The truth about money: Sam Stubbs on how to live a rich life

Financial high-flyer Sam Stubbs is on a mission to help more Kiwis learn how to build wealth. By Paul Little.

Sam Stubbs, co-founder and public face of Simplicity, the not-for-profit KiwiSaver and fund manager, is
in Oslo. He is not there to research possible investment opportunities for the fast-growing company, nor to examine how a socially progressive country tends its citizens’ finances. He’s there because he told his 18-year-old son, Ben, that if Ben applied himself to his studies, he would take him on a trip anywhere in the world. Consequently, the early morning Zoom call is backgrounded by Ben’s hunt for socks and a charger as he prepares to amble out for breakfast.

Stubbs and his partner, journalist Amanda Morrall, have a blended family made up of his two – Emma, 21, and Ben – and her two – Connor, 20, and Liam, 19. All are students. Morrall is one of Simplicity’s other co-founders, along with Andrew Lance and Amir Bashir.

It will probably reassure Simplicity’s 126,000 investors to know that the man overseeing their $4.3 billion in investments has their interests in mind, even on the other side of the world.

“Every single cent of it is someone else’s money and it’s a very big responsibility,” says Stubbs, “but I don’t consider it a burden. When you have 3000 investments in 23 countries, on any one day something’s going up and something’s going down. If you have diversified risk, nothing can hurt you too much. You tend to sleep well at night.”

Simplicity is run as a close-knit team including the founders, 30 staff and a changing roster of volunteers.

Stubbs, 57, definitely thinks outside the spreadsheet. A self-described disruptor, his priorities have changed considerably since his early days, first at local merchant bank Fay, Richwhite and later at Goldman Sachs, in the UK and around the world, for 10 years.

He studied politics and philosophy at Auckland University, emerging with a master’s degree with first-class honours and no intention of going into the world of finance. But he did.

“It was for all the wrong reasons,” he says. “Faster cars, pretty girls. It was Fay, Richwhite, and it was glamorous. We were trying to win the America’s Cup. A lot of it was that I wanted to be wealthy, because I came from an area that wasn’t so wealthy.”

He grew up in West Auckland, the son of schoolteacher parents who lived the sort of life that was taken for granted then but seems increasingly unrealistic now. His parents worked hard, bought their house, bought a bach and held to strong family values.

At rugby-mad Kelston Boys’ High School, Stubbs, “a thin white nerdy kid”, learnt about pecking orders and priorities. “That was a bit of a jungle for me early on and so learning how to navigate that was really valuable.”

Not a natural sportsman, he had been ­relegated to the hockey team.

He was also, due to circumstances beyond his control, acting head boy at the time when Graham Henry – who would eventually become the All Blacks’ coach – took over as principal of the school. Stubbs was summonsed.

“Stubbs, you play hockey?” barked Henry.

“Yeah.”

“We need to do something about that.”

Next minute, the lowly hockey player had been dismissed and the captain of the First XV appointed head boy, and the natural order was restored.

There was another valuable lesson, when Stubbs joined the ill-fated Hanover Group as its chief executive on his return to New Zealand in 2007, after the Goldman Sachs years.

“I did that purely for money. They gave me the job and said, ‘We want you to list this company, want you to take it into fund management, and then we’ll exit it.’

“That was what I was sold, and that’s what I bought, and I didn’t do my proper due diligence. Not only could I not work with the owners, there was a difference of opinion at a very fundamental level. The Global Financial Crisis was starting to happen, and it was clear the company wasn’t going to get listed, the founders weren’t going to exit and there wasn’t going to be a fund management business. So there was no reason for me to be there.”

His resignation was announced amid growing turmoil in the finance sector. Hanover collapsed a few months later, owing more than half a billion dollars to more than 36,000 investors, many of whom knew very little about what they were actually investing in.

“Every now and again, when someone wants to have a hit at me, they’ll bring that up: ‘You can’t trust this guy.’ Because in my entire career, I spent seven months working for one particular finance company.”

His midlife crisis involved “divorce and looking in the mirror and feeling uncomfortable about the person I’d become. Getting out of that hedonistic trouble was wrenching emotionally. It probably was depression.”

Since then, he says, he has gone back to the Kiwi values of fairness and opportunity with which he was brought up and that used to be taken for granted. “I’m just doing what my mother would do in school, which was fight for the kids and do what was good for them. I’m just doing it in a different area.”

Demystifying money

His fight is currently focused on getting basic financial wisdom into as many heads as possible via a pocket-sized book, Money Made Simple. “I personally think it’s crazy that we don’t have basic financial literacy as a core school subject, because money is so important in people’s lives.”

Much of the advice in his book is well-worn: don’t get into debt, buy a house if you can and pay it off ASAP, understand compound interest. This is not occult knowledge reserved for initiates. And yet, people struggle to follow it.

Who benefits from this state of affairs? Finance companies, which profit from consumer anxiety. One of Stubbs’ main aims is to help people overcome their fear that finance is complicated.

“Money is incredibly simple,” he insists. “But our industry loves complexity, because complexity is profit. The finance industry is like any other priesthood – they want you to think it’s difficult and complex.” The idea that money can be made simple does not appeal to it.

Some of the advice in his book might fall into the “that’s easy for you to say” category. Such as “never make a decision based on money”, which is swell if you’ve got plenty of it. He acknowledges this.

“It’s easy for me to get into a patronising mode and assume that everyone has choices in life, when they don’t. For some people, there is literally not much they can do, they are dependent on the state, and dependent on income over which they have no control. For them, this book is not going to be useful. But that won’t be many people, because the vast majority of New Zealanders still have some choices, and they do still have a job. I think capitalism is a great way of making money, but I think socialism is a great way of distributing it.

“The point at which you stop worrying about money is a door opener to a whole lot of other things, because money worries are the worst. Every time you go to the shops, every time a bill arrives, every time the kid asks for something – it’s massively draining.”

He’s putting his investors’ money where his mouth is. Advice like “buy a home ASAP” might be impractical for many in today’s volatile housing market – but Simplicity is investing in building affordable homes. ASAP.

“Simplicity has opened up my eyes to the power of social enterprise. When you have billions of dollars to invest, you can invest it and make money and do good. The money we lend out to first-home buyers, or the affordable housing we’re doing now, is making a really good solid return for people.”

Unrecognised expertise

Stubbs believes we would worry less about money if we realised how much we already know. “Most people don’t need financial advisers, and most people are pretty good financial experts, because they run their own household. If you’re running a home and household finances, you’re actually a financial expert. You don’t realise it but you understand assets and liabilities, you understand cash flow, you understand budgeting, you understand investing.

“But the sheer volume of financial products on the market, the amount of information fired at us and the variety of financial institutions that exist are daunting.”

Stubbs agrees that money is more complicated than it used to be. “And it’s certainly much harder than it needs to be. It’s because the industry needs to generate new stuff all the time to stimulate people’s interests. The industry wants you to think about money maybe 2 per cent of your time, but actually you should be thinking about money about 1/10th of 1 per cent of your time.”

Which will reduce anxiety considerably. “A lot of the stress about money is the perceived feeling of lack of control.”

Simplicity describes his own lifestyle as well as his business. He has no credit cards and some basic insurance, but not, interestingly, health insurance, about which he remains ambivalent.

“I have had it myself, when the kids were young. I don’t have it now. I actually trust the state will look after me if I get really sick. And I can afford to pay for the small stuff.”

Nevertheless, “I think Southern Cross are an awesome organisation. We modelled ourselves on them. We want to be the Southern Cross of finance.”

The danger with private healthcare, he says, oscillating between his capitalist and socialist modes, “is when you get money, you start insulating yourself from the real world. When you start sending your kids to private school, you’re not as invested in the welfare of everyone else and yourself by investing in the state-run institutions.”

He also passes on oft-quoted advice that is all too easy to forget: that after a certain amount of income, happiness is not increased. “In my Goldman Sachs days, I hung around with billionaires, and I can honestly say, from my sample set, that there is zero correlation between wealth and happiness.”

Up to a point, however, money is incredibly important. He quotes studies showing the optimal household income is anywhere between $100,000 and $200,000 a year, but believes the amount is now probably closer to the latter than the former.

One rule that isn’t in his book but underlies much of what he says and does is that “True happiness has nothing to do with what you have. It’s to do with people.”

Which is a message as old as Ecclesiastes, yet one that people still fail to take on board.

Knack for simplifying

If Stubbs’ ambitions for it are realised, Money Made Simple will get that message across. It’s more of a booklet than a book, but even that was a bit of an effort, apparently. “Writing a book’s hard, eh? I never knew you had to reread something so many times, and every single time you find something.”

It was the suggestion of publisher Robbie Burton, who had attended one of Stubbs’ presentations. “Robbie said: ‘What you’re saying here is not being said. People may know it, but it hasn’t been simplified the way you do.'” So Stubbs agreed to do the book “because our mission is to get everybody with more money, more choices, and a more dignified life”.

It is not, he insists, just a case of getting people to pay $10 for an ad for his fund.

“We’re a non-profit company owned by a charity. The purpose of the book was that we just want people to be smarter with money. Maybe they’ll find their way towards us, and maybe they won’t. That’s okay, because we’re big enough anyway.”

He hopes there will be a version in te reo Māori and is offering free copies to any school that wants them.

Wealth of opinions

The book complements Stubbs’ high profile and his willingness to speak out as a critic of the finance industry and others. Which is all the more surprising given that “I had a very bad stutter when I was a kid. I couldn’t use the phone. I couldn’t speak at all, actually. At my worst, that was one word a minute.”

But when he had to do a school give-a-speech-to-the-class exercise, his stutter disappeared. “When I got up on stage, for some reason, boom, I didn’t stutter. I still can’t explain it. So, when I’m in front of a crowd, I’m in my comfort zone.”

Just as well, because he has a lot to say. He is a believer in “speaking truth to power. I think that the vast majority of the finance industry in New Zealand are hugely compromised, because the people that they should be holding to account are their clients.”

Take the controversy over Fletcher Building and Gib supply and costs, about which Stubbs has hollered loud and long.

“We’re one of the few KiwiSaver managers that don’t also want to be a client of Fletcher’s. Many banks and investment banks that run KiwiSaver schemes want Fletchers as a client for their bank or investment bank. That’s why, I think, they remained strategically silent [on Fletcher Building]. We didn’t have that conflict, so spoke up.

“And I believe that there is a responsibility, if you’re acting on behalf of a lot of shareholders, to encourage companies to behave better. We will use the commercial advantages we have, and also the heft we have as a shareholder. We’re pretty close to owning 1 per cent of all of the biggest companies in New Zealand. At that point, you start to get noticed.”

His readiness to remind people about Simplicity’s ethical stance – and the fact that its fees are a third of the industry norm – makes him something of a schadenfreude magnet.

If you’re positioning yourself as the ethical investment, you’re implying the others’ investments are not ethical.

Few of Simplicity’s competitors grieved publicly when an ad it had been running for quite some time with no complaints came to the attention of the Financial Markets Authority, which ruled that it was misleading.

“We’ve been advertising that way for about five years,” says Stubbs, “and we had received no industry objections. The ad said you could be 20 per cent better off [with Simplicity]. It had been through all the sign-offs. And then the FMA decided that was misleading. And so we just we accepted that and, of course, changed it.”

The blip will not alter the fund’s trajectory. “I think Simplicity will be the biggest financial institution in New Zealand. There’s nothing special about what we’re doing. There’s not a single new idea. We’re just doing what’s worked overseas. I don’t like investing in new ideas with your money. That’s not right. [Other funds will] come back and compete, for sure. But they don’t have an enduring competitive advantage, because they have to make a lot of money.”

Simplicity is 100 per cent owned by the Simplicity Charitable Trust. It makes a small cash surplus every year and 15 per cent of fees go to the Simplicity Foundation, which has already given more than $4 million to charity.

“And we are accumulating a rainy-day fund now. We have to fund some growth in the business, but the rest of it goes back to investors in fee cuts – we’ve already cut fees four times in five years.”

It seems everyone wants to help: “Robbie is doing the book pro bono. The printers have given us an incredibly good rate. We have been gifted a building company, to do [affordable housing developer] Simplicity Living. It’s been an absolute revelation to me about how generous people are.”

Volunteers donating a little of their time are an important part of the mix. “At any one time we have six to 10 working with us – as trustees of our charity, lawyers, marketing and in other roles.

“The most recent example are Shane and Anna Brealey, who have effectively gifted us their construction company so we can build affordable homes [through Simplicity Living]. They will run it for another five years – pro bono.”

It’s an enterprising social enterprise. “We are one of the most thinly populated countries in the world with some of the most expensive house prices. You can either accept that, in which case we are consigning a generation of kids to non-homeownership, which is not the New Zealand dream, or you can do something about it.

“We will have tens of billions of dollars to help do something about that. And we will. We’re building the first 120 homes now and we’ve got the land for the first 600. It doesn’t displace the state. It just supplements that and helps create the infrastructure that creates a better New Zealand.”

Frugal is fun

Sam Stubbs says he is a lot happier since he began divesting. Out went the de rigueur trappings of the successful financial high-flyer: “All my cars, boats, houses. Everything. I had a very hedonistic life at one stage, and I was very unsatisfied.”

Finding ways to live more frugally is one of Stubbs’ hobbies. Given his ability to generate a considerable amount of personal income, why bother?

“Because I think it is more fun. Because I’ve had experience with the other side. Don’t get me wrong, I have the odd treat every now and again, but there’s an optimal point where spending a lot more money does not get you more pleasure.”

Take his current trip: “I could afford a five-star hotel. I could equally stay in a backpackers with my son. We’re somewhere in the middle. We’re in a three-star, because it’s fine, because it’s got a nice shower and beds and I don’t need more than that. Decluttering these things and making things generally as simple as they can be is a nice way to live.”

Stubbs says he always flies economy. He could turn left and pay some of the world’s most extortionate mark-ups for a glass of okay champagne, but “I’d rather spend the money on a slightly better hotel”.

Also, he knows how to make economy and seat selection work for him when booking. “You know certain flights will be busier, so if you have time flexibility you can take advantage of that. It’s not often I’ll be sitting next to somebody in the economy section of an international flight anywhere.”

8 golden rules of money

1. Pay off your debts

Compounding interest is great when you are earning it, deadly when it is adding to your debt burden.

2. Invest in education

Educational qualifications and how much you earn are closely linked.

3. Buy a house if you can, and pay it off as fast as possible

Almost the only possession that will increase in value over the long term.

4. Get into Kiwisaver

Because the government will give you $500 a year free money.

5. Stop paying high fees and high interest

Because they can make a big difference to how much money you have in retirement.

6. Choose diversified, passive funds

Diversity means risk is spread; passive management means someone like Stubbs isn’t trying to beat the market and pick winners.

7. Have a rainy-day fund

Put a little aside regularly where you won’t miss it, because rainy days do come.

8. Have some basic insurance

Treat it as something to have in case of potential disasters, not for lifestyle preservation.

Money Made Simple: Managing your money – a guide for all New Zealanders, Potton & Burton, $10.

This story was first published in the August 6, 2022 issue of the Listener.