to take a quote from The Millionaire Next Door, and when the time is right that I would seek to arrange mentors for them within the industry so that they could spend time with other client-centric financial advisers, just as my father Don arranged for me, commencing from my high school years. I would also delegate to them the responsibility for their financial affairs as I think first-hand experience with both success and failure is important as these personal learnings, and also developing a passion and enthusiasm for financial services in paramount. I could still remember rigging new cray pots during the 1991 summer ensuring that every piece of rope that we acquired for the pots had to be Donaghy’s rope, as this was a favourite company of mine. I had a passion for following the company and enjoying its Fairy Down sleeping bags and ski jackets. It was a great way to understand capitalism and the rewards through stock price appreciation and a regular dividend cheque that despite my age and a small wallet that I was able to participate.

What’s one thing people may be surprised to know about you?

Since the young age I enjoyed reading of the WW1 flying Ace Manfred von Richthofen, the Red Baron. There wouldn't be a book or a documentary that I haven't read or seen, and I've been collecting Red Baron memorabilia for many years, such as pieces of his red Fokker Tri-plane and more recently, a signed photograph from 1917, his most successful year of combat.