Blue Chip Journal Issue 76
Blue Chip is a quarterly journal for the financial planning industry and is the official publication of the Financial Planning Institute of Southern Africa NPC (FPI), effective from the January 2020 edition. Blue Chip publishes contributions from FPI and other leading industry figures, covering all aspects of the financial planning industry.
Blue Chip is a quarterly journal for the financial planning industry and is the official publication of the Financial Planning Institute of Southern Africa NPC (FPI), effective from the January 2020 edition. Blue Chip publishes contributions from FPI and other leading industry figures, covering all aspects of the financial planning industry.
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<strong>Issue</strong> <strong>76</strong> • July 2020<br />
www.bluechipdigital.co.za<br />
The Official Publication of the FPI<br />
<strong>Blue</strong> sky investing<br />
The nonconservative<br />
approach to investment<br />
opportunities<br />
Living annuities<br />
The good news on the<br />
latest amendments<br />
Developing a<br />
post-Covid-19<br />
INVESTMENT STRATEGY<br />
Florbela Yates, Momentum<br />
Investment Consulting
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CONTENTS<br />
JULY 2020<br />
WHAT’S HAPPENING AT THE FPI?<br />
Message from the CEO<br />
ISSUE<br />
<strong>76</strong><br />
02<br />
44<br />
THE IMPACT OF COVID-19 ON CFP® PROFESSIONALS AND THEIR CLIENTS<br />
The Financial Planning Institute surveyed CFP® professionals<br />
to find out what’s happening on the ground<br />
44<br />
46<br />
48<br />
50<br />
WHAT IS IN A NAME? WHY PROFESSIONAL NAMES MATTER<br />
Recent developments are set to provide clarity in terms of financial<br />
advisor titles and regulatory certainty for financial planners in South Africa<br />
AMENDMENTS MADE TO LIVING ANNUITIES<br />
It is now possible for retirees to amend their drawdown<br />
rate during the year for a limited period<br />
MOVING BRANDS<br />
Change is inevitable. The FPI is updating its brand to become<br />
more inclusive and accessible to all South Africans<br />
04 08<br />
PUBLISHER’S NOTE<br />
12<br />
22<br />
26<br />
28<br />
30<br />
34<br />
36<br />
42<br />
52<br />
ON THE MONEY<br />
Milestones, news and snippets<br />
BUILDING MOMENTUM IN A GLOBAL SLOWDOWN<br />
Interview with Florbela Yates, Momentum Investing Consulting<br />
BLUE SKY INVESTING<br />
Are we overly conservative in our assessment of investment opportunities?<br />
SEEKING OPPORTUNITY THROUGH AN ESG LENS<br />
Responsible investing during the Covid-19 crisis<br />
CONTROLLING THE “CONTROLLABLES” IN UNCERTAIN TIMES<br />
Using evidence-based investing principles to meet investment goals<br />
A BETTER – AND VERY DIFFERENT – TOMORROW<br />
As a consequence of Covid-19, the future will look very different from what we now imagine<br />
COULD COVID-19 HAVE CHANGED FINANCIAL PLANNING FOREVER?<br />
A crisis often presents both tragedy and opportunity<br />
INNOVATIVE WEALTH MANAGEMENT<br />
Nevathee Moodley imparts her wisdom on sustainable financial strength<br />
SOME THINGS NEVER CHANGE<br />
Natasja Hart, Financial Planner of the Year 2010, on a decade of change<br />
EMPATHY FUELS TRUE CLIENT CONNECTION<br />
Changing the way we connect with clients<br />
34<br />
www.bluechipdigital.co.za<br />
22<br />
12<br />
1
FOREWORD<br />
Lelané Bezuidenhout CFP®, CEO, Financial<br />
Planning Institute of Southern Africa<br />
What’s happening<br />
at the FPI?<br />
In the last week of April, we surveyed more than 750 CFP®<br />
professionals across Southern Africa on the effects of the<br />
pandemic on their businesses. The results make for fascinating<br />
reading. The full story is on page 44, but here’s a taster…<br />
Greetings from my home office. So much has changed since I last wrote to you.<br />
I hope you are all coping with the ever-changing “new normal” we find<br />
ourselves in. The Financial Planning Institute of Southern Africa (FPI) is blessed<br />
to be able to work remotely. We’ve been more productive than ever! I’d like<br />
to take this opportunity to thank every single member of my fantastic team for their<br />
incredible productivity during this trying time.<br />
We asked our members how they’re coping with the pandemic<br />
Underlining the fact that our industry has not been as hard hit as some, 56% of respondents<br />
said the pandemic would not change their long-term professional or personal goals.<br />
Sixty-one percent of financial planners believe that there will be a growing demand<br />
for financial advice in the wake of Covid-19. Until that time, however, the advice of more<br />
than two-thirds of Mzansi’s CFP® Professionals is to “sit tight and wait until volatility<br />
decreases before making any major financial decisions”. As you were.<br />
We are helping to feed vulnerable South Africans<br />
As the economic impact of the pandemic deepens, we all need to do everything we can<br />
to assist those in need. When the lockdown was announced, the FPI decided to put our<br />
weight behind FoodForward SA (www.foodforwardsa.org), a ground-breaking charity<br />
which distributes surplus food from supermarkets, farms and factories to over a quarter<br />
of a million needy South Africans.<br />
Two months down the line I can honestly say it was one of the best decisions we<br />
have ever made. With hunger rates soaring, the charity is now more relevant than ever,<br />
and I would like to personally urge anyone who can afford to donate, to do so now.<br />
FoodForward’s innovative model means that every R1 you donate puts R15 worth of food<br />
in the mouths of the people who need it most. It’s tax-deductible too.<br />
We have taken our annual convention online<br />
When the pandemic first reared its head, we acted decisively to postpone our FPI<br />
Professionals Convention and to extend the deadlines for entry into our various award<br />
categories. The entire event will now take place online on 27 and 28 October 2020.<br />
The FPI is committed to doing the right thing – for the country and the health and<br />
safety of our members. The convention’s theme – Future Proof Your Business – is<br />
61%<br />
of financial<br />
planners believe<br />
that there will<br />
be a growing<br />
demand for<br />
financial advice<br />
in the wake<br />
of Covid-19.<br />
2 www.bluechipdigital.co.za
now more relevant than ever. I can’t wait to hear what our stellar line-up of speakers,<br />
including Bruce Whitfield, Rob Macdonald and Juanita Vorster, will have to say about<br />
taking the financial planning industry forward in a post-Covid world.<br />
We have applauded two positive changes to Linked Living Annuity legislation<br />
As a body that is deeply concerned about the financial wellbeing of all South Africans,<br />
we are grateful for further tax relief measures introduced by the government to<br />
try to combat the effect of Covid-19 on household budgets. The FPI supports the<br />
(temporary) proposed changes to Linked Life Annuity (LLA) regulations which give<br />
retirees more control over drawdown rates.<br />
While the changes are only supposed to last for the duration of the pandemic, we<br />
will be engaging with National Treasury via the FPI’s advocacy arm and public policy to<br />
make some of the changes permanent. We believe that South Africans deserve more<br />
freedom in deciding what to do with their hard-earned retirement savings (like keeping<br />
the minimum drawdown rate at 0.5% p.a.).<br />
Another exciting matter is the precedent-setting Montanari Supreme Court of<br />
Appeal case (1086/2018 (2020) ZA SCA) in which the Supreme Court of Appeal of South<br />
Africa (ZA SCA) overturned findings of the High Court with regards to living annuities and<br />
the calculation of accrual claims at the date of divorce. The case has a noteworthy impact on<br />
the future treatment of living annuity income payments in the case of divorce and makes it<br />
clear that the value of an annuitant’s future annuity payments is regarded as an asset in<br />
his/her estate to calculate the accrual at the date of divorce.<br />
We have launched a Brand Ambassador Programme<br />
As part of our ongoing mission to make all South Africans aware of the value of the<br />
financial planning process and the CFP® certification, we are launching a Brand<br />
Ambassador Programme. Ambassadors will promote the financial planning profession<br />
in the mainstream media, on social media and at conferences and events. The first wave<br />
of ambassadors are all previous winners of the Financial Planner of the Year award, but<br />
we’ll soon be expanding the net to ensure that our ambassadors are engaging with people<br />
from all corners of the Rainbow Nation.<br />
We are dreaming of a brighter future<br />
The Covid-19 crisis has galvanised us to work even harder to grow the financial planning<br />
industry in South Africa. I wholeheartedly believe that our industry has a pivotal role to<br />
play in helping South Africans to deal with the economic fallout of the pandemic. If you<br />
or any of your friends or family need the assistance of an FPI professional, please visit<br />
www.letsplan.co.za to find a trusted expert in your area.<br />
Wishing you good health during these turbulent times,<br />
Lelané Bezuidenhout CFP®<br />
CEO, Financial Planning Institute of Southern Africa<br />
The FPI is<br />
committed to<br />
doing the right<br />
thing – for the<br />
country and the<br />
health and safety<br />
of our members<br />
SAVE THE DATE!<br />
FPI Professionals Convention<br />
This year our FPI Professionals<br />
Convention will take place entirely<br />
online. Members can log in to the<br />
event on 27-28 October 2020.<br />
Visit fpi.co.za and download the<br />
awards guide for more information.<br />
www.bluechipdigital.co.za<br />
3
PUBLISHER’S NOTE<br />
New at<br />
<strong>Blue</strong> <strong>Chip</strong><br />
The impact of the Covid-19 pandemic has been felt strongly<br />
in the media industry, as it has across most sections of the<br />
economy, with many long-running magazines and journals<br />
closing down or moving to purely online channels. Global<br />
Africa Network Media has continued to print and distribute the <strong>Blue</strong><br />
<strong>Chip</strong> journal directly to the country’s Certified Financial Planners, and<br />
has now added a variety of online options to allow broader access<br />
to the high-quality content we publish. These include a new website<br />
at www.bluechipdigital.co.za, which also hosts an ebook edition of<br />
the print journal; a presence on LinkedIn; and, launching in July 2020,<br />
the <strong>Blue</strong> <strong>Chip</strong> Digital monthly e-newsletter. The e-newsletter is sent to<br />
every member of the FPI, and access to subscribe to the newsletter<br />
can be found on the <strong>Blue</strong> <strong>Chip</strong> Digital website. Follow <strong>Blue</strong> <strong>Chip</strong> on our<br />
online and social media channels to receive regular news and updates<br />
which will complement the quarterly print journal.<br />
Appropriate for this Women’s Month issue of the journal, <strong>Blue</strong> <strong>Chip</strong><br />
also welcomes a new editor from this edition in Alexis Knipe. With<br />
over 23 years spent working with leading publishers and conference<br />
owners, Alexis has gained extensive knowledge and experience<br />
in all aspects of business-to-business media, with a focus on editorial<br />
and high-level content production. Chris Whales, Publisher<br />
blue-chip-journal<br />
<strong>Blue</strong> <strong>Chip</strong> <strong>Journal</strong><br />
The official publication of FPI<br />
<strong>Blue</strong> <strong>Chip</strong> is a quarterly journal for the financial planning industry and is the<br />
official publication of the Financial Planning Institute of Southern Africa<br />
NPC (FPI), effective from the January 2020 edition. <strong>Blue</strong> <strong>Chip</strong> publishes<br />
contributions from FPI and other leading industry figures, covering all aspects of the financial<br />
planning industry.<br />
A total of 10 000 copies of the publication are distributed directly to every CERTIFIED FINANCIAL<br />
PLANNER® (CFP®) in the country, while the <strong>Blue</strong> <strong>Chip</strong> Digital e-newsletter reaches the full FPI<br />
membership base. FPI members are able to earn one non-verifiable Continuous Professional<br />
Development (CPD) hour per edition of the print journal (four per year) under the category of<br />
Professional Reading.<br />
Special advertising packages in <strong>Blue</strong> <strong>Chip</strong> are available to FPI Corporate Partners, FPI Recognised<br />
Education Providers and FPI Approved Professional Practices.<br />
ISSUE <strong>76</strong><br />
JULY 2020<br />
Publisher: Chris Whales<br />
Publishing director: Robert Arendse<br />
Managing director: Clive During<br />
Editor: Alexis Knipe<br />
Online editor: Christoff Scholtz<br />
Art director: Brent Meder<br />
Designer: Simon Lewis<br />
Production: Lizel Olivier<br />
Ad sales:<br />
Sam Oliver<br />
Gavin van der Merwe<br />
Jeremy Petersen<br />
Bayanda Sikiti<br />
Venesia Fowler<br />
Administration & accounts:<br />
Charlene Steynberg<br />
Natalie Koopman<br />
Printing: FA Print<br />
PUBLISHED BY<br />
www.bluechipdigital.co.za<br />
Global Africa Network Media (Pty) Ltd<br />
Company Registration No:<br />
2004/004982/07<br />
Directors: Clive During, Chris Whales<br />
Physical address: 28 Main Road,<br />
Rondebosch 7700<br />
Postal address: PO Box 292,<br />
Newlands 7701<br />
Tel: +27 21 657 6200<br />
Fax: +27 21 674 6943<br />
Email: info@gan.co.za<br />
Website: www.gan.co.za<br />
No portion of this book may be reproduced without written consent of the<br />
copyright owner. The opinions expressed are not necessarily those of <strong>Blue</strong> <strong>Chip</strong>,<br />
nor the publisher, none of whom accept liability of any nature arising out of,<br />
or in connection with, the contents of this book. The publishers would like to<br />
express thanks to those who support this publication by their submission of<br />
articles and with their advertising. All rights reserved.<br />
4 www.bluechipdigital.co.za
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TAKE THE<br />
next<br />
step<br />
in your<br />
career with<br />
an accredited<br />
qualification<br />
from the<br />
UFS School<br />
of Financial<br />
Planning<br />
Law.<br />
Advanced Diploma in Estate and Trust Administration<br />
The School of Financial Planning Law at the University of the Free<br />
State offers students the unique opportunity to acquire the necessary<br />
academic qualification and skills to become fiduciary practitioners who<br />
will be able to provide advice on a multitude of platforms, including<br />
administration of trusts, estate planning, administration of deceased<br />
estates, drafting wills, and legislative issues around the fiduciary<br />
services industry. This is the only qualification that is currently<br />
endorsed by the Fiduciary Institute of Southern Africa (FISA) as the<br />
academic requirement in the process to be awarded the Fiduciary<br />
Practitioner of South Africa ® (FPSA ® ) designation.<br />
The Advanced Diploma in Estate and Trust Administration is also the<br />
only South African accredited diploma that meets the academic<br />
requirements of the Society of Trust and Estate Practitioners (STEP).<br />
The Diploma put graduates on the road to become full members of this<br />
global professional association as Trust and Estate Practitioners (TEP).<br />
Postgraduate Diploma in Financial Planning<br />
This qualification will enable students to obtain the highest academic and<br />
professional levels of competency and to become eligible for professional<br />
membership of the Financial Planning Institute of Southern Africa (FPI).<br />
The FPI is the leading membership association in South Africa, and<br />
caters for the competency needs of financial service providers, including<br />
financial planners. The FPI competence certificates of CFP ® professional/<br />
certified financial planner ® professional accreditation represents the<br />
pinnacle of competence as a professional financial planner.<br />
The CFP ® professional accreditation mark is recognised in over 25<br />
countries around the world and represents the global professional<br />
designation for the financial planning profession.<br />
T: +27 401 2823 | E: SFPL_Appl@ufs.ac.za | www.ufs.ac.za/SFPL<br />
Inspiring excellence.<br />
Transforming lives.
Postgraduate Diploma in Investment Planning<br />
The Postgraduate Diploma in Investment Planning provides students<br />
with the necessary academic qualification and skills to become<br />
experts in the field of investment planning, who will be able to<br />
provide leadership and expert advice within a multitude of financial<br />
and legal contexts, e.g., providing advice to a Board of Trustees<br />
and employees, and to manage legislative issues surrounding the<br />
investment planning industry.<br />
This qualification will open doors to further study opportunities for<br />
individuals working in this specific environment, but who have not<br />
obtained an official degree qualification.<br />
Postgraduate Diploma in Estate Planning<br />
The Postgraduate Diploma in Estate Planning intends to deliver<br />
practitioners who can act ethically and professionally, think<br />
analytically, communicate with relevant role players in the industry,<br />
interact effectively with members of the public and evaluate and<br />
apply relevant information in legislation, literature and secondary data<br />
sources to specific practical scenarios.<br />
This qualification provides students with an academic qualification and<br />
the necessary skills to become experts in the field of estate planning.<br />
Graduates will be able to provide leadership and expert advice in<br />
a multitude of financial and legal contexts, e.g., providing<br />
advice to Boards of Trustees and to employees<br />
about legislative issues surrounding the estate<br />
planning industry.<br />
This qualification will also open doors to<br />
further study opportunities for individuals<br />
working in this specific environment, but<br />
who lack formal qualifications.
On the money<br />
Making waves this quarter<br />
Satrix is still the people’s choice<br />
SATRIX CLINCHES TOP SPOT IN SEVEN AWARDS AT SALTA<br />
The third annual South African Listed Tracker Funds Awards<br />
(SALTA) was held at the Johannesburg Stock Exchange in<br />
March 2020 and Satrix was awarded the top spot in seven<br />
categories on the night. While Satrix is proud of all the awards<br />
they received, the one which stands out for them is The People’s<br />
Choice for the favourite ETF among the investing public won<br />
by Satrix 40 ETF.<br />
The coveted People’s Choice award is decided by the public<br />
who vote via an online poll. The Satrix 40 ETF proved to be the<br />
favourite ETF among South African investors.<br />
Says Satrix CEO, Helena Conradie (right), “Winning ‘The<br />
People’s Choice’ three years in a row is a huge honour for us.<br />
This award signifies the core of what Satrix is: a means for the<br />
people of South Africa to own the market, with ease and at<br />
low cost. We’d like to thank our investors, our stakeholders and<br />
the SA ETF industry for taking this 20-year journey with us.<br />
I couldn’t be prouder!”<br />
“This award<br />
signifies the core<br />
of what Satrix is:<br />
a means for the<br />
people of South<br />
Africa to own the<br />
market, with ease<br />
and at low cost.”<br />
– Helena Conradie<br />
Save the date!<br />
FINANCIAL PLANNER OF THE YEAR 2020 COMPETITION IS OPEN<br />
To be the FPI Financial Planner of the Year is the highest award a<br />
professional financial planner can achieve as it recognises the top<br />
professional financial planner in the profession. The 2020 competition<br />
is now open.<br />
• Visit fpi.co.za and download the awards guide for more information.<br />
New group sales<br />
director for Carrick<br />
Carrick is delighted to welcome aboard<br />
Bradd Bendall (right), who will take up<br />
his new appointment as group sales<br />
director at the Carrick Group, effective<br />
1 July 2020. Fresh from his position as<br />
general manager: operations at Pam<br />
Golding Properties, the Cape Town<br />
father of three describes himself as<br />
servant leader by nature. With a diverse<br />
background that saw him part study civil engineering before building<br />
a business in logistics, followed by a stint at African Life Assurance<br />
and then 14 years at the Ooba Group before his move to Pam Golding<br />
Properties, Bendall has fine-tuned his ability to spot new opportunities.<br />
New sections of POPI Act<br />
to be implemented<br />
With the new sections of the Protection of Personal Information<br />
Act (POPIA) being implemented, businesses need to tighten their<br />
cybersecurity. The Act aims at protecting the personal information<br />
of consumers and that of employees by holding businesses<br />
accountable should their information be compromised.<br />
For companies to comply, organisations need to assess where<br />
personal information is being used, identify cybersecurity threats<br />
and weakness that could compromise the integrity of the data and<br />
put appropriate measures in place to mitigate any risks identified.<br />
According to a study conducted by the South African Banking Risk<br />
Information Centre, South Africa has lost over R2.2-billion through<br />
cyberattacks in 2017. Businesses will be under pressure to comply<br />
with the POPIA. Compliance failure will have severe penalties.<br />
8 www.bluechipdigital.co.za
On the money<br />
Making waves this quarter<br />
Covid update: Private sector feeds the poor<br />
Heeding President Ramaphosa’s call for a united response to the<br />
Covid-19 crisis, 15 professional bodies from the finance industry are<br />
putting their weight behind a ground-breaking charity that distributes<br />
surplus food to a quarter of a million vulnerable South Africans every<br />
day. If your business is lucky enough to continue to operate<br />
during lockdown you should consider making a tax-free<br />
donation to FoodForward SA.<br />
What does FoodForward SA do?<br />
FoodForward SA “connects a world of excess<br />
to a world of need,” says MD Andy du Plessis,<br />
by collecting surplus food from farms, factories<br />
and supermarkets and delivering it to beneficiary<br />
organisations. What’s more, over 80% of the food they<br />
distribute is considered nutritious.<br />
FoodForward SA currently feeds 255 000 South Africans<br />
every day but one look at the numbers shows that the possibility for<br />
change is endless. In addition to operating a conventional supply<br />
chain where they collect, store and redistribute the surplus produce,<br />
WORLD OF EXCESS<br />
1/3 of all food produced in South Africa ends up in landfills<br />
FoodForward SA has developed a digital technology platform<br />
that takes out the middleman by virtually connecting beneficiary<br />
organisations to nearby retail stores and food outlets. With this scalable<br />
model, FoodForward SA feeds urban and rural communities in six of<br />
South Africa’s nine provinces.<br />
FoodForward SA’s innovative model means that<br />
every R1 you donate puts R15 worth of food in the<br />
mouths of the people who need it most. It’s taxdeductible<br />
too. What does all of this have to do<br />
with the finance community? In normal times,<br />
organisations like the Financial Planning Institute<br />
(FPI) and the Institute of Risk Management<br />
(IRMSA) put all of their energies into representing<br />
their members and growing their industries to<br />
ensure a brighter financial future for all South Africans.<br />
“These are not normal times,” says Lelané Bezuidenhout, the<br />
FPI’s CEO: “As the world battles the coronavirus pandemic, we all need<br />
to do everything we can to assist those in need.”<br />
• For more info, email linda@fincommunications.com<br />
WORLD OF NEED<br />
14-million South Africans struggle to put food on the table<br />
MEET THE MANAGERS<br />
Meet The Managers allows<br />
financial planners access<br />
to short and concise<br />
presentations and discussions<br />
from 28 fund managers over<br />
three days, 25, 26 and 27<br />
August 2020, either via live<br />
streaming or through the<br />
virtual event site which is open<br />
until the end of September.<br />
www.meetthemanagers.co.za<br />
FPI PROFESSIONALS CONVENTION<br />
2020 sees the hosting of the 31st FPI Professionals Convention which<br />
includes the announcement of the Financial Planner of the Year.<br />
The event is scheduled to take place online on 27-28 October 2020.<br />
The theme of the event for this year is “Future Proof Your Business”.<br />
EVENTS GO<br />
VIRTUAL<br />
The Covid-19 pandemic<br />
has seen the regular fixtures<br />
on the financial planning<br />
events calendar going virtual.<br />
HUMANS UNDER MANAGEMENT<br />
The second annual Humans Under Management conference<br />
will take place on 8 September 2020, from 09h30 to 17h30.<br />
www.humansundermanagement.com/southafrica2020<br />
IRFA CONFERENCE<br />
The Institute of<br />
Retirement Funds<br />
Africa (IRFA) has taken<br />
its annual conference<br />
for 2020 and its 2021<br />
events online:<br />
19-20 November 2020<br />
Virtual conference, exhibition<br />
and Master Class sessions<br />
11-12 March 2021<br />
Virtual conference, exhibition<br />
and Master Class sessions<br />
5-7 September 2021<br />
Hybrid on-site and virtual<br />
conference, exhibition and<br />
Master Class sessions<br />
www.irf-conference.co.za<br />
www.bluechipdigital.co.za<br />
9
On the money<br />
Making waves this quarter<br />
SARS Commissioner breathes sigh of relief<br />
The Minister of Finance delivered an Emergency Budget in June<br />
2020, which can be described in diplomatic terms as gloomy<br />
and uneventful. Most notably, despite speculation by some to<br />
the contrary, the Minister did not impose any new taxes, which<br />
leaves SARS with no respite as it faces a mighty revenue shortfall<br />
of around R300-billion.<br />
The Minister has indicated that the funds will be sourced by<br />
other means, seemingly letting SARS off the hook to a degree.<br />
From here onwards, one foresees SARS embarking on two possible<br />
paths in the coming fiscal year, or a hybrid of the two.<br />
The obvious, but difficult, answer to this equation is to try<br />
to stem the tide by prioritising collections – most taxpayers<br />
and their tax advisors appear to expect SARS to be extremely<br />
aggressive in its collection of taxes in the coming months, given<br />
the government’s desperate need for more funds.<br />
SARS may take an alternative approach to the crisis. It may<br />
decide to not participate in Covid-19, instead of deploying its<br />
resources to extract taxes from a limping tax base, it may use the<br />
year of famine as an opportunity. The Commissioner has lamented<br />
the lack of capacity within SARS. If SARS uses this opportunity<br />
wisely, we may just see a more resilient and assertive revenue<br />
authority emerging from the debris of the pandemic.<br />
• By Jean du Toit, Admitted Attorney & Head of Tax Technical at Tax<br />
Consulting SA<br />
Balancing economy and health<br />
Infections in the country’s economic heartland of Gauteng<br />
appear to be on the rise. On the economic front, the Emergency<br />
Budget tabled in June by Minister Tito Mboweni makes the dire<br />
fiscal reality very clear. The economic devastation caused by the<br />
lockdown has reduced tax collections while increasing calls on<br />
the fiscus. Reducing the economic burden on citizens and their<br />
dependents is critical not least from a socio-political viewpoint:<br />
if people cannot discharge their obligations to dependants, civil<br />
disobedience may follow.<br />
REBUILDING THE SOCIAL COMPACT<br />
To combine economic revitalisation and health or safety, the<br />
government must successfully transfer responsibility from the<br />
state (lockdown and all its attendant laws) to civil society, both<br />
individuals and corporates. This is a difficult exercise to pull off<br />
at the best of times, but the government has squandered a lot of<br />
the trust it originally enjoyed. The public has grown cynical about<br />
the myriad regulations that have eroded trust.<br />
Perhaps most important of all, the extreme slowness with<br />
which the much-heralded aid to citizens and companies has been<br />
rolled out, and the growing suspicion that corruption is occurring,<br />
has reduced the propensity to follow the government playbook.<br />
The government has consistently indicated that Covid-19 is with<br />
us for the foreseeable future, yet its plans have seemed ad hoc and<br />
short term in focus. If civil society can be convinced that a long-term<br />
and carefully constructed plan exists, then we may yet win through.<br />
• By Professor Rashied Small, Executive: Centre of Future Excellence<br />
(CoFE), South African Institute of Professional Accountants (SAIPA)<br />
Construction industry hit hard<br />
The construction industry has been touted as one of the key sectors the<br />
government should prioritise to ramp up job opportunities to revive the<br />
South African economy. It’s an industry employing hundreds of thousands<br />
of workers that was hit hard by the Covid-19 pandemic. There have been<br />
suggestions that the impact could result in a year-on-year contraction of<br />
18%, which represents 4% of GDP.<br />
Potentially, this could mean the loss<br />
of up to 140 000 formal jobs, according<br />
to construction market intelligence firm<br />
Industry Insight.<br />
In response to Covid-19, the construction<br />
sector has formed a Construction Sector<br />
Covid-19 Task Team composed of contractors,<br />
built professional services firms,<br />
property developers, regulators, professional<br />
associations and manufacturers.<br />
It has submitted a comprehensive shortto<br />
medium-term plan to the government<br />
for actionable reforms to help the sector<br />
recover and is working with the government to develop an industryspecific<br />
Covid-19 Construction Health & Safety Protocol.<br />
Cobus Bedeker (above), MD of Evergreen Property Investments, says:<br />
“The construction sector is already working together to ensure the<br />
sustainability of this industry over the coming months to play its part in<br />
our country’s economic recovery.<br />
“There are huge opportunities in this property class in South Africa,”<br />
says Bedeker. “Too many of our elderly population are living in inadequate<br />
homes when they could be living in an estate offering a sense of support<br />
along with a ream of services and amenities.”<br />
10 www.bluechipdigital.co.za
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COVER FEATURE<br />
12 www.bluechipdigital.co.za
COVER FEATURE<br />
Building<br />
momentum<br />
in a global<br />
slowdown<br />
In<br />
the post-Covid-19 transformed<br />
world of business, remaining flexible,<br />
supportive and resilient is vital.<br />
Florbela Yates, Head of Momentum<br />
Investment Consulting, shares her<br />
advice on how to keep a long-term<br />
view through short-term volatility.<br />
www.bluechipdigital.co.za<br />
13
COVER FEATURE<br />
Florbela, you joined Momentum Investment Consulting in<br />
January 2017 as the head of Momentum Investment Consulting.<br />
Please describe the path that led you to this point.<br />
I started my career as a consultant in the healthcare space at<br />
Alexander Forbes. I transferred to Investment Solutions after six<br />
years. That’s where I became involved in investments, even though<br />
I was mainly involved with the institutional side of investments.<br />
When I worked for the group previously (for the division that is now<br />
Momentum Global Investment Management, but was then RMB<br />
International Multi-Managers), I got my first insight into retail investments.<br />
So I guess that’s the start of the path that led me to this point.<br />
What are the defining highlights of<br />
your career? One would have to be<br />
the year that the institutional team<br />
at Investment Solutions brought in<br />
R10-billion in assets. There is no better<br />
feeling than knowing that a client has<br />
seen the value that your team can<br />
add. Securing a client and then jointly<br />
growing assets with them would be a<br />
career highlight for me regardless of<br />
where I have worked over the years. Also,<br />
heading up various new business teams<br />
and being involved in partnership JVs<br />
with advisors would be other highlights.<br />
What do you deem to be the most critical component to<br />
financial success? I believe that the best place to start in securing<br />
your personal financial success is to appoint a financial advisor and<br />
together go through a budget exercise to determine your short-,<br />
medium- and long-term financial goals. Once this is clear, it’s easy<br />
to evaluate the different investment options likely to get you to<br />
those goals. Without a plan or goal, it’s difficult to measure how<br />
successful or unsuccessful you have been.<br />
Advisors should remain<br />
objective and not allow<br />
their subjectivity or<br />
own personal views on<br />
markets, the economy<br />
or the virus to drive<br />
the formulating and<br />
planning process.<br />
MOMENTUM INVESTMENT CONSULTING<br />
Momentum Investment Consulting (MIC) was<br />
launched in 2008 to minimise the pressures of<br />
determining asset allocation and fund choices<br />
for client portfolios – and today MIC manages<br />
assets in excess of R7 billion. What do you<br />
attribute this success to? Our understanding<br />
of the financial advice process is one of our key<br />
strengths. Our team is made up of CFA charter<br />
holders, actuaries and certified financial planners,<br />
allowing us to consider the various effects of<br />
decisions taken in managing client portfolios.<br />
We are a client-centric business. Our clients<br />
often cite our regular communication, transparent<br />
and detailed reporting, and flexibility in the<br />
execution of our investment skill, as the things<br />
that they value most.<br />
What is the baseline factor the makes MIC’s financial services<br />
and products so popular? I think our outcome-based investing<br />
(OBI) philosophy works well in an advice-led investment world. It<br />
makes it easy for us to construct portfolios that are closely aligned<br />
to clients’ own investment goals over their investment terms.<br />
Please outline areas of growth in the past two years. We have<br />
segmented the retail clients into different markets, allowing us<br />
to price appropriately and competitively regardless of client size.<br />
The evolution in the advice market and the expected effect that<br />
legislation such as the Retail Distribution Review (RDR) will have<br />
on advisors has resulted in us develop-<br />
ing a more flexible offering so that both<br />
Category I and Category II advisors have<br />
more choice in the services that they can<br />
get from us.<br />
In what areas do you see the company<br />
expanding in the short term?<br />
Although the majority of our advisors<br />
have historically wanted to be involved<br />
in all aspects of building solutions for<br />
their clients, this year we have seen a<br />
trend towards outsourcing the full asset<br />
management service to us.<br />
We are also seeing an increase in<br />
appetite from other Category II licensed<br />
advisors and advisor networks wanting to partner with us to<br />
enhance their existing offering. I suspect this is where the majority<br />
of the growth will come from once RDR comes into effect.<br />
As a result of these trends, we have accordingly restructured<br />
our team to ensure specialisation. We need to remain scalable<br />
and flexible. The biggest focus has been on the automation of<br />
our processes and the development of more tools to enhance the<br />
value for our clients.<br />
14 www.bluechipdigital.co.za
COVER FEATURE<br />
Please tell us about the industry benchmarks that MIC has<br />
fashioned. Momentum Investments is the South African market<br />
leader in building outcome-based or goal-based investing<br />
solutions. MIC has adopted this philosophy and most of our<br />
clients use an OBI benchmark over a suitable measurement period.<br />
Consistency is the measure that we place the biggest emphasis<br />
on. Although we aren’t peer-cognisant, we do always report back<br />
to clients showing both our benchmark as well as the relevant<br />
peer group benchmark. We encourage our clients to measure us<br />
against both benchmarks in terms of consistency and our hit rate<br />
(or realised probability of reaching the benchmark).<br />
don’t stick to their longer-term strategies lose value. As shown in<br />
the table on page 16, missing out on the best return day in every<br />
year over the past five years can harm a client’s returns. Missing<br />
the top 20 performing days has a significant effect.<br />
How does outcome-based investing align with active or<br />
passive investment management? Outcome-based investing<br />
is the overarching investing philosophy. When we execute, we do<br />
this through the use of active, passive or smart-beta strategies<br />
depending on the appropriateness and availability of each of these<br />
in various asset classes.<br />
OUTCOME-BASED INVESTING PHILOSOPHY<br />
What makes the outcome-based investing philosophy<br />
revolutionary in the investment management space?<br />
This philosophy allows us to build portfolios that we<br />
can adapt to client-specific needs rather than trying to<br />
fit all clients into a balanced fund regardless of their<br />
varying needs.<br />
How can you ensure that a financial advisor’s advice<br />
process is aligned with the outcome-based solutions<br />
you offer? When we first engage with an advisor, we<br />
spend a lot of time understanding their advice process<br />
and what their particular clients require. We then build<br />
portfolios that specifically align with the advisor’s advice<br />
process, which give advisors flexibility in using the range<br />
of portfolios to cater to their clients’ varying needs.<br />
There is no<br />
better feeling<br />
than knowing<br />
a client has<br />
seen the value<br />
that your team<br />
can add.<br />
How equipped is the advisor to deliver a goal-based<br />
service to their clients? All the research we have seen<br />
both globally and locally shows that clients benefit from<br />
advice. One study showed that advised households<br />
accumulate 2.73 times the amount of assets than those<br />
that don’t have an advisor. At MIC, we believe hugely in<br />
the value of advice. I’d say that many of the advisors that<br />
we deal with already advise in such a way as to assist<br />
their clients in achieving their particular individual goals.<br />
What skills do financial advisors need to be able to<br />
help clients stay the course to achieve their goals?<br />
I believe that our advisors have all the necessary<br />
skills and training to give advice, but if they can<br />
then overlay this with an understanding of client<br />
psychology (especially during times of crisis), they<br />
can then have even more powerful conversations with<br />
their clients.<br />
Over the past two years, we have spent a great deal<br />
of time researching the effect of client behaviour on<br />
investment returns. We all know that timing the market<br />
is impossible. When you overlay this with the insights<br />
that show how clients make decisions based on fear and<br />
greed, you get a great perspective into why clients who<br />
www.bluechipdigital.co.za<br />
15
COVER FEATURE<br />
DISCRETIONARY FUND MANAGERS<br />
Why use a Discretionary Fund Manager? A Discretionary Fund<br />
Manager (DFM) should become an extension of the advisor’s<br />
practice. They become the advisor’s investment team, giving him<br />
access to specialist investment skills, which should improve their<br />
clients’ investment outcomes.<br />
YEAR 2015 2016 2017 2018 2019<br />
ALSI Market Return 5.13% 2.63% 20.95% -8.53% 12.05%<br />
Miss Top Trading Day 1.96% -0.34% 18.55% -11.81% 9.<strong>76</strong>%<br />
Miss Top 5 Trading Days -7.89% -9.34% 11.60% -21.37% 2.50%<br />
Miss Top 10 Trading Days -16.65% -18.00% 4.52% -29.24% -4.68%<br />
Miss Top 20 Trading Days -28.47% -30.61% -5.94% -39.60% -15.43%<br />
or fund changes simultaneously across all advisors through<br />
their ability to bulk switch, whereas a Category I advisor would need<br />
to meet with each client and get their signed consent to make these<br />
changes. Although advisors with a Category II licence can legally<br />
provide these services, many are smaller firms without the necessary<br />
skills to provide the full range of services. In these instances, they<br />
often appoint a DFM in a sub-advisory<br />
role. MIC offers a range of services<br />
ranging from manager research,<br />
portfolio construction, attribution,<br />
performance monitoring, portfolio<br />
optimisation, asset allocation, reporting<br />
and execution, allowing other Category<br />
II licence holders to enhance their value<br />
to clients.<br />
In a market that is preparing itself for the Retail Distribution<br />
Review (RDR) regulatory framework, MIC’s tailored DFM<br />
capability applies to both Category I and II financial service<br />
providers. Please expand on this. Category I advisors often<br />
partner with a DFM to help them with portfolio construction,<br />
manager or fund selection and the efficiencies that a Category<br />
II licence brings. For example, a DFM can apply asset allocation<br />
Without a plan or goal, it is difficult<br />
to measure how successful or<br />
unsuccessful you have been.<br />
What changes would you like to see happen in the industry<br />
over the next five years? I would like to see the industry becoming<br />
more professional and transparent in terms of both fees and<br />
skills. I am encouraged by the suggested licensing requirements<br />
for different categories of licences that we saw under the latest<br />
RDR proposals.<br />
What are the latest developments, trends and innovations<br />
in this market that pertain to your business directly?<br />
Consolidation and digitisation are two big trends that I believe will<br />
continue for the foreseeable future. Compression on fees is another<br />
trend that I’m seeing especially in a low-return environment.<br />
I also believe that RDR will have a significant effect on advisors<br />
and asset managers.<br />
EFFECT OF COVID-19<br />
MIC combines traditional and alternative<br />
asset classes to meet the specific risk and<br />
return objectives of clients. This approach<br />
is based on asset classes that are defined<br />
by their different responses to changes<br />
in economic conditions. The effect and<br />
unexpected response in the economy that<br />
Covid-19 caused has been unfathomable.<br />
Were the predictions in terms of responses<br />
to economic fluctuations adequate? We<br />
build diversified and resilient portfolios that<br />
will consistently deliver on their objectives<br />
or outcomes over the relevant time frames,<br />
regardless of short-term volatilities or crises.<br />
Risk management forms part of the portfolio<br />
construction process. We don’t believe that all<br />
managers have skills in all asset classes, and<br />
so we prefer to select best of breed managers<br />
per asset class. We use a combination of active,<br />
passive and smart-beta solutions in asset classes<br />
where this makes sense.<br />
16 www.bluechipdigital.co.za
BRAVE/57<strong>76</strong>/MMI/E<br />
Momentum Investment Consulting<br />
will help you build sustainable<br />
investment solutions to help your<br />
clients achieve their goals.<br />
We provide discretionary fund management services to both<br />
Category I and Category II financial services providers and advisory services<br />
to Category II financial services providers. Our expertise includes everything<br />
from mandate design, asset allocation, strategy optimisation, risk management,<br />
fund research and manager selection to customised reporting.<br />
For more information contact us at mic@momentum.co.za<br />
investment consulting<br />
Momentum Investment Consulting is an authorised financial services provider (FSP32726).
COVER FEATURE<br />
SWOT BOX<br />
Florbela Yates, Head of Momentum Investment Consulting, offers her<br />
SWOT analysis of the South African investment landscape.<br />
STRENGTH On the whole, financial advisors are professional and<br />
research shows that advised households tend to have higher savings<br />
rates than those that don’t use a financial advisor.<br />
WEAKNESS<br />
The average age of advisors in South Africa is 56 years<br />
and the majority are white. We need to encourage transformation and<br />
make it attractive for younger advisors to join the industry.<br />
OPPORTUNITY By simplifying their investment offering, advisors<br />
can unlock huge efficiencies in their practice and free up time to sell<br />
their book, buy a new book, grow their business, or align different<br />
investment books.<br />
THREAT Change is inevitable. Technology is changing both the<br />
advice and asset management business. If you don’t keep up, you open<br />
yourself up to competition from those who are changing with the times.<br />
Our risk process places a greater emphasis on downside risk<br />
in the more conservative portfolios, and a greater emphasis on<br />
getting to the goal in the more aggressive portfolios where we<br />
have the luxury of time. We have optimised our portfolios to<br />
have a greater focus on quality factors, and so we went into the<br />
crisis with exposure to more resilient companies and higherquality<br />
credit, which we believe gives us better protection in the<br />
current market environment.<br />
I’d love to say that our portfolios weren’t affected by the crisis.<br />
But the reality is that the extreme moves in yields, spreads, listed<br />
property, inflation-linked bonds and equities experienced<br />
towards the end of February and March, did result in portfolio<br />
values falling. The good news is that diversification gave us some<br />
protection and we saw some recovery in April and into May.<br />
We remain committed to outcome-based (or goal-based)<br />
investing as an overriding philosophy. The biggest step in our<br />
process is the strategic asset allocation, and that looks through the<br />
cycle and ignores current crises or events. However, we do consider<br />
making tactical calls at the margin where<br />
we feel that certain assets are mispriced or<br />
showing obvious over- or undervalued steps.<br />
The coronavirus has led us to re-evaluate<br />
the current positioning, and given the<br />
expected volatility over the next few months,<br />
we have made some tactical changes relative<br />
to our longer-term strategic positions.<br />
Consistency is the<br />
measure that we<br />
place the biggest<br />
emphasis on.<br />
We believe that our portfolios are still<br />
positioned to make their targets over<br />
the longer term.<br />
What significant changes, if any, have<br />
been made to the portfolios? We have<br />
slightly underweighted the positions<br />
to the more aggressive asset classes<br />
given the current and expected market<br />
volatility and uncertainty over the shorter<br />
term. We have also evaluated our<br />
exposure to credit and positioned the<br />
portfolio towards higher-quality equity<br />
and credit counters.<br />
What is MIC’s perspective on how<br />
long we can expect the volatility that<br />
we have seen in markets to continue?<br />
It’s difficult to say exactly how long this<br />
volatility will continue. Given that we<br />
haven’t yet seen a peak in the infection<br />
rates locally, the fact that the lockdown<br />
has been extended beyond the original<br />
period added to the knock-on effects to<br />
various industries, I would say it’s safe<br />
to expect this to continue for at least the<br />
next six months.<br />
Depending on the fall-out that<br />
we see and how significant the effect is on the economy and<br />
unemployment, as well as the effect of greater liquidity being<br />
injected by governments across the world, it could potentially<br />
continue for longer.<br />
The current slowdown in global economic growth coupled with<br />
South Africa’s sluggish economy and increasing government<br />
debt is extraordinary. What strategies should clients adopt?<br />
Yes, our economy faces many challenges. I expect growth to<br />
remain weak over the short term, but some asset classes will<br />
continue to deliver real returns despite this. Make sure you partner<br />
with someone who understands markets and can build resilient<br />
and diversified portfolios.<br />
How do you manage client behaviour in an era where fear<br />
steers every decision made by every individual? Over the<br />
last two years, Momentum as a group has spent a lot more<br />
time researching and trying to understand the effect of client<br />
behaviour on their investments. The best<br />
that we can do is to continuously share<br />
these results with the market to get clients<br />
to stick to their investment goals and not<br />
make decisions based on emotions. Our<br />
clients have started to see the value of this<br />
research and we are starting to see them<br />
questioning their decisions.<br />
18 www.bluechipdigital.co.za
COVER FEATURE<br />
We build diversified and resilient portfolios<br />
that consistently deliver on their objectives<br />
or outcomes over the relevant time frames,<br />
regardless of short-term volatilities or crises.<br />
Please outline the dynamic behaviour of asset markets during<br />
high-stress events. What advice can you share with the industry<br />
on how to manage through this trying time? The coronavirus<br />
has had a dramatic effect on financial advisors in two key ways:<br />
1) a fall in their revenue due to the fall in investment markets<br />
and the difficulty of generating new business in the lockdown;<br />
2) clients who have been affected financially – either through job<br />
loss or a temporary fall in income or the value of their investments.<br />
From an investment perspective, I would suggest that those<br />
clients who can, stay invested and consider other alternative<br />
sources of income. For example, many insurers have allowed<br />
clients to consider reducing cover or even take some payment<br />
holidays for the next few months. If there are any assets that they<br />
don’t need, selling these could also release some capital. I would<br />
suggest reducing debt and saving more.<br />
For clients who have lost their jobs or experienced<br />
a reduction in income, and need to disinvest to<br />
meet their costs of living, I would suggest that<br />
disinvesting from the more liquid money market<br />
or income portfolios while leaving their longterm<br />
portfolios the time to recover. Partner with<br />
a financial advisor that can help you identify your<br />
investment and income goals over the short,<br />
medium and long term. Revisit them at least<br />
yearly and make sure that your investments keep<br />
pace with your changing life. It has been tough,<br />
and we expect the volatility to continue for some<br />
time to come. In South Africa, the government<br />
has projected that we will only see a peak in<br />
infections in August or September, so I don’t<br />
think the bad news is over yet.<br />
What advice would you give to advisors about<br />
how to manage their clients who are currently<br />
going through a difficult time? I recommend<br />
that advisors stay true to their clients’ financial<br />
needs and plan accordingly. Many of their<br />
clients’ financial needs may be changing due to<br />
changes in their circumstances and advisors need<br />
to update their investment plan accordingly.<br />
Implementing the changes in planning should<br />
be done in such a way as to limit the effect on the<br />
client’s returns, such as locking in losses.<br />
Advisors should remain objective and not<br />
allow their subjectivity or own personal views<br />
on markets, the economy or the virus to drive<br />
the formulating and planning process.<br />
Should strategic asset class preferences<br />
change during and after Covid-19? Strategic<br />
asset allocation forms the cornerstone of our<br />
investment process. It looks through current<br />
markets and focuses on the expected returns of<br />
each asset class through the cycle. Although it should be reviewed<br />
at least yearly, to ensure that our expectations still hold, we wouldn’t<br />
recommend making changes based on shorter-term movements,<br />
as a result of a crisis. Where asset prices are depressed, this may<br />
present an opportunity to rather make some tactical changes. It<br />
is very important to have a disciplined approach to tactical asset<br />
allocation as you don’t want to make such big changes that you<br />
erode the value of your strategic asset allocation.<br />
What are the fundamental factors that Momentum Investment<br />
Consulting considers when planning to build investment<br />
portfolios that are resilient to financial market shocks?<br />
We apply a disciplined process and build diversified portfolios<br />
that are better able to consistently deliver on their objectives.<br />
Risk forms part of our portfolio construction process. We tend to<br />
www.bluechipdigital.co.za<br />
19
COVER FEATURE<br />
place a greater emphasis on asset managers with specialist skills<br />
and a greater focus on quality factors in both the equity and fixed<br />
income space. We constantly monitor and evaluate decisions taken<br />
and ensure that every manager is delivering on their appointed<br />
strategy and mandate.<br />
How does the global economic effect of Covid-19 affect<br />
offshore investments? The effect of the pandemic also affects<br />
retirement savings that are invested offshore. How so? What<br />
do you advise people in this predicament? Although we follow<br />
the same process locally and internationally, we do rely heavily<br />
on our international team based in London to guide us on the<br />
international market as they are a lot closer to it than we are. For<br />
the offshore portion of local portfolios, we believe that the biggest<br />
detractor of performance has been fees. In model portfolios,<br />
the costs of feeder funds and performance fees often result in<br />
underperformance. We prefer to execute using mainly passive<br />
or smart-beta strategies. For hard currency solutions, we would<br />
once again prefer to use specialist managers in each asset class<br />
and can execute through active, passive and alternative strategies<br />
depending on their appropriateness in each portfolio.<br />
To what extent have advisors who have had a DFM during the<br />
pandemic benefitted? I think the biggest benefit is probably the<br />
ability for us to implement any decisions simultaneously across<br />
all the portfolios. Our Category II licence allows our discretion to<br />
make changes to both the underlying asset classes and funds. All<br />
our clients benefit from this advantage at the same time.<br />
What is the silver lining, if any, in what has happened to<br />
investment markets? Markets that were overvalued have come<br />
off. The sell-off in March presented this opportunity for our clients<br />
Improved<br />
communication<br />
is key during<br />
these times of<br />
increased volatility.<br />
who were waiting for the correct time to<br />
get into the market. We saw large flows of<br />
assets transitioning into model portfolios<br />
as the capital gains tax (CGT) effect of<br />
switching out of other assets reduced.<br />
Please give a message of motivation<br />
with regards to financial investments<br />
during this Covid-19 term. Markets go<br />
through cycles and if your investment is<br />
worth less now than a few months ago,<br />
remember that you have not lost money<br />
until you disinvest and lock in those losses.<br />
Patience and discipline in your investment<br />
goals result in success. If the lockdown has<br />
prompted you to save money on items<br />
that you usually spend on (eg fuel, beauty<br />
treatments, etc) invest this now, so you can<br />
build a bigger reserve. If you are forced to<br />
supplement your income, start by selling<br />
assets that you don’t need or use. Then only<br />
start using savings. Use this opportunity to revise your budget<br />
and to find ways to be disciplined in saving again, once your<br />
circumstances change.<br />
Momentum’s brand proposition is: “Keep your clients focused<br />
on their goals, even as the world around us changes”. How<br />
has MIC helped advisors in keeping their clients focused on<br />
their goals? The MIC team has increased our interactions with<br />
advisors. We have been writing a lot more articles (literally every<br />
week) explaining the effect of movements in local and offshore<br />
assets on their portfolios.<br />
As an investment team, we have also increased the frequency<br />
of our interaction with asset managers and clients alike. Improved<br />
communication is key during times of increased volatility. We have<br />
implemented changes this quarter by increasing our exposure to<br />
the quality strategy and reduced our vulnerability to funds with<br />
high exposure to credit and listed property – an area that we<br />
believe the risks of defaults has increased.<br />
As August is Women’s Month, what advice do you give to<br />
women in the finance industry? Our deputy CEO, Jeanette<br />
Marais, always says that “A man is not a plan”. I’d like to expand<br />
on this by saying that you shouldn’t rely on anyone else to have<br />
your best interests at heart. Make sure that you start saving early,<br />
continue to save and have sufficient money for life’s surprises.<br />
For women entering the financial industry, you have the<br />
opportunity to contribute and shape it in the same way that your<br />
male counterparts have done. Join an employer who offers equal<br />
opportunities, the flexibility to continue working when you decide<br />
to have children and the ability to add value throughout your<br />
working career. And then give back by being an inspiration and<br />
mentor to younger women. <br />
20 www.bluechipdigital.co.za
I believe that the sum of the parts is better than each individual’s<br />
contribution and so everyone has an equal voice. – Florbela Yates<br />
What were your aspirations as a child? As a child, I think I just<br />
wanted to be the best at whatever I did and personal recognition<br />
was very important. I think it was all about how “I” did.<br />
And now? As an adult, I’ve realised the value of partnerships and<br />
focusing on others rather than me. Now, I aspire to make a real<br />
difference in the lives of others – my children,<br />
my husband, my friends, my colleagues and<br />
my clients. Knowing that I have succeeded<br />
in helping them achieve their financial or<br />
in my career. Howard Walker sensed my impatience and boredom<br />
with what I was doing and created the opportunity for me<br />
to grow by suggesting I go into investments. Since then, there<br />
have been numerous people who have inspired me to dream big<br />
and aim to be the best at whatever I do. Some within our industry,<br />
personal goals is how I define my success. I really would like to<br />
leave this world a better place than I found it.<br />
What was the motivating factor that made you choose this<br />
profession? I don’t think it was initially a choice, more where my<br />
career took me. The reason I chose to stay is seeing the direct<br />
effect that investment decisions have on people’s lives. Knowing<br />
that we can help clients realise even some of their goals is a<br />
great feeling.<br />
How has your career created value in your life?<br />
I enjoy a challenge and having something to look forward to<br />
every day. It has made me realise why saving is so important and<br />
how having goals keeps you focused and driven. I meet amazing<br />
people every day who enrich my life and teach me so much.<br />
As long as I am learning, I know that I am still living. Also, my<br />
career doesn’t leave much time for me, which has made me much<br />
better at managing my hours and to value the time I do have, for<br />
personal relationships and hobbies.<br />
Who has been your biggest influence in business and your<br />
career? There hasn’t been one single person, but rather various<br />
people throughout. Probably starting with my mom. She was<br />
a working mom but always made time for us. She taught me<br />
to set realistic goals. Then, I’d have to say it was one of the first<br />
leaders that I had the privilege of working with quite early on<br />
including Laurie Dippenaar,<br />
Paul Harris, GT Ferreira, and<br />
Adrian Gore, and others outside<br />
it, like Steven Covey, Malcolm<br />
Gladwell and Nelson Mandela. Lastly, I’d say that a personal<br />
inspiration in my life were my grandparents, who constantly<br />
reminded me why it is important to start saving early and<br />
the importance of doing the right thing, even if it benefits<br />
someone else first.<br />
What is the best advice that you have ever received? Don’t be<br />
scared to make mistakes, because that’s how you learn and grow.<br />
And remember, “This too shall pass”.<br />
What does the word “family” mean to you? Family starts with the<br />
people closest to me, who know the most about me and still love<br />
me despite this! In my world, these are the people that make me<br />
want to be a better person and whom I would fight to protect at<br />
all costs. My husband, Mike, my children, my dad, my brothers,<br />
my best friend and my godchildren. I have two girls aged 17 and<br />
15 whom I love with all my heart. I can’t imagine my life without<br />
them. They are the best decision Mike and I ever made.<br />
The second layer of family would be my close friends and people<br />
who have had a significant impact on my life. In recent years, there<br />
are some work colleagues and clients that I would include in a<br />
third circle. People that enrich my life and who I would go to great<br />
lengths to protect and stay connected to.<br />
What do you love doing most when not at work? Running or<br />
reading a really good book and spending time with my family at<br />
my happy place in St Francis Bay.<br />
What book are you currently reading? Dare to Lead by Brené Brown.<br />
Life statement? Love with all your heart.<br />
<strong>Blue</strong> <strong>Chip</strong> advice? You should see the partnership with a financial<br />
advisor in the same way you do marriage. Your advisor is there to<br />
help you set a strategy for life, celebrate with you during the good<br />
times and support you during the challenging ones. Make sure<br />
you choose someone who shares your values and ethical code..
GROWTH MANAGERS<br />
<strong>Blue</strong> sky<br />
investing<br />
Are we overly conservative<br />
in our assessment<br />
of investment opportunities?<br />
A<br />
s investors, we are trained to be<br />
conservative, to expect less in<br />
future, and to avoid the hype of<br />
the moment. This conservative<br />
mindset underpins an industry which<br />
has the responsibility of managing other<br />
people’s money. Could it be though, that<br />
this conservative mindset is a net cost to<br />
the same investors we are aiming to serve?<br />
The early founders of modern investing<br />
– the likes of Benjamin Graham and David<br />
Dodd – put forward a sensible approach,<br />
premised on “not overpaying”, which lies<br />
at the heart of a valuation-based approach.<br />
This approach is useful in the case where<br />
a company’s prospects are known, its<br />
operating costs established and its profit<br />
margins observable through analysis<br />
over long periods. The Graham and Dodd<br />
approach encouraged diligent fundamental<br />
analysis. Investors would then do well to buy<br />
those shares which were undervalued and<br />
sell those which became overvalued.<br />
If diligent analysis is required, then this<br />
assumes a company and the industry in<br />
which it operates are broadly understood.<br />
What happens when a company or industry<br />
is entirely new and is set to disrupt the status<br />
quo going forward? Where these companies<br />
have the potential to put the long-standing<br />
companies from the Graham and Dodd<br />
world entirely out of business, and to<br />
become future leaders?<br />
This segment of the share market – the<br />
“blue sky” investment opportunities – often<br />
requires a different mindset. Research by<br />
Hendrik Bessembinder [1] highlights that<br />
just 4% of shares ever listed in the US have<br />
created all of stock market wealth, and just<br />
90 companies out of over 24 000 listed<br />
since 1925 have created half of all wealth.<br />
The number of truly successful companies<br />
is simply very small over time.<br />
There are two significant examples of blue<br />
sky investing, both from the US over the past<br />
20 years. The first is Amazon, founded by Jeff<br />
Bezos, which initially displaced Barnes and<br />
Noble as the leading book retailer. Amazon’s<br />
business model enables it to target an everincreasing<br />
spread of industries as the world<br />
of e-commerce becomes broadly accepted.<br />
The number of truly successful companies<br />
is simply very small over time.<br />
Martin Eberhard and Marc Tarpenning<br />
founded Tesla in 2003. The primary initial<br />
investor was Elon Musk. Originally set up<br />
to manufacture electric cars, it now has its<br />
sights set on all forms of mobility, powered<br />
by electric energy. With Tesla reporting<br />
profit for the first time in late 2019,<br />
the share price responded by increasing<br />
materially since June 2019.<br />
As a result, Musk may now qualify for<br />
a payday of over $346m (given he is paid<br />
entirely in shares should the company reach<br />
its ambitious targets).<br />
Do investors rejoice in the fact that<br />
the potential for this company to start<br />
disrupting the world’s largest automakers<br />
is starting to bear fruit? Well, for the most<br />
part, they don’t. Tesla is not a share favoured<br />
by most investors. The following attributes<br />
provide some insight as to why not:<br />
• The business has not made a full-year<br />
profit, ever.<br />
• No dividends have ever been paid.<br />
• Debt levels are high and climbing (peaking<br />
at 80% of total business value).<br />
• Productions targets have consistently<br />
been missed.<br />
Typically, these traits would be a no-go<br />
zone for most investors. As Graham and Dodd<br />
would likely attest, how do you perform<br />
diligent research when it’s not possible to<br />
observe any reasonable financial outcome<br />
for the business? Tesla has one of the highest<br />
“short interests” [2] , indicating most investors<br />
think the share is wildly overvalued. Why<br />
is it so difficult to invest in shares like these?<br />
We provide possible reasons next:<br />
22 www.bluechipdigital.co.za
GROWTH MANAGERS<br />
1<br />
2<br />
3<br />
1. You don’t know what you are buying<br />
As an investor, you are not buying<br />
established businesses with observable<br />
business models that are easy to value. You<br />
are buying businesses that are generally<br />
early in their business cycle; are disrupting<br />
incumbents and driving new business<br />
models; have no established market as they<br />
are often creating new markets; don’t know<br />
their client base yet; are often making a loss<br />
and have very little foresight of margins. You<br />
are buying an idea, often with a visionary<br />
leader leading the charge.<br />
2. Very few companies are successful<br />
The nature of these “high-risk start-ups”<br />
means that failure rates are high, so<br />
the selection is very important. A study<br />
performed in the US between the period<br />
2008 and 2018 tracked 1 119 US tech<br />
start-ups that received seed funding<br />
between 2008 and 2010. The study found<br />
that by the end of 2018, 67% of those<br />
companies had failed and less than 1%<br />
had become “unicorns” (a market cap of<br />
over $1bn). [3] Some of these companies<br />
are the most-hyped tech companies of<br />
the decade, including Uber, Airbnb, Slack,<br />
Stripe and Docker. It is not surprising then<br />
that the behavioural bias of risk aversion is<br />
hard for managers. No-one wants to be the<br />
fund manager who has a share go to zero.<br />
3. You need to be a long-term investor<br />
The nature of these businesses, the stage<br />
of their business cycle when you generally<br />
first invest, and the fact that selection is so<br />
important means that once you choose to<br />
invest you need to be invested for the long<br />
term. It may take years for the business<br />
model of these businesses to materialise.<br />
Often, further capital investments are<br />
needed as the company requires funding.<br />
Leaders require guidance (or removal, as in<br />
the case of Uber’s Travis Kalanick).<br />
Why do traditional investors miss these<br />
opportunities? Traditional active investors<br />
can be separated into two broad types:<br />
■ Quality investors look for businesses<br />
which have strong market positions, a<br />
stable client base and a defendable longterm<br />
product or service. They look for<br />
businesses that have a demonstrable<br />
business model. They want to see reliable<br />
earnings and margins, and determine,<br />
with a certain degree of comfort what a<br />
business will look like in five years. They<br />
are generally not as concerned with the<br />
price they are paying if the business can<br />
protect and grow its earnings above the<br />
market average.<br />
■ Value investors are typically looking<br />
for established businesses which are at<br />
a cyclical low, or where a specific event<br />
has meant they are trading below their<br />
fair value.<br />
What types of investors can capture this<br />
type of return?<br />
We identify investors who get excited about<br />
businesses like Tesla, as growth investors.<br />
Growth investors at their core are trying<br />
to identify businesses where expected<br />
earnings growth is significantly higher<br />
than average and believe that even an<br />
expensive price to pay is justified given<br />
the potential outcome. They are generally<br />
optimistic by nature as they make decisions<br />
with little or no sight on earnings or<br />
business model. They put a big emphasis<br />
on the “what ifs” of an investment case. They<br />
are risk-taking rather than conservative<br />
as they ride the winners rather than sell<br />
them down and generally have a very low<br />
turnover of holdings.<br />
They require a very deep level of research<br />
and insight into a business, particularly<br />
given the business is still finding its growth<br />
path. Rather than research being focused<br />
on financial statements, they have a focus<br />
on emerging industries, changing behaviours<br />
and innovation to inform their views.<br />
They also need to be comfortable<br />
making mistakes, as often they have more<br />
losers than winners in their portfolios.<br />
Because of the types of businesses they<br />
are investing in (businesses that can grow<br />
to many multiples of their current size),<br />
the contribution of the winners often<br />
far outweighs that of the losers. Growth<br />
managers refer to this as asymmetric<br />
returns, where you can lose a maximum of<br />
100% of your capital on the losers, but you<br />
can make back multiples of your capital<br />
on the winners.<br />
What should you expect from a growth<br />
manager’s portfolio?<br />
There is a high failure rate in the pool of<br />
companies they are investing in, and the<br />
concentration risk is high as a large portion<br />
of the portfolio returns are generated by<br />
few holdings. Often the businesses in the<br />
portfolios are still driven by their founders<br />
and there is significant key man risk. How<br />
much of Tesla’s success is due to Musk, or<br />
what does Amazon look like without Jeff<br />
Bezos? Because of this, investors in these<br />
funds should expect higher real returns<br />
with bigger drawdowns and more volatility.<br />
Moreover, there are very few professional<br />
investment managers that can successfully<br />
manage this sort of portfolio, given how<br />
difficult it is to get the selection right as well<br />
as the career and business risks attached.<br />
In our efforts to ensure our clients<br />
are fully exposed to the full range of<br />
investment opportunities in the market,<br />
we seek out managers who can deliver on<br />
this sort of potential, to complement the<br />
overall portfolio. To invest successfully,<br />
we need to come to terms with our own<br />
behavioural biases and cast our perspective<br />
wider than the more conservative stance<br />
that often pervades. <br />
[1] Do Stocks Outperform Treasury Bills, 2017.<br />
[2] Short sellers bet on, and profit from, a drop<br />
in a share’s price. Therefore, if an investor<br />
believes the share price of a company will<br />
decrease in the future they will “short sell”<br />
that share.<br />
[3] CB Insights<br />
Peter Foster, CIO, Fundhouse<br />
www.bluechipdigital.co.za<br />
23
T<br />
PROFILE<br />
he evolution<br />
a portion of your savings to 36ONE<br />
hedge funds can improve your portfolio longevity<br />
of savings<br />
Allocating<br />
Markets are intrinsically volatile and for investors<br />
making regular withdrawals, this volatility is<br />
particularly relevant. If the value of your retirement<br />
savings falls near the outset of drawing an income,<br />
the amount withdrawn will represent a bigger portion of your<br />
investment than if your savings had grown over this period.<br />
The impact is that the base continues to decline with each<br />
additional withdrawal leaving less savings to grow. The risk<br />
involved in withdrawing money from a volatile portfolio, termed<br />
sequence-of-return-risk, is lower when portfolio volatility is lower.<br />
The recent market capitulation has highlighted the value of having<br />
the right mix of portfolios in reducing this type of risk without<br />
compromising too much on longer-term growth.<br />
The 36ONE hedge funds can produce positive returns in both<br />
rising and falling equity markets (due to their combination of long<br />
and short positions). Investing in the 36ONE hedge funds can limit<br />
the impact of market volatility on a portfolio and reduce sequenceof-return<br />
risk.<br />
Example: An investor with a R2-million lump sum invests<br />
R1 million in the 36ONE SNN QI Hedge Fund (36ONE Hedge Fund)<br />
and R1 million in the FTSE/JSE All-Share Index (ALSI) at the start of<br />
April 2006 (36ONE Hedge Fund launch date). The table summarises<br />
portfolio values on May 31 2020 in nominal terms:<br />
SCENARIO 1: LUMP-SUM SCENARIO<br />
End<br />
Portfolio<br />
Value<br />
Since<br />
Inception<br />
Return p.a.<br />
36ONE Hedge Fund R8 123 300 15.9%<br />
ALSI R3 771 500 9.8%<br />
Difference R4 351 800 6.1%<br />
Source: Bloomberg, 36ONE Research<br />
The client would have been substantially better off if he had<br />
invested the full lump-sum amount in the 36ONE Hedge Fund,<br />
as the hedge fund outperformed the ALSI by 6.1% per year over<br />
the period.<br />
DISCLAIMER<br />
Source: Bloomberg, 36ONE Research; Performance<br />
to 31 May 2020. The information presented here is<br />
Extending the example: Assume that he invested the R2 million<br />
but needs to draw R7 500 monthly, increasing at 6% p.a. The table<br />
summarises portfolio values on May 31 2020 in nominal terms:<br />
SCENARIO 2: INCOME-PRODUCING PORTFOLIO SCENARIO<br />
End<br />
Portfolio<br />
Value<br />
Since Inception<br />
Return p.a.<br />
(after<br />
withdrawals)<br />
36ONE Hedge Fund R5 718 700 13.1%<br />
ALSI R2 179 100 5.6%<br />
Difference R3 539 600 7.5%<br />
Source: Bloomberg, 36ONE Research<br />
When you compare the end values of the income-producing<br />
portfolios, the 36ONE Hedge Fund outperformed the ALSI by 7.5%<br />
a year. This is higher than the lump sum scenario where the 36ONE<br />
Hedge Fund outperformed the ALSI by 6.1% a year. The reason<br />
for this is simply volatility. Over the +14 years, the 36ONE Hedge<br />
Fund was substantially less volatile than the ALSI. The hedge fund<br />
also experienced much lower drawdowns during the period.<br />
While the above scenarios are simplified, they show the impact of<br />
volatility on income-producing portfolios.<br />
As is evident, higher volatility can act as a drag on performance<br />
in income-producing portfolios and can result in clients not meeting<br />
their income objectives over the lifespan of their retirement.<br />
We are living longer, which<br />
means time in retirement is longer<br />
and therefore more money is<br />
needed. Having to draw an income<br />
from your retirement savings<br />
for longer needs an appropriate<br />
investment strategy. <br />
Stash Martins is an Investment<br />
Consultant at 36ONE Asset<br />
Management<br />
not intended to be relied upon for investment advice. Various assumptions were made.<br />
See our full disclaimer here: https://www.36one.co.za/articles/disclaimer<br />
24 www.bluechipdigital.co.za
HAS YOUR PORTFOLIO EVOLVED THROUGH<br />
THE TIMES? IT’S TIME TO CONSIDER<br />
HEDGE FUNDS
GREEN ECONOMY<br />
Seeking opportunity<br />
Responsible investing<br />
during the Covid-19 crisis<br />
through an ESG lens<br />
At the time of writing, the Covid-19 crisis is wreaking<br />
havoc across international markets, interrupting global<br />
supply chains, drying up demand and, of course, taking<br />
a massive personal toll on affected families. Given the<br />
scale of the devastation, some investors might ask, why worry<br />
about Responsible Investing or ESG (environmental, social and<br />
governance) issues issues at this stage? Surely it makes sense to<br />
just focus on the ‘important’ investment numbers and rather leave<br />
the soft ESG stuff for after the crisis? In this article, I’ll argue that:<br />
1) The current Covid-19 crisis has many important lessons that<br />
strengthen the case for responsible investing;<br />
2) The current downturn provides early but compelling evidence<br />
that ESG is not just a nice to have but it is also good to have; and<br />
3) The ‘green economy’ has real potential to deliver long-term<br />
win-win outcomes.<br />
LESSONS FROM COVID-19<br />
Lesson 1: We’re all interconnected<br />
One of the founding principles of Responsible Investing (RI) is<br />
the interconnected nature of our social, biophysical and market<br />
eco-systems. Importantly RI recognises the impact of unpriced<br />
externalities on the safe operation of the market, society and the<br />
environment. Examples include the social and environmental costs<br />
from burning fossil fuels or societal health impacts of high calorific<br />
foods. By considering externalities in its approach the RI field<br />
essentially asks all participants in the investment value chain to<br />
consider the wisdom of pursuing short-term returns at the expense of<br />
long-term resilience of social and environmental systems. The<br />
Covid-19 crisis has laid bare the very real interconnectivity between<br />
our social, environmental and market systems. The lesson here is<br />
don’t neglect interconnectivity and long-term system resilience.<br />
Lesson 2: Shared value<br />
Professors Kramer and Porter of Harvard Business School<br />
penned their famous article on Share Value in the early 2000s.<br />
In it, they argued that the best business strategy to adopt in a<br />
world with increasing social and environmental pressures was<br />
one that generated profits while solving for long-term social and<br />
environmental resilience. They proposed a stakeholder inclusive<br />
model for capitalism which encourages value to be shared across<br />
participating stakeholder groups. In effect, this type of strategy<br />
requires company management to carefully consider a broad<br />
range of stakeholders and the associated business impacts. For<br />
some management teams, this is a sharp departure from the<br />
age-old adage that, the business of business is business.<br />
Covid-19 puts a sharp focus on management approaches to<br />
human capital management, corporate culture, and the treatment<br />
of customers. Corporate responses around these issues can<br />
potentially have lasting impacts for all company stakeholders.<br />
For investors that are ESG literate, it’s no news that workforce<br />
management, employee satisfaction and corporate culture, have<br />
a long-term impact on productivity, share price performance<br />
and returns. Similarly, companies’ treatment of customers is<br />
an important driver of brand equity and improved customer<br />
relationships over time. How management teams respond in this<br />
time of crisis will be telling for their long-term profitability.<br />
Aside from management practices, the Covid-19 crisis also<br />
exposes the underlying business model, specifically what goods<br />
and services do the company provide. As we are collectively finding<br />
out, essential services mean something very specific. It redefines<br />
what we can and can’t do without and what we are prepared to pay<br />
for. Business models that solve for food security, connectivity, online<br />
education, entertainment, sustainable mobility, finance, water,<br />
energy, sewage, waste, health care, etc have prospects for growth.<br />
Those investment teams with deeply integrated ESG processes<br />
will no doubt be attuned to these issues. They will have a view of<br />
which business models and management teams are therefore best<br />
placed to retain value through the cycle.<br />
Covid-19 has been indiscriminate in whom it infects, and doing<br />
so it has become everyone’s problem. Those with the best chance<br />
of fighting it are doing so collaboratively across a broad range of<br />
stakeholders. The Covid-19 crisis reminds us of the power of working<br />
proactively with all stakeholders to achieve shared value outcomes.<br />
Lesson 3: Understanding the science<br />
As a consequence of its focus on ESG issues, the field of RI relies<br />
on scientific data to make the business case for sustainability.<br />
Most asset managers with a focus of RI will thus have a clear<br />
understanding of the science behind climate change and<br />
the attendant risks and opportunities. Notwithstanding this, in<br />
the current age of populist politics, the role of science has<br />
increasingly taken a back seat.<br />
Despite being one of the most scientifically peer-reviewed<br />
publications produced by humanity, the Intergovernmental<br />
The Covid-19 crisis reminds us of the power of working proactively<br />
with all stakeholders to achieve shared value outcomes.<br />
26 www.bluechipdigital.co.za
GREEN ECONOMY<br />
Panel on Climate Change assessment reports failed to inspire<br />
political leadership. Although the Covid-19 crisis is more near<br />
term compared to climate change, it is instructive to see how<br />
rapidly political leaders, despite<br />
their differing views, have fallen<br />
in line with prevailing medical and<br />
scientific consensus.<br />
The lesson of Covid-19 is don’t forget the science. Importantly<br />
those asset managers with these specialist skills will be well placed<br />
to look ahead. As tough as the lessons from Covid-19 crisis are we<br />
expect that they will strengthen RI as an approach to investments.<br />
ESG is a good to have<br />
Like all funds, sustainable equity funds suffered large and sudden<br />
losses of value in the first quarter of 2020 due to the global<br />
coronavirus pandemic. Direct Morningstar report that sustainable<br />
investment funds held up better than conventional<br />
funds during this period. They report<br />
that seven out of 10 sustainable<br />
equity funds finished in the<br />
top halves of their Morningstar<br />
categories, and 24 of 26 environmental,<br />
social, and governancetilted<br />
index funds outperformed<br />
their closest conventional<br />
counterparts.<br />
ESG funds favour companies<br />
with better ESG credentials and<br />
as such, they can be expected<br />
to manage their environmental<br />
impacts, treat their stakeholders<br />
well, and ethically govern themselves.<br />
It appears that such<br />
busi-nesses have been more resilient during this crisis and are<br />
showing themselves to be the new ‘quality companies’ of the<br />
21st Century. Strangely, the Covid-19 crisis has provided a good<br />
litmus test for the quality management argument around ESG<br />
investing and provides further support to the idea that ESG<br />
integration is not just a nice to have, but it is also a good to have.<br />
Perusing Green Growth<br />
As society seeks to rebuild in a post-Covid-19 world, we expect<br />
the idea of Green Growth to continue to gain traction. The notion<br />
of Green Growth rose in the aftermath of the last financial crisis<br />
as alternative growth path, one guided by climate awareness,<br />
resource efficiency and social inclusion. At a global level, Green<br />
Growth features in national growth strategies and the EU is<br />
putting in place legislation to drive and incentivise these kinds of<br />
outcomes. At the local level, National Treasury recently published<br />
a technical paper on Financing a Sustainable Economy and work is<br />
underway to develop a Green Economy taxonomy for South Africa.<br />
Green Growth is not only a scientifically bounded economic idea<br />
but is also as a set of globally consistent consumer preferences, as<br />
more and more consumers align with the sustainability agenda.<br />
Doing more with less has always been a good idea, as has caring<br />
for the environment along with being a good neighbour.<br />
The lesson of Covid-19 is don’t forget the science.<br />
What next?<br />
It is not clear what’s next, the Covid-19 pandemic is unprecedented<br />
in modern times. There is much we don’t know about how this<br />
plays out however what we do know is that the world will be<br />
much changed. Our sense of interconnectivity will be enhanced,<br />
we’ll have learnt that it’s not just returns that matter and that<br />
business-focused term shared value outcomes will survive.<br />
For too long we have bought into the notion that short-term<br />
market relief while extending long-term social and environmental<br />
decline, is a good idea. The current moment provides aninteresting<br />
opportunity to align Covid stimulus packages with longterm<br />
sustainable outcomes. Is this the moment the world<br />
decides to shift towards a global economic path that is low<br />
carbon, resource-efficient and socially inclusive? <br />
Jon Duncan, Head of Responsible<br />
Investing, Old Mutual Investment<br />
Group. Jon has over 23 years of<br />
experience in the field of sustainability<br />
research and engagement.<br />
He has led the Responsible<br />
Investment Programme at Old<br />
Mutual for the past 10 years.<br />
His focus is on driving the<br />
systemic integration of material<br />
environmental, social and<br />
governance (ESG) issues into<br />
the products and services of<br />
Old Mutual Investment Group.<br />
www.bluechipdigital.co.za<br />
27
INVESTMENT STRATEGY<br />
Investors have been saddled with far<br />
greater responsibility in recent decades<br />
as defined contribution schemes<br />
replaced defined benefit schemes.<br />
Along with investors living longer, this<br />
creates a challenge for retirement planning.<br />
CoreShares Asset Management took<br />
a fresh look at this challenge through a<br />
scientific lens. Evidence-based investing<br />
is an investment strategy that is not<br />
influenced by short-term market trends or<br />
predictions. Instead, it relies on accurate<br />
facts and credible analysis (published<br />
and peer-reviewed) – to make calculated,<br />
unbiased decisions. The result for an<br />
investor is a higher likelihood that they will<br />
achieve their investment goals.<br />
events like the Covid-19 crisis. Here, we<br />
have explored an approach that is focused<br />
on key controllables across asset allocation,<br />
cost management and diversification and<br />
uses Smart Beta to align client goals with<br />
the portfolio.<br />
The evidence: asset allocation<br />
CoreShares assessed the inflation goal<br />
and converted it into a target of CPI+3%.<br />
We saw that across any rolling seven-year<br />
period over the last 118 years, equity<br />
outperforms this benchmark <strong>76</strong>% of<br />
the time, while bonds only have a 37%<br />
chance of beating it. We concluded that<br />
to provide inflation protection, a longterm<br />
asset allocation needs enough risky<br />
We also weighed up the effectiveness of<br />
using tactical asset allocation (or “tilting”)<br />
to take advantage of any short-term market<br />
trends to improve performance. We examined<br />
15 years’ performance history in the<br />
(ASISA) Low Equity category and found<br />
that managers lowered their chances of<br />
beating a CPI+3% benchmark by using<br />
tactical asset allocation (only overthrowing<br />
the benchmark 32% of the time). Had they<br />
simply stuck to their long-term strategic<br />
asset allocation, they would have beaten<br />
this benchmark 48% of the time.<br />
The evidence: costs<br />
There has been plenty of focus on costs<br />
in recent years, especially as local equity<br />
Controlling the “controllables”<br />
in uncertain times<br />
Using evidence-based investing principles to meet investment goals<br />
Approaching the investment challenge<br />
We started with the assumption that, in<br />
retirement planning, advisors must help<br />
investors work out the amount of income<br />
they can draw, and how much they can<br />
increase this each year to maintain their<br />
lifestyle (i.e. inflation protection). They must<br />
also help investors choose investments<br />
that are unlikely to result in permanent loss<br />
of capital. These investment goals are to:<br />
• Create enough income<br />
100% 100%<br />
• Protect against inflation<br />
100%<br />
80% 80%<br />
• Protect capital<br />
80%<br />
60% 60%<br />
An evidence-based investor approaches 100%<br />
60%<br />
40% 40%<br />
this problem by first starting with the<br />
40% 80%<br />
20% 20%<br />
“controllables”. These are decisions we<br />
20%<br />
0%<br />
make based on reliable data and history 60%<br />
0%<br />
– such as asset allocation, diversification<br />
40%<br />
and fees.<br />
We try to avoid making decisions based 20%<br />
on the “uncontrollables” or speculative<br />
0%<br />
forecasts, for example, trying to predict<br />
short-term market performance or macro<br />
28 www.bluechipdigital.co.za<br />
assets to deliver the required returns with<br />
a high level of probability. While equity is<br />
considered a “risky” asset, and will certainly<br />
introduce higher levels of volatility into a<br />
portfolio in the short-term, the risk of<br />
having too little exposure to this ‘risky’ asset<br />
class is of failing to beat the benchmark and<br />
satisfy the goal of inflation protection over<br />
Keeping Keeping the goal the in mind: goal in The mind: Importance 60% The Importance of Equityof Equity 60%<br />
Keeping the Keeping goal the in the mind: long goal term. The in mind: Importance The Importance of Equityof Equity<br />
60%<br />
markets have delivered a disappointing<br />
performance, with investors scrutinising<br />
where each basis point of their performance<br />
has gone.<br />
Some investors still argue that they are<br />
Does Tactical Asset Allocation improve<br />
Does Tactical Asset happy Allocation to pay Does higher improve Tactical fees performance?<br />
Asset to a Allocation manager that improve performan<br />
Does Tactical Asset Allocation improve performance?<br />
Does Tactical delivers Asset superior Allocation performance. improve performance?<br />
But is this<br />
Impact of TAA on return predictability<br />
Impact of TAA on return predictability<br />
necessarily the case? 60% Impact of TAA on return predictability<br />
Morningstar says that<br />
Impact of TAA on return predictability<br />
Does Tactical the goal The of<br />
“the Does single Tactical Asset Impact largest Allocation Asset of TAA on determinant 50% Allocation return predictability improve improve of performance?<br />
a fund’s performance?<br />
Keeping the Keeping goal in mind: in The mind: Importance The Importance of Equityof Equity<br />
48,18%<br />
48,18%<br />
50%<br />
Keeping the goal in mind: Does The Tactical<br />
60%<br />
Importance Asset<br />
50%<br />
of Allocation Equity improve performance?<br />
48,18%<br />
Does Purchasing Tactical Power Purchasing Power Asset Allocation 50% improve 40% performance?<br />
48,18%<br />
40% 50%<br />
40%<br />
Purchasing Power Purchasing Power<br />
Impact of TAA Impact on return of TAA predictability on return predictability 32,05%<br />
100%<br />
KEEPING 100%<br />
THE 90%<br />
GOAL IN MIND: 90%<br />
32,05%<br />
THE IMPORTANCE Power<br />
OF EQUITY 60%<br />
DOES 60%<br />
TACTICAL ASSET ALLOCATION<br />
32,05%<br />
Purchasing Power Purchasing Power<br />
40%<br />
30%<br />
IMPROVE PERFORMANCE?<br />
90% 90%<br />
75,67% 75,67% 30% 40%<br />
30% 32,05%<br />
80% 100% 100% 90% 75,67%<br />
80% 90% 75,67% 90%<br />
32,05% Impact of TAA on return predictability48,18%<br />
48,18%<br />
62% 50% 62% 50% 30%<br />
20%<br />
Purchasing Power<br />
60%<br />
75,67%<br />
80% 60%<br />
75,67% 75,67% 62% 20% 60% 62% 30% Impact of TAA on return 20% predictability<br />
80%<br />
90%<br />
60%<br />
62% 62% 40% 62%<br />
36,90%<br />
40% 20%<br />
10%<br />
36,90%<br />
40% 60% 40%<br />
10%<br />
60%<br />
20%<br />
36,90% 36,90%<br />
32,05% 10% 32,05%<br />
48,18%<br />
50%<br />
75,67%<br />
30% 30% 10%<br />
0% 48,18%<br />
20%<br />
36,90%<br />
40%<br />
20%<br />
36,90%<br />
40%<br />
50%<br />
0%<br />
36,90%<br />
10%<br />
0%<br />
Average Manager TAA Consistency<br />
Average M<br />
Average Manager TAA Consistency<br />
Average<br />
0% 0%<br />
20% 20% 62%<br />
Manager SAA TAA Consistency Consistnecy<br />
Average Manager SAA Consis<br />
40%<br />
0%<br />
20% 20%<br />
0%<br />
Equity Equity<br />
Bonds Bonds<br />
Average Manager Source: TAA Consistency<br />
Morningstar. Historic probability of Average relative three Manager year rolling outperformance SAA Consistnecy relative to CPI +<br />
40%<br />
Source: Morningstar. Historic probability of relative<br />
Equity Equity<br />
Bonds Bonds<br />
Average three 32,05% Manager year rolling Source: outperformance TAA Consistency<br />
Morningstar. relative Historic ASISA CPI probability +3%. Multi-Asset of Average relative Low Equity three Manager Category year rolling for outperformance the SAA period Consistnecy<br />
July 2005 relative to end to CPI December +3%. 2019<br />
ASISA Multi-Asset Low Equity<br />
0% 0%<br />
10% Category for the 10% period July 2005 to end ASISA December Multi-Asset 2019 Low Equity Past Category performance the is period not an July indication 2005 to of end future December performance. 2019<br />
Past<br />
30%<br />
performance is 32,05%<br />
not an indication of future performance. Source: Morningstar. Past Historic performance probability is not of an .<br />
relative indication three of year future rolling performance. outperformance relative to CPI +3%.<br />
Probability Equity of Maintaining Probability Purchasing of Equity Maintaining Equity Power Purchasing Probability Power . of Bonds Maintaining Probability Purchasing of Maintaining Bonds Bonds Power Purchasing ASISA + 3% Multi-Asset Power . Low Equity + 36,90%<br />
Source: Morningstar. Historic probability of relative three 3% Category year rolling for outperformance the period July 2005 relative to end to CPI December +3%. 2019<br />
Probability of Maintaining Probability Purchasing of Maintaining Power Purchasing Probability Power 30% of Maintaining Probability Purchasing of Maintaining Power Purchasing + 3% ASISA 0% Multi-Asset Power + Low 0% 3% Equity Past Category performance the is period not an July indication 2005 to of end future December performance. 2019<br />
Past performance is not an . indication of future performance.<br />
Average Manager Average TAA Manager Consistency TAA Consistency Average Manager Average SAA Manager Consistnecy SAA Consistnecy<br />
.<br />
Probability of Maintaining Probability Purchasing of Maintaining of Power Purchasing Probability Power Power of Maintaining Probability 20%<br />
Purchasing of Maintaining of Power Purchasing + 3%<br />
Power Power + 3% + 3%<br />
Source: Morningstar. The 1901-2019. Source: evidence Morningstar. Historic probability 1901-2019. of shows Historic 20% outperforming probability CPI that returns of outperforming over the a 7 year CPI rolling goal returns period. over a of 7 year inflation rolling period. protection can be met with greater<br />
certainty by using an appropriate asset allocation (enough risky assets) and sticking<br />
to it (only Equity using strategic asset allocation and no Bonds tactical asset allocation).<br />
0%<br />
0%<br />
Average Manager TAA Consistency<br />
Average Manager SAA Consistnecy<br />
Probability of Maintaining Purchasing Power Average Manager Probability TAA Consistency of Maintaining Purchasing Average Power Manager + 3% SAA Consistnecy<br />
Source: Morningstar. Source: Historic Morningstar. probability Historic of relative probability three year of relative rolling three outperformance year rolling outperformance relative to CPI +3%. relative to CPI +3%.<br />
Source: Morningstar. 1901-2019. Source: Morningstar. Historic Past performance probability 1901-2019. of is outperforming not<br />
Historic Past an performance indication<br />
probability CPI of returns is future<br />
of not outperforming an over performance. indication a 7 year CPI of rolling future returns period. performance. over a 7 year rolling period.<br />
ASISA Multi-Asset ASISA Low Equity Multi-Asset Category Low for Equity the Category period July for 2005 the period to end July December 2005 to 2019 end December 2019<br />
Past performance is not Past an indication performance of future is not performance.<br />
indication of future performance.<br />
10%<br />
Past performance Past is not performance indication is not of future an indication performance. of future performance.<br />
Source: Morningstar. 1901-2019. Source: Source: Morningstar. Historic Morningstar. probability 1901-2019. 1901-2019. of outperforming Historic Historic probability probability CPI returns of outperforming of over outperforming a 7 year CPI rolling returns CPI period. returns over a over 7 year 7 rolling year rolling period. period. .<br />
.<br />
Past performance is not Past an indication performance Past performance of future is not performance.<br />
is not indication indication of future of future performance. 10% performance.<br />
Source: Morningstar. Historic probability of relative three year rolling outperformance relative to CPI +3%.<br />
ASISA Multi-Asset Low Equity Category for the period July 2005 to end December 2019<br />
Source: Morningstar. Historic probability of relative three year rolling outperformance relative to CPI +3%.<br />
Past performance is not an indication of future performance.<br />
ASISA Multi-Asset Low Equity Category for the period July 2005 to end December 2019<br />
.<br />
Past performance is not an indication of future performance.<br />
Source: Morningstar. 1901-2019. Historic probability . of outperforming CPI returns over a 7 year rolling period.<br />
Past performance is not an indication of future performance.
future success is the costs it charges” and<br />
our research shows that on average, the<br />
most expensive funds underperform.<br />
In the chart on page 29 (top left), we<br />
divided the low equity managers into<br />
quartiles based on fees. The most expensive<br />
quartile only beat the benchmark 25% of<br />
the time, while the cheapest quartile beat<br />
the benchmark 46% of the time. This might<br />
effective and efficient way for investors to<br />
implement the appropriate strategic asset<br />
allocation is to use low-cost funds as the<br />
building blocks, where indexation (aka<br />
passive investing) plays an important role.<br />
This is particularly useful in the low-yield<br />
environment in which South Africans have<br />
found themselves in recent years: every<br />
basis point counts.<br />
The evidence: capital protection<br />
Harry Markowitz claimed that “Diversification<br />
is the only free lunch in investing” and<br />
this certainly applies to capital protection<br />
in the world of multi-asset investing. By<br />
making sure portfolios are sufficiently<br />
diversified across geographies, industries<br />
and companies, we can limit exposure to<br />
any possible unforeseen company failure<br />
or event particular to a region or sector.<br />
Using passive strategies as the building<br />
blocks to implement the asset allocation<br />
decision is a precise and accurate way to<br />
Helping investors “stay the course” and not panic-sell during volatile periods<br />
adds significant value to a client’s total return in the long term.<br />
&P PIVA: South S&P SPIVA: SPIVA: Africa<br />
look<br />
South S&P<br />
like<br />
S&P 50 Africa<br />
a<br />
South<br />
negative<br />
South 50 Africa<br />
correlation,<br />
Africa 50but 50it is a make sure you get the exact exposure you<br />
causal link and not a correlation. The higher have chosen and remain well diversified.<br />
fees erode the performance that investors Using index strategies as the building<br />
receive. We conclude that the most blocks also brings a second benefit:<br />
S&P South S&P African South 50 S&P African index S&P South outperformed 50 South African index African outperformed 50 index over 50 index 96% outperformed of over 96% added of over over 96% increased 96% of of certainty. By using a<br />
South Africa South Equity Africa Funds South SPIVA: Equity South S&P over Africa SOUTH Funds Africa a 5 Equity AFRICA year over Equity 50 period Funds a 5 Funds year over period over a 5 year a passive 5 year period period fund, we avoid the risk that comes<br />
100<br />
ping the<br />
100 100<br />
goal in mind: Lowering Manager with selecting Selection an active Risk manager. The<br />
goal<br />
90<br />
in<br />
90<br />
mind:<br />
90<br />
Lowering Manager 96,2Selection most recent Risk 96,2S&P Index V Active (SPIVA)<br />
80 80 80 97,9 97,9 97,9 97,9<br />
ind: 85,3Lowering Manager 85,3 85,3 Selection Risk reports that over 96% of active managers<br />
70 70 70<br />
in South Africa have underperformed<br />
the Top 50 index over a five-year period<br />
ended 31 December 2019. [1] The difference<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
Predictability && & Cost: Cost: Impact of of cost of cost cost on on on achieving CPI CPI CPI goals goals goals<br />
3,0% 3,0% 3,0%<br />
2,5% 2,5% 2,5%<br />
2,0% 2,0% 2,0%<br />
1,5% 1,5% 1,5%<br />
1,0% 1,0% 1,0%<br />
0,5% 0,5% 0,5%<br />
0,0% 0,0% 0,0%<br />
PREDICTABILITY & COST:<br />
IMPACT OF COST ON ACHIEVING CPI GOALS<br />
25% 25% 25%<br />
29% 29% 29%<br />
40% 40% 40%<br />
Avg Avg TER Avg TER TER<br />
Consistency<br />
Source: Source: Morningstar. Source: Morningstar. Morningstar. Historic Historic probability Historic probability probability of relative of relative of three relative three year three year rolling year rolling outperformance rolling outperformance outperformance relative relative to relative CPI to +3%. CPI to +3%. CPI +3%.<br />
ASISA ASISA Multi-Asset ASISA Multi-Asset Multi-Asset Low Low Equity Low Equity Category Equity Category Category for the for July the for 2005 July the 2005 July to end 2005 to December end to December end December 2019. 2019. 2019.<br />
Past Past performance Past performance performance is not is not is indication an not indication an indication of future of future of performance. future performance. performance.<br />
60 60<br />
50 50<br />
40 40<br />
The Alpha<br />
30 30<br />
between picking The Alpha Dream<br />
one of the top performers<br />
20 20<br />
The Alpha<br />
Dream<br />
versus one of the bottom performers<br />
Dream<br />
10 Keeping 10 the goal in mind: Lowering introduces unnecessary Manager uncertainty Selection into a Risk<br />
0 0<br />
multi-asset portfolio.<br />
1 Year 1 Year 1 Year 3 Years 1 3 Years 3 Years 5 Years 3 5 Years 5 Years 5 Years<br />
350<br />
300 300<br />
KEEPING THE GOAL IN MIND:<br />
th Source: Africa SPIVA 30 June South 2019 Source: Africa Source: SPIVA 30 June South SPIVA 2019Africa South 30 Africa June 30 2019 June 2019<br />
250 250<br />
KEEPING THE GOAL IN MIND:<br />
is Past not performance indication is Past of not future Past indication performance.<br />
LOWERING is of not future an is indication not performance.<br />
MANAGER indication of future SELECTION of performance.<br />
future performance.<br />
LOWERING MANAGER SELECTION RISK<br />
RISK<br />
200 200<br />
150<br />
150<br />
46% 46% 46%<br />
The evidence shows that using lowcost<br />
passive funds that deliver better<br />
performance helps meet the goal of<br />
creating reliable income streams,<br />
as well as inflation protection.<br />
50% 50% 50%<br />
45% 45% 45%<br />
40% 40% 40%<br />
35% 35% 35%<br />
30% 30% 30%<br />
25% 25% 25%<br />
20% 20% 20%<br />
15% 15% 15%<br />
10% 10% 10%<br />
5% 5% 5%<br />
0% 0% 0%<br />
The Alpha<br />
Risk<br />
2013/11<br />
2012/03 2010/07<br />
2014/04<br />
2012/08 2010/12<br />
2014/09<br />
2013/01 2011/05<br />
2015/02<br />
2013/06 2011/10<br />
2015/07<br />
2013/11 2012/03<br />
2015/12<br />
2014/04<br />
2010/02<br />
2012/08<br />
2016/05 2010/07<br />
2014/09 2013/01<br />
2016/10 2010/12<br />
2015/02 2013/06<br />
2017/03 2011/05<br />
2015/07 2013/11<br />
2017/08 2011/10<br />
2015/12 2014/04<br />
2018/01 2012/03<br />
2016/05 2014/09<br />
2018/06 2012/08<br />
2016/10 2015/02<br />
2018/11 2013/01<br />
2017/03 2015/07<br />
2019/04 2013/06<br />
2017/08 2015/12<br />
2019/09 2013/11<br />
2018/01 2016/05<br />
2020/02 2014/04<br />
2018/06<br />
2014/09<br />
2016/10<br />
2018/11<br />
2015/02<br />
2017/03<br />
2019/04<br />
2015/07 2017/08<br />
2019/09 2018/01<br />
2020/02 2018/06<br />
100<br />
100<br />
2015/12<br />
2016/05<br />
The Alpha<br />
Risk<br />
2018/11<br />
2016/10<br />
2019/04<br />
2017/03<br />
2019/09<br />
2020/02<br />
The Alpha<br />
Risk<br />
2010/02 2010/12 2011/10 2012/08 2013/06 2014/04 2015/02 2015/12 2016/10 2017/08 2018/06 2019/04<br />
S&P SA 50 Worst Fund Best Fund<br />
S&P SA 50 Worst Fund Best Fund<br />
S&P SA 50 Source: Morningstar. Worst Fund 10 Years cumulative Best returns Fund ended 29 Feb 2020, ASISA General Equity fund category.<br />
Past performance is not an indication of future performance.<br />
Worst Fund Best Fund<br />
orningstar. 10 Years cumulative returns ended 29 Feb 2020, ASISA General Equity fund category.<br />
ormance is not an indication of future performance.<br />
mulative returns ended 29 Feb 2020, ASISA General Equity fund category.<br />
ation of future performance.<br />
GRAPHICS COMPILED BY CORESHARES. DOWNLOAD THESE STATS AND FACTS FROM OUR WEBSITE –<br />
9 Feb 2020, ASISA General Equity fund category.<br />
ce.<br />
www.bluechipdigital.co.za/featured/controlling-the-controllables/<br />
2017/08<br />
2018/01<br />
2018/06<br />
The evidence shows that using reliable, well-diversified<br />
strategies (such as an index) as building blocks to implement the<br />
asset allocation helps meet the goal of capital protection.<br />
2018/11<br />
2019/04<br />
2019/09<br />
2020/02<br />
INVESTMENT STRATEGY<br />
Meeting the goal mechanically<br />
Much work has been done to quantify the<br />
multi-faceted role that financial advisors<br />
play, from tax advice to withdrawal strategies<br />
and behavioural coaching, to name<br />
but a few. For example, helping investors<br />
to “stay the course” and not panic-sell<br />
during volatile periods like the Covid-19<br />
crisis, adds significant value to a client’s<br />
total return in the long term. Morningstar<br />
has termed this advisory role “gamma” and<br />
calculates the value to be around 1.59% per<br />
year. [2] Advisors must retain their margin<br />
and keep delivering a high-quality professional<br />
service in this way. Cutting fund<br />
fees is a simple and effective way to improve<br />
the investor’s bottom line, while the advisor<br />
retains a well-deserved margin. Advisors<br />
can bring more certainty to retirement<br />
planning by minimising the moving parts<br />
and using evidence-based investing<br />
principles to meet investment goals<br />
mechanically, with greater certainty. <br />
[1] According to SPIVA reports published<br />
from December 2014 to December 2019<br />
(a total of 11 five-year review periods),<br />
active managers have, on average, underperformed<br />
the benchmark 87% of the time.<br />
[2] Morningstar Report: “Alpha, Beta, and<br />
Now… Gamma” by David Blanchett, CFA,<br />
CFP & Paul Kaplan, Ph.D., CFA, published<br />
28 August 2013.<br />
The Alpha<br />
Dream<br />
The Alpha<br />
Risk<br />
Michelle Noth, CFA, Client Coverage Executive<br />
at CoreShares Asset Management. CoreShares<br />
offers a range of multi-asset funds that employ<br />
the principles discussed in this article.<br />
www.bluechipdigital.co.za<br />
29
INVESTMENT TRENDS<br />
A better<br />
– and very different –<br />
tomorrow<br />
As a consequence<br />
of Covid-19,<br />
the future will look very different from what we now imagine<br />
Following the endless stream of<br />
Covid-19 headlines, extended<br />
lockdowns and associated economic<br />
hardships, we are all suffering<br />
from Armageddon fatigue. It is easy to<br />
become pessimistic in the face of the very<br />
real challenges we are grappling with.<br />
But history teaches us that periods of<br />
disruption and uncertainty go hand-inhand<br />
with innovation, sparking a wealth<br />
of investment trends and opportunities.<br />
The Covid-19 pandemic will force<br />
sectors to fast-forward changes, which<br />
otherwise may have taken years to come<br />
about, and industries are likely to be either<br />
materially reformed or made redundant.<br />
As Dr Peter Diamandis and Steven<br />
Kotler note in their book, Abundance,<br />
artificial intelligence, robotics, digital<br />
manufacturing, nanomaterials, synthetic<br />
biology and other rapidly developing<br />
technologies will enable us to make<br />
greater gains in the next two decades than<br />
we have made in the last 200 years.<br />
The sweet spot of<br />
investing remains<br />
unchanged: investing<br />
in good companies<br />
at great prices.<br />
Consider, for instance, that in the 1900s,<br />
around two-thirds of the Dow Jones<br />
Industrial Average was made up of railroad<br />
stocks. Today, a large portion of the<br />
US index is instead made up of technology<br />
and healthcare companies –<br />
companies whose roles have become<br />
even more prominent amidst new social<br />
distancing norms and the hunt for a<br />
vaccine, and whose agility, scalability<br />
and automation lead us into the future.<br />
By contrast, it will come as no surprise<br />
that stocks in ”BEACH” industries (booking,<br />
entertainment and live events, airlines,<br />
cruises and casinos, and hotels and resorts)<br />
have declined by more than $332-billion<br />
this year. (To put this in perspective, that<br />
figure is equivalent to the GDP of Israel.)<br />
The graph above illustrates just how far<br />
global travel and entertainment companies<br />
have fallen.<br />
Some have speculated that once a<br />
vaccine is available, pent-up demand and<br />
millions of would-be travellers suffering<br />
from cabin fever will result in a V-shaped<br />
CHART 1: BEACH STOCKS<br />
recovery. On the other hand, this may<br />
be hampered by significant job losses<br />
in these sectors and beyond, and just<br />
the threat of a global recession could<br />
hamper a recovery in consumer spending<br />
for some time to come. Depending on<br />
how optimistic or pessimistic you are,<br />
the shape and timing of a recovery is<br />
anyone’s guess.<br />
Source: Cannon Asset Managers, 2020<br />
Where to invest for the future?<br />
While no one knows exactly what the<br />
future may hold, seeking to identify broad<br />
themes or mega-trends may offer investors<br />
a powerful advantage in decision-making,<br />
as long-term investment success is all<br />
about having a view of the direction in<br />
which you think the world may be headed.<br />
To this end, we see a future dominated<br />
by more people – as people live longer<br />
due to improvements in healthcare – and<br />
more machines. And given the changes<br />
30 www.bluechipdigital.co.za
INVESTMENT TRENDS<br />
brought on by Covid-19, it is especially<br />
worth considering the rapid digitisation of<br />
industries worldwide.<br />
In terms of investment trends, digitisation<br />
of sectors is key. One local example<br />
of this tucked away in the mid-cap sector<br />
of the JSE, is Altron. As people rush to work<br />
and socialise remotely, Altron’s security<br />
and digital transformation services will<br />
likely be much in demand for the foreseeable<br />
future. And their acquisition of<br />
Ubusha Technologies (the largest identity<br />
security company in Africa) in 2019 has<br />
proven prescient. The group is on an<br />
undemanding price multiple of 11 times,<br />
and with increased opportunities in a post-<br />
Covid-19 world, this is an example of a great<br />
investment case and an attractive price.<br />
The payments sector is also ripe for<br />
digitisation. For instance, Al Kelly, CEO of<br />
Visa, notes that 56 countries have lifted<br />
contactless payment limits this year to<br />
support social distancing measures. While<br />
e-commerce has traditionally comprised<br />
14% of retail spending, we expect this to<br />
increase dramatically globally. And while<br />
Visa faces some headwinds due to a slowdown<br />
in economic activity, it is wellpositioned<br />
to capitalise on the digitisation<br />
of payments.<br />
With the limelight on healthcare,<br />
these shares have generally enjoyed the<br />
benefits of share price appreciation, a<br />
streak of bullish earnings growth, as well<br />
as high price-earnings ratings. Boston<br />
Samantha Steyn, CFA<br />
®<br />
, Chief Investment<br />
Officer, Cannon Asset Managers<br />
Scientific, on the other hand, has not quite<br />
shared in the uplift. This is mainly due to the<br />
deferment of many elective procedures and<br />
surgeries as healthcare workers respond<br />
to a rise of critical patient care. These companies<br />
have collaborated with hospitals,<br />
universities and industry peers in an<br />
attempt to find innovative ways to meet<br />
the urgent demand for personal protective<br />
equipment (PPE) and ventilators.<br />
With an undemanding multiple of 14<br />
times, a gross operating margin of 70% and<br />
ROE of 41.6%, Boston Scientific is a great<br />
investment opportunity, in the thick of the<br />
economic fog. While speaking of structural<br />
drivers, there is at least one caveat that<br />
Yanga Nozibele, Investment<br />
Associate, Cannon Asset Managers<br />
must be considered. Crucially, the sweet<br />
spot of investing remains unchanged:<br />
investing in good companies at great prices<br />
Amazon is a great example of a company<br />
that will likely see increased or even<br />
exponential growth. However, this is a<br />
widely acknowledged fact, and therefore<br />
the prospects are very much priced in.<br />
Ultimately, the search for investment<br />
returns will be found in those companies<br />
that can benefit from the structural drivers<br />
that will shape tomorrow’s investment<br />
landscape, without paying for years of<br />
sometimes inflated and – pandemic or no<br />
pandemic – always uncertain, forecasted<br />
earnings. <br />
CHART 2: 20/20 HINDSIGHT<br />
Source: Visual Capitalist, 2019<br />
www.bluechipdigital.co.za<br />
31
INVEST<br />
GLOBALLY,<br />
LOCALLY.<br />
With Satrix, investing globally is as easy as investing at home. Our global exchange-traded<br />
funds track the MSCI World Index, MSCI Emerging Markets IMI, S&P 500 ® and the Nasdaq-100 ® .<br />
Access the power of these global markets at www.satrix.co.za.<br />
Satrix Managers (RF) (Pty) Ltd (FSP no. 15658) is an authorised financial services provider and a registered and approved<br />
manager in terms of the Collective Investment Schemes Control Act. A schedule of fees is available from the Manager.<br />
OF INNOVATION
OFFSHORE INVESTMENTS<br />
The currency and your ETF<br />
A guide to helping your clients understand investing globally, locally<br />
Have you ever wondered why the performance of your<br />
global (exchange-traded fund) ETF sometimes looks like<br />
it is moving in the same direction as the global index it<br />
tracks and at other times it doesn’t?<br />
If an investor holds the Satrix S&P 500 ETF, the Rand is used<br />
to purchase this ETF and earns US dollar returns. There are,<br />
however, two primary drivers of the performance of this ETF:<br />
the Rand performance of the S&P 500 Index in US dollars, and<br />
the Rand performance versus the US dollar. When investing<br />
offshore, two levers need to work in your favour:<br />
• The underlying asset needs to appreciate (i.e. the S&P 500), and<br />
• the currency you are investing in should strengthen (or the<br />
Rand weaken). If the Rand strengthens, this will offset any<br />
growth achieved in the S&P 500.<br />
Real-world example<br />
Let’s assume you wanted to buy yourself a high-tech drone that<br />
was not available in South Africa. You would probably use your<br />
credit card and purchase this through a retailer in the USA.<br />
Suppose the Rand/dollar exchange rate was R10/$1 and the<br />
drone was priced at $1 000. Your purchase would cost you R10 000.<br />
Assume a year later, you wanted to sell your drone. The price for it<br />
in the USA has increased to $1 100, but the value of the Rand<br />
has strengthened to R9/$1. In Rand terms, it is now only worth<br />
R9 900, even though in dollar terms it has increased in value<br />
to $1 100.<br />
The weakening of the dollar (strengthening of the Rand)<br />
would have devalued your purchase, even though it is worth<br />
more in dollar terms. You probably wouldn’t find many<br />
buyers at R11 000 ($1 100 x R10/$1), as they would be able to<br />
purchase it for R9 900 at the current exchange rate, directly<br />
from the retailer.<br />
The same approach is used when valuing ETFs, except<br />
this occurs on a real-time basis throughout the JSE’s<br />
trading hours. To illustrate the performance of the Satrix<br />
S&P 500 ETF we have plotted the following chart (see<br />
opposite). Each line represents the cumulative compounded<br />
performance starting at the close of 31 Dec 2018 through to the<br />
close of 14 May 2020. A description of each line follows:<br />
S&P 500 (USD) This is the performance of the S&P 500 Total<br />
Return Index in US dollars, and is the performance we want<br />
from our underlying investment in US dollars. It cumulatively<br />
returned 17% over this period.<br />
USD/ZAR This is the performance of the dollar versus the Rand.<br />
On 31 Dec 2018, it closed at R14,38/$1 and strengthened to<br />
R18,60/$1 (Source: IRESS).<br />
S&P 500 (ZAR) This is the performance of the S&P 500 Total<br />
Return Index in Rands. This is what our investment is tracking. It is<br />
calculated by multiplying the S&P 500 Index level by the<br />
exchange rate, as we did in the real-world example above. Over<br />
the period it cumulatively returned 51,2%, because the weakening<br />
Rand relative to the dollar added to the growth in the S&P 500<br />
in dollar terms.<br />
Investing offshore is a great way to diversify your investments,<br />
but it does introduce currency risk, particularly if the currency<br />
you have invested in gets weaker. Investing for the long-term and<br />
having a disciplined approach to saving each month are timeless<br />
strategies to grow wealth. <br />
– Kingsley Williams, CIO, Satrix<br />
60%<br />
50%<br />
40%<br />
30%<br />
20%<br />
10%<br />
0%<br />
-10%<br />
-20%<br />
S&P 500 (USD) USD/ZAR S&P 500 (ZAR)<br />
51.2%<br />
29.3%<br />
17.0%<br />
Satrix Managers (RF) (Pty) Ltd (Satrix) a registered and approved Manager in Collective<br />
Investment Schemes in Securities and an authorised financial services provider in terms of<br />
the FAIS. Collective investment schemes are generally medium- to long-term investments.<br />
Unit Trusts and ETFs the investor essentially owns a “proportionate share” (in proportion to<br />
the participatory interest held in the fund) of the underlying investments held by the fund.<br />
With Unit Trusts, the investor holds participatory units issued by the fund while in the case<br />
of an ETF, the participatory interest, while issued by the fund, comprises a listed security<br />
traded on the stock exchange. ETFs are index tracking funds, registered as a Collective<br />
Investment and can be traded by any stockbroker on the stock exchange or via Investment<br />
Plans and online trading platforms. ETFs may incur additional costs due to it being listed on<br />
the JSE. Past performance is not necessarily a guide to future performance and the value<br />
of investments / units may go up or down. A schedule of fees and charges, and maximum<br />
commissions are available on the Minimum Disclosure Document or upon request from the<br />
Manager. Collective investments are traded at ruling prices and can engage in borrowing<br />
and scrip lending. Should the respective portfolio engage in scrip lending, the utility<br />
percentage and related counterparties can be viewed on the ETF Minimum Disclosure<br />
Document. The Manager does not provide any guarantee either with respect to the capital<br />
or the return of a portfolio. The index, the applicable tracking error and the portfolio<br />
performance relative to the index can be viewed on the ETF Minimum Disclosure Document<br />
and or on the Satrix website. Performance is based on NAV to NAV calculations with income<br />
reinvestments done on the ex-div date. Performance is calculated for the portfolio and the<br />
individual investor performance may differ as a result of initial fees, actual investment date,<br />
date of reinvestment and dividend withholding tax. Some funds may hold assets in foreign<br />
countries and could be exposed to risks such as potential constraints on liquidity and the<br />
repatriation of funds, macroeconomic, political, foreign exchange, tax risks, settlement risks<br />
and potential limitations on the availability of market information.<br />
www.bluechipdigital.co.za<br />
33
GLOBAL VULNERABILITY<br />
Could Covid-19<br />
have changed<br />
financial planning<br />
FOREVER<br />
A crisis often presents both tragedy and opportunity<br />
The Spanish Flu of 1918 was the<br />
deadliest pandemic in history.<br />
Estimates are that over 50-million<br />
people died or 3 to 4% of the<br />
global population. Over 60% of the South<br />
African population was infected with<br />
between 300 000 and 350 000 people<br />
dying. According to Howard Philip [1] , a<br />
South African historian of epidemics, South<br />
Africa’s estimated mortality rate of 4.4%<br />
made it the fourth worst-hit country in the<br />
world after Western Samoa (22%), India<br />
(6.2%) and Gambia (5.7%).<br />
Mortality from the Spanish Flu mainly<br />
afflicted those aged 18 to 35. Many young<br />
families were left destitute by the death<br />
of a breadwinner and many children were<br />
orphaned. It took a tragedy of this nature to<br />
“drive home the need for life insurance with<br />
extraordinary sharpness” [2] . Life insurance<br />
had been available in South Africa since<br />
1835 but the Spanish Flu boosted the<br />
industry to the next level. Arguably it<br />
did the same for financial advice in the<br />
form of the insurance broker, the primary<br />
distribution channel for life insurance.<br />
Many clients still see their insurance broker<br />
as their financial planner. But the two<br />
are not the same. I believe the Covid-19<br />
pandemic provides the opportunity to<br />
clarify this once and for all.<br />
According to the World Economic<br />
Forum [3] , anyone with the job title<br />
“broker” will become redundant in the<br />
21st century. Technology is disintermediating<br />
brokers at a rapid rate. As Melitta<br />
Ngalonkulu puts it, “The Covid-19 crisis<br />
has triggered an unexpected change in<br />
the insurance industry. Aside from making<br />
people more aware of their mortality,<br />
it’s also seeing them get cover through<br />
digital channels” [4] .<br />
Ngalonkulu reports that one local digital<br />
provider of life insurance has seen a 40%<br />
increase in business during the pandemic.<br />
What the World Economic Forum predicted<br />
is happening. It means selling, masquerading<br />
as financial planning, is on the<br />
way out. But I believe Covid-19’s impact<br />
could be even more dramatic than simply<br />
adding impetus to this shift. I think it could<br />
redefine the role of the financial planner,<br />
just as the Spanish Flu redefined the role<br />
of life insurance in people’s lives.<br />
The World Uncertainty Index is now<br />
at unprecedented levels, double that<br />
of the 2008 Global Financial Crisis.<br />
It is no surprise then that a recent<br />
FPI Survey [5] of financial advisors<br />
found that 80% of respondents<br />
said their clients are “stressed” or<br />
“very stressed”. Research by Gallup [6]<br />
suggests that levels of worry and<br />
stress have risen dramatically<br />
in the United States. Recently<br />
I have worked with various<br />
groups of financial planners, most<br />
of whom indicated their clients were<br />
experiencing real emotional exposure.<br />
Financial risk, too, is now at levels<br />
perhaps never seen before. Unemployment<br />
is at record levels around the world.<br />
Even your clients who have not lost their<br />
jobs or businesses are probably concerned<br />
about savings and investments. 58% of<br />
the FPI survey respondents reported that<br />
their clients have raised concerns about<br />
unemployment or reduced income; debt<br />
management and protection of assets.<br />
Neuroscientists tell us we are emotional<br />
creatures who try to think. The response<br />
globally to the Covid-19 pandemic is<br />
evidence of this. Panic buying of toilet<br />
paper perhaps best captures the emotions<br />
of panic and fear that unfolded around<br />
the world. The S&P 500 had its fastest fall<br />
?<br />
34 www.bluechipdigital.co.za
into the bear market territory in history.<br />
Physical and financial risk combined with<br />
clients. In contrast, the research found that<br />
investors rated “Helps me stay in control<br />
improved from dramatically.<br />
As you think about innovating to keep<br />
GLOBAL VULNERABILITY<br />
up with constant change, don’t get stuck<br />
on technology and forget about your<br />
people. They may just end up working for a<br />
business of life insurance, that has found but that’s a real not way all. to It has make<br />
a magnified dent in traffic what congestion! it means to be human.<br />
fear. A lethal cocktail of vulnerability. Brené of my emotions” the least important of 15 We are emotional creatures. We are social<br />
no surprise, Brown, then, researcher that Ricardo and author Semler, whose a TED R20k, attributes and that the of a process financial usually advisor’s involved service.<br />
highly successful, Talk on the innovative power of vulnerability industrialist is one four Before meetings. the pandemic, The potential clients client – it seemed had<br />
and entrepreneur of the most from viewed Brazil, YouTube wrote TED a Talks experienced – valued technical so much skills value over in human just one skills.<br />
References<br />
creatures. We crave connection. We can<br />
David experience Rock, The collective Neuroscience vulnerability. of Leadership And<br />
– how Improving we feel Organisations impacts the decisions by Understanding<br />
we make<br />
book entitled<br />
ever,<br />
The<br />
suggests<br />
Seven<br />
that<br />
Day Weekend.<br />
a combination<br />
He aspect<br />
of<br />
of<br />
Yet,<br />
the<br />
there<br />
first<br />
is<br />
meeting<br />
much behavioural<br />
that they<br />
finance<br />
were the<br />
about<br />
Brain,<br />
our<br />
Talk<br />
life<br />
at<br />
and<br />
FPI<br />
our<br />
Convention,<br />
money. The<br />
2012<br />
Covid-19<br />
“uncertainty, risk and emotional exposure” research to show how investors’<br />
encourages employers to think differently moved to ask if this was R20k per meeting Morgan Housel, The advantage of being a<br />
equals vulnerability [7] . Few have escaped emotions get the better of them The virtual HUMANS UNDER MANAGEMENT<br />
about how they manage their people, and – not because they didn’t want to pay the little underemployed, www.collaborativefund.<br />
this feeling during the pandemic.<br />
when investing and working SA CONFERENCE on 8 SEPTEMBER 2020<br />
more importantly, how to get the best out fee but because they thought given the com, 17 May 2017<br />
We have probably experienced, for towards financial goals. The offers financial planners the opportunity<br />
of people. the He first argues time, that a dose technology of collective that global value importance they had already of this experienced, work is this Ricardo Semler, The Seven Day Weekend,<br />
was supposed vulnerability. to make Prompted life easier by such information as was a reflected possibility.<br />
to<br />
in the fact that in the past<br />
Penguin<br />
hear financial<br />
Publishing,<br />
planners<br />
2004<br />
and experts<br />
laptops, cellphones overload and and international email, has actually<br />
share<br />
travel that 20 years, three experts in the field:<br />
Robert relevant Booth, Four-day insights week: about trial and finds the lower<br />
encroached helped on the people’s virus travel free time. to almost all corners The value Daniel in Kahneman, people Vernon Smith application stress and of increased relevant productivity, human skills www. in their<br />
But as of he the says, world. this The can last be time a good large thing sectors In of a knowledge-based and Richard Thaler economy, have received when you engagements theguardian.com, with 9 clients. February Find 2019out more<br />
if you have society the autonomy shut down to in get this your way was work during are providing the Nobel a Prize professional for Economics service for based at www.humansundermanagement.com<br />
McKinley Corbley, Microsoft Japan Recently<br />
done on the your Second own terms World and War. to But blend the your effect was on knowledge, their work in experience, the field. It thinking seems and Gave their Employees a 4-day Week – and<br />
work life<br />
only<br />
and personal certain<br />
life.<br />
parts<br />
He suggests<br />
of the world.<br />
that<br />
And<br />
interpersonal<br />
that clients<br />
skills,<br />
don’t<br />
to<br />
know<br />
quantify<br />
what the<br />
anything<br />
experts<br />
Productivity<br />
pandemic<br />
Skyrocketed<br />
has clarified<br />
by<br />
for<br />
40%,<br />
us that<br />
www.<br />
it is a<br />
even countries in the heart of the conflict, know…yet.<br />
non-negotiable for financial planners to<br />
innovative employers will eventually realise in terms of time – be it your employees’ goodnewsnetwork.org, 8 November 2019<br />
such as Britain, were able to send their The challenge for financial planners is develop the human skills that help clients<br />
that people may be more productive if they working hours or the time spent with a LinkedIn Talent Solutions, 2019 Global Talent<br />
children off to the countryside to escape to demonstrate to clients how important not only manage their emotions but make<br />
have the flexibility to decide for themselves client – is a disservice to the value that Trends Report, 2019<br />
the traumas of the war. In 2020, children human skills are to the service they provide. and implement sensible decisions about<br />
when to have work been and in play, lockdown rather around than the the world. financial planners and their staff potentially Samantha their life and McLaren, money. How And these for the 4 Companies<br />
clients of<br />
employer There deciding. has been Rather no escape than from time the in, impact can add to Empathy their clients’ lives. drives are financial Embracing planners Flexible who work don’t – and have Why these You<br />
employers of ideally Covid-19. should This focus experience on value of out. collective So the opportunity is ripe for the picking Should human Too, skills, www.businesslinkedin.com, the choice to go the Robo 22<br />
connection, and<br />
The vulnerability importance presents of the value challenge was and to innovate with respect to how you get May advice 2019 route will be easy. <br />
highlighted the opportunity for me recently for financial when planners I met to and emotional keep people and connection<br />
make them more<br />
with a financial redefine planner their role who with related clients. how productive. LinkedIn’s 2019 Global Talent<br />
they helped Recent a potential research client by PortfolioMetrix resolve a Trends [8]<br />
Report<br />
is<br />
indicates<br />
what<br />
that<br />
clients<br />
over 30% of<br />
dilemma suggests about their that financial future retirement.<br />
advisors believe job-seekers are will turn desperately<br />
down a job if there are<br />
empathy is the most important attribute<br />
They helped the client assess retirement not flexible work arrangements. Computer<br />
or service that they offer clients. This makes<br />
options in a more rigorous and creative giant Dell needing implemented in flexible the work<br />
sense as Brené Brown suggests a remedy<br />
way than if the client had simply tried practices in 2009. US healthcare company<br />
for vulnerability is empathy. She believes wake of Covid-19.<br />
to do it empathy on their drives own. connection, No doubt and emotional the Humana did the same in 2016, using<br />
experience connection and thinking is what that clients this are planner desperately technology The collective to enable vulnerability call-centre we workers have all<br />
had done needing over in many the wake years of Covid-19. made this to work experienced from home. in the Covid-19 pandemic may<br />
meeting very Pre-pandemic impactful. research by Morningstar [9] More just have recently made that Microsoft challenge a in little Japan easier.<br />
When found it came that to discussing financial advisors the financial believe that experimented Spanish with Flu accelerated a four-day the week growth for of<br />
planning helping fee, the their planner clients mentioned stay in control that their of the employees. life insurance Without industry, an adjustment<br />
and Covid-19 Rob Macdonald, Head of of Strategic Advisory<br />
the upfront their financial emotions is planning a key service fee they was offer in remuneration. will remind us The again result? of the Productivity<br />
importance Services at Fundhouse<br />
[1] ‘Black October’: The Impact of the Spanish Influenza Epidemic of<br />
1918 on South Africa. By Howard Phillips, Archives Year Book for<br />
South African History, Government Printer, Pretoria, 1990.<br />
[2] Assessing the Impact of a Pandemic on the Life Assurance Industry<br />
in South Africa. A paper by Andre Dreyer, Grete Kritzinger and<br />
Jethro de Decker, presented to the 1st IAA Colloquium, 10-13<br />
June, 2007, Stockholm, Sweden.<br />
[3] The Future of Jobs Report. The World Economic Forum, 2018.<br />
[4] Covid-19 is shaking up the insurance sector. Article by Melitta<br />
Ngalonkulu published on Moneyweb, 23 June 2020.<br />
44 www.bluechipjournal.co.za<br />
[5] The Impact of Covid-19 on CFP © Professionals and their Clients.<br />
Financial Planning Institute of Southern Africa. April 2020.<br />
[6] Gallup Health and Wellbeing Index & Gallup Panel, 2019 & 2020.<br />
[7] Dare to Lead. Brené Brown. Penguin, Random House, London.<br />
2018.<br />
[8] The Insider’s Guide to the Value of Advice. A PortfolioMetrix White<br />
Paper. May 2020.<br />
[9] The Value of Advice. What Investors Think, What Advisors Think,<br />
and How Everyone Can Get on the Same Page. Morningstar. The<br />
Investor Success Project. 2019<br />
www.bluechipdigital.co.za<br />
35
FINANCIAL PLANNING<br />
What inspired you to leave the corporate world to start your<br />
own business?<br />
Forty years ago, I started my career in financial planning and realised that<br />
the idea of starting my own business would be a captivating concept<br />
and would leave a legacy for my family. That’s when I decided it was time<br />
for me to leave the corporate world and pursue my passion, by offering<br />
support to the financial industry. The journey of building my own business<br />
four years later has left me with no regrets in leaving the comfort of the<br />
corporate world.<br />
My sincere appreciation and gratitude to my husband Ravi, and<br />
children Surushka, Tisha and Keagan, for my inspiration to allow me to<br />
follow my dreams and who had believed in me; the mere fact that I have<br />
been able to turn my passion into a successful career is greatly down<br />
to their continuous encouragement. I get to decide the measures of my<br />
success. Whatever limits that exist is my creation.<br />
What is unique about your business and the service you offer?<br />
STK Advisory Connect came together to build an innovative wealth<br />
management company to offer a distinctive business, one built on values<br />
and understanding a code of ethics with a focus on people’s needs,<br />
innovation and creating meaningful impact.<br />
Our belief is that if you get the culture right most of the other aspects<br />
such as superior customer service or building a long-term brand or<br />
empowering passionate employees and clients will form on its own.<br />
We drive efficiencies, manage risk and compliance and achieve client<br />
outcomes to enable profitability and reduce costs.<br />
Our mission is to employ graduates who intend to enter the financial<br />
services industry or are considering it as a career, so that they can become<br />
accustomed to this environment. This forms a platform to apply and<br />
extend their knowledge base from tertiary level to that of the real world.<br />
Our vision is sustainable financial strength for all South Africans<br />
because in this industry we choose to stand up rather than stand by;<br />
deep roots, strong mindset, clear vision and empowering positive growth.<br />
INNOVATIVE<br />
WEALTH MANAGEMENT<br />
Our mission is to employ<br />
graduates who intend<br />
to enter the financial<br />
services industry or are<br />
considering it as a<br />
career, so that they can<br />
become accustomed<br />
to this environment.<br />
SUSTAINABLE FINANCIAL STRENGTH<br />
<strong>Blue</strong> <strong>Chip</strong> interviews Nevathee Moodley,<br />
Director of STK Advisory Connect, a femaleand<br />
black-owned business that provides a<br />
support service to financial planning businesses<br />
primarily around the use of technology
FINANCIAL PLANNING<br />
What has been your biggest challenge as a blackowned<br />
business?<br />
The industry that we support has primarily been a maledominated<br />
world. I am assured that we can take our rightful place<br />
alongside our male counterparts, understanding fully that we need<br />
collaboration and respect for each other. The Covid-19 pandemic<br />
has shown once again how countries governed by women have<br />
had the lowest statistics, managed in a strategic and proactive way.<br />
Bias, stereotypical thinking and gender inequality are all<br />
limitations and have no place if we want to empower, grow,<br />
become people of integrity and set the path as role models;<br />
become worthy examples for the younger generation.<br />
What are the challenges currently facing independent<br />
financial planning businesses?<br />
Financial advisors have a myriad challenges facing them in<br />
their practices. I believe their biggest challenge is probably<br />
moving from commission to fee-based business. In addition,<br />
the other key drivers for improvement are compliance and<br />
regulatory requirements. Advanced technology will therefore<br />
be a significant enabler. Businesses need to evolve and to be<br />
relevant with the rest of the world in order to be successful.<br />
What is the biggest challenge in providing support to<br />
financial planners?<br />
Streamline operations and automation. The Covid-19 pandemic<br />
has accelerated changes in how we work. The biggest challenge to<br />
support financial planners, wealth and portfolio managers would<br />
be that time is money.<br />
Another is changing the mindset of moving away from<br />
spreadsheets and manual processes, to embracing the benefits<br />
of improved technology.<br />
Other challenges include:<br />
• Data management<br />
• Legacy systems<br />
• Streamline operations and automation<br />
How do you think technology is going to influence the role of<br />
financial planning going forward?<br />
Technology and innovation will play a key role in the industry,<br />
which is rapidly changing. Digital transformation brings a whole<br />
new world of opportunities. We have to embrace this age of<br />
technology and use it to our fullest advantage especially in terms<br />
of understanding trends and competing with global markets.<br />
Technology will have major ramifications on accessibility,<br />
information sharing and communication, and we need to<br />
continuously use media and technology to become innovative<br />
in our applications.<br />
Please share an inspiring message for Women’s Month.<br />
In this month dedicated to women, we as a female-owned and<br />
managed enterprise would like to offer these words to encourage<br />
you to follow your dreams and aspirations to reach those heights.<br />
Know that the challenges that you face can only serve to build<br />
you and make you even stronger. Face them with grace and<br />
determination. Keep your inner sense of value and integrity close<br />
to all decision-making in a “somewhat ruthless and cold” world.<br />
There are many opportunities which await the eager and<br />
fearless, if you allow them to be just that – opportunities. See<br />
opportunities in everything. Never ever allow anyone to take<br />
away your passion, energy and drive or<br />
to dim your light. Shine in all that you<br />
endeavour to achieve, without compromise,<br />
malice or greed – the very vices<br />
which plague our world today.<br />
Always give back, realising that we<br />
are all but part of a big puzzle and that<br />
the spirit of Ubuntu has to be central<br />
in all our greatest achievements. <br />
Our vision is sustainable financial strength for all South<br />
Africans because in this industry we choose to stand<br />
up rather than stand by; deep roots, strong mindset,<br />
clear vision and empowering positive growth.<br />
Nevathee Moodley,<br />
STK Advisory Connect<br />
www.bluechipdigital.co.za<br />
37
RETIREMENT<br />
Retire<br />
with flexibility<br />
LIFESTYLE CHOICES FOR THE MODERN RETIREE<br />
While all our lives have been put on hold for at least a few months as<br />
a result of the lockdown caused by the Covid-19 pandemic, decisions<br />
about our futures still have to be made, and this includes older people<br />
making choices about the way they will live in their retirement.<br />
38 www.bluechipdigital.co.za
RETIREMENT<br />
Making the big decision to move to a new home<br />
can be one of the toughest aspects of ageing. It is,<br />
understandably, hard to consider moving out of a<br />
home where you have spent years, or an entire lifetime,<br />
creating memories with your family.<br />
It is human nature to cling to what is familiar and to even be<br />
averse to moving to new surroundings. However, at some point,<br />
there inevitably comes a transition point where seniors either<br />
choose full-blown retirement or decide to adjust their lifestyle to<br />
allow for more flexibility. For most retirees, this means moving out<br />
of the family home.<br />
Today, it is the Baby Boomer generation that is looking to retire.<br />
They are, according to Prieshka Taylor, Head of Marketing for<br />
Evergreen Lifestyle Villages, “confident, optimistic, independent<br />
individuals who value innovation, self-reliance, accomplishment<br />
and change”. Taylor explains that they are still living active lives and<br />
showing no signs of slowing down.<br />
“We are seeing a trend in the retirement industry in terms of<br />
which the Baby Boomer generation wants more flexibility from<br />
their retirement options. They want to lead active lives, and many<br />
of them still work in some capacity and want to be able to downsize<br />
in stages,” she says.<br />
The traditional retirement home model – the aged home – does<br />
not fit these requirements. Instead, the focus must be on matching<br />
the lifestyle of the modern retiree with their personal life stages.<br />
Demand for modern retirement estates<br />
“It is for these reasons that retirement lifestyle estate developers<br />
are providing villages with far more flexibility to meet the needs,<br />
requirements and constraints of today’s working retirees,” says Taylor.<br />
“Developers must stay on the ball to ensure retirees feel<br />
comfortable about moving into a new environment, knowing that<br />
they have everything they need to live a full and active life.”<br />
She adds that one of the main concerns of retirees is financial<br />
security. Evergreen Lifestyle estates operate on the life rights model,<br />
Making the big decision to move<br />
to a new home can be one of the<br />
www.bluechipdigital.co.za<br />
39
RETIREMENT<br />
and equipped care centres with 24-hour<br />
nursing, frail and dementia care, offering<br />
peace of mind should the need for these<br />
facilities arise.<br />
“The options are very flexible for our<br />
residents,” explains Taylor. “They are able to<br />
downsize from the family home and later<br />
have the option to easily shift from a house<br />
to an apartment within the same village.”<br />
Access to amenities<br />
Evergreen Lifestyle Retirement Villages<br />
have good locations in different regions of<br />
South Africa. Some homes are surrounded<br />
by natural wetlands; others are located in<br />
a quiet cul-de-sac overlooking majestic<br />
in terms of which residents do not own the property<br />
but rather acquire the right to live in the home for the<br />
remainder of their (and their partner’s) life. Evergreen<br />
villages also offer top security along with an array of<br />
activities and amenities that encourage wellness, a sense<br />
of community, access to continuous healthcare and<br />
exceptional hospitality to residents.<br />
“I’ve been here for four years and never looked back,”<br />
says Sophia McKeller, a resident at an Evergreen Lifestyle<br />
village. “People sometimes cling to things, afraid to make a<br />
mind shift or to move away from what they know. You have<br />
to take a leap of faith – I did, and I recommend it.”<br />
Technology is essential<br />
Many people of retirement age choose to continue working and<br />
may do so until well past 65. Up-to-date technology in retirement<br />
villages allows them to work from their retirement homes. This<br />
option works well: the household-maintenance burden of staying<br />
in the family home is removed, and the older person can live life<br />
as they wish.<br />
“Many of our residents are working well into their 70s, entering<br />
this phase with a need to connect with their world,” says Taylor.<br />
“They want to be active, fit and productive. The Baby Boomer<br />
generation is looking for an environment that enables them to<br />
fully enjoy their years, to function effectively and to remain vital.”<br />
Flexibility is key<br />
With this in mind, the new wave of retirees is not looking to go<br />
straight from full-time work to a traditional retirement model.<br />
Modern retirement estates meet this challenge by offering mature<br />
residents the adaptability to downscale their accommodation<br />
according to their changing needs over time.<br />
Whatever property they select, all residents have access to<br />
support such as personalised home-based and primary healthcare,<br />
Making the<br />
big decision<br />
to move to<br />
a new home<br />
can be one of<br />
the toughest<br />
aspects of<br />
ageing.<br />
mountains. What they have in common are spaces that afford<br />
their residents privacy, peace and a great quality of life along with<br />
easy access to amenities and various community-centred exercise,<br />
sporting and social activities.<br />
Overall, the benchmark for a retirement offering should<br />
be a place where lifestyle meets secure living in an environment<br />
that combines<br />
residential,<br />
recreational and<br />
quality healthcare<br />
facilities so that<br />
you can truly enjoy<br />
the best years of<br />
your life. <br />
Prieshka Taylor is<br />
Head of Marketing<br />
at Evergreen<br />
Lifestyle Villages<br />
40 www.bluechipdigital.co.za
Note: White logo must please be used on colour backgrounds<br />
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25, 26 & 27 August<br />
REGISTER NOW<br />
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POINTS / HOURS<br />
* Subject to FPI final agenda approval<br />
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FINANCIAL PLANNERS<br />
Some things just<br />
never change<br />
Natasja Hart, Financial Planner of the Year 2010, looks back on a decade of change<br />
The world in 2010 was a quite different place to the one<br />
it is now, especially since Covid-19 ousted many of our<br />
certainties. But even without that particular black swan,<br />
much has changed, from the geopolitical to the purely<br />
social. Back in 2010, the big news here in South Africa was the<br />
Soccer World Cup, and the mad rush to get all the stadiums built<br />
as well as the hotels and B&Bs refurbished. Planeloads of people<br />
from all over the planet. Huge and happy crowds.<br />
In at least one respect, the more things change, the more they<br />
stay the same. One unchanging feature of the investment world<br />
is the important – perhaps key – role that a financial planner plays<br />
in helping individuals build and maintain an effective, successful<br />
financial plan. Both planner and plan are essential to ensuring<br />
financial stability precisely because so much else has changed.<br />
To understand why the financial<br />
planner, the plan and the long-term<br />
relationship between advisor and<br />
client remain so critical, one must<br />
understand the profound nature of<br />
the changes that have occurred.<br />
South African investors<br />
have developed a healthy<br />
appetite for global markets.<br />
The growing role of technology. The continuing and rapid<br />
march of technology now defines both life and business.<br />
Consumers generally are much more demanding than they<br />
used to be, and they also expect similar levels of personalised<br />
service from all their service providers, not just some. In the<br />
context of financial planning, this means that clients expect<br />
quicker, more direct access to their financial advisors and planners<br />
across a range of channels.<br />
Another key aspect of the digital revolution is that we have<br />
all become accustomed to accessing unparalleled amounts<br />
of information and, increasingly in these days of artificial<br />
intelligence (AI), to interrogate it. In our world, this means that<br />
clients want to have direct digital access to their portfolios<br />
and plans at will. Increasingly, they are looking to their<br />
advisors and planners also to provide<br />
them with tools that make it easy to<br />
test scenarios and alternative plans.<br />
Both of these developments are<br />
to be welcomed because they help<br />
ensure that clients remain engaged<br />
42 www.bluechipdigital.co.za
FINANCIAL PLANNERS<br />
with their investment strategies, and thus more likely to<br />
stick to them. Financial planners and investment advisors who<br />
cannot meet these expectations will soon find themselves<br />
losing clients. The forced virtualisation of so much of business over<br />
the Covid-19 period has accelerated this trend, and even older<br />
clients have become noticeably more digital.<br />
The concept of tools that can be used to test various scenarios<br />
raises another set of technology-related issues that impact on<br />
our industry: the increasing use of AI has given rise to some<br />
speculation that so-called robo-advisors might replace human<br />
advisors someday soon. These predictions are somewhat<br />
fanciful. On the one hand, there is no doubt that planners and<br />
their clients will increasingly use smart technology like this to<br />
help them, but I do not see any way to replace the human<br />
element. Complex decisions<br />
– and financial decisions are<br />
getting more and more<br />
complex – cannot be made<br />
solely on logic and probability,<br />
especially where humans<br />
are involved.<br />
Only a human advisor can empathise with a client’s strategy<br />
and understand that there is more to it than just its parts, and only<br />
a human can see the illogical connections that offer a solution.<br />
And only a human planner/advisor, one should add, can help<br />
a client overcome his or her emotional bias to make decisions<br />
based on the short term despite their long-term implications.<br />
A good example of this was the share price drop associated<br />
with Covid-19 which, allied to the dire prognostications about<br />
the long-term financial impact, caused a huge sell-off in equities<br />
just a few weeks ago. It’s the human planner who can persuade<br />
her client to stick with the plan, but also to adjust it when necessary.<br />
One way in which technology has not delivered a promised<br />
change is the long-heralded shift to paperless business. Quite<br />
the opposite – it seems like technology has simply made it easier<br />
to generate even more paper.<br />
Markets have changed. A quick way to get a sense of the scale<br />
of the change is to consider the Top 40 index on the JSE – the<br />
companies on the list have changed and so have their rankings.<br />
In 2010, BHP Billiton was the share with the highest weighting<br />
(13.47%), followed by Anglo American and SABMiller. This<br />
year, the top-weighted share is Naspers (18%), a communications<br />
company, followed by BHP Group and Richemont, with<br />
Anglo American having retreated to No. 4. Steinhoff, of course,<br />
featured on the 2010 list.<br />
Globally, the shift towards technology and communications<br />
stocks has been much more profound than on the parochial<br />
South African bourse. Recent moves have seen the technologyintensive<br />
Nasdaq overtake the Dow Jones in terms of initial public<br />
offerings, clearly mirroring the onward march of technology to the<br />
centre of business as outlined above.<br />
As the Fourth Industrial Revolution builds momentum,<br />
companies associated with artificial intelligence, robotics,<br />
machine learning and cybersecurity will grow in importance in<br />
business – and investment portfolios. Biotechnology is another<br />
hot area, and then there is the elusive promise of the<br />
cryptocurrencies. Another big change is the growing interest in<br />
socially responsible investing centred on environmental, social<br />
and governance (ESG) criteria.<br />
South African investors are going global. In 2010, the JSE<br />
was still the focus for South African investors even though the<br />
lifetime allowance of R4 million had been eased to R4 million per<br />
year. It now stands at R10 million per year, plus the R1-million<br />
discretionary allowance and South African investors have<br />
developed a healthy appetite for global markets.<br />
Regulations are affecting the industry. Financial markets<br />
are highly regulated, and regulatory changes have supported<br />
consumers’ desire to have<br />
greater access to informa-<br />
Both planner and plan are essential<br />
to ensuring financial stability precisely<br />
because so much else has changed.<br />
tion as noted earlier, in the<br />
technology section. Information<br />
about fees and<br />
commissions is now also<br />
freely available.<br />
Locally, a big change has been the emergence of the Financial<br />
Service Conduct Authority (FSCA) which has oversight over the<br />
whole industry. This is not an exhaustive survey of what has<br />
changed, and the pace and scale of change simply seem to<br />
increase. In tandem, so does the complexity.<br />
In this constantly shifting environment, the security of a trusted<br />
advisor who has expert knowledge and your financial wellbeing<br />
at heart is more essential than ever before. <br />
Natasja Hart, CFP®, FPI Planner of the Year 2010.<br />
www.bluechipdigital.co.za<br />
43
FPI<br />
The impact of Covid-19 on CFP®<br />
professionals and their clients<br />
The Financial Planning Institute surveyed CFP® professionals<br />
to find out what’s happening on the ground<br />
A<br />
n impressive <strong>76</strong>1 CFP® professionals completed the<br />
online FPI survey conducted during April 2020 throughout<br />
Southern Africa. Most responses came from Gauteng,<br />
the Western Cape and KwaZulu-Natal, but all nine<br />
provinces and several neighbouring countries were represented.<br />
The survey underscores the FPI’s commitment to ensuring<br />
that South Africans have access to the services of competent<br />
financial planners who adhere to a professional code of ethics.<br />
Making the most of the “new normal”<br />
The survey provided concrete evidence that the financial planning<br />
industry was hit to some extent by the pandemic but not as<br />
hard as many other sectors of business. While the pandemic has<br />
changed how all CFP® professionals work, a heartwarming 56% of<br />
respondents said the pandemic would not change their long-term<br />
professional or personal goals. “My business remains the same,<br />
I just have to be nimble and able to adjust the way I do it!” said one<br />
44 www.bluechipdigital.co.za
One thing that unites all CFP® professionals is their conviction that<br />
the pandemic – and the associated economic impacts – has made<br />
the financial planning profession more important than ever.<br />
especially chipper respondent. Meanwhile, 19% of those surveyed<br />
said Covid-19 caused them to consider postponing their own<br />
planned retirement date and working longer.<br />
Regarding the challenges presented by the pandemic, a full<br />
quarter of respondents listed establishing relationships with new<br />
clients as their primary concern while a further 21% stated planning<br />
for the upcoming economic recession as their biggest worry.<br />
The responses underline the fact that financial planners who<br />
are open to technology – specifically digital marketing, cloudbased<br />
software and video conferencing technology – have found<br />
the fallout of the pandemic easier to manage. As one respondent<br />
put it, “Change is inevitable. It is a great opportunity to see ‘crisis<br />
management plans’ in action and to see where we can improve on<br />
processes. Obviously, we do expect challenging times, but there<br />
will also be a lot of new possibilities.”<br />
Advice amid the pandemic<br />
Many readers will be wondering how they should react in the face<br />
of tumbling share prices and seesawing exchange rates. More<br />
than two-thirds of the <strong>76</strong>1 CFP® professionals who completed the<br />
survey say that their advice to clients is to “sit tight and wait until<br />
volatility decreases before making any major financial decisions”.<br />
Proving that financial planning is as much about people as it is<br />
about numbers, more than four-fifths of respondents expressed<br />
concern at their clients’ mounting stress levels.<br />
Across the board, the five biggest client concerns are:<br />
• Unemployment or reduced income<br />
• Protecting assets<br />
• Managing debt<br />
• Liquidity/cashflow<br />
• Rent/mortgage payments.<br />
“When everything you’ve worked so hard to achieve is<br />
disappearing before your eyes, it can be very tempting to try<br />
to take financial planning matters into your own hands,” says<br />
the FPI’s CEO, Lelané Bezuidenhout. “Clients should resist the<br />
temptation to do this and speak to their financial planner and<br />
if they do not have a planner, to visit www.letsplan.co.za to<br />
find an FPI professional member in their area.”<br />
Now is the time to sit tight<br />
and wait until volatility<br />
decreases before making<br />
any major financial decisions.<br />
FACTORS TROUBLING CFP ®<br />
PROFESSIONALS IN SOUTH AFRICA<br />
Conducting client meetings by phone<br />
16% or video conference and not in person.<br />
The emotional factor. Clients are<br />
11% leaning on me as a therapist first.<br />
Balancing the needs of my clients<br />
11% with my own personal/family needs.<br />
9%<br />
Maintaining more frequent communications<br />
with clients and prospects.<br />
Working remotely.<br />
8%<br />
A huge responsibility awaits<br />
One thing that unites all CFP® professionals is their conviction<br />
that the pandemic – and the associated economic impacts – has<br />
made the financial planning profession more important than ever.<br />
A whopping 91% of respondents agree that South Africans with a<br />
financial plan are more likely to make progress towards their goals,<br />
even during these uncertain times.<br />
As a result, 61% of financial planners<br />
believe that there will be a growing<br />
demand for financial advice delivered<br />
by a professional in the wake of Covid-<br />
19. Already, over a third of respondents<br />
have seen an increase in client queries,<br />
but this is set to grow exponentially as<br />
the public health crisis makes ways for<br />
an economic one.<br />
“This is a tough time for all,” says<br />
Bezuidenhout, “but CFP® professionals<br />
around the country are not shying away<br />
from the challenge of improving the<br />
financial wellbeing of all South Africans<br />
and their families even during turbulent<br />
times like this.”<br />
We wouldn’t want it any other way. <br />
Lelané Bezuidenhout,<br />
CEO, FPI<br />
www.bluechipdigital.co.za<br />
45
FPI<br />
WHAT<br />
IS IN A<br />
NAME? WHY<br />
PROFESSIONAL<br />
NAMES MATTER<br />
Recent developments<br />
are set to provide clarity<br />
in terms of financial advisor<br />
titles and regulatory certainty for<br />
financial planners in South Africa<br />
“<br />
Arose by any other name would smell as sweet,”<br />
said Juliet to her off-limits Romeo. While this may<br />
be true for star-crossed lovers, it doesn’t apply<br />
for professions. If I were to introduce myself<br />
as Dr David Kop, you would immediately place me as<br />
a qualified medical doctor, with a professional status.<br />
You would know instantly that I had been through a<br />
rigorous process of education and training, that I had<br />
pledged an oath to act ethically towards my patients and<br />
that I am “regulated”.<br />
In December 2019, the Financial Sector Conduct<br />
Authority (FSCA) released its long-awaited discussion<br />
document on the categorisation of advisors. Among other<br />
matters, the paper deals with the title(s) that advisors<br />
may use – a hotly debated topic since the release of the<br />
original Retail Distribution Review document in 2014.<br />
Clarity for financial advisors<br />
While the Financial Advisors and Intermediary Services<br />
(FAIS) Act has provided consumer protection and<br />
increased the competency and ethical requirements for<br />
financial advisors, it only regulates advice around financial<br />
products. If a person stops short of recommending a<br />
particular financial product, they will fall outside of the<br />
definition of financial advice in FAIS.<br />
Notably, FAIS does not protect the job title of financial<br />
advisors. There is, in fact, a growing global community<br />
of people who call themselves financial planners and<br />
financial advisors (or some other variant of this) who,<br />
because they do not advise on financial products, fall<br />
outside of the regulatory net.<br />
This is problematic as it creates confusion in the<br />
consumer’s mind about who and what a financial<br />
advisor is and what competency level they can expect from<br />
a financial advisor. This is frankly dangerous: consumers<br />
need protection from exploitation by unqualified and<br />
unethical individuals. The FSCA, therefore, wants to ensure<br />
that the title used by financial advisors will promote<br />
consumer understanding of:<br />
• The scope of products and services the advisor<br />
may recommend, and limitations on that scope. For<br />
example, whether a range of products from different<br />
suppliers can be offered or only those of a particular<br />
supplier or group.<br />
• The type of relationship between the advisor and the<br />
product supplier/s.<br />
• Which entity (advisor, supplier, or both) may be<br />
held accountable for the advice provided and the<br />
performance of the product concerned.<br />
At the FPI, we believe that it would be almost<br />
impossible to meet the objectives outlined above with<br />
46 www.bluechipdigital.co.za
In a Global FPSB survey into financial planning, 60% of South<br />
African consumers either answered no or were not sure<br />
whether financial planning was regulated in this country.<br />
only a title, and would require additional<br />
disclosure (that is already covered by<br />
FAIS in any event). We feel strongly that<br />
an advisor’s title should indicate which<br />
activity they are licensed for, and not who<br />
they do it for.<br />
We have proposed the following titles<br />
for financial advisors:<br />
• Financial Product Advisor<br />
• Financial Advisor<br />
Splitting advisors into these categories<br />
will allow for different competency<br />
frameworks. This will also have the bonus<br />
of creating established career paths and<br />
attracting more talented youngsters to<br />
our profession.<br />
The legislation must also include<br />
sanctions for anyone who uses these titles<br />
without being duly licensed to perform<br />
these activities.<br />
What about financial planning?<br />
In a Global FPSB survey into financial<br />
planning, 60% of South African consumers<br />
either answered no or were not sure whether<br />
financial planning was regulated in this<br />
country. If there’s confusion in the financial<br />
advice space, this is doubled when it comes<br />
to the financial planning profession.<br />
There is likewise no current legislation<br />
around who is allowed to call themselves<br />
a financial planner or to describe their<br />
services as financial planning. Unlike the<br />
medical profession, we have so-called<br />
financial planners ranging from the<br />
minimum education requirement to<br />
license as a financial advisor right through<br />
to financial planners who hold the globally<br />
recognised Certified Financial Planner®<br />
professional designation.<br />
Hopefully, this is about to change in<br />
South Africa. The discussion document<br />
contains the following proposal:<br />
“One of the desired outcomes of our<br />
RDR reforms is to enhance standards of<br />
professionalism in financial advice and<br />
intermediary services to build consumer<br />
confidence and trust. To this end, the FSCA<br />
confirms our intent to acknowledge the<br />
professional status of qualified financial<br />
planners by reserving the use of the<br />
designation ‘financial planner’ for those<br />
holding a formal professional designation<br />
in this discipline. Persons designated as<br />
a CFP® professional, who therefore meet<br />
the standards and requirements set by<br />
the Financial Planning Standards Board<br />
(FSPB), would meet this criterion... In<br />
South Africa, the relevant organisation<br />
is the Financial Planning Institute, which<br />
is also recognised by the South African<br />
Qualifications Authority as the professional<br />
body for the financial planning profession<br />
in South Africa.”<br />
We are pleased to see the recognition<br />
of the CFP® designation. Financial planning<br />
is a relatively young profession, having<br />
started only 50 years ago. In that period<br />
the Financial Planning Standards Board<br />
has done much to ensure that financial<br />
planning meets the generally recognised<br />
characteristics of a profession (recognising<br />
that the legal protection offered to most<br />
other professions is missing when it comes<br />
to financial planning). This proposal would<br />
make South Africa one of the few countries<br />
in the world that recognise the professional<br />
status of financial planning.<br />
We believe that the protection of<br />
the terms financial planner, financial<br />
planning and financial plan is important<br />
for consumer protection.<br />
The protection of the title of “Financial<br />
Planner”, as proposed, is more than just title<br />
protection. It allows for the adoption of a<br />
uniform oversight of financial planners that<br />
includes adherence to a world-class code<br />
of ethics, requiring a fiduciary standard<br />
of care, and a set of professional practice<br />
and competency standards developed<br />
from empirical research into the practice<br />
of financial planning.<br />
Financial planners, through their professional<br />
bodies, will need to demonstrate<br />
professional competency and commitment<br />
by meeting initial and ongoing education,<br />
examination, experience and ethics<br />
requirements. This approach will protect the<br />
public and allow for recognition of financial<br />
planning as a true profession.<br />
The bottom line<br />
For too long now, consumers have been<br />
befuddled by the variety of titles used in the<br />
financial advice industry and the financial<br />
planning profession. Both financial advice<br />
and financial planning are vital to the<br />
economic growth of South Africa.<br />
We believe that affording legal<br />
protection to certain titles can only<br />
enhance consumer trust in financial advice<br />
and financial planning. <br />
David Kop, Executive Director for Relevance, FPI<br />
www.bluechipdigital.co.za<br />
47
RETIREMENT<br />
48 www.bluechipdigital.co.za<br />
Amendments<br />
made to living<br />
annuities It<br />
is now possible for<br />
retirees to amend<br />
their drawdown rate<br />
during the year for<br />
a limited period
W<br />
e have seen some important<br />
changes in living annuities<br />
over the past couple of<br />
months. One of these<br />
changes was brought about by Covid-19<br />
and its impact on capital values (reduction<br />
in share prices) of living annuities and<br />
another was brought about by the 2020<br />
Montanari Judgement in the Supreme<br />
Court of Appeal.<br />
Looking at the first amendment to living<br />
annuities, it is now possible for retirees to<br />
amend their drawdown rate during the<br />
year for a limited period, where before,<br />
they could only make this amendment<br />
once a year (on the anniversary date of<br />
their policy).<br />
The income band has also widened,<br />
from 2.5% and 17.5% to 0.5% and 20%<br />
respectively, as part of Government’s<br />
temporary regulatory changes to ease the<br />
pain. Covid-19 has affected and will, for a<br />
long time, affect local and international<br />
markets and therefore returns earned on<br />
underlying investments.<br />
This change to the income band of living<br />
annuities is important because some<br />
retirees may decide to reduce the income<br />
drawn from their living annuities to align<br />
with the actual return on the capital<br />
invested and therefore not draw down<br />
capital itself. Some retirees may not be<br />
able to live on the income they have drawn<br />
before, and although not advisable, decide<br />
to increase their income drawdown rate,<br />
which will result in the capital value being<br />
drawn down, to make ends meet.<br />
The second important change in living<br />
annuities was brought about by the 2020<br />
Montanari Judgement in the Supreme<br />
Court of Appeal.<br />
A life annuity is far<br />
easier to value than<br />
a living annuity.<br />
In the past, only the value of retirement<br />
funds and not the value of a living annuity<br />
could be taken into account for a divorce<br />
settlement. This relates to the clean break<br />
principle and allows the non-member<br />
spouse to access their former spouse’s<br />
retirement fund benefit and have an<br />
amount or percentage (as stipulated by<br />
the divorce decree) paid out or transferred<br />
to another fund.<br />
The argument was always that the living<br />
annuity income could not be considered<br />
as a right to an income with a capitalised<br />
value, as the funds were owned by the<br />
insurer, and not the person receiving the<br />
income. The courts had ruled previously<br />
that the income could only be taken into<br />
account for a maintenance claim, not a<br />
divorce settlement.<br />
This has all changed with the 2020<br />
Montanari Judgement in the Supreme<br />
Court of Appeal which acknowledged that<br />
the annuity does have a capital value and<br />
can be taken into account when dividing<br />
assets after a divorce.<br />
The Montonari Judgement is a major<br />
step in the right direction. However,<br />
there is still a problem in that the person<br />
receiving the income has the right to<br />
vary the drawdown from 2.5 % to 17.5 %<br />
(during Covid, between 0.5% and 20%),<br />
and can reduce the drawdown to lower the<br />
capitalised value of the income.<br />
Although this case dealt with the right to<br />
living annuity income, the principle would<br />
apply similarly to a right to income from a<br />
guaranteed life annuity. A life annuity is far<br />
easier to value than a living annuity.<br />
One final change to living annuities is<br />
that previously, smaller annuities with a<br />
value of up to R50 000 (where a third had<br />
been taken in cash) and up to R75 000,<br />
where no cash amount had been taken,<br />
could be withdrawn in full.<br />
This threshold has been increased to<br />
R125 000 across the board. This change<br />
will be permanent and ongoing.<br />
Considering the above changes and<br />
deciding what is best for you and your<br />
family is a daunting process. We suggest<br />
you consult a Certified Financial Planning®<br />
professional who will be able to look at<br />
your situation objectively and suggest the<br />
best course of action. <br />
Cluhein Trubshaw, Technical Specialist, FPI<br />
www.bluechipdigital.co.za<br />
49
Moving<br />
brands<br />
ing<br />
bran<br />
A<br />
VERY BRIEF HISTORY OF BRANDING<br />
Branding has been around, in some form or another,<br />
for millennia, writes Adrian Room in Brands: the New<br />
Wealth Creators, an influencing work on the topic.<br />
“The Greeks and Romans and other large trading nations before<br />
them had various ways of promoting goods, and even services,<br />
whether they were wines, pots, metals or ointments.”<br />
Branding, as we know it, made a quantum leap in the 20th<br />
century, causing us all to form deep relationships with brands<br />
and products. These relationships have adapted over the years<br />
from meeting brands in-store via packaging, through advertising<br />
in newspapers, radio and television and now onwards to yet more<br />
fragmented and rapid encounters through social media, the web<br />
and mobile apps. Soon we’ll even be experiencing branding<br />
through augmented reality like that of ‘lenses’, which Google and<br />
Apple are launching in 2021.<br />
Reimagining the FPI’s brand<br />
Today, branding isn’t just about products on shelves, it is interwoven<br />
into the essential component of all successful businesses,<br />
organisations and even individuals. The FPI is no exception. To<br />
herald the start of a new decade, the FPI is embarking on a drive to<br />
meet the needs of current members, future custodians of personal<br />
finance and consumers throughout Southern Africa. In the coming<br />
months, we will be refreshing our brand logo, revitalising our look<br />
and feel and modernising the way we interact with our members.<br />
Our inclusive digital ecosystem will make it much easier for<br />
members and consumers alike to access the deep knowledge<br />
pools that reside within the FPI.<br />
Our first big test – the digital convention<br />
In October 2020, as our commitment to lead the way in both ethics<br />
and innovation, the FPI will be taking our convention online. For<br />
us, going digital is an opportunity to showcase the great strides<br />
50 www.bluechipdigital.co.za<br />
Change is inevitable. The FPI is updating its brand to become<br />
more inclusive and accessible to all South Africans<br />
we have made in giving our brand a 21st-century makeover. The<br />
FPI will be bringing a new edge to the convention calendar by<br />
showcasing that even in disruptive times the FPI is innovative and<br />
is lean and able to adapt to ensure networking and sharing of<br />
information. International will be brought local and those ‘water<br />
cooler’ moments will be enjoyed with challengers, trendsetters and<br />
policymakers at this ground-breaking digital event. The movement<br />
to start enriching the environment through collaboration and<br />
continuity is vital. The rebranding process is about so much<br />
more than a new communication style – it’s about redefining the<br />
responsiveness of the FPI to the needs and requirements of its<br />
members as well as to new environments burgeoning globally<br />
and staying switched on to change.<br />
The movement to start enriching<br />
the environment through<br />
collaboration and continuity is vital.<br />
The way ahead<br />
The FPI brand experienced by members and consumers alike will be<br />
evoked, not only ensuring that our ethics and professional values<br />
are reflected but that the journey of consumer and professional<br />
covey a more connected and demonstrative environment to all<br />
stakeholders. The FPI is evolving, and we look forward to sharing<br />
the next milestones with you in the upcoming months. As a<br />
member organisation, we welcome your feedback on the process.<br />
We look forward to developing this new journey together and<br />
moving things forward, bringing innovation and rejuvenation to<br />
a long valued organisation. <br />
Louis Friderichs is the Financial Planning Institute’s newly appointed<br />
Marketing Manager
ds<br />
Reach financial planners<br />
and associated practitioners<br />
The official publication of the Financial Planning Institute (FPI)<br />
ABC-certified distribution through:<br />
• Major financial planning events<br />
• Financial planning workshops<br />
• Direct distribution to all Certified Financial Planners<br />
PLUS BLUE CHIP ONLINE<br />
Advertising queries: sales@gan.co.za<br />
www.bluechipdigital.co.za<br />
The South African <strong>Journal</strong><br />
for Financial Planners
MEETING WITH CLIENTS<br />
Empathy<br />
fuels true client<br />
connection<br />
Changing the way we<br />
connect with clients<br />
Our relationships with clients<br />
are changing, and the<br />
Covid-19 pandemic has again<br />
highlighted the need for<br />
planners to connect with clients differently.<br />
We have all been interacting in new<br />
virtual ways, and most of our time is spent<br />
helping clients navigate the financial and<br />
emotional impact of volatile markets and<br />
long-term planning. I have spent a significant<br />
portion of my lockdown time running<br />
webinars for financial planners; teaching the<br />
skills of life planning, coaching and empathy.<br />
We need to show up differently with our<br />
clients, and I believe that incorporating life<br />
planning, combined with coaching and<br />
the skill set of empathy, is financial planning<br />
Financial planners<br />
simply have to revise<br />
their value proposition<br />
to remain relevant.<br />
done properly. It’s also heartening to see<br />
that FP Canada has revamped their entire<br />
curriculum to focus on the human element<br />
of financial planning. Financial<br />
planners simply have to revise their value<br />
proposition to remain relevant. We need to<br />
connect with our clients as humans, and<br />
empathy lies at the core of this connection.<br />
Pioneering in the field of vulnerability<br />
and empathy is Dr Brené Brown. She<br />
has spent 20 years studying courage,<br />
vulnerability, shame and empathy and<br />
recently completed a seven-year study on<br />
brave leadership.<br />
Before attending her Dare to Lead<br />
programme, I believed that I knew what<br />
empathy was. But the training made me<br />
realise that there were many parts to<br />
empathy that I needed to unlearn.<br />
Unlearning old behaviour<br />
The first step to unlearning old behaviour<br />
is to stop giving advice in the initial<br />
client meeting. Be curious instead. It is<br />
not our role to dominate the conversation<br />
and immediately share solutions to fix<br />
client problems.<br />
52 www.bluechipdigital.co.za
MEETING WITH CLIENTS<br />
We generally only show surface emotions to the world – the<br />
part that we’re comfortable sharing and allow ourselves to feel.<br />
THE FIRST MEETING<br />
The real value of the first meeting<br />
is truly connecting with the client –<br />
creating a space of non-judgement<br />
and emotional bonding; a space<br />
where clients feel listened to and<br />
understood.<br />
A quick check is to think about<br />
how you feel when sharing something<br />
deeply private with someone<br />
else. Would you like them to:<br />
• Make eye contact<br />
• Look away so you don’t feel<br />
self-conscious<br />
• Reach out to hug you<br />
• Give you space<br />
• Respond right away<br />
• Listen intently and hold the<br />
space with you?<br />
Empathy holds a huge amount of power<br />
and communicates “that incredible healing<br />
message of, ‘You’re not alone’” - Brené Brown.<br />
Connection misses<br />
Although the definition of empathy is clear,<br />
it is still easy to fumble our responses while<br />
trying to interact meaningfully with clients.<br />
Let me share some stumbling blocks to<br />
keep in mind.<br />
Mistaking sympathy for empathy is a<br />
common error. Sympathetic responses<br />
include statements like, “I feel sorry for<br />
you”; “You poor thing”; or sentences<br />
starting with, “At least…” These types of<br />
responses leave clients feeling shame and<br />
regretful for having shared personal and<br />
vulnerable information.<br />
Don’t confuse connection with the<br />
opportunity to “one-up” your client, for<br />
example by saying something like, “Listen<br />
to what happened to me.” Your seemingly<br />
worse story does not cultivate connection,<br />
but rather makes the client feel undermined<br />
and insignificant.<br />
Instead, use your listening skills to<br />
encourage empathy.<br />
Connecting to the emotions that<br />
underpin the experience<br />
Empathy is to understand what someone<br />
else is experiencing from their perspective<br />
– seeing the world through their eyes. It’s<br />
about understanding where your client is<br />
coming from, how they got to where they<br />
are today, what their unique challenges<br />
and experiences have been up to now,<br />
and how it’s affected them emotionally<br />
and financially.<br />
You don’t have to have physically<br />
experienced the emotion; the important part<br />
is to spend time listening and understanding<br />
the emotions as best you can.<br />
Explore your own emotions<br />
It is challenging to understand a client’s<br />
emotion if you are not able to understand<br />
your own. Most of us are short on emotional<br />
literacy and we have been taught to bury<br />
our emotions, or that showing emotion is<br />
a sign of weakness.<br />
We generally only show surface emotions<br />
to the world – the part that we’re comfortable<br />
sharing and allow ourselves to feel. The<br />
root cause of our actual emotions are often<br />
hidden, and it represents the full version<br />
of how we’re feeling. Research tells us that<br />
we are capable of feeling more than 40<br />
emotions. We just don’t have the sensitivity<br />
to identify the full range of them any more.<br />
It is helpful to start identifying your own<br />
emotions as a prelude to connecting with<br />
client emotions. A good read on this topic<br />
is Permission to Feel by Dr Marc Brackett –<br />
the book encourages readers to stop being<br />
ashamed of their feelings and provides<br />
helpful tips on how to upskill emotionally.<br />
Cultivate new skills<br />
I encourage planners to practise their<br />
listening skills. Advice can only be effective<br />
if it speaks to the client; if the client buys<br />
into the plan and if the client feels<br />
understood, respected and valued. Practise<br />
hearing your client and listen with empathy<br />
in mind.<br />
A helpful tip is to communicate back<br />
to the client what you heard them say<br />
in your own words. Communicate your<br />
understanding of the emotion, without<br />
judgement and solutions – the result is<br />
true connection.<br />
The new virtual way of connecting<br />
has placed a huge emphasis on empathy.<br />
If you’re meeting with clients online,<br />
remember to make eye contact, ensure that<br />
you’re in a safe, quiet space and that you’re<br />
not distracted by email or phone alerts.<br />
If you are serious about truly connecting<br />
with your clients, you have to be fully<br />
present, curious and listen with intent. <br />
Kim Potgieter CFP®, Director at Chartered<br />
Wealth Solutions | ICF Professional Certified<br />
Coach | New Money Story® Mentor Coach |<br />
Certified Dare to Lead Facilitator<br />
www.bluechipdigital.co.za<br />
53
ADVERTORIAL<br />
Petroleum Agency SA is a<br />
key player in a vital sector<br />
South Africa’s oil and gas exploration and production sector an excellent investment<br />
As stated in the National<br />
Development Plan (NDP), the<br />
government’s intention is to<br />
“enable exploratory drilling<br />
to identify economically recoverable<br />
coal seam and shale gas reserves,<br />
while environmental investigations will<br />
continue to ascertain whether sustainable<br />
exploitation of these resources is possible.<br />
“If gas reserves are proven and<br />
environ-mental concerns alleviated, then<br />
development of these resources and gas-to<br />
power projects should be fast-tracked.”<br />
The plan also calls for the need to<br />
incorporate a greater share of gas in South<br />
Africa’s energy mix, through importing<br />
liquefied natural gas (LNG), using shale<br />
gas if reserves prove commercial, and<br />
developing infrastructure for the import<br />
of LNG, mainly for power production, over<br />
the short to medium term.<br />
Opportunities for<br />
gas lie in the<br />
realisation of<br />
South Africa’s NDP<br />
and the Integrated<br />
Resource Plan (IRP)<br />
Petroleum Agency SA plays an<br />
important role in developing South<br />
Africa’s gas market by attracting qualified<br />
and competent companies to explore for<br />
gas in the country, as well as monitoring<br />
and regulating their activities. In addition<br />
to ensuring operators always comply with<br />
the law, a major area of focus is increasing<br />
the inclusion of historically disadvantaged<br />
South African-owned entities in the<br />
upstream industry. South Africa needs<br />
large discoveries of indigenous gas as well<br />
as fair access to opportunities and social<br />
licence to develop a healthy gas market.<br />
Currently, natural gas supplies about<br />
just 3% of South Africa’s primary energy.<br />
71 SOUTH AFRICAN BUSINESS 2019<br />
54 www.bluechipdigital.co.za
ADVERTORIAL<br />
A significant challenge facing the<br />
development of a major gas market in<br />
South Africa is the extreme dominance<br />
of coal as a primary energy source, and<br />
industry’s historic reliance on coalgenerated<br />
electricity.<br />
A lack of extensive gas transport and<br />
reticulation infrastructure goes hand in<br />
hand with this, while other challenges<br />
include uncertainty about volumes of<br />
indigenous gas available to industry;<br />
security of supply; switching and conversion<br />
costs; gas pricing; and negativity around<br />
the ongoing use of fossil fuels. End users<br />
require certainty before committing, while<br />
explorers look for a guaranteed market.<br />
On a more positive note, opportunities<br />
for gas lie in the realisation of South Africa’s<br />
NDP and the Integrated Resource Plan (IRP).<br />
Both call for indigenous hydrocarbons –<br />
conventional and unconventional – and<br />
independent power production to play an<br />
increasing role in the nation’s energy mix.<br />
The national power utility also intends<br />
to replace coal-fired power stations with<br />
gas-fired counterparts, in line with the<br />
vision of the NDP. The advent of gas-fired<br />
power stations will represent a ready,<br />
indigenous market for operators that<br />
make discoveries of gas in South Africa,<br />
ensuring it will be far easier to monetise<br />
smaller discoveries that may otherwise<br />
have remained undeveloped.<br />
As custodian, Petroleum Agency SA<br />
ensures that companies applying for<br />
gas rights are vetted to make sure they<br />
are financially qualified and technically<br />
capable. Applicants also need to have a<br />
good track record in terms of oil and gas<br />
exploration activity, as well as regard for<br />
the environment. This applies to both<br />
local and foreign companies. Oil and gas<br />
exploration requires enormous capital<br />
outlay and can represent a risk to workers,<br />
communities and the environment.<br />
Applicants are therefore required to prove<br />
their capabilities and safety record and<br />
must carry insurance for environmental<br />
rehabilitation.<br />
Social and labour plans<br />
In addition, all planned activities can<br />
only be carried out after completion of<br />
an environmental impact assessment<br />
and under an approved environmental<br />
management plan, after consultation with<br />
the public as well as interested and affected<br />
parties. Explorers are also required to<br />
contribute to skills development through<br />
the agency’s Upstream Training Trust.<br />
Oil and gas exploration in South Africa<br />
is regulated in terms of the Mineral and<br />
Petroleum Resources Development Act<br />
In today’s world, oil and gas remain<br />
the most critical of energy resources.<br />
(MPRDA) of 2002, which stipulates that<br />
applicants for production rights are<br />
required to submit social and labour plans<br />
(SLPs) to assist in transforming the industry,<br />
promoting employment and advancing<br />
social and economic welfare in South<br />
Africa.<br />
Applicants must develop and implement,<br />
where applicable, comprehensive<br />
SLPs that cover human resourcesdevelopment<br />
programmes, community<br />
development, housing and living<br />
conditions, and employment equity.<br />
In addition to the MPRDA, other acts<br />
also regulate the sector – including the<br />
National Environmental Management<br />
Act, the Royalties Act, the Mining Titles<br />
Registration Act and the National Water<br />
Act. These acts and regulations have served<br />
DRIVING THE SECTOR<br />
Driving South Africa’s emerging gas<br />
sector while ensuring a well-regulated<br />
and responsible environment is a key<br />
mandate of Petroleum Agency SA, as<br />
is assisting operators with monetising<br />
smaller discoveries that may otherwise<br />
remain undeveloped, through<br />
advertising these opportunities to<br />
potential partners.<br />
Our Vision<br />
A diverse upstream industry contributing<br />
to energy security through sustainable<br />
growth in exploration and development<br />
of oil and gas.<br />
Our Mission<br />
To promote, facilitate and regulate<br />
exploration and sustainable development<br />
of oil and gas contributing to<br />
energy security in South Africa.<br />
the upstream industry well and are all in<br />
line with international standards.<br />
Minister of Mineral Resources Gwede<br />
Mantashe and President Cyril Ramaphosa<br />
have recently stated that oil and gas<br />
exploration and production activities<br />
should have their own standalone<br />
legislation, separate from that applicable<br />
to hard mineral mining. This legislation is<br />
being drafted and the agency is part of<br />
the team at the Department of Mineral<br />
Resources working on it.<br />
In today’s world, oil and gas remain<br />
the most critical of energy resources, and<br />
Petroleum Agency SA is in full support of<br />
those entering the South African oil and gas<br />
exploration and production industries. The<br />
Agency is fully committed to ensuring that<br />
our government and policy-makers sustain<br />
the sector for the benefit of all involved and<br />
will do everything in its power to advance<br />
the industry. <br />
ABOUT PETROLEUM AGENCY SA<br />
Petroleum Agency SA was established in 1999 by Ministerial<br />
directive and is mandated through the Mineral and Petroleum<br />
Resources Development Act, 2002 (Act No.28 of 2002) together<br />
with the National Environmental Management Act, 1998 (Act<br />
No.107 of 1998). These Acts provide for Petroleum Agency<br />
SA to evaluate and promote oil and gas potential exploration<br />
and production activities in South Africa, to regulate oil and<br />
gas exploration and the production industry and to archive all<br />
geotechnical data produced through oil and gas exploration.<br />
The Agency acts as an advisor to the government on issues<br />
regarding oil and gas exploration and production and carries<br />
out special projects at the request of the Minister.<br />
www.bluechipdigital.co.za<br />
55
WEALTH MANAGERS<br />
LEADING GLOBAL<br />
financial services<br />
South African wealth manager chosen for global Top 100 list<br />
Every year the global Top 100<br />
independent advisers are selected<br />
by International Adviser, a Londonbased<br />
publication. The awards<br />
honour the industry’s most influential<br />
wealth managers and shine a light on those<br />
wealth managers who are successfully<br />
meeting the challenges of global<br />
regulatory shifts, technological advances<br />
and the ever-changing needs of clients in<br />
the financial services sector.<br />
There have been some seismic changes<br />
within the industry in recent times but there<br />
are many long-standing influential figures<br />
across the world who have stood out from<br />
the crowd to make up this Top 100 list.<br />
The diverse spread of names ranges from<br />
leading financial advisers, heads of trade<br />
bodies, international life company CEOs,<br />
platform heads and specialist product and<br />
service providers to technical gurus and<br />
regulators. These are the leading figures in<br />
the global financial services arena.<br />
This year, Andrew Ratcliffe CFP® of<br />
Cape Town-based wealth management<br />
firm Private Client Holdings, was selected<br />
as one of the Top 100 of the industry’s<br />
most influential independent advisers<br />
in the world. Ratcliffe, Director of Private<br />
Client Holdings and head of the wealth<br />
management division, acts as a family<br />
officer. He has had extensive exposure to<br />
asset management (both domestic and<br />
offshore), international tax, accounting,<br />
share portfolio management and fiduciary<br />
needs of private clients for more than<br />
two decades. He is passionate about the<br />
financial well-being of his international<br />
high-net-worth clients and their families.<br />
Of his career highlights, Ratcliffe says<br />
that together with partner Grant Alexander,<br />
transforming Private Client Holdings from a<br />
small company focused on tax advice into<br />
an award-winning full-service, multi-family<br />
office with more than 100 staff is definitely<br />
at the top.<br />
Private Client Holdings was founded<br />
as a corporate tax consultancy in 1990.<br />
Since then it has developed into a full<br />
spectrum asset and wealth management<br />
company and multi-family office with six<br />
specialist divisions and offers a complete<br />
range of professional services to handle<br />
every aspect of their client’s financial life,<br />
including wealth and asset management,<br />
tax, accounting, cash and fiduciary services<br />
– which together provide a multi-family<br />
office service.<br />
“From humble beginnings, Private<br />
Client Holdings is now taking the lead<br />
in Southern Africa when it comes to<br />
providing high-net-worth families with an<br />
all-inclusive wealth management solution.<br />
In the past year alone, we have won several<br />
awards from the likes of the Intellidex Top<br />
Private Banks & Wealth Managers Awards<br />
as well as the London-based Capital<br />
Finance International Awards. However, it<br />
is not the awards that we are after. What<br />
is important to us is our relationship with<br />
our clients and ensuring that their personal<br />
wealth management and growth goals are<br />
consistently met.<br />
“I am humbled to have been selected as<br />
one of the Top 100 of the industry’s most<br />
influential by International Adviser and<br />
feel honoured that Private Client Holdings<br />
is recognised as providing a globally<br />
relevant service. That South African wealth<br />
management standards can really compete<br />
globally,” says Ratcliffe.<br />
The life-altering effects of the Covid-19<br />
pandemic sweeping the globe have added<br />
many pressures to everyone’s lives – not<br />
least of which is economic and financial<br />
disruption. Now more than ever it is<br />
important to partner with a wealth manager<br />
who understands the current market<br />
landscape, the need to keep on course<br />
towards one’s long-term financial and life<br />
goals despite the current uncertainty, and<br />
to not fall victim to market noise.<br />
Private Client Holdings has consistently<br />
grown the wealth of their clients and<br />
their assets under management through<br />
the various market upheavals over the<br />
past 30 years – including events such<br />
as the Asian financial crisis in 1997 and<br />
the global financial crisis in 2008 (for<br />
example) – and the Covid-19 pandemic will<br />
be no different. <br />
Andrew Ratcliffe, director of<br />
Private Client Holdings<br />
For more information on the IA100 awards visit https://international-adviser.com/ia-100/ or contact<br />
Private Client Holdings and Andrew Ratcliffe at andrew@privateclient.co.za or on 021 671 1220.<br />
56 www.bluechipdigital.co.za
SUCCESS IS BETTER,<br />
SHARED. *<br />
We’re proud to be allocating our largest Profit-Share yet, to our members.<br />
Our 2019 financial results are proof of our unwavering commitment<br />
to our members. As the only business in South Africa that caters<br />
exclusively to graduate professionals, we allocate all our profits<br />
to our members with qualifying products – because we believe<br />
success is better, shared.<br />
Visit pps.co.za for more information or contact your PPS accredited financial adviser.<br />
PPS is an authorised FSP<br />
*Past performance is not necessarily indicative of future performance