The editorial below reflects the views of the editorial contributor only and content may be out of date. This article is sourced from a previous JUNO issue. JUNO’s content comes from sources that it considers accurate, but we do not guarantee that the content is accurate. Charts are visually indicative only. JUNO does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions.
Dunedin-born businessman and noted philanthropist Sir Eion Edgar is the chairman of financial services company Forsyth Barr. He shares his views on trust, success and what to do when investments go wrong.
Sir Eion Edgar is a businessman with a diverse range of interests, who has been praised for his lifetime of giving.
He was named NBR New Zealander of the Year in 2004, and Ryman Healthcare Senior New Zealander of the Year in 2010 in recognition of his achievements and generosity.
He’s a former chancellor of the University of Otago, chairman of the New Zealand Stock Exchange, and president of the New Zealand Olympic Committee. He also chairs the Edgar Olympic Foundation, NZ Dementia Prevention Trust, Queenstown Resort College, and the Winter Games NZ. He is patron of Diabetes NZ and a life trustee of the Halberg Trust.
He’s been on the boards of the Reserve Bank, the Accident Compensation Commission, and Vero.
Sir Eion’s career at Forsyth Barr started in 1972, and he has been involved with the business ever since, much of the time as chairman. Forsyth Barr now manages more than $5 billion of clients’ money.
For the full interview visit unfiltered.co.nz
At Forsyth Barr, how did you build that trust and loyalty with the people who are trusting you to manage their money?
When I joined the partnership on the first of April, 1973, I took the view that if you do well for your clients, you will do well. And that’s the philosophy we’ve always worked on and it’s worked very well, because if they do well, they’ll keep doing business with you, and therefore you do well.
You might recall there was the Securitibank collapse in 1976. One of our partners, the late Keith Skinner, was a director of Securitibank and . . . we felt that because of his involvement we weren’t as well informed about Securitibank as others. So, we made the decision when it collapsed that we would personally pay out all of the clients of Forsyth Barr who had investments with Securitibank.
It was quite a cost to us. But the integrity of paying those people probably did more to grow the business than anything.
Another thing was that during the big hype in the late 80s [before the share market crash], we actually stopped taking new clients. We said: “Look, we’re struggling to keep up with our existing clients, why take on more, because we’re just going to put ourselves in a situation where we can’t service existing clients.”
So, we were quite unpopular, I have to say, among the industry and people who wanted to become clients, but we said, “Well, look, we’ve got good clients now, we’re trying to look after them.”
From your perspective, what’s the most important factor in the success of a business?
Getting the governance right. The governance’s big job is to appoint an inspirational chief executive . . . and then make sure they perform. And if they don’t, replace them. At the end of the day, great companies come from great people.
If you were going to summarise a few bits of advice for people wanting to get into investment, what would you say?
No shortcuts! Do your homework. Put in the time or ask your trusted adviser, who can give you good advice.
Study it, read about it. Is the industry right? If it’s a growth industry, is it going to get bigger?
Secondly, once you’ve decided on the industry, who are the good companies and who’s got the good management; who’s showing innovation?
It’s really just gradually going through those steps. And of course, the thoroughness of it depends on the relevant size of the investment.
If you’re going to put 5 per cent of your wealth into something, you obviously put in an enormous amount of effort into it, whereas if it’s half of 1 per cent you might say: “Well, that sounds like a good idea. The adviser has given me good advice in the past, so I’ll do it.”
I think you’ve got to put into perspective the scale of what you’re investing in.
What was one of the best bits of advice you were ever given?
Well, I think there are three things that I would say. Firstly, there is no question: the harder you work, the luckier you get.
It sounds glib, but it’s right, and it really manifests itself: if you’re going to look at any investment, you need to do your homework. You know you can look at the glossies and other things, but you need to dig in, ask questions. When I look at the mistakes I’ve made – and there’s been a lot of them – most of the mistakes were because I didn’t do enough homework.
I trusted the people, thought it sounded a great idea: “Yes, look, I’m busy – let’s get on with it.”
Secondly, no one is perfect in their investments. You’ll make mistakes.
Lastly, pull the pin quick on the mistakes. I’ve tended to say, “Oh well, I’ve got so much invested I’d better stick in for a bit longer and it’ll come right.”
If you make a mistake, and see that the company’s not going the right way, cut the painter.