Sporting name of the share-trading game

BY CATHERINE HARRIS

Talking to Neil Paviour-Smith, one can't help but sense his passion for sport.

He reckons he has been to every game at Wellington's "Cake Tin". He supported its development as an affected resident, "although I kept saying I was positively affected".

Even his office window looks back towards the stadium and Petone, rather than out towards Cook Strait.

So he is obviously excited by his firm securing naming rights on the new Dunedin stadium.

The project has provoked controversy with lovers of the old Carisbrook grounds, but Mr Paviour-Smith believes the debate is healthy and similar to those over other public spaces such as the Auckland waterfront.

"Think of Westpac Stadium. There was a lot of controversy about it at the time but now I think Wellingtonians see it as a fantastic asset to the city, as something that has brought life and a lot of things to celebrate here.

"It has brought the Phoenix here, the sevens ... the Hurricanes have stayed here, test rugby is still played here. I mean, think of what might have been had that not been built."

Forsyth Barr, which has $4 billion under management, is one of the few big brokerages to remain completely Kiwi-owned. It was established in Dunedin nearly 75 years ago.

However, its managing director is very much Wellington-oriented.

Born in the capital and educated at Victoria University, Mr Paviour-Smith spent his earlier years living in various parts of Australasia.

He spent some formative years in Melbourne, where he played cricket and Aussie Rules, and when he was 15 the family returned to Wellington.

Although he was unclear at that time what he wanted to do, it was about then that he remembers first becoming aware of the stockmarket.

"It was probably the pre-1987 stockmarket frenzy that got me interested in the market. I wasn't a prolific trader, a schoolboy share trader sort of thing. I had bought some shares with some money but it was something I got interested in."

To a kid in the 1980s it might have seemed glamorous, but Mr Paviour-Smith is quick to dismiss any unrealistic notion people might have of sharebroking today.

"I think what you see on TV is either imported and it's frenzied Wall Street, paper flying everywhere, traders on the floor flapping their arms about with four telephones up to their ear, and the reality is completely different.

"Equally, the attention grabbing television news or even the newspaper headlines are very much around, they tend to profile the big changes in the stockmarket, the big movements, the volatility and, by and large, most of the time it's a lot more mundane and dull."

Nevertheless, his interest and a keen work ethic have helped Mr Paviour-Smith rise to the top of his field at a relatively young 40 years of age.

He attributes this partly to his impatience to get out in the working world.

He left university part way through his commerce degree, and finished it while working in investment accounting, then funds management for a decade.

In 1998, having become head of research for National Mutual Funds Management, Mr Paviour-Smith and five Forsyth Barr staff bought a half stake in Forsyth Barr and moved into management roles. The three original owners, including former NZX chairman Sir Eion Edgar, still hold the other half.

Now a NZX director himself, Mr Paviour-Smith initially took on the role of head of research.

But he increasingly found himself drawn into management tasks until he became managing director in 2001.

"What I liked about Forsyth Barr was having come from a wholesale funds management background, I liked the fact it had essentially a retail business, a private client business, which I saw as very much where the growth was going to be at the time."

Time has proved him right. Competition in the share-trading sphere is no longer just among brokers but from banks, financial planners and others, and brokers are dabbling in other areas, too.

"People are accessing the market through different mechanisms, brokers are diversifying their activities into portfolio management, wealth management in our case, and through much more varied activities."

The shift into portfolio management is not just about turf rivalry. Clients themselves want a one-stop shop, he says. "They don't just want advice on shares. They want advice on fixed interest and global investments, cash management, currencies."

SOME people have expressed concern that the brokerage industry is also shrinking into an increasingly smaller pool of hands. The flipside is that it has helped Forsyth Barr grow from 11 to 19 branches and to about 110 advisers during the recession.

Mr Paviour-Smith does not believe there will be much more consolidation among the half a dozen major players, "and if there was, it would be a concern because you need enough participants to be a market".

But he is concerned about the wider picture – New Zealand's productivity, its shrinking pool of capital, a stagnant sharemarket and a risk-averse preference for fixed interest and bonds.

He thinks Kiwis have a "do it yourself" approach to the savings market and that has inevitably led to "a more conservative set of outcomes".

He compares this with Australia, where compulsory superannuation has led to fund managers doing much of the investing, resulting in a heavier focus on shares.

And like NZX chairman Andrew Harmos and outgoing AgResearch chief executive Andrew West, Mr Paviour-Smith finds it hard not to look at that country's deep pool of compulsory savings and think the same thing should be here.

"I think ultimately there are many things in life that are compulsory ... and you accept those as being good for society and the economy you live in. I must admit it's extremely frustrating to not be part of an industry that has the savings clout behind it, as we see in our nearest neighbour.

"People look at Australia a lot [but] you could look at other countries around the world where there are similar things going on."

He particularly likes the approach Norway has taken to save its oil wealth rather than consume a high income.

"That to me is a fantastic example of responsible government, so I think the idea of the Government putting additional money into looking after its future liabilities through a scheme like that is also an important part of how capital markets can flourish."

Critics have been quick to point out that a compulsory savings regime would be very good for brokers and financial planners, but Mr Paviour-Smith is unapologetic.

"I think it takes the pressure off Government to fund certain things like infrastructure and development because the private sector will do it for you in many cases.

"New Zealanders hate the fact that so many of our assets are not owned by New Zealand. We've had to sell them, we've had to rely on foreign capital to sustain our standard of living. We'd love to own more of our assets again, and to do that we've got to save up."

Compulsory savings are just part of the capital markets debate, and Mr Paviour-Smith believes some fine tuning of the tax laws is also in order.

He notes the grey area over whether individuals should be deemed to be traders and liable for tax if they trade in New Zealand or Australian shares outside the PIE regime.

He thinks this makes people reluctant to trade.

"You would see a massive change in the level of the activity if you took away the uncertainty."

These things are interconnected, long-term discussions, he says, "not the sort of political arguments about Closing the Gaps, those sorts of things, but looking at what can New Zealand do ... to grow its wealth over time".

Mr Paviour-Smith is father to four young children. He seems more of a generation that would listen to pop music on the car radio than opera, but as Forsyth Barr winds up an eight-year sponsorship of the Arts Foundation, he holds a warm view of the foundation's work.

"I think it's fantastic if you look at what has happened in the last 20-odd years, the appreciation of New Zealand art, music and so on, from where it was ... we used to have a cringe factor. If it was from New Zealand it wasn't any good. Whereas now it's celebrated."

The Dunedin stadium is the new focus of the firm's sponsorship, "which is very exciting, and the only covered roof stadium in New Zealand".

"Once it's open and the World Cup matches are being played there, and ... it's played under cover in the middle of July, or whatever, they'll realise it's a pretty special experience."

- © Fairfax NZ News