More redundancies on way: director

Neil Paviour-Smith. PHOTO: SUPPLIED
Neil Paviour-Smith. PHOTO: SUPPLIED
Forsyth Barr managing director Neil Paviour-Smith suspects more businesses are likely to call for redundancies in the second half of the year.

Mr Paviour-Smith, who was at the investment firm’s Dunedin headquarters this week, was discussing the current economic situation and how optimism at the beginning of the year that business would pick up had been "dealt to" by recent news and expectations it would take longer.

The world was paying the price for cheap credit created to deal with the Covid-19.

"When did we last see money so freely available? Governments just printing money . . . there’s a price to pay."

After the crash of 1987, the years of 1988-89 were "pretty bad" but there was a mini-bounce in markets in 1989. But it was 1990-91 that were really hard years and, while it was different circumstances, that was probably something to reflect on.

Times were tough and people were feeling that. Inflation had a ravaging effect on the economy, people and communities. Some of the pressures were external and macro, while others were industry pressures.

Every business was facing big cost pressures and revenue under pressure. People did not have as much money to spend, which was a challenge for businesses, he said.

There was also much uncertainty with the geopolitical situation, including a fixation with the Donald Trump versus Joe Biden presidential election in the United States.

But regardless of who won, the US would still be a powerhouse and he believed there would be a disproportionately large focus on the outcome. The media was creating in people’s minds that it was a "bigger thing" than it actually was.

Alongside the US election, there was the Russia-Ukraine conflict, which did not appear to have any near-term resolution. There were questions over China and the nature of New Zealand’s relationship with its biggest trading partner, and the view of some commentators that it was a matter of not if, but when, China got a military base in the Pacific.

Then there was Europe "bumbling along" as the EU, and the situation in the Middle East.

So there was "a lot of noise there", worry and concern and a genuine fear that these things could escalate into "something really bad". But he believed a level head was needed and a reminder that there was some sort of conflict in the geopolitical landscape in just about every year in history.

Forsyth Barr was affected by economic conditions like any other business but it was "not sitting still", he said.

It had a very active strategy around growth. That was about providing its core services to people struggling to access financial advice and effectively build its share of the wealth market which was dominated by bank deposits.

Core to its proposition was a human relationship around the wealth services it provided. When people had a meaningful sum of money, whatever it might be, they wanted to sit down with someone they trusted, rather like visiting a GP to talk about a medical problem.

Its strategy as a business was to look at how it could continue to grow at the rate it had over a long period — it bought Hobson Wealth last year which was integrated into Forsyth Barr at the end of March — and continue providing good advice to clients who could get overwhelmed and worried about the "noise".

"Our job is to provide the reassurances."