Blue Chip Issue 91

BLUE
CHIP
0.5 CONTINUOUS
PROFESSIONAL DEVELOPMENT
THE OFFICIAL PUBLICATION OF THE FPI
Issue 91 • May/Jun/Jul 2024
www.bluechipdigital.co.za
0.5 CONTINUOUS
PROFESSIONAL DEVELOPMENT
01 CONTINUOUS
PROFESSIONAL DEVELOPMENT
01 CONTINUOUS
PROFESSIONAL DEVELOPMENT
1.5 CONTINUOUS
PROFESSIONAL DEVELOPMENT
1.5 CONTINUOUS
PROFESSIONAL DEVELOPMENT
02 CONTINUOUS
PROFESSIONAL DEVELOPMENT
02 CONTINUOUS
PROFESSIONAL DEVELOPMENT
THE COST OF CARBON
An investor’s perspective
The evolving landscape of
CRYPTO ASSETS
How will COFI impact FSPs?
2023 FPI PROFESSIONAL PRACTICE OF THE YEAR
Sue and Craig Torr, Crue Invest

Century City Conference Centre Cape Town
Cultivate Growth, Harvest Excellence

13-14 August 2024
Century City Conference Centre
Cultivate Growth, Harvest Excellence

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Principles of
the profession
Even with the ongoing emphasis on ethics training for financial service providers (FSPs),
it can still go wrong and controversy sometimes follows. It is a matter of principles. We
cannot go wrong if we stick to the principles of what is ethical. Our column on page
16 reminds FSPs to return to the basics regarding the ethical treatment of clients and
our businesses.
Many business and legal principles in the industry have been firmly shaped over time.
As we move towards promulgating COFI, financial advisors are the beneficiaries of the
entrenched tenets that have sustained FSPs for years. COFI is centred on principles that focus
more on the outcomes within the spirit of the law, rather than a tick-box methodology to
compliance. Principle-based legislation means relying more on broadly stated principles that
set the paradigms by which FSPs should conduct their business. Principles refer to behavioural
standards, for example, “honesty”, “integrity” and “skill, care and diligence” with which FSPs
organise their businesses and treat their customers (page 64).
There are also new principles that are created as the world grows and the next big thing
appears on the horizon. (Don’t miss our article on investment themes on page 30.)
Regulators in South Africa require investment managers to absorb ESG principles into the
responsible management of their clients’ assets. Investment managers’ challenge is maximising
the projected benefits while minimising adherence costs to these ESG-related targets. Clients
must recognise that their ESG goals will have some performance-related consequences in
their portfolio returns. Increased transparency should help manage client expectations and
encourage them to make informed decisions aligning with their values (principles) and
financial goals (page 22).
To abate the risks relating to crypto assets, South African regulators have started
constructing regulatory framework, which includes the deposition of crypto assets as a
financial product for purposes of the Financial Advisory and Intermediary Services (FAIS)
Act. However, the regulatory framework relating to crypto assets will continue to transform
as crypto assets evolve. In this edition, Blue Chip introduces a series of articles which aim
to provide readers with a more holistic understanding of cryptocurrency and the current
South African regulatory framework (page 54).
On page 78, Reg Thompson, DTB Wealth director, reviews The 7 Pillars of Financial Health by
Rob Macdonald, head of strategic advisory services, Fundhouse. Based on insights garnered
from coaching and consulting with hundreds of financial advisors over his career spanning 25
years, Macdonald delves into why we should completely rethink our approach to money. He
provides seven principles for financial planners to stay relevant in their professions.
These pillars of financial health as well as the principles implemented by the FPI and
the FPI Code of Ethics and Practice Standards guide FSPs in treating customers fairly and
organising their businesses based on sound values.
Stick to your principles!
Alexis Knipe, Editor
Blue Chip Journal – The official publication of FPI
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CHIP
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CONTENTS
ISSUE
91
MAY/JUN/JUL 2024
04
10
12
16
EDITOR’S NOTE
By Alexis Knipe
TOMORROW IS HERE
Message from the CEO of the FPI
ON THE MONEY
Milestones, news and snippets
THE ETHICAL TREATMENT
OF CLIENTS
Column by Rob Macdonald, Head of
Strategic Advisory Services, Fundhouse
17 CRYPTOCURRENCY’S
EVOLUTION
Column by Kobus Kleyn, CFP®, Tax and
Fiduciary Practitioner, Kainos Wealth
18
PRACTICE MAKES PERFECT
Meet Crue Invest, winner of the FPI’s
2023 Approved Professional Practice of the
Year Award
20
THE UP-AND-COMING RISING
FPI STARS
Blue Chip speaks to the 2023 FPI Student
Financial Plan Competition winners
22
THE COST OF CARBON: AN
INVESTOR’S PERSPECTIVE
ESG criteria have moved from a “nice idea”
to a cornerstone of current investment
management practices. By Professor Evan
Gilbert, Momentum Investments
25
REMOVING THE JARGON FROM
YOUR INVESTMENT GOALS
By Florbela Yates, Head of Equilibrium
26
LISTINGS ON THE JSE
Should recent history make
us worried? Asks Vongani Masongweni,
Quantitative Research Analyst,
Momentum Investments
30
THERE IS ALWAYS THE NEXT
BIG THING
Matthew Molyneux, Investment Analyst,
Fundhouse, talks about investment themes
34
THE PINNACLE OF
WEALTH CURATORSHIP
Jaco Gouws, Head of Proposition and
Business Development, Old Mutual Wealth
tells Blue Chip about Private Clients
36
DIVERSIFYING PERSONAL
SHARE PORTFOLIOS ON A
GROWING $12-TRILLION GLOBAL
ETF OPPORTUNITY
By Michelle Noth, Head of Financial
Intermediaries, 10X Investments
38
REPLACE LUCK WITH FACT
NOT FEELINGS
By Reza Khan, CEO, Lodestar Fund Managers
42
PROPERTY INVESTING AND
FINANCIAL PLANNING
By Warren Ingram, CFP®, Director,
Gallileo Capital
44
DO YOU WANT TO TAKE
ADVANTAGE OF THE
HIGHEST FIRST-WORLD INTEREST
RATES IN DECADES?
Scott Cooper, Investment Professional,
Marriott Investment Managers tells you how
46
A CHANGING LANDSCAPE
PPS Investments speaks about the
investment landscape
48
LIFE AFTER WORK
Rudolph Geldenhuys, CFP®,
WealthUp, gives an alternative perspective
on retirement planning
50
AI: AN APPROACH THAT WILL
POWER CHANGE IN ALMOST
EVERY INDUSTRY
By Chris Willis, Research Analyst, Melville
Douglas Investment Management
6 www.bluechipdigital.co.za

CONTENTS
ISSUE
91
MAY/JUN/JUL 2024
52
LIFE AFTER CASH
Schroders’ experts tell us what to
do as interest rates start to fall
54
CRYPTO ASSETS: AN EVOLVING
LANDSCAPE. PART 1
First article in the series on cryptocurrency
56
MEDIHELP IS DEEPLY INVESTED
IN MEMBERS’ HEALTH
Empathy is a key differentiator in today’s
product, service and journey design, by
Varsha Vala, Principle Officer: Medihelp
Medical Scheme, Medihelp
58
WHERE TO TECH AND WHEN
TO HUMAN
Francois du Toit, CFP®, Founder, PROpulsion,
tells us how technology can enhance the
value of financial advice
60
TIRED OF PLAYING
BROKEN TELEPHONE?
So are your clients, says Tim Slatter, Director,
Slatter Communications
62
UNBELIEVABLE SAVINGS:
DISCOVER THE TRUE LOW
COST OF AI
Zeldeen Müller, CEO of AgendaWorx, says
that the real surprise is the true cost of AI
64
HOW WILL COFI IMPACT
FSP REPRESENTATIVES?
By Anton Swanepoel, Founder,
Trusted Advisor
67
IT IS THE TEAM THAT WINS
THE TOURNAMENT
There is no “I” in team, says Darren Burns, Head:
Business Development, Graviton
68
FINANCIAL PLANNER AS
CHOICE ARCHITECT
A way to help clients take ownership of
their choices, by Rob Macdonald, Head of
Strategic Advisory Services, Fundhouse
70
ENHANCING CLIENT
WELL-BEING THROUGH
HOLISTIC PLANNING
By Kim Potgieter, CFP®, Director of
Chartered Wealth Solutions
72
WHO DO YOU TRUST WITH
YOUR DIGITAL INFORMATION?
Sarah Love, CFP®, FPSA®, TEP, Fiduciary
Practitioner, Private Client Trust, guides
those who answered, “no-one”
74
MONEY ISSUES IN DIVORCE
The proprietary settlement, by
Hannah Wilson, Director, Simplifi Law
77
THE RIGHTS OF
TRUST BENEFICIARIES
It is imperative to understand the different
rights that could be given to trust
beneficiaries, by Dr Rika van Zyl, CFP®, FPSA®,
School of Financial Planning Law, UFS
78
THE 7 PILLARS OF
FINANCIAL HEALTH
Reg Thomson, Director at DTB Wealth, reviews
Rob Macdonald’s latest book
80
MAKING A POSITIVE IMPACT
Blue Chip speaks to Nonhlanhla
Nxele, CFP®, Founder and CEO of Esteemed
Financial Solutions who has participated in a
growth support programme run by ASISA
87 PROFILING
FINANCIAL PLANNERS
Discover how other financial planners run
their practices
8 www.bluechipdigital.co.za

MEET THE
MANAGERS 2024
CAPE TOWN: 6 JUNE 2024 | CAPE TOWN INTERNATIONAL CONVENTION CENTRE
JOHANNESBURG: 11 JUNE 2024 | SANDTON CONVENTION CENTRE
Register Now:
www.meetthemanagers.co.za
Meet the Managers is considered the “Ted-Talk” in investment management, where financial advisers can access a
vast array of investment managers, covering all types of investment strategies. With a world that is constantly in flux,
financial advisers need to regularly evaluate investment market conditions and strategies to ensure that their clients
assets grow and are protected from volatility and losses.
Meet the Managers is one of the largest gatherings of investment managers in South Africa. It is an effective platform
to learn about the latest investment thinking. By attending the event you will also stand a chance of winning
R50 000.00* in cash at each venue.
*Please note that the terms and conditions of participation are on our registration site.
Why attend Meet the Managers?
• Stay ahead: Keep abreast of the latest investment insights from top managers across all asset classes, both
domestic and global.
• Unmatched access: Gain access to an unparalleled selection of investment managers and strategies. In a single
day, you will have access to a selection of concise 30-minute sessions.
• Expert speakers: Learn from industry experts as they delve into domestic and international strategies, providing
you with invaluable knowledge to share with your clients.
• Explore differences: Understand the distinctions between large investment firms and boutique managers,
empowering you to make informed decisions for your clients.
• Navigate challenges: Hear first-hand how managers are addressing rising global inflation and the impact on “the
famous 7 stocks.”
• Expand your network: Connect with new investment managers and explore potential opportunities for you and
your clients.
• Earn CPD points/hours: Enhance your professional development with valuable CPD points.
MEET THE
MANAGERS 2024
Register Now:
www.meetthemanagers.co.za

BLUE
CHIP
FPI UPDATES | CEO Message
Lelané Bezuidenhout, CFP®,
CEO, Financial Planning
Institute of Southern Africa
Tomorrow is here
The CEO of Financial Planning Institute of
Southern Africa shares FPI’s latest news.
When I was in primary school, I authored a poem that
started with, “Yesterday is gone, tomorrow is here,
who has done anything here?” This simple verse
still holds a profound truth in my life today: time is
precious, and each moment offers us the chance to be effective,
no matter how big or small.
This sentiment is especially relevant to the financial planning
profession. Time is a currency that never stops flowing, reminding
us to make the most of every moment, especially when it comes to
planning for our clients’ (and our own) financial futures.
The importance of the time value of money and helping clients
to understand this
Understanding the Time Value of Money (TVM) is crucial for clients
to make informed decisions about investing, saving and borrowing
money. A rand today is worth more than a rand in the future. Clients
who grasp TVM are more likely to take a long-term perspective on
their finances, understanding the benefits of starting to save and
invest early, even if the risk and reward seem daunting.
This takes me to the role that financial planners play as
mentors/coaches for their clients
Financial planners play a crucial role as a mentor and coach for
their clients. They focus on key points essential to their clients’
Time is
precious, and each moment offers
us the chance to be effective.
financial well-being, such as understanding TVM, financial goals,
budgeting, savings, debt management and more.
The psychology of financial planning also comes into play here,
as financial planners need to understand their clients’ attitudes,
beliefs and behaviours related to money, demonstrating empathy
and understanding of clients’ unique circumstances.
A great book recommendation based on the above
I recently had the opportunity to catch up with Warren Ingram,
CFP®, and he told me about one of his new books, Small Changes
for BIG Results – How to Improve Your Finances One Step at a Time.
As I left Cape Town via Cape Town International Airport back to
Gauteng, I stopped at Exclusive Books and bought my copy. The
book covers real-life case studies of people who overcame financial
difficulties and highlights the small steps they took to change the
course of their lives. What is interesting is Warren’s own story that
started with... a measuring cup!
10 www.bluechipdigital.co.za

FPI UPDATES | CEO Message
BLUE
CHIP
Highlights at FPI and looking ahead
In February, over 130 candidates sat for the Professional Competency
Examination (PCE) with a 54% pass rate. Over 240 candidates are
registered for the April sitting. The Annual Budget review session
had 1 167 online attendees and the Annual Refresher was a success
with 962 attendees in-person and online.
FPI has secured funding from INSETA for a project focusing
on unemployed youth, a significant step in supporting and
empowering young people in our community.
The FPI Professional’s Convention is coming to Cape Town on
13 and 14 August 2024. With the theme Cultivate Growth, Harvest
Excellence, this event promises to be inspiring. In-person seats are
limited, so do not miss this opportunity to attend in person.
If you are not able to attend, there is an online option as this
is a hybrid event.
On the regulatory front, just high level for now
In case you missed it, there is a new Ombudsman in town. The
National Financial Ombudsman (NFO) came into effect on 1
March 2024 via the amalgamation of four voluntary ombudsman
schemes. The Pension Funds Adjudicator may also in the future be
known as the Retirement Fund Ombudsman (RFO).
The four schemes that merged are the Short-term Ombud, Longterm
Ombud, Banking Ombud and Credit Ombud Association.
For more information on the establishment of the NFO, visit the
Ombud Council website at ombudcouncil.org.za.
National Treasury’s “A simpler, stronger Financial Sector Ombud
System Policy Statement” is also well worth the read – this is on the
Ombud Council’s website.
Enjoy this edition of Blue Chip, packed with the latest updates
in financial planning and the financial services industry.
Make the best of your time and purposefully choose to make
a positive impact.
Until next time,
Lelané Bezuidenhout, CFP®, CEO, Financial Planning Institute
of Southern Africa
SAVE THE DATE
FPI Professional’s Convention 2024
Cultivate Growth, Harvest Excellence
13-14 August 2024
www.bluechipdigital.co.za
11

BLUE
CHIP
On the money
Making waves this quarter
Embracing tech and the JSE Index Harmonisation
WHY YOU SHOULD EMBRACE TECH FOR WEALTH CREATION
The Nasdaq posting a record high recently underscores why investors need
to embrace tech into their portfolios. The deVere Group’s CEO, Nigel Green
says, “The Nasdaq’s ascent to an all-time high underscores the resilience
and innovation embedded in tech companies. Investors who recognise
and leverage this momentum will be well-positioned to ride the wave of
the tech boom, potentially reaping substantial rewards in the process.
“The transformative impact of AI on various industries is reshaping
the business landscape and propelling tech companies to new heights.
From machine learning and automation to data analytics, AI is unlocking
unprecedented possibilities, creating efficiencies and driving revenue
growth. Investors who are serious about building long-term wealth can’t
afford to overlook the seismic shift that AI is bringing to the forefront of
the tech sector,” comments Green.
He continues, “Tech stocks have consistently demonstrated their ability
to outperform the broader market, contributing significantly to overall
portfolio growth.
“The recent achievement of the Nasdaq Composite, coupled with the
S&P 500’s robust performance, highlights the sustained upward trajectory
of the tech sector.”
As traditional sectors face challenges and uncertainties, tech stands
out due to its invaluable diversification benefits. Embracing tech in
portfolios provides investors with exposure to sectors driving the future
of global economies.
“This global reach of tech diversifies investment portfolios and aligns
them with the broader trends shaping the future of the digital age,”
Green concludes.
THE JSE INDEX HARMONISATION
The first phase of the JSE’s Index Harmonisation project involves
aligning the weighting methodologies of what the JSE calls its “vanilla”
indices [FTSE/JSE All Share Index (ALSI) and FTSE/JSE Top 40 Index] with
those of its Shareholder Weighted (SWIX) variants. The second phase of
the project will see the termination of the SWIX indices and the effective
collapse of the vanilla and SWIX indices into one set of benchmark
indices. Recent changes to regulations have resulted in several
funds in this category changing their benchmarks from domesticonly
to composite benchmarks of
South African and global equity
benchmarks to better reflect their
new, broader investable universe.
The JSE notes that the process
of harmonisation has naturally
occurred over the last few years.
A significant contributor to the
weighting differences between
the ALSI and the SWIX has been
the “grandfathered” companies
that form part of these indices.
“Grandfathered” companies refer
to local companies that moved
their primary listing offshore before
Michael Dodd, Senior Fund
Analyst, Morningstar
October 2011, and these companies
are weighted differently in the two
index variants. There are only a
handful of remaining grandfathered companies, and so the JSE now
sees it as an opportune time to align the weighting methodologies of
the vanilla and SWIX indices without too much disruption.
Why is this a good thing?
At the culmination of the Index Harmonisation project, the JSE will have
a single set of headline indices all following a consistent weighting
methodology and a single representative benchmark index for the
South African equity market. This is important for the industry for
several reasons:
Uniformity. A single domestic equity index will reduce the confusion
among investors regarding equity market performance. It should also
result in an alignment of benchmark selection among South African
equity managers.
Comparable performance. A standard industry benchmark makes the
comparability of domestic-only South African equity fund performance
more consistent. Out/underperformance of peers should no longer be
able to be explained away by benchmarking differences.
Reduction in the number of products. With a standard industry
benchmark comes a universally agreed upon proxy for market “beta”.
Index Harmonisation should result in a reduction in the number
of index-tracking products being offered on different JSE indices. It
provides the opportunity for product providers to improve economies
of scale and potentially lower fees by merging existing strategies.
By Michael Dodd, Senior Fund Analyst, Morningstar South Africa

BLUE
CHIP
On the money
Making waves this quarter
Retaining top talent
HOW TO RETAIN TOP TALENT
As the international financial sector faces an
ongoing talent crunch, organisations that have
a strongly diverse and inclusive culture are
more likely to attract and retain professionals,
according to the Association of Chartered
Certified Accountants’ (ACCA) annual Global
Talent Trends Survey 2024.
In South Africa, 49% of accounting
and financial professionals said that their
organisations were not inclusive, while 42%
said that they were, and the remaining 9%
were unsure. When asked if their organisation
focused more on some aspects of diversity
than others, 49% of respondents agreed, 36%
disagreed and 15% were unsure.
Portia Mkhabela, market head of ACCA
Southern Africa, says the shortage of talent
and cost of meeting pay rise demands, together with the many job
opportunities available to professional accountants, meant that
attracting and retaining talent presents a huge
ongoing challenge for employers, and it was
not surprising that 64% of African respondents
would look for better opportunities external to
their organisation.
Other findings showed that globally
accounting and financial professionals face
economic strain and are concerned about their
future, the adoption of artificial intelligence
and their mental well-being among many
other things.
As a result, at least half of them will look
for work in a different company, sector, region
or country.
The survey showed that in Africa (including South
Africa) the top three reasons for moving were
improved opportunities abroad, international
experience to add to resume and better remuneration at 29%, 19%
and 14% respectively.
Century City Conference Centre
13 -14 August 2024
Cultivate Growth, Harvest Excellence
’
Cultivate Growth, Harvest Excellence

BLUE
CHIP
On the money
Making waves this quarter
Two-pot, COFI and Morningstar Awards for Investing Excellence
MISINFORMATION ON TWO-POT RETIREMENT SYSTEM
As a prominent stakeholder in South Africa’s retirement funding sector,
Alexforbes has the responsibility of empowering members to understand
the intricacies of the two-pot retirement system, enabling individuals to
make well-informed decisions regarding their savings.
The timing of the two-pot retirement system and access to the savings
pot can be emotional. It becomes more challenging when incorrect
information spreads, creating wrong expectations among members. It
is important to focus on a few of the critical points that members must
be aware of regarding the two-pot retirement system:
COFI BILL SET TO SHAKE UP LOCAL FINTECH SECTOR
Market players eagerly await the Conduct of Financial Institutions (COFI)
Bill enactment and its many benefits, especially with low-risk, rapid
innovation in the fintech space.
“With the introduction of the Bill, the conduct of every institution
that participates in the provision of any financial service product will
fall under the oversight of the regulator,” explains Mpho Sadiki, Group
MD, Merchant Solutions (Africa) at Network International. “By creating
a level playing field, the legislation allows for rapid deployment of new
products that can only benefit the local consumer. The organisations
most likely to benefit from this new environment are those with access
to technology partners who can enable rapid, low-risk deployment to
take advantage of opportunities as soon as they arise.”
A more inclusive approach
“With COFI, more than just the banks can get involved to originate
and receive payments, driving competition in the market and
benefiting the consumers and building trust in the entire financial
system,” he concludes.
This more open approach will help South Africa transition towards
true open banking.
“South Africa has a mature and excellently regulated financial services
sector. By levelling the playing fields and moving towards an activitiesbased
regulatory regime we are preparing an environment primed for
more innovation. And that is where APIs and open banking can shine,”
Sadiki concludes.
2024 MORNINGSTAR AWARDS FOR INVESTING EXCELLENCE
Morningstar, Inc (Nasdaq: MORN), a leading provider of independent
investment insights, recently announced the winners for the 2024
Morningstar Awards for Investing Excellence South Africa. The awards
recognise those funds and asset managers that have served investors well
over the long term and which Morningstar’s research team believes will be
able to deliver competitive risk-adjusted returns over time.
Truffle Asset Management won Best Bond Fund for the third year
running, with Fairtree crowned Best Asset
Manager for 2024. Returning 2023 winner,
Nedgroup, was awarded the Best Flexible
Allocation Fund at this year’s awards.
“We’d like to congratulate all 2024
winners and finalists. The Morningstar
Awards for Investing Excellence commends
Truffle Asset Management
won Best Bond Fund.
the industry’s fund offerings and investorcentric
firms. Based on Morningstar’s
forward-looking ratings for funds, the
• The implementation date is 1 September 2024.
• From 1 September 2024, any amounts saved in a retirement fund will
be split into a savings component and a retirement component.
• One-third (about 33%) of retirement savings automatically go into the
savings component.
• The initial amount in the savings component will be 10% of the
amount saved in the vested component, up to a maximum of
R30 000.
• The minimum withdrawal amount is R2 000.
Morningstar research team carefully selects the winners across equity,
fixed-income and multi-asset categories, as the leading funds within South
Africa for investors,” said Tal Nieburg, managing director of Morningstar
South Africa.
Morningstar Category Awards
Best Bond Fund
Best Cautious Allocation Fund
Best Moderate Allocation Fund
Best Flexible Allocation Fund
Best Aggressive Allocation Fund
Best South Africa Equity Fund
Best Global Equity Fund
Best Asset Manager
Winner
Truffle SCI Income Plus Fund
H4 Stable Fund
Ninety-One Opportunity Fund
Nedgroup Investments Global
Flexible Feeder Fund
Denker SCI Balanced Fund
36ONE BCI Equity Fund
Artisan Global Value Fund
Fairtree Asset Management

BLUE
CHIP
On the money
Making waves this quarter
The Financial Advisor’s Playbook, SALTA 2024 and exceptional performance
THE FINANCIAL ADVISOR’S PLAYBOOK
PROpulsion is proud to announce the release of The Financial Advisor’s
Playbook, an invaluable resource for new and experienced financial
advisors. Authored by a team of seasoned financial professionals, the
playbook offers practical advice across topics crucial for developing a
successful financial advising practice.
The book’s comprehensive advice, ranging from personal branding
to client service and business development, provides a solid foundation
to build a successful practice. For anyone committed to excelling in the
financial advisory field, this playbook is essential. It prepares the reader
to meet today’s market demands and to innovate and lead for tomorrow.
Whether you are establishing your practice or looking to refine it, the
playbook offers relevant, actionable guidance that can be tailored to any
advisor’s needs.
Authors: Hannes Visser, Ignatius Muller, Carol Lenzi, CFP®, Kobus Kleyn,
CFP®, Wouter Snyman, Alice Myburgh, CFP®, Henri le Grange, CFP®, Paula
Berrow, Geoff Noble, Rizanne
Oosthuisen, Kevin Yeh, CFP®,
Louis van der Merwe, CFP®,
Carl van Vuuren, CFP®, and
David Kop, CFP®.
The Financial Advisor’s
Playbook can be purchased
from www.propulsion.co.za
and the digital copy will be
available on Amazon from
May 2024.
WINS AT SALTA 2024
Satrix scooped 10 awards at the annual South African Listed
Tracker Awards (SALTA) held at the Johannesburg Stock Exchange
(JSE) in March 2024 Satrix's full list of SALTA 2024 wins include:
Trading Efficiency (three years)
SA Equity: Satrix RESI 10 ETF
SA Non-Equity: Satrix GOVI ETF
Foreign Equity: Satrix MSCI China Feeder ETF
Capital Raising (three years)
SA Equity: Satrix 40 ETF
Foreign Equity: Satrix MSCI World ETF
Total Capital Raised – by issuing house: Satrix Managers
Tracking Efficiency (three years)
SA Non-Equity: Satrix Multi Asset Passive Portfolio Solutions
Protect ETF
Foreign Equity: Satrix MSCI China Feeder ETF
People’s Choice
Local ETP: Satrix 40 ETF
Foreign ETP: Satrix MSCI
World ETF
ABSA has been recognised at
the Awards for exceptional
performance three years in a row.
This year, the ABSA NewWave
Silver ETN won Capital Raising
(three years): Foreign Non-Equity
ETPs and Tracking Efficiency
(three years): Foreign Non-Equity,
Commodity and Currency and
the ABSA NewWave US Dollar
ETN won the Trading Efficiency
(three years): Foreign Non-Equity,
Commodity and Currency.
SHAPING THE FUTURE OF FINANCIAL ADVICE
Congratulations to Blue Chip columnist, Kobus Kleyn, CFP®, tax and fiduciary practitioner, Kainos Wealth, for
winning the INN8 Invest Diamond Award for Best Overall Impact and Contribution to the Advice Profession
in South Africa.
The INN8 Invest Diamond Awards serve as a platform to honour individuals and companies that have
demonstrated exceptional performance, innovation and dedication to delivering value to investors.

BLUE
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COLUMN
The ethical treatment of clients
Let’s get back to basics.
Rob Macdonald, Head of Strategic
Advisory Services, Fundhouse
Rob Macdonald has held
several senior positions in
the investment industry.
At Fundhouse, he acts as
a consultant and coach
to financial advisors and
develops and facilitates training
programmes in behavioural
coaching and practice
management. Before joining
the financial services industry,
Macdonald was MBA director
at the UCT Graduate School
of Business. Business. He has
written the book The 7 Pillars
of Financial Health and is coauthor
of the book Rethinking
Leadership and has consulted,
written and spoken widely on a
range of topics. Macdonald has a
Master’s degree in Management
Studies from Oxford University
and is a CFP® Professional.
Despite an ongoing emphasis on
ethics training for financial services
providers (FSPs) and the importance
of getting ethics CPD points regularly,
the financial planning profession seems never
far from a fresh controversy. The leading wealth
manager in the UK, St James Place (SJP), recently
had to make a GBP450-million provision to pay
back up to 15 000 clients who were charged for
services they did not receive. This hiccup comes
hot on the heels of SJP last year agreeing to
stop their practice of penalising clients when
withdrawing from funds with a 6% exit fee.
In South Africa, a financial advice business
has hit the headlines because it has been
accused by whistle-blowers of paying financial
advisors sign-on bonuses masked as vocational
restraints of trade payments. These bonuses
and enhanced commission incentives were
allegedly paid for advisors to churn their clients’
investments into higher income-generating
The client’s interests
come ahead of the
financial planner.
assets for the company in question. The Financial
Sector Conduct Authority is investigating the
allegations, so the jury is still out on what has
happened, but stories like this and that of SJP
undoubtedly make clients question the ethics of
financial planners.
After all our ethics training, where are we
going wrong? Arguably, if we stick to the basics
of what is ethical, we can’t go far wrong. The first
Financial Advisory and Intermediary Services
(FAIS) Ombud, the late Charles Pillai, once
shared with me what he thought the basics
are: “If a financial planner just acted in a client’s
interests they wouldn’t have to worry about
compliance and regulation”. His view is clarified
in Section 3 (1)d of the FAIS General Code of
Conduct which states that when rendering a
service to a client, “The interests of the client…
must be accorded appropriate priority over any
interests of the provider”. We could debate how
to define “appropriate”, but the word “priority”
is clear: the clients’ interests come ahead of the
financial planner.
The new CEO of St James Place, Mark FitzPatrick
is committed to cleaning up the poor historic
practices at a business which services over 10%
of the UK wealth management market, with
over 900 000 clients advised by around 2 200
financial advisors. New brooms sweep clean. In
so doing, if St James Place was a South African
FSP, FitzPatrick would need to consider the
question: Does SJP give its clients “appropriate
priority”? Despite his South African roots, this
is not a requirement for him, but it is a question
South African FSPs ideally should be asking
themselves on an ongoing basis.
A test that all South African financial
planners could take to help them assess
whether they give clients “appropriate priority”
when giving advice is what may be appropriate
to call the 3 “P” test. First, the “Press” test: Would
you be happy if the advice you give clients; the
products and funds you recommend; and the
fees you charge appeared on the front page
of a national newspaper or made social media
headlines? Second, the “Peer” test: Would you be
happy for your fellow professionals to review
all your advice, products, funds and fees? Third,
the “Personal” test: Would you give yourself,
your family members or close friends the
same advice, products and funds and charge
the same fee?
Ethical hiccups are always helpful reminders
for us to get back to basics when it comes to
the ethical treatment of clients and to consider
whether we give “appropriate priority” to clients.
16 www.bluechipdigital.co.za

COLUMN
BLUE
CHIP
Cryptocurrency’s evolution
Navigating the cryptocurrency landscape.
Kobus Kleyn, CFP®, Tax and
Fiduciary Practitioner, Kainos Wealth
Kobus Kleyn has published
over 200 articles and authored
four books. He is a multiple
award-winning professional
and holds eight memberships
with professional associations.
His most recent awards were
lifetime achievements awards
from the FPI (Harry Brews),
The Million Dollar Round
Table (Top of the Table Life
Membership) and Liberty Group
(Life Membership) in 2021/22.
The complimentary publication of
CryptoMania, launched on 1 April 2018,
offered an independent analysis at
a time when digital currencies were
capturing global attention. Six years later, the
sector has matured dramatically, characterised by
technological stability in leading cryptocurrencies
like Bitcoin and Ethereum, regulatory evolution
and economic indicators’ increasing influence on
crypto valuations.
Regulatory landscape within South Africa
In South Africa, the official recognition of
cryptocurrencies as an asset class heralds a new era
of regulation and oversight. The requirement for
traders and advisors to register with the Financial
Sector Conduct Authority (FSCA) introduces
a formal framework, integrating crypto assets
into the financial mainstream and promoting
responsible trading and advisory practices,
with some consumer protection. The irony is
that Bitcoin and other cryptos were designed to
operate in a decentralised ecosystem.
The tax treatment of cryptocurrencies by the
South African Revenue Service (SARS) offers a
clear example of how regulatory bodies are
adapting to the unique challenges presented
by digital currencies. SARS has delineated that
income generated from trading or investing in
cryptocurrencies will be subject to taxation,
with the nature of activities determining
whether capital gains tax or income tax
applies. Specifically, gains realised from the
disposal of crypto assets are liable for capital
gains tax, while income from mining activities
or trading in the ordinary course of business
falls under income tax. This approach ensures
that crypto investments are treated with a level
of scrutiny comparable to traditional financial
assets, promoting transparency and fairness
in taxation.
The convergence of cryptocurrencies
Its responsiveness to traditional economic
indicators, such as interest rates, is an intriguing
development in the cryptocurrency market.
This trend indicates a shift towards mainstream
financial behaviours, challenging the original
decentralisation ethos of cryptocurrencies. The
alignment with economic indicators suggests an
increasing maturity of the market.
Investment strategies
The adage of spending time in the market, rather
than attempting to time it, is particularly relevant
in the volatile crypto market. Historical peaks
and troughs, including the record high in 2021
followed by significant corrections, underscore
the value of patience and strategic investment.
ETF activism
The recent record highs in Bitcoin are attributed
to the activism surrounding cryptocurrency
ETFs. ETFs have played a pivotal role in making
cryptocurrency more accessible and palatable to
traditional investors, enhancing market liquidity
and stability. The halving event, a built-in feature
that reduces the reward for mining Bitcoin, is
keenly anticipated for its potential impact on
supply and, consequently, price.
Looking ahead
The cryptocurrency market’s journey underscores
its transition from a speculative novelty to a
complex financial ecosystem. The regulatory
advancements in jurisdictions like South Africa,
coupled with the market’s responsiveness
to economic indicators and the strategic
involvement of ETF activists, paint a picture
of a maturing market. As the sector continues
to evolve, navigating the interplay between
innovation and regulation, traditional financial
principles and cryptocurrency-specific dynamics
will be crucial for investors seeking to capitalise
on this digital asset class’ opportunities while
mitigating its inherent risks.
For those keen on
delving deeper into the
transformative journey
of the cryptocurrency
market, download a copy
of CryptoMania from
www.bluechipdigital.co.za
or scan the QR code.
www.bluechipdigital.co.za
17

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FPI UPDATES | Awards
Practice makes perfect
Meet Crue Invest, winner of the Financial Planning Institute of Southern Africa’s (FPI) 2023 Approved
Professional Practice of the Year Award. Crue Invest, founded in 2004, provides expert advice on all
aspects of financial planning. Blue Chip caught up with managing director and co-founder, Sue Torr.
Congratulations to the team for winning the 2023 FPI Approved
Professional Practice of the Year Award! In your opinion, what
is the fundamental reason for your success?
Thank you. To be honest, winning this award was part of our
strategic plan, and the team has been very focused on achieving
this goal. We have been intentional over many years in our drive
to provide high-quality, fiercely independent advice to consumers,
and I believe this has raised the profile of Crue Invest nationally. As
a full-suite practice that has enjoyed substantial organic growth,
we have remained deliberate about keeping our business highly
personal and client-focused, never losing sight of the fact that it
is our clients who form the basis of our success.
We have been relentless in our pursuit to share much-needed
information with South African consumers on the benefits of
holistic, independent financial planning and the valuable role it can
play in achieving sustainable wealth – and our clients appreciate
this. From an operational perspective, we take compliance, data
protection and cybersecurity very seriously, and have tight
management systems and controls in place.
We have also invested heavily in training, mentoring and
upskilling our people to ensure that our clients have access to
the expertise they deserve. Being intentional about developing
a world-class advisory team, we now have nine CERTIFIED
FINANCIAL PLANNERS®, two legal advisors and several team
members furthering their tertiary education.
How has Crue Invest espoused the principles outlined in the
FPI Code of Conduct?
We place the client at the centre of our business and ensure
that all advice is in the client’s best interests. Being fee-based
and completely independent, we can focus our attention on
fully understanding each client’s needs and goals, and create
bespoke financial solutions designed to help each client achieve
their objectives.
Throughout all our processes, honesty, ethics and integrity
remain front and centre, with a total commitment to full
transparency at all times. Placing client interests above all else
forges trust which is the foundation upon which our client
relationships are built. As a team, we remain committed to ongoing
professional development to ensure that we not only keep pace
Teamwork is at the heart
of what we do.
The Crue Invest team with the award.
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FPI UPDATES | Awards
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with industry advancements and best practices but also push each
other out of our comfort zones. For instance, we’ve developed an
in-house library of some great book titles covering a broad range
of topics and run a weekly book club to discuss and share insights.
We’ve just initiated a weekly current affairs forum to ensure that,
as a team, we remain abreast and objectively informed on what
is happening in the world and how it impacts (or can impact) our
clients. We’ve developed a fantastic ethos of growth and learning
that is fortified by a culture of accountability and excellence in
financial planning.
Why do clients choose Crue Invest? What sets you apart?
We have an incredible team of people with a shared purpose to
help others navigate their personal finances and make their lives
better. I believe that Crue has the “x-factor” – an inimitable team
spirit and shared value system that reflects the soul of the business.
We love what we do. We love coming to work. We love serving
our clients.
What is Crue Invest’s particular area of expertise?
Being a full-suite financial planning practice, our expertise cover
investment advice, retirement planning, tax and estate structuring,
risk protection, business assurance, employee benefits and
healthcare (medical aid and gap cover). Our financial advisory
team of 14 is based in our Pinelands office in Cape Town while
our healthcare team of three operates from our Brackenfell office.
investors, and we are doing great work in this space, especially
through our partnerships with Just Grace (a Langa-based NPO),
the UCT Investment Society and several other organisations. All
South Africans should have access to the mechanisms of wealth
creation, and we believe we have a role to play in creating access.
What did you learn through the process?
Entering the competition afforded us some great opportunities
to examine our business critically and insightfully. As a team, we
thoroughly enjoyed interrogating our systems and processes
and challenging each other to scrutinise our business through
different lenses. The process also provided a great opportunity to
expose the younger team members to the operational aspects of
running a business. In a sense, we spent time as a team “auditing”
our business and sharing ideas for enhancements, improvements
and innovation, which in itself was a team-strengthening exercise.
Finally, I think we came away from the competition having a
deeper appreciation for the incredible profession we find ourselves
working in. There are so many world-class advice practices out
there, and to be counted among them is a privilege.
The other finalists in the 2023 FPI Approved Professional
Practice of the Year were Veritas Wealth and Integral
Wealth Management.
What is Crue Invest’s advice philosophy and mission?
Believing unequivocally in the benefits of holistic financial
planning, we were intentional about building an advice practice
that reflects this belief and that enables us to deliver bespoke
advice of the highest calibre. Each client is allocated a team of
advisors and para-planners who work together to create a highly
personalised financial plan, with each team being supported by a
team of administrators who ensure that all financial solutions are
implemented efficiently. Teamwork is at the heart of what we do.
Why did you enter the FPI Awards?
We wanted to raise the profile of qualified, independent financial
advisors and the incredible value they can add to people’s lives and
believed that winning this award would give us a great platform to
achieve this. There are many excellent financial advisors out there
and we want to encourage consumers to find a trusted advisor
who they can partner with for life.
Being passionate about building the professional standing of
qualified financial advisors in South Africa, we’d love to leverage
this award to attract young talent to the profession so that we can
play a meaningful role in building the base of professional advisors.
And finally, we’d love to use the platform to create greater inclusion
especially when it comes to creating opportunities for first-time
investors to build wealth.
Our in-house education programme, Crue Academy, is a
fantastic initiative designed to break open barriers for first-time
Sue Torr, Managing Director,
Crue Invest
Craig Torr, CFP®, Director,
Crue Invest
www.bluechipdigital.co.za
19

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FPI UPDATE | Awards
The up-and-coming rising
FPI stars
The FPI Student Financial Plan Competition is designed for finance-related undergraduate students and
aims to promote the financial planning profession as a viable career choice. Meet the 2023 winners.
Teams compete in this competition to advance
through three stages:
- a written financial planning case study
(30% weighting)
- a financial planning case study presentation
(50% weighting)
- an off-the-cuff challenge (20% weighting)
The weighting was determined with an emphasis
on the oral presentation as it indicates the
importance of both the client relationship and the
value of financial planning.
Winners of the 2023 FPI Student Financial Plan Competition, McCallister
Jere, Karabo Huma and Asanda Cele from MSK Financial Services, University
of Johannesburg.
McCALLISTER JERE
What did you achieve by entering the FPI
Student Financial Plan Competition?
By entering and winning this competition, my team
and I achieved several significant accomplishments.
It demonstrated our understanding and
proficiency in creating a comprehensive financial
plan that not only addresses the technical
and financial aspects but also incorporates an
empathetic understanding of human behaviour
and the emotional attachment people have with
their assets.
This award helped me gain recognition within
the financial planning industry, which can and
will open doors for future opportunities, clients or
professional relationships.
I also experience a sense of achievement and
pride in my team’s hard work, dedication and
willingness to push through. With every meeting,
draft and review we experienced, I saw what can
be achieved when people have a common goal.
The competition supports the next generation of financial
planners by serving as a recruiting opportunity for
potential students who may want to take up a career
in financial planning and engages students in a holistic
financial planning learning experience.
What did you learn through the process?
Working closely with my team taught me the importance of
effective communication, delegation and leveraging each other’s
strengths. Understanding how to filter through a mess of ideas
ensures that the result is what is important.
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FPI UPDATE | Awards
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I learnt the importance of thorough research, analysing data and
understanding human psychology, which was the winning factor.
Financial planning is more than managing finances but ensuring
that the person behind the money is taken care of regardless of
the fluctuations in their money status.
Lastly, understanding industry knowledge and trends.
Immersing myself in this competition provided insights into
the current industry practices and how the future of financial
This award helped me gain
recognition within the financial
planning industry, which
can and will open doors for
future opportunities, clients
or professional relationships.
planning will look like, I was able to learn how other planners
approach this problem and how we can incorporate these
techniques into future proposals.
ASANDA CELE
What is your understanding of the role of a financial planner?
Financial planners are key, essential professionals who work with
individuals and businesses. The main objective is to help clients
achieve their short-term and long-term financial goals. Like a
medical doctor, who helps patients with their health, a financial
planner fixes and cultivates a client’s financial health. This is done
by understanding the needs of the client.
What do you think was the winning factor of your financial plan?
For the most part, it was understanding our clients’ needs. But
beyond that, we tried to put ourselves in our clients’ position
by asking questions like: How would we feel about the current
situation? What matters most to them? This allowed our approach
to be one of empathy and realism.
Our recommendations were based on our clients' needs and
what matters most to them, supplemented with secondary
recommendations, giving our couple an option and thus
an element of control. We kept a bigger picture in mind
and developed a comprehensive financial plan, covering all
components, this was done by understanding the singular thread
in all the financial planning domains.
KARABO HUMA
How did you espouse the FPI’s Codes of Conduct in your
business plan?
Following the eight principles within the FPI’s Code of Ethics, we
ensured that the client came first and that every recommendation
was based on what would be best for them. This was done
through review sessions showing alternatives and basing our
options on that scale.
We also ensured that the integrity of the plan was maintained
by remaining honest and transparent and approaching each
decision fairly.
The financial analysis was based on thorough research,
unbiased data and an objective assessment of the client’s unique
goals and risk tolerance.
By creating a financial plan that addressed various aspects such
as retirement plans, investment plans, etc we demonstrated a high
level of knowledge and expertise that align with the professional
competence required.
The most important aspect was confidentiality, fair and
diligent treatment and professionalism.
We ensured that our client’s information was safeguarded and
that we followed all the data processing regulations.
Adhering to industry standards and best practices ensures
that we uphold the integrity of the financial planning profession.
What inspired you to become a financial planner?
My passion for financial education stems from witnessing the harsh
realities of my community growing up. Money was merely a tool
for survival, with many families, including my own, lacking access
to proper financial knowledge. This deprivation perpetuated a
cycle of living paycheck to paycheck, unable to build a positive
relationship with money.
From those harsh experiences, I made a commitment to
empowering others, especially within my community, to
cultivate a healthy relationship with money. I recognised the
transformative power of financial literacy, enabling individuals
to break free from the cycle and embrace long-term planning,
saving and investing.
Through education and guidance, I aim to aid individuals
with the fundamental principles of finance, budgeting, saving
strategies and investment planning, empowering them to make
informed decisions and secure their financial futures.
This deeply personal journey, rooted in childhood
experiences, fuels my determination to effect change by
fostering a positive relationship with money and instilling the
value of financial education.
FPI SPONSOR CALL OUT
Cultivate Growth, Harvest Excellence
The FPI is seeking a 2024 FPI Student Financial Plan
Competition sponsor. The sponsorship will assist in
paying for the winning students’ accommodation and
travel expenses. The sponsor’s logo will appear on all
marketing materials for the FPI Professional’s Convention
2024 in August 2024. Please get in touch with Lelané
Bezuidenhout, CEO of FPI at lelane@fpi.co.za if you wish to
cultivate growth and harvest excellence for our students.
www.bluechipdigital.co.za
21

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INVESTMENT | Responsible investment
The cost of carbon: an
investor’s perspective
Environmental, Social and Governance (ESG) criteria have become a cornerstone of current investment
management practices – but there are implications that need to be recognised.
Climate change and carbon emissions matter, but so
does the cost of managing these – particularly in a
concentrated investment universe like the JSE. We
evaluated the effects of managing carbon emission
on the purity of the portfolio factor signal (value,
momentum and quality) and risk-adjusted returns by
either excluding the most carbon-intensive companies
or creating portfolios that achieve a less-thanbenchmark
carbon-intensive level.
The results are clear: it is possible, but the impact on
factor scores and risk-adjusted returns is consistently
negative. These findings suggest that it is more beneficial
and impactful for South African investors to look for
these gains in their offshore portfolios to reduce their
carbon footprint holistically. They should encourage their
investment managers to engage with the management
teams of the most carbon-intensive companies to get
them to focus on carbon emissions reduction targets and
the strategies necessary to get them there.
Regulators in South Africa and the industry-developed
(voluntary) Code for Responsible Investing South Africa
(CRISA) also require investment managers to incorporate
ESG principles into the responsible management of their
clients’ assets. However, it is also important to recognise that any
restrictions on a portfolio will impact its risk and return profile.
Investment managers’ challenge is how to maximise the
expected benefits while minimising adherence costs to these
ESG-related targets. While managers will do their best, their
clients must understand that their ESG goals will certainly have
some performance-related effects on their portfolio returns –
especially in the short term. Increased transparency should help
manage client expectations and empower them to make informed
decisions aligning with their values and financial objectives.
Investing in a smaller carbon footprint
Momentum Investments through its Research Hive conduct
research on the impact of restricting portfolios’ carbon footprints
relative to the benchmark. Carbon emissions are an important
source of greenhouse gases and from an ESG perspective,
Figure 1: WACI levels by super-sector.
Source: MSCI Barra, Momentum Investments
22 www.bluechipdigital.co.za

STRAP: INVESTMENT | Responsible investment
HEAD: The cost of carbon: an investor’s perspective
INVESTMENT | Responsible investment
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PLACE FIGURE 1
ESG remains at the forefront
of our investment approach.
investors may want to hold portfolios with a smaller carbon
footprint than the benchmark. There are two main ways to do this
– either exclude the most egregious emitters from the investment
universe; or create portfolios using a process that down-weights
them somehow.
The first approach represents a clear and simple commitment
to reducing carbon emissions. It is an unambiguous signal to the
offending companies, but it does result in a smaller investment
universe with a strong anti-resources bias. The second method
pragmatically targets a portfolio's carbon footprint lower than the
benchmark. This is more flexible and nuanced than the first approach.
These two approaches are compared in the context of large,
liquid South African equities for the period 2017 to 2023 using
carbon emissions data provided by MSCI Barra. Both were applied
to three different factor-based investment portfolios (Value,
Momentum and Quality). In each case, 10 increasingly intense
carbon intensity (CI)-related targets were set and the relative
performance of these more binding commitments were identified.
By carbon footprint, we mean the weighted average carbon
Source: MSCI Barra, Momentum investments
intensity (WACI) of a portfolio (or benchmark). The WACI levels
for the resources, financial and industrial super-sectors (using
benchmark weights) are illustrated in Figure 1. The graph clearly
illustrates that resource companies are the most intensive carbon
emitters. Managing them effectively will require under-weighting
this cyclical, but important, part of the market.
Caption: Figure 1. WACI levels by super-sector.
Eliminating carbon-intensive companies from the
investment universe
The first question we asked in the research process was: what
happens to your portfolios if you sequentially eliminate the
top 10 most carbon-intensive companies from the investment
universe? We compared the WACI for these portfolios with the
WACI of the unconstrained portfolio and the average relative
WACIs are summarised in Figure 2.
Excluding these shares reduces the average relative WACIs.
Still, these average results hide that these reductions happen
only when the excluded shares are in the top 20 when ranked by
their factor exposure. In other words, the relative improvements
are not consistent over time.
The next question was: what impact does optimising a portfolio
to (at most) meet a benchmark relative WACI level have? Again, we
evaluated 10 different levels of benchmark-relative WACI targets
(decreasing by 5% each time) and constructed portfolios of at
least 20 shares in a benchmark-cognisant way where we allowed
a maximum of a 5% active position. These portfolios gave us the
desired decrease in WACI, but more consistently this time.
The final research question was: what is the impact of
these improvements in terms of the portfolios’ risk-adjusted
performance? It will have an effect; either it leads to a smaller
universe to invest in (ie one with fewer resources shares as they
are increasingly excluded) or there is an obligation to hold a
portfolio that has a lower average factor score (because we’re
under-weighting the high-CI shares). The relative factor scores
and risk-adjusted returns of the constrained portfolios were thus
also identified. As expected, there was a negative impact on both
the relative factor scores and the resulting risk-adjusted returns.
Eliminating carbon-intensive companies from the investment universe
PLACE FIGURE 2
Figure 2: Constrained universe factor-based portfolio WACIs (relative to the unconstrained universe portfolio).
Source: MSCI Barra, Momentum Investments
Caption: Figure 2. Constrained universe factor-based portfolio WACIs (relative to the
unconstrained universe portfolio).
Source: MSCI Barra, Momentum investments
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Table 1. Average changes in portfolio WACI and related impact on relative risk-adjusted returns.
Average change in
relative WACI
Average change in relative
risk-adjusted return
Factor Exclusion
BM-
Cognisant
Exclusion
BM-Cognisant
Quality -4.44% -4.95% -7.72% -7.29%
Value -4.81% -2.67% -42.26% -4.39%
Momentum -5.83% -4.39% -7.52% -13.37%
Table 1: Average changes in portfolio WACI and related impact on relative risk-adjusted returns.
Source: MSCI Barra, Momentum Investments
Source: MSCI Barra, Momentum investments
The average impact of these WACI improvements for each method
over the 10 different constrained factor portfolios is summarised in
Table 1. A comparison of these average WACI decreases across the
various factors shows that you can constrain the carbon footprints
of the portfolios and that the portfolio construction methodology
does not seem to matter too much (on average).
When looking at the impacts on the risk-adjusted returns the
most important point to take away from this is that in every case
the decrease in risk-adjusted returns is larger than the decrease in
the WACI. This decline is not an increase in risk levels, but rather
a decline in the average returns from the constrained portfolios.
How to effectively manage ESG in the SA market
To summarise, our research clearly shows that while a South
African equity portfolio’s WACI can be significantly improved, there
are costs associated with it (lower risk-adjusted returns). The higher
the desired change, the lower the risk-adjusted portfolio return no
matter what method or factor considered. This is directly a result of
the limited and concentrated nature of the resource-heavy equity
universe that investment managers have access to in South Africa.
There are a couple of important points to note. Firstly, this
exercise is limited as it is only focused on the carbon component
of the E in the ESG. As an investment management firm, we believe
that you can manage ESG effectively in the South African market,
but as pointed out above, the nature of the South African equity
market constrains the management of carbon emissions in this
specific way.
Secondly, it is important to remember that this specific way
of managing carbon emissions is not meant to be the only,
or necessarily the most effective, way to change the desired
behaviour. There is greater scope for more effective impact via
active engagement with management teams by investment
managers on behalf of their clients. These engagements should
focus on requiring them to produce targets for ESG outcomes,
develop strategies to achieve these and then hold them to account
in terms of progress. As a company, we are actively engaged in
these discussions through our responsible investing team.
Finally, we believe that investors need to be conscious of the
potential impacts of this approach and so we remain cautious
of its application in South Africa. We know that the global
equity markets are a much more effective way to reduce carbon
footprint by adjusting portfolio holdings as there are much greater
opportunities for substituting highly CI companies.
The Research Hive was set up within Momentum Investments
to provide research insights and we will continue to
monitor the situation as new data arrives. ESG remains at
the forefront of our investment approach. As such, we will
continue to conduct these kinds of research activities. They
are important to gauge what is practical for our clients as
we continue to try to improve the environment and society
through better portfolio management decision-making and
levels of active ownership.
For more information on The Research Hive, visit
www.momentum.co.za.
Professor Evan Gilbert, Research Strategist,
Momentum Investments
Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services (FSP 6406) and registered credit (NCRCP173) provider.
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FINANCIAL PLANNING | Investment
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Removing the jargon from your
investment goals
Clients encounter a lot of jargon in the financial services
industry which may add more anxiety regarding
their investments. Some people may use big terms to
convince clients to think they have the right answers
without first trying to explain the underlying principles.
After seeing an answer a friend received about the security of
his unit trust versus that of his bank deposit, my colleague Rowan
Burger, head of strategic finance at Momentum Metropolitan
Holdings explained the security of a bank, life insurance company
and unit trust investment without the jargon.
A bank collects deposits and provides loans. It tries to balance
loans with deposits by taking a client’s deposits and issuing them
to someone as a loan. The risk to the bank (and the client) is that
its deposits dry up or its loan book fails. It then cannot honour
the other side of the transaction. A bank fails when there is a loss
of faith in its ability to do this, for example, if a large number of
depositors want their cash back and the bank cannot cancel loans
to effect payment. They hold capital as protection against this, but
the write-downs deplete their capital.
An insurance company, however, is fully funded as the investment
products underwritten by a life insurer will have all the assets of a
life insurer on the balance sheet. In the event of an influx of claims
by clients, they can disinvest these assets and make payments.
However, a life insurer integrates its investment business with its risk
business. The risk in the event of a pandemic, for example, is that the
loss on the risk side of the business could leave insufficient capital
available to pay out the claims in full. In South Africa, insurance
companies have always paid out 100% of their liabilities.
On the other hand, companies that are only asset managers
don’t have large balance sheets for protection. Accordingly,
South African investments are structured so that the company
never holds its clients’ assets. These are held in a trust. The client
owns a portion of the trust, broken up into units, hence the name
“unit trust”. The trust contracts the asset manager to manage the
funds according to the mandate. The trustee is usually a bank
or a financial institution not affiliated with the asset manager.
This means that if there are any financial concerns at the asset
manager, this does not impact the assets invested in the unit
trust. If the asset manager goes bankrupt, the trustees have
the power to appoint a new manager or arrange for liquidation
of the underlying investment holdings and make payments to
unit holders. The transaction costs would marginally reduce the
value of the investment, for example, the sale of the equities for
cash. However, the assets are secure in this trust, governed by the
Collective Investment Scheme Control Act (CISCA).
It would be painful to invest your assets across many managers and
track these holdings, so investors typically use Linked Investment
Service Provider (LISP) platforms to buy, sell and report on their
holdings across these multiple unit trusts. This is legislated under
the Financial Advice and Intermediary Services (FAIS) Act.
Trusts and asset managers typically have insurance to protect
against fraud and loss. The LISP platforms hold capital in the event
of a failure to perform their duty or go into financial difficulty. This
capital ensures that the fund can continue operating and be wound
down if necessary without additional cost to the unit holders.
LISPs were specifically designed to protect investors in the
event of failure of the asset manager (or the related companies
performing other parts of the investment process). The key risk
is measured by the choice of asset manager and their ability to
manage the performance delivery.
Cash deposits are considered safer regarding capital protection,
while unit trusts offer the potential for higher returns that come
with market risk. The security of unit trusts versus bank deposits
depends on a client’s risk tolerance and investment goals. In
general, conservative unit trusts are less risky than more aggressive
unit trusts as they have less exposure to growth asset classes that
tend to be more volatile.
Florbela Yates, Head of Equilibrium
Equilibrium Investment Management (Pty) Ltd (Equilibrium) is an authorised financial services provider (FSP32726) and part of Momentum Metropolitan Holdings Limited and rated B-BBEE level 1.
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FINANCIAL PLANNING | Investment
Listings on the JSE: Should recent history make us worried?
The JSE has undergone a notable transformation over the
past two decades, marked by a significant reduction in
the number of listed companies from its peak of 484
companies in 2002 to 275 as of Q1 2024. This decline
reflects a structural change rather than a temporary fluctuation,
not unique to the JSE but part of a broader global trend observed
in major equity markets worldwide.
Despite fewer listed companies, the JSE’s overall market
capitalisation increased over the same period. This indicates a
concentration of value among select companies. Notably, the
proportion of companies with a foreign primary listing on the
JSE has risen significantly to 20.4% of total listings. This increase
highlights the JSE’s global integration, offering local investors
diversification opportunities.
While delistings are inevitable and are a natural part of market
dynamics, the imbalance between new listings and delistings is
the main concern, with reluctance from new companies to enter
the market being the main issue. This imbalance is evident in the
steady net decline in the number of shares entering and exiting the
JSE All Share Index (ALSI) since 2018 (Figure 1). Without a steady
stream of new listings, the JSE may face limitations in its ability to
adapt to evolving market conditions and provide investors with a
diverse set of investment opportunities.
Figure 1: Annual changes in the number of constituents on the
JSE (2004-2023).
Source: MSCI Barra Portfolio Manager, Momentum Investments
The trend in the number of ALSI constituents (see Figure 2)
reveals a notable 22% decrease from 161 companies to 127
over the same period. Concurrently, the market capitalisation
of the index exhibited an upward trajectory, highlighting a
consolidation of market value among fewer entities. Despite
fluctuations in the composition of the index, the proportion
of total market capitalisation lost due to companies exiting
remains modest.
For asset managers and investors tracking the ALSI index,
this suggests that while changes in index constituents may
occur, the broader market’s stability and performance are
not as severely affected. For example, in 2023 the JSE saw 23
Figure 2: Number of ALSI constituents and their total market
capitalisation.
Source: MSCI Barra Portfolio Manager, Momentum Investments
companies delist while only 11 companies exited the ALSI,
meaning that over 52% of companies delisted are not part
of the opportunity set as defined by asset managers. This
discrepancy highlights the selective nature of the opportunity
set, with smaller companies that do not meet the typical size
and liquidity requirements of the average asset manager
comprising a significant portion of delisted companies. The
modest decrease in annual market capitalisation resulting
from exits also suggests that the downward trend primarily
stems from exits among smaller to mid-cap companies that
fall outside the scope of the opportunity set.
The shrinking investment universe presents both challenges
and opportunities. While it limits diversification and investment
options, it also concentrates the opportunity set among larger and
more established companies, offering the potential for stability
and liquidity.
By understanding and
addressing the implications
of these trends, Momentum
Investments can optimise
investment strategies and
drive long-term growth in
an increasingly competitive
global market. The Research
Hive was set up within
Momentum Investments to
provide research insights, like
the shrinking opportunity set
on the JSE, to assist financial
advisors in helping their clients
achieve their financial goals.
For more information
on The Research Hive, visit
www.momentum.co.za.
Vongani Masongweni,
Quantitative Research Analyst,
Momentum Investments
Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services (FSP 6406) and registered credit (NCRCP173) provider.
26 www.bluechipdigital.co.za

’
The 2024 FPI Professional’s Convention
themed ‘Cultivate Growth, Harvest
Excellence’, will be taking place on the
13th and 14th of August 2024. The
event will be hosted at Century City
Conference Centre in Cape Town.
www.fpi.co.za
Cultivate Growth, Harvest Excellence

Century City Conference Centre Cape Town

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INVESTMENT | Themes
There is always the next big thing
Every December, financial journalists sharpen their pencils
and write about the biggest themes that will drive market
returns over the next year. Thinking about and rationalising
investment markets through a set of themes is a powerful
way to convey some very succinct messages. For instance, the
theme that the Internet would change the world founded favour
with many investors leading up to the turn of the millennia.
Globalisation and the idea of an interconnected economy is
another theme that has been relatively popular in the financial
market discourse for decades.
These themes provide us with investment narratives that we
can believe and understand. Being able to identify and take
advantage of them can lead to positive investment outcomes.
For that reason, recognising even one of the factors that
may lead to the next big thing is a prized skill in the world of
investment management. So, when investment managers or the
media present us with what seem to be compelling investment
themes, we are often inclined to believe them. After all, now and
again, some of those themes do end up driving markets, but not
necessarily in the way you may think.
Let’s say, for instance, that in 1999 you believed that the Internet
would change the world we live in, you would have been right.
But had you chosen to buy a range of newly listed US companies
that would benefit from that theme, you would have lost a lot
of money in the Dot Com Crash. Recognising and accepting the
Matthew Molyneux, Investment Analyst, Fundhouse
investment theme as being correct wasn’t enough, you would also
have needed to know when to access it.
Often, investors buy compelling investment themes at the
wrong times, but it isn’t always easy to see that when you’re
caught up in the market hype. To that end, let’s use hindsight
to our advantage and look at three themes of old, how they
played out, and why the line between great investment themes
and overpriced assets isn’t always that easy to see. Although
each theme is quite different, they have some important
commonalities that may help us navigate another theme that
has a powerful grip on financial markets today.
Theme #1: The (Still) Sleeping Dragon – China
The positives. Over the past few years, we have written extensively
about China, its economy and the investment opportunity that the
world’s second-largest economy represents. Certainly, China and
the country’s path to global supremacy has been one of the most
common investment themes of the past decade.
First and foremost, Chinese equities have only been available
to purchase by foreign investors since 2012, when the Stock
Connect programmes were launched. These programmes,
sanctioned by the Chinese government, connected mainland
Chinese exchanges with Hong Kong for the first time.
Over the ensuing decade, more and more “good news” polished
up the Chinese investment case – robust GDP growth, a nascent
technology sector that would bring Chinese consumers online
and strong regulatory support from the Chinese government to
name a few. In 2020, the Covid-19 pandemic further accelerated
a lot of these trends and the price of many Chinese shares rose
meaningfully. In the investment management world, China could
do no wrong with many investors calling for specific Chinese
allocations in addition to their emerging market exposure.
The negatives. However, since 2021, a crackdown on the
technology sector by the Chinese government has led many
to question how investor-friendly the state is. In addition, the
country’s complex real estate sector and trade issues with the
US mean that transitioning the economy is going to be trickier
than once thought. And lastly, the robust economic growth that
underpinned the entire investment case is slowing.
The CSI 300, which is an equity index that tracks 300 companies
listed on the Shanghai and Shenzhen stock exchanges, reached
an all-time high on 18 February 2021. Today, it’s down 40% from
that peak. In the investment management world, investors have
started calling for China to be excluded from their emerging
market exposure and we have seen several “emerging markets
ex-China” funds being launched.
Aside from the positives and negatives of the investment case,
let’s look at when many investors started to access the Chinese
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INVESTMENT | Themes
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Often, investors buy compelling
investment themes
at the wrong times.
2020 and 2021 off the back of strong performance from many
ESG funds.
Ultimately, ESG investing considers the impact that a company
or entity’s operations may have on the planet, its employees and
society more generally in addition to the company’s financial
performance. As society has become more aware of climate
change, how companies are governed and how companies treat
their employees, ESG investing has gained popularity.
ESG investing is based on the premise that a combination
of risk mitigation, long-term value creation and alignment
with long-term market trends means that companies that
adopt appropriate ESG practices are likely to benefit more than
companies that do not.
The negatives. Since 2021, several factors have changed the
ESG investment theme. For instance, most ESG metrics are still
evolving and accurately gauging whether companies are ESG
compliant is more difficult than previously thought.
In part, this has been driven by the fact that ESG-scoring
methodologies have tended to focus on how established
a company’s internal processes are inclined to be and not
necessarily on the impact that the company’s operations have
on its external environment. For example, a company like Pepsi
generally scores highly when it comes to disclosing its board
investment theme. Ultimately, when we start to consider investor
behaviour an interesting trend emerges, regardless of the theme
we are looking at. We show this in Figure 1.
The orange line on the graph tracks the performance of the
iShares MSCI China ETF over the last decade which serves as a
proxy for the China investment theme. This is then compared to
the number of units that have been created for that ETF over the
same period. As more capital flows into the ETF, more units are
created so the Total ETF Units serve as a proxy for investment flows
INVESTMENT into the ETF. | Economy
A meaningful uptick in flows into this ETF only started to
HEAD: occur after There the MSCI is always China Index the next peaked big in thing late 2021. While it is
important to note that this only relates to one ETF, it does illustrate
an important point – investors started to access this theme after
Figure the assets 1. associated ETF performance with it had vs experienced unit creation a significant until February price 2024 – iShares MSCI China ETF
increase. Ultimately, the theme and resultant growth that many
PLACE Figure 1. FIGURE ETF performance 1 GRAPH vs unit creation until February 2024 – iShares MSCI China ETF.
Source: Thomson Reuters Reuters
investors were buying had already been priced into the market. composition, health and safety policies as well as climate targets.
This is a Figure common 2. trend ETF across performance another two vs themes unit creation of old that until we February For that reason, 2024 – it iShares may score Global highly Sustainable
according to some scoring
will also Development look at. Goals ETF
metrics. However, when the impact of Pepsi’s operations on the
broader environment is considered, it may not necessarily score
Theme #2: ESG investing
as highly according to other metrics. Ultimately this leads to
The positives. Environment, Social and Governance (ESG) inconsistencies relating to how ESG investing is interpreted.
investing is a form of investing that incorporates non-financial In addition, several companies have been engaged in a practice
factors into the investment decision-making process. ESG known as greenwashing for promoting their ESG credentials falsely
investing first came about when the UN Principles of Responsible which has cast a negative light on the practice more broadly. For
Investment were developed in 2006 and became very popular in example, recently the German asset manager DWS came under
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INVESTMENT | Themes
Figure 2. ETF performance vs unit creation until February 2024 – iShares Global Sustainable
Figure 2. Development ETF performance Goals vs unit ETF creation until February 2024 – iShares Global Sustainable Development Goals ETF.
Source: Thomson Thomson Reuters Reuters
investigation from regulators for engaging in greenwashing by
promoting some of its funds as “green funds” when they weren’t.
More specifically, from August 2018 to late 2021, the company
marketed itself as a leader in ESG investing but failed to adhere
to its own ESG investment processes that it said it followed in its
communication with clients.
Taking all of this into account, it is interesting to again assess
how investor capital flowed into the ESG investing theme after
the assets associated with that theme experienced a strong run
in performance, similar to the China case. In Figure 2, we look
at this.
The red line shows the performance of the iShares Global
Sustainable Development Goals ETF from 2016 until February
2024 and the number of units created for that ETF is also shown. In
a very similar way to the iShares China ETF, flows into this ETF only
started to occur after a period of strong performance. Ultimately,
this again illustrates an important point – many investors bought
into this theme after it had been priced into markets.
Like the China and ESG investing themes, one last theme of
old has experienced a similar journey to these two.
Theme #3: Cryptocurrency
The positives. Simply put, a cryptocurrency is a digital global
currency created outside of the well-regulated confines of the
global monetary system. It exists only in the online world, and
not in the physical world. This puts it out of reach of central banks,
regulators and other watchdogs, making it the first independent,
global currency.
For the better part of a decade, the price of cryptocurrencies
like Bitcoin boomed. Largely because of many factors, including
the scope and power of blockchain technology and the fact that
they could act as an alternative means of banking in the future.
We do not view Bitcoin as an asset, but rather as an alternative
currency that in part promotes cross-border transactions more
efficiently than traditional currencies do.
A large part of the reason for the rise in the prices of
cryptocurrencies like Bitcoin has been a result of traders looking
It would be difficult to find an
investment outlook that doesn’t
speak about Artificial Intelligence
(AI) as the next big thing.
to profit from short-term price movements and not necessarily
because of a strong underlying investment case. This can be
considered a form of momentum investing which argues that
assets that have experienced strong price increases will continue
to experience more price increases as investors drive up prices.
The negatives. Since 2021, cryptocurrencies have experienced
a difficult time. Primarily because of a reversal in macroeconomic
circumstances worldwide, a regulatory crackdown exposed
unscrupulous businesses like FTX and technical limitations
associated with various cryptocurrencies. Ultimately, the momentum
trade on cryptocurrencies like Bitcoin reversed strongly.
Obtaining flow data on cryptocurrencies like Bitcoin is
difficult, mainly because the first Bitcoin ETFs were only launched
this year by Blackrock. A similar pattern shown in Figures 1 and
2 has meant that many investors bought Bitcoin and similar
cryptocurrencies after they experienced a very strong run in
prices. In summary, many investors accessed the theme after it
had already been priced into markets.
All three themes discussed are still playing out to this day.
Ultimately, we don’t know how they will develop going forward and
if history has taught us anything, the price they are bought at is often
the differentiator between investment success and disappointment.
So, what of the next theme?
Echoes of the past – Theme #4: Artificial Intelligence
We have explicitly positioned each investment theme by showing
both the positives and the negatives associated with them and,
where possible, illustrating how many investors accessed these
themes after their growth had been priced into markets, and were
left disappointed.
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INVESTMENT | Themes
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Over the past year, another investment theme has stolen a lot
of the limelight from China, ESG investing and cryptocurrency.
Indeed, it would be difficult to find an investment outlook that
doesn’t speak about Artificial Intelligence (AI) as the next big thing.
However, what is interesting about AI is that we seem to be at
a point where the theme itself is still in its nascency.
The positives. On 30 November 2022, OpenAI, a research
organisation, launched ChatGPT publicly, an AI-powered chatbot.
Although talk of AI and how it may impact the world we live
in has been around for decades, ChatGPT acted as one of the
first tangible pieces of technology that evidenced the power and
potential power of AI.
From new scientific discoveries to increasing supply chain
efficiencies, throughout 2023, markets got very excited about
the potential growth in company earnings that AI could unlock.
In that process, seven companies were identified in part because of
the role that they are playing in driving AI forward – today they are
known as the Magnificent 7 (Apple, Microsoft, Alphabet, Amazon,
Meta, Nvidia and Tesla) and for 2023, their market capitalisation in
total increased by $5-trillion.
The negatives. As of today, the story has not yet been fully
written and there may not be a negative story. However, it is
important to note that while all seven companies are seen as
market leaders in the AI space, most aren’t generating profits from
AI yet. Many investors have bought future earnings growth and, in
the process, bid up the price of these seven companies substantially.
Ultimately, if yesterday’s themes have taught us anything, we
should at the very least be asking ourselves whether or not many
investors are again buying a compelling investment theme after
the positives have been reflected in the price.
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FINANCIAL PLANNING | Investment
The pinnacle
of wealth curatorship
True wealth management is a subtle transformative process that connects a unique combination of
elements to create a powerful outcome. It requires a specific mindset, a distinct philosophy and a true depth
of expertise. Private Clients by Old Mutual Wealth has mastered these elements. We speak to the Head of
Proposition and Business Development, Jaco Gouws.
In 2023, Old Mutual Wealth consolidated its high-net-worth
business behind a unified proposition, Private Clients. Despite
challenging market conditions, the unrelenting weak currency and
muted business activity in South Africa, Private Clients witnessed
remarkable growth over the last year.
Please provide an overview of Private Clients.
We offer bespoke and holistic global wealth and investment solutions
that are tailored to high-net-worth individuals’ (HNWI) complex needs.
Importantly, we forge quality, long-term partnerships with financial
planners and their clients.
Partnerships are key because a team is required to identify and
understand clients’ needs and cater to them in a personalised way.
In this way, our approach is deeply tailored to individual needs and
our process is streamlined, refined and integrated. We are agile and
responsive because our clients lead busy lives and it’s crucial that
everything runs seamlessly.
Please outline your services.
HNWIs live and invest as global citizens and their wealth and solutions
therefore need to come from a trusted partner who is geared towards
helping them navigate the intricacies of global citizenship.
Investment management is at the heart of our business and
we currently have a team of 30 dedicated portfolio managers
who manage portfolios around the globe. Our clients need
exclusive market access to unique investment opportunities and
industries worldwide.
In addition to managing funds, we also ensure that our clients’
structures, or how they have set themselves up, are appropriate,
efficient and effective. If the structure that owns the investment,
whether an individual, company or trust, is not properly set up,
fees will be wasted, taxes will be exorbitant and there are multiple
other risks too.
We also focus on providing our clients with premium fiduciary
services. Our fiduciary specialists have several decades of
experience and offer advanced estate planning, drafting of wills,
professional executorship as well as setting up and running local
and international trusts as independent trustees.
Our approach is deeply
tailored to individual needs
and our process is streamlined,
refined and integrated.
In my experience of working with planners over the last two
decades, clients often seek guidance in setting up specific
structures that were recommended to them, particularly foreign
structures. An example would be a client wanting to set up a trust
in Mauritius. However, upon closer review, we often find that the
respective structure will not necessarily help the client achieve his/
her desired outcome. This is why the first, and most important, step
is to help clients identify and unpack the actual need or objective
they are trying to address. In such a scenario, our dedicated and
experienced fiduciary specialists and portfolio managers are key
partners in helping planners unpack this with their clients. Once
this has been done, we, together with the planner, are then able
to create and implement an appropriate solution for the client by
tapping into our global network of specialist partners.
What do you attribute Private Clients’ success to?
Partnerships. The partnership we offer helps a financial planner
transition from one person trying to solve multiple complexities
to a team with the planner as the captain.
The world has changed and so too have HNWIs’ needs, which
extend beyond geographies and generations. We work closely
with planners to identify, plan and address clients' needs, going
beyond traditional asset allocation and portfolio management,
and offer global opportunities that ordinarily cannot be accessed
in South Africa. The global economy has various exciting prospects
in terms of growing and diversifying.
So your success lies in the value that your partnership brings
to financial planners?
Planners know and understand their clients intimately through
relationships that have been built for years. We want planners to
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FINANCIAL PLANNING | Investment
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elevate and grow their practices, unlocking value by partnering
with the best in various industries. This enables them to navigate
around the complexities of different countries, tax jurisdictions
and structures, which are continuously changing.
What gives Private Clients its edge?
You’ve got to do what the label says so if you want to manage
wealth, you need to do it well. We have a very strong track record as
our global equity, global balanced and local portfolios have done
exceptionally well over the past five years. In this way, financial
planners have confidence knowing that their clients’ portfolios are
being managed superbly.
Our true north is that we are very clear that the client relationship
and the custodian of that relationship remains with the planner.
It’s this partnership with well-defined roles and responsibilities
that gives planners comfort in the daunting task of introducing
someone new (us) into their client relationship.
As a team, you can do so much more. Planners can access their
ideal clients because they understand HNWIs’ needs, provide
bespoke solutions and have the confidence to answer questions
and exceed expectations. Our edge is our clear-cut partnerships,
supported by a network of best-of-the-best global specialists.
Many financial planners are focused on the big drive for
passive income and with us they’re gaining access to those
clients. Premiumisation is a pricing strategy that leverages the
unique characteristics of a product to influence the perceptions
of clients so that they are willing to pay more for that product. Our
partnership enables planners to premiumise their practices, attract
their ideal clients and feel confident to charge an appropriate and
professional fee.
How does Private Clients help financial planners to premiumise
their practices?
Private Clients helps planners to premiumise by making them:
A safe bet. When you partner with us, you are partnering
with a business that has demonstrated its ability to deliver
investment returns worldwide no matter where we invest.
We have almost two centuries’ worth of experience and our
fiduciary business turns 100 in 2025. If you’re going to partner
with us as a custodian, continuity will be there for your children
and their children because that is important for high-net-worth
clients. Global citizens want the peace of mind that in 30 years
their great-great-grandchildren will be secure with their trust
and finances. They are already very wealthy, and we look after
their wealth.
A memorable experience. We partner with planners to create
engagements with clients whether it’s a personal wine-tasting
experience at home or in a very niche spot. We are invested in
arts and we’re in all the places where HNWIs socialise. We create
that platform for a planner to offer their clients a comfortable
environment to spend time with the planner.
This raises the planner’s social image as they can solve their
clients’ complex needs around the globe, which elevates the
social image of the practice and when the practice elevates, other
clients will want to deal with that practice – a self-fulfilling loop.
Simple and easy. We offer planners a dedicated portfolio
manager, fiduciary specialist and client relationship manager,
a whole team that’s always going to make business as easy as
possible for them.
Innovative. We’re continuously bringing unique investment
opportunities, themes and all those topics that are very relevant
to high-net-worth individuals. We offer exclusive investments such
as private equity to planners to take to their clients.
Contact Private Clients by Old Mutual Wealth at
+27 (0)21 524 4678 or privateclients@omwealth.co.za or visit
wealthprivateclients.co.za.
Jaco Gouws, Head of Proposition and Business Development,
Private Clients by Old Mutual Wealth
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INVESTMENT | ETFs
Diversifying personal share
portfolios in a growing $12-trillion
global ETF opportunity
Amid multi-decade-high US interest rates and evolving
market conditions, exchange-traded funds (ETFs) are
emerging as integral components in personal share
portfolios managed by professionals. These innovative
investment vehicles have gained significant traction in recent
years, revolutionising how wealth managers and portfolio
managers approach the construction of portfolios.
The beauty of ETFs lies in their ability to allow investors to
buy a broad range of securities in a single trade, and the most
sophisticated portfolio managers in South Africa are already using
ETFs alongside traditional stock picking to increase diversification
and address macroeconomic shifts.
With the almost $12-trillion global ETF industry poised for
exponential growth, it’s crucial to understand their role in
enhancing portfolio diversification and managing risk. ETFs
can deliver simple, long-term exposure to a whole asset class,
geographic region, sector or theme, particularly in the bond
market, which was previously hard to access.
Personal share portfolios
Actively managed ETFs (AMETFs) are the latest addition to the
investment landscape in South Africa. While some market
participants may be confused, having always associated ETFs
with index-tracking (also known as “passive”) investment
strategies, the new regulations allow multi-asset solutions,
traditional active mandates and many other types of strategies
to be listed in the efficient and convenient ETF fund format,
being labelled as an AMETF.
Multi-asset income AMETFs offer investors a comprehensive,
managed income solution in the listed format. The 10X Income
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INVESTMENT | ETFs
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AMETF, for example, offers a strategic asset allocation spreading
the investment across money markets, government bonds and
corporate credit, locally and abroad. The fund is designed to deliver
returns that beat inflation by 2.5 percentage points over rolling
three-year periods while controlling volatility for a smoother
ride. With a maximum duration of three years and an attractive,
steady yield, this ETF presents a compelling opportunity for
investors seeking consistent, low-risk returns while navigating the
complexities of the fixed-income markets.
Integrating ETFs, especially fixed-income ETFs, into traditionally
stock-dominated portfolios reflects a notable trend. This strategic
allocation approach emphasises the importance of blending
individual stocks with ETFs to achieve optimal diversification
and risk management. By combining the stability and income
potential of fixed-income ETFs with the growth potential of
individual stocks, investors can create a well-rounded portfolio
that balances risk and return.
Defensive global equity exposure
In recent years, market-cap weighted global benchmarks have
become heavily concentrated in US equities and the technology
sector respectively. With the tech mega-caps trading at eyewatering
multiples and US valuations causing concern, many
investors are now seeking different indices. For example, in light
of the geopolitical and economic worries facing global markets
and the associated investor preference for more defensive global
allocations, one strategy in focus is an index that screens for
companies that have demonstrated reliable earnings through
the cycle, the S&P Global Dividend Aristocrats index. This strategy
selects companies with a long history of paying and growing
their dividends. These businesses are robust, cash generative, or
as the Boston Consulting Group would
call them – “cash cows” – and are wellplaced
to weather challenging economic
conditions. By comparison to marketcap-weighted
global indices, this index
offers a more diversified geographic
spread (with a lower US weighting). It is
underweighting the technology sector
while being overweight on the resilient
consumer staples sector.
An ETF based on this benchmark, for
example, is a convenient and attractive
“building block” that can be added to local
share portfolios as a diversified, quality,
global equity allocation. It is well-suited
to investors who want to participate in
equity markets with a defensive tilt due
to the quality and robust nature of the
companies that make up the strategy.
While we could extend this article
to unpack many other interesting JSElisted
exposures, the point worth noting,
in summary, is that ETFs have become indispensable tools for
investors navigating the complexities of today’s investment
landscape. Their simplicity, accessibility and cost-effectiveness
make them valuable assets in constructing diversified share
portfolios. As the ETF landscape evolves, including ETFs in share
portfolios will be essential for achieving superior outcomes in
personal investments. By staying informed and embracing the
benefits of ETFs, investors can position themselves for long-term
success in an ever-changing market environment.
Michelle Noth, Head of Financial Intermediaries, 10X Investments
www.bluechipdigital.co.za
37

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INVESTMENT | Portfolio construction
Replace luck with
fact not feelings
Towards the end of December, there’s a part of me that
misses the pace and energy of a normal workday. I
habitually check my phone every few minutes despite
knowing that there’s little going on. Every year I promise
myself that it’ll be different this time but somehow last year I was
worse than the years before. I even went as far as to send myself
a test mail to confirm that my inbox was still working. After this I
needed a distraction, so I wandered over to YouTube.
Their algorithm suggested that I watch a video by Neil
deGrasse Tyson (the director of the Hayden Planetarium in
New York and part of the team that demoted Pluto from planet
status) about why clocks run clockwise. Spoiler: in the northern
hemisphere, it’s the direction that a shadow cast by the sun
moves. This took me down a deGrasse Tyson wormhole until a
short video caught my attention. He stated, with his inimitable
enthusiasm, that eyewitness accounts don’t carry any weight
in science. Science requires evidence and saying that you saw
or heard something is not evidence. In science, evidence is
something that can be measured in a controlled and repeatable
manner. Contrast this view to the investment industry where
we often rely on the art of persuasion and piece together a
hypothesis with incomplete information.
Investing isn’t a hard science like physics with its deterministic
equations that can predict outcomes precisely. This, as we operate
in an environment that incorporates human nature, complex
interactions and feedback loops and we need to extrapolate these
into future expectations. But applying the rigours of scientific
evidence is key, even if it may seem daunting, and it’s easy to
instead fall back onto how we feel to rationalise a decision, not
fact. It doesn’t have to be this way. While we must accept that there
are limits to what we can know we also need to maximise the use
of the information available to us.
I believe that the market is all-knowing; it never forgets and
punishes the complacent. That sounds like a cult leader but unlike
gurus in pyjamas, the market will reward your patience if you follow
a few simple principles. We need to apply rigour and discipline to
areas that we can control and exercise our best judgement in areas
that we can’t.
The first and most obvious place to apply rigour is to fees. We
all know that low fees are better, and that costs must be managed
tightly, but it’s more nuanced than that. Where you save fees is as
Investing isn’t a hard science
like physics with its deterministic
equations that can predict
outcomes precisely.
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INVESTMENT | Portfolio construction
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important as how much you save. It is more important to manage
costs on the highest-performing asset classes because the savings
are compounded on a larger return. Lowering equity investing
costs has a much greater impact than the same saving would have
on cash or bonds.
Assume that you have R1-million to invest for 10 years and
that the expected net annual return on bonds and equities is 8%
and 14% respectively. Then, let’s measure the impact of a 0.2%
pa cost saving pa on both portfolios. The cost-saving compounds
to an extra 4% on bonds and 7% on equities. If we extend the
period things get interesting; over 15 years
the savings compound to 9% vs 19% and
over 20 years 18% vs 49%. This is the power
of compounding, and its implications are
clear: managing fees, especially the pernicious
effects of performance fees, has an outsized
effect when applied to the highest-returning
assets. This is the simplest yet most effective
way to guarantee value-add to a portfolio.
Another area that is often underappreciated
and punishes the complacent if it is ignored,
is risk management. It is tempting to start
portfolio analysis with return comparisons, especially to peers,
but past returns can be the least dependable indicator of future
outcomes. Returns are calculated using only two data points, the
start and the end and ignore the rest. Risk measures are concerned
with the journey and not just the outcome and make use of all data
points between the start and end points.
Even something as simple as a three-year volatility number
would use all 36 monthly returns and is thus far more informationally
dense than the return over that period. Over a full market cycle, this
information density can provide meaningful insights about how a
fund manager has behaved under different scenarios and is a better
foundation for inferences about the future than a return ranking table.
Effective diversification is also often neglected. Diversification
is an efficient and effective way to reduce losses. Counter to
what is typically believed, owning many different assets does not
automatically imply that you are diversified. This is especially true
in the South African context where it can feel like we have more
fund managers than investable securities.
Compound Savings Bonds: 8% pa Equities: 14% pa
Cost Saving pa 0.2% 0.2%
10 Years 4% 7%
15 Years 9% 19%
20 Years 18% 49%
Calculating the Effective Number of Constituents (ENC) value is
a better metric than counting portfolio contents. This measures
the amount of concentration in the portfolio and expresses this
as a notional portfolio count. Imagine an equally weighted twostock
portfolio: the ENC would be two, ie the same as the count.
The same portfolio with 99% in one stock and 1% in the other
would have an ENC of close to one even though the count is
still two.
Portfolio 1 Portfolio 2
Share 1 Share 2
Share 1 Share 2
www.bluechipdigital.co.za
39

BLUE
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INVESTMENT | Portfolio construction
An even better measure would be the similar-sounding Effective
Number of Bets (ENB). This is more computationally intensive but
considers portfolio weight as well as how constituents interact
with each other. Once again, imagine an equally weighted
25%
20%
15%
10%
5%
0%
Portfolio 1: Effective Number of Bets = 1
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Share 1 Share 2
two-stock portfolio. If those two assets behave the same then
the ENB would be one, despite the count being two, ie there is
no diversification. If the assets have inverted behaviour (ie are
perfectly negatively correlated) then the ENB would be two and
the portfolio is diversified.
These are metrics that measure
portfolio characteristics in a manner
that rises towards scientific standards
and provides an objective base from
which we can add more colour. This
is not an exhaustive list, just a place
to start. Adding rigour to portfolio
construction means that we rely less
on chance and allows us to replace
luck with something more absolute
and enduring.
As 2024 gains momentum and my
phone is beeping constantly again, I
believe it is prudent to keep a scientific
approach in mind when creating
portfolio constructions. While science
cannot forecast the future, it can mitigate
against it. This is why we should take a
rational, scientific approach to building
and managing clients’ portfolios.
Portfolio 2: Effective Number of Bets = 2
25%
20%
15%
10%
5%
0%
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Share 1 Share 2
Reza Khan, CEO, Lodestar
Fund Managers
Lodestar Fund Managers is a Level 1 B-BBEE provider. 100% Black owned. 100% Black managed. Lodestar Fund Managers (Pty) Ltd is an authorised financial services provider, FSP 49808.
40 www.bluechipdigital.co.za

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FINANCIAL PLANNING | Property
Property investing and
financial planning
One key element of financial planning is dealing with property investments. Holistic financial plans must
consider property, as it is a cornerstone asset for most people.
Simply ignoring property might be a disservice to clients.
At the same time, many financial planners are not
property experts and could feel uncomfortable making
recommendations beyond generic advice, eg trying to pay
down your mortgage.
There are many types of property investments to consider
To complicate matters for financial planners, clients are offered a
variety of property investments. These range from their primary
residence to listed property companies, unit trusts, offshore
property schemes (golden visa anyone?) and many other offerings.
Financial planners might be best served by offering advice based
on a few fundamental principles rather than specific advice on
investments outside their expertise.
Concentration risk
Diversification of investments is a sound principle and a proper
diversification strategy is an excellent antidote to economic,
political and stock market uncertainty. When discussing property
investments with clients, it is critical to determine how much of
their wealth will be tied up in their property investment(s). For
most people, they must own their home. It might be correct
to advise them to pay down their mortgage and build up nonproperty
investments simultaneously to compensate for the
concentration risk.
Cost of transactions and ongoing cost of ownership
It is worth highlighting the total cost of property ownership before
allocating money to this asset class.
Offering a cost comparison might be helpful, for example, compare
the cost of buying a property vs buying a unit trust or ETF. Property
transaction costs include transfer duties, mortgage registration,
agent’s commissions, etc. In addition, the cost of ownership and
maintenance must be factored into any calculation, including
property taxes, levies (for apartments or clusters) and maintenance
(even apartments must be repainted). I have run some simulations
and believe the ongoing cost of property ownership (excluding
transaction costs) averages more than 2% per year. This excludes
the cost of a mortgage repayment.
Complexity: syndications/fractional ownership
Many investors like property as an asset class because it is simple,
easy to identify and visible. However, some product providers have
created complex property structures that are not transparent,
simple or easy to understand. Unfortunately, many of these
structures have imploded in the past (please search Sharemax or
Masterbond for two examples) and some new structures might be
headed in the same direction.
One significant benefit of a listed share, ETF or unit trust is that
it can be sold quickly. Still, selling your portion of a property via
a syndication or fractional ownership structure is very difficult. I
prefer a listed property company, property ETF or unit trust for
investors who want to be part-owners of a property portfolio.
Merits of leverage
Investors often argue about the potential for outsize returns if
they borrow money to invest in a property. This type of leverage
is not readily available on shares, ETFs or unit trusts. This is a valid
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FINANCIAL PLANNING | Property
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Potential returns
While property investments can sometimes yield attractive returns,
some property sectors have not been great historical performers.
For instance, residential property growth rates have been modest
compared to the stock market – even over very long periods. In
South Africa, capital growth on residential property has delivered
half the stock market’s growth over the long term.
Listed property used to be a star performer in South Africa, but
the economic decline in the country combined with the move
away from offices after the Covid pandemic has caused real
damage to investors. More recently, some industrial properties
that suit logistics operators have done well, and some pockets
of residential property in the Western Cape have been great for
investors. In summary, property returns will always be patchy
and focusing on historical returns to predict future growth could
be harmful.
argument in favour of property. Financial planners need to remind
clients that the flip side of this benefit is the potential for implosion
if the investment goes wrong.
Rental income
Many investors favour property as they can earn a stable and
predictable rental income from the investment. A well-chosen
property with a reliable tenant can provide a steady and increasing
rental income. In an ideal scenario, rental income can even cover
mortgage payments in the long term, effectively allowing the
tenant to pay off the investor’s mortgage.
However, if the tenant cannot pay and decides not to move out,
the landlord could be in trouble. On average, it takes six months to
evict a non-paying tenant legally. The landlord must still pay the
mortgage and monthly property ownership costs. If the tenant is
unscrupulous, there might be damage to the property that must
be repaired before a new tenant can be found.
Stability against market fluctuations
Unlike investments in shares, ETFs and unit trusts, physical
property prices are less susceptible to short-term market
fluctuations. The tangible nature of real estate often provides
a sense of stability and security to investors, shielding them
from short-term volatility. This can be a powerful psychological
benefit to skittish investors who cannot sell their property
quickly in a market downturn. The slow pace of transactions
can help nervous investors to stop panicking and think more
rationally. Sometimes, the best decision in personal finance is
to do nothing.
Conclusion
While property’s passive income and long-term appreciation
potential may seem enticing, financial planners must remind their
clients to carefully weigh the pros and cons before diving into this
asset class. Financial planners do not need to become property
experts to offer a sounding board for their clients. Providing a
perspective based on financial planning principles might be a real
benefit. In addition, there is a real lifestyle value for some people
who can afford to own multiple properties and it is the job of a
financial planner to enable these clients to enjoy their lives if it is
viable. The best financial planning decisions are not always driven
by return on investment.
Warren Ingram, CFP®, Director, Galileo Capital
www.bluechipdigital.co.za
43

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FINANCIAL PLANNING | Investment
Do you want to take advantage
of the highest first-world interest
rates in decades?
Fresh from a market rally in the final six weeks of last year,
markets began the first quarter of 2024 optimistic that
declining inflation would lead to meaningfully lower
interest rates. As the quarter progressed, however, it
became evident that inflation was sticky and interest rates would,
therefore, need to remain higher for longer.
Jerome Powell confirmed this at the latest Federal Open
Market Committee (FOMC) meeting where the benchmark
interest rate was kept unchanged at a two-decade high. At the
meeting, it was noted that interest rates would only be lowered
when the committee had gained sufficient confidence that
inflation was moving sustainably toward 2%.
Similarly, the Bank of England’s Monetary Policy Committee
(MPC) opted to maintain the bank rate at 5.25%. As a result, First
World interest rates will remain elevated for some time, particularly
in the US where economic growth remains robust. Investors are
therefore still able to achieve attractive hard currency returns from
low-risk investments – an investment opportunity that has been
missing for the past 15 years.
To help investors take advantage of this opportunity in the
most tax- and cost-efficient way possible, Marriott has launched
the Smart International Income Portfolio (SIIP) – a simple, lowcost
investment for conservative investors looking to achieve
hard currency returns in excess of bank deposits in either US
Dollars or Sterling.
The two portfolios only hold liquid, investment-grade
instruments and yield 5.6% and 5.1% respectively.
Importantly, all interest-bearing assets are held via
accumulating ETFs and funds. This is highly tax efficient for
South African investors as the income is automatically retained
Scott Cooper, investment professional, Marriott
Investment Managers
within the portfolios without incurring tax. If capital is required,
the investor can simply repurchase the required amount.
Although a tax charge is triggered at this point, it will be subject to
capital gains tax as opposed to income tax – providing a large tax
saving (up to 27%) for individual South African investors.
Looking forward, although major central banks are expected
to begin cutting rates later this year, the trajectory is likely to
be gradual, with interest rates remaining in restrictive territory
until inflation is sustainably back at their 2% targets. As a result,
Marriott’s SIIP is well-placed to provide
investors with attractive hard currency
yields in a highly cost- and tax-efficient
way for the foreseeable future.
The two SIIP portfolios can be
accessed via the International Investment
Mandate (using your annual individual
offshore allowance).
Smart International Income Portfolio
• Smart Dollar Portfolio (USD)
• Smart Sterling Portfolio (GBP)
44 www.bluechipdigital.co.za

Take advantage of decades-high
US and UK interest rates.
Smart International Income Portfolio
• High Income
• Less Risk
• Tax Efficient
• Low Cost
More Predictable
Investment Outcomes
Contact our Client Relationship Team on
0800 336 555 or visit www.marriott.co.za

BLUE
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FINANCIAL PLANNING | Investment
Navigating a changing landscape
Blue Chip chats with David Crosoer, Chief Investment Officer at PPS Investments,
about the opportunities and challenges investors are having to navigate across the
investment landscape.
How investable is South Africa right now?
South African assets are priced cheaply, partly because investors
are not convinced that government has the appetite to drive
through the necessary structural reforms, and nominal economic
growth remains far below the cost of government funding. The
question investors would be asking is does this make South Africa
a good investment opportunity?
Clearly, if structural reforms do take place, then investors will
be handsomely rewarded for taking on South African risk at these
valuation levels. We think this scenario is unlikely, at least in the
short term, because the most probable election outcome either
leaves the ANC in a coalition or with the majority neither of which
is likely to create an environment of lasting structural reform.
However, a lot of bad news is already in the price, and the bar
for positive surprises is quite low. This should make one cautious
about writing off South Africa completely, as we could benefit
significantly if a few things go in our favour.
Overall, we are still cautious about South African assets in our
portfolios, despite their attractive valuations, and tend to favour
South African cash over other South African assets where we have
discretion relative to our strategic asset allocation.
This also does not mean there aren’t attractive investment
opportunities on the JSE, or unlisted companies that can generate
outsized returns for investors. But it does mean that the general
environment is still not favourable for South Africa.
Investors expect risk premiums associated with emerging
markets like South Africa, so are investors being compensated
and is the ROI worth it?
The returns on offer in South Africa are significant. Five or 10 years
ago, if we were told that we could get 5% real returns on South
African bonds, most of us would have banked that immediately.
The challenge is whether our debt is on a sustainable path –
there has been no evidence so far that government has got a grip
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Investors need to look at
both sides of the coin.
on this – but in five or 10 years’ time one can easily see a scenario
where investors challenge us for not having taken more advantage
of the opportunity on offer today.
On a medium- to long-term view (10 to 15 years), I don’t
think it is outlandish to think that we will be able to implement
economic reforms. We will then be able to pick up growth and
start performing. If that is the case, this is a great entry point for
South African assets. However, if we have another 10 years like
we’ve had up until now, we aren’t getting enough compensation
for holding South African assets, even at these high yields.
Today, it is difficult to say with conviction which scenario will
materialise. When we build portfolios, we try to consider both
outcomes, as we don’t want to take on a binary call where we are
backing one view. Having said that, if we had greater conviction
in the reform agenda in South Africa we would have a higher
weighting to South African assets than we do currently.
Please tell us how your view on local assets impacts your
offshore allocation.
One does not want all one’s portfolio exposed to South Africanspecific
risk, and an allocation to offshore can help reduce that. So
even though South African assets are inexpensive, it still makes
sense to allocate offshore to help diversify one’s portfolio.
When the regulations changed a year and a half ago to allow
45% offshore in retirement funds, it was a big change for South
African investors. It allowed us to hold a lot more offshore than we
have held in the past; in a multi-asset high portfolio where most
retirement savings are for example, our strategic asset allocation
now splits our 70% equity allocation equally between South
African equities and offshore equities.
Some might argue that this is still a high allocation to South
African equities, given how small and concentrated the South
African market is, but it is a lot less South African equity than we
would have held in the past.
Offshore, we have tended to favour global equities over other
asset classes, but today we also have an allocation to offshore
bonds and cash in most of our portfolios. The allocation to
global bonds is relatively recent, as valuations until recently
have been underwhelming.
Locally, relative to our strategic asset allocation, we are only
overweight South African cash, as we remain concerned with
South African-specific risk. In contrast, our global allocation is
overweight offshore cash and bonds, as equity valuations are not
inexpensive. So, overall, our portfolios are cautiously positioned.
While we are holding more cash than typical, we would look to
deploy cash in times of market weakness, which is our base case for
this year given the potential for short-term volatility in the market.
Lastly, please elaborate on how being a mutual impacts your
investment process and solution.
PPS has been around for more than 80 years and one thing we have
learnt is thinking long-term differentiates us from everybody else.
Our profit-share is available to qualifying members at retirement
to help augment their life savings, and our investment solution
mindset aims to cater for different eventualities on the road to
financial freedom.
As the mutual that serves the professionals that serve South
Africa, we are very much focused on education as the most
effective way of building resilience for South Africa, and it’s a critical
component of ensuring South Africa will be a good investment in 10
or 20 years. At PPS, we are focused on ensuring that we have a big
stream of professionals who continue to help grow the economy in
our country. As a mutual, we can take a long-term perspective on
that because we can look at the whole education ecosystem and
where we should best intervene to try to help sustain it.
So, I think that the most important thing about a mutual is it takes
a long-term perspective. We are an intergenerational mutual. We are
owned by our members and we are owned by the professionals that
serve South Africa – today’s and tomorrow’s professionals. By its very
nature, a mutual needs to look long-term and that impacts how we
invest and how we think about investing because we realise we
are playing an infinite game.
David Crosoer, Chief Investment Officer, PPS Investments
www.bluechipdigital.co.za
47

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FINANCIAL PLANNING | Retirement
Life after work
An alternative perspective on retirement planning.
I
have been in the financial services profession since 2013 and
my experience has taught me that clients have one central
question they need help answering: “Am I going to be okay?”
In the context of retirement planning, the capital available
vs capital required calculation should be enough to answer this
question. A surplus in the calculation would mean yes, you will
probably be fine, and a shortfall means no, you’re not going to be
completely okay. Simple.
I have found, however, that the longer I work as a financial
planner, the more difficult this question is to answer. Even with
a pretty cool tool that helps me illustrate the capital available vs
capital required calculation. I guess that is the normal evolution
of any vocation.
As a financial planner, I would’ve been better equipped to deal
with this question if I had a psychology class in my commercebased
undergraduate and postgraduate studies. For the
psychology students turned financial planners, we envy you. The
answer to the question, I believe, requires the courage to leave
your technical skills at the door.
Have you ever found yourself emotionally charged about a
situation? Am I the only one who has mistakenly told my wife to
calm down, when she wasn’t calm and then expected her to calm
down? For context, we have two kids under the age of seven and
some days it is like the Wild West in our house. I should know better.
A few years ago, I received an email from a client that accused
me of missing, and thus not taking action on a crucial instruction.
After reading and re-reading the client’s email and reviewing all
our historic email correspondence (and to be safe, I also checked
my WhatsApp chat history, my Facebook messages and even
my Twitter DMs – fun fact, I had no DMs), I was able to confirm,
thankfully, that I did, in fact, not miss their instruction. But from
the email I read multiple times, the client was adamant that I
made a mistake. The client even pointed out in their email that
they remember telling me how important this new retirement
annuity account with its monthly debit order was to them and that
it was a top priority to implement.
After writing and rewriting my reply trying to absolve myself
from the mistake that wasn’t mine, I re-read the client’s initial email
and (finally) caught a glimpse of something more. Having reflected
on this story more than a few times, I could have managed my
emotional response better, I could’ve potentially picked up the
distressed or panicked response from the client’s email sooner.
After a quick pep talk with my colleague and friend, Louis, we
decided to phone the client instead of responding via email. And
this was the best lesson I have ever learnt about the presentation
of left-brain fact vs right-brain feeling. To cut a long story short, the
client had just separated from their spouse, and they were starting
their divorce proceedings. So, an email that I understood to be an
accusation of my inability to execute the clearly expressed wishes
of my client was a symptom of the root cause which, now with
hindsight, was my client’s search for certainty, security and safety
given that their world had just turned upside down.
I know this story might seem to have nothing to do with
retirement planning or life after work, but honestly, it has
everything and more to do with retirement planning. And let me
tell you why. Retirement planning is an example of one of life’s
many transitions and is not simply a discipline on its own. By only
focusing on a client’s money during a transition – solely providing
a retirement income funding plan for example – and not on the
client’s life that is changing, we could miss an opportunity to
provide our client with the much-needed certainty, security and
safety they seek.
I’m sure you will agree that journeying with a client through
any life transition, whether retirement or something else, can be
uncomfortable. But I believe when you are feeling uncomfortable
or out of your depth, that is where the magic happens. When you
are not in the driver’s seat, it forces you to focus on your client
and not on your ability to flex your technical financial planning
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muscles. This is key for your client’s life to be changed in the
best way.
This approach to tackling a client’s transition into retirement
(including any other transition) has been a game-changer for me.
I believe it can significantly impact your planning process, business
and most importantly your clients.
The framework we use when walking a client through a
life transition, including that of retirement, is built around the
following three key areas:
• Create a safe space
• Move to the balcony
• Give the work back
Creating a safe space
The essence of a safe space is that “during times of transition when
the client is immersed in uncertainty and important aspects of
their life are shifting, they need an anchor. They need someone
they trust who tells them that what they are experiencing is
normal. They need that person not to rush them or make them feel
incompetent if they’re uncomfortable with the idea of a timeline
for their work. They need to feel like they’re not ‘crazy’, that it is okay
to feel ‘numb’, and they need to know that there isn’t some giant,
life-altering decision that they might miss or mess up. And if there
is a giant, life-altering decision to be made, they need to know that
they will have help making it. They want what we all want during
a tumultuous time: to feel safe and protected”. [1]
To become a safe space for a client, we must sharpen our
emotional intelligence (EQ) skills to counteract our intelligence
quotient (IQ), which at least for me is my (unfortunate) default
mode. The work of Daniel Goleman in his theory of social
intelligence helped me come to terms with the skills I needed to
add to my toolkit to be the best financial planner for my clients. And
these skills will improve your relationship with those closest to you
too. Win-win. Goleman’s theory of social intelligence has two parts:
social awareness and social facility. Social awareness is the ability
to accurately notice the emotions of others and “read” situations
appropriately. Social facility builds upon social awareness to allow
smooth and effective interactions. Social awareness coupled with
social facility (and a healthy dose of self-awareness) is one of the
quickest and most authentic ways to build trust with someone.
And it should be no surprise that trust is the foundation upon
which deep, lasting and impactful relationships are built. When
working out your social awareness and social facility abilities, your
humanity will be highlighted along with your technical skills.
Moving to the balcony
If you have successfully created a safe space for your clients, they
will trust you enough to follow you as you move from the garden
bench to the balcony overlooking the stunning garden with views
as far as the eye can see. This analogy is all about perspective.
If you decide, based solely on your experience of sitting on
the garden bench, you can easily make a wrong decision because
what you can see from your seated position is limited. That said,
you can also make a wrong decision based solely on your view
from the balcony, as you would not consider what it is like to be in
the garden. So with that in mind, managing the tension between
being seated on the garden bench and viewing the garden from
the balcony up high and the fluidity with which you move between
the two, will be a skill that adds significant value to the financial
planning process.
Giving the work back
As a financial planner, “giving the work back” was the most difficult
part of adopting our new transitions-focused framework. It has also
been the most liberating part. “Giving the work back” has allowed
me to remove many unnecessary and unfair responsibilities I
placed upon my shoulders in my client relationships. Is it fair
that we are expected to take sole responsibility for creating the
financial plan and adopting advice given within that financial plan?
By “giving the work back” we accept that “it is not our job to
mysteriously solve our client’s problems and create a plan of action
from behind a curtain”. [2] If we move from creators of our client’s
financial plans to co-creators by “giving the work back” to them,
they discover what they want, what they value most, what kind of
life they want to lead and what kind of legacy they want to leave.
By doing this we will, without a doubt, see our clients flourish as
they move through their different transitions.
By walking alongside our clients, we will help them move
towards living a life of significance. My clients, your clients, our
clients will be able to do that because we’ve shown them that once
the dust has settled, they will be okay. They might even reflect that
something good has come out of the previous season of their life
even though it was difficult. And that will help them move a bit
lighter into their next season.
[1]
Financial Transitionist Institute Core Training Course Curriculum
[2]
Financial Transitionist Institute Core Training Course Curriculum
Rudolph Geldenhuys, Certified Financial Planner®, WealthUp
www.bluechipdigital.co.za
49

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FINANCIAL PLANNING | Technology
AI: an approach that will power
change in almost every industry
There is no doubt what the most popular investing theme of the day is. Artificial intelligence (AI) has been
more than a buzzword for several years but confined to AI researchers it felt far away for most of us. That
all changed in 2023.
Generative AI models such as ChatGPT and Google
Bard have made AI accessible to the public for the first
time, which led to a surge of interest in the potential
applications. Public enthusiasm for AI has been
unprecedented, with ChatGPT reaching 100-million users in under
two months – seven months faster than TikTok and more than two
years ahead of Instagram.
The enthusiasm to talk about AI is not limited to the public.
Executives across industries have used the opportunity to discuss
their own AI plans. According to Bank of America, mentions of AI
were up more than 85% in 2023, and seemingly every business
must now have an AI strategy.
This excitement has translated into returns, too. Consider the
performance of companies building large language models (LLMs)
and the hardware that runs them. In the first half of 2023, the likes
of Amazon, Alphabet, Meta Platforms, Nvidia and Microsoft beat
all comers. This technology is the foundation on which most AI
is built. The market soon recognised the important and prolific
change that was underway.
However, past performance is no guarantee of future
performance. As long-term investors, we need to pause and evaluate
the substance behind the hype.
Here, it may be apt to remind ourselves of Amara’s law.
This is the observation that, when forecasting the impact of
technology, we tend to overestimate the effect in the short run
and underestimate the effect in the long run.
This fits with intuition. We tend to want better, faster computers
and gadgets – and want them now. History suggests that the first
few generations of new technology will look antiquated within
just a few years. Think of the initial versions of the iPhone.
So, applying Amara’s law, investors will do well to consider the
bigger picture with AI, rather than media hype. But what is the
bigger AI picture?
For starters, AI is demonstrating its ever-increasing capabilities
by passing tangible tests, literally. It is passing – and excelling at –
tests that no technology could until recently. For example, GPT-4
achieved a score in the top 10% of test-takers in a simulated legal
bar exam. By contrast, GPT-3.5’s score was in the bottom 10%.
Secondly, AI is not just one technology. It is an approach that
will power change in just about every industry, those in tech and
more traditional sectors of the economy. From self-driving cars and
factory robots to filmmaking and cloud computing, AI is set to be
a key part of the future, not just a sector or two.
Finally, multiple sources have made impressive forecasts on
the future of AI. One recent study by the McKinsey Global Institute
found that AI could boost global GDP by up to $13-trillion by
2030. An additional 1.2% of global GDP per year. The equivalent
of adding a UK-size economy every two years.
Morgan Stanley estimates that 25% of all labour will be
impacted by current AI technology. With advancements in AI, this
is expected to grow to 44% in just three years. Forecasts like this
speak to the product breadth and economic endurance of AI.
Is there hype? Absolutely. The question to ask is: is the excitement
justified? There is compelling evidence that it is.
This sort of thinking contributes to our strategy for the Melville
Douglas Global Equity Fund, whose constituent companies are
positioned to play significant roles in bringing AI technology to
fruition in the years to come.
Chris Willis, Research Analyst, Melville Douglas
Melville Douglas Investment Management (Pty) Ltd is a subsidiary of Standard Bank Group Limited. Melville Douglas Investment Management (Pty) Ltd (Reg. No.1987/005041/07) is an Authorised
Financial Services Provider. (FSP number 595).
Any information, illustrative prices, disclosure materials or analyses provided to you have been prepared on assumptions and parameters that reflect good faith determinations by Melville Douglas and
do not constitute advice by Melville Douglas it should not be relied upon as such.
50 www.bluechipdigital.co.za

If it’s personal to you,
it’s personal to us.
To do things the right way requires a
personal commitment. A considered
approach. That’s why we use decades
of expertise and market knowledge
combined with fundamental research
to guide all our investment decisions.
Because when it comes to managing your wealth, it’s not
just a job, to us: it’s personal.
We care for our clients’ assets like our own because
we never forget who they really belong to. If you’re an
individual, family, charity, trust or corporate looking for
a global investment manager with diversified investment
solutions, choose the one that is personally committed
to your future. The one who does things the right way.
The Melville Douglas way.
melvilledouglas.co.za
Melville Douglas is a subsidiary of Standard Bank Group Limited. Melville Douglas Investment Management (Pty) Ltd. (Reg. No. 1987/005041/07) is an authorised Financial Services Provider.
(FSP number 595). STANLIB is a registered representative in terms of CISCA. For any additional information and basis for the award please contact Melville Douglas.

BLUE
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FINANCIAL PLANNING | Investment
Life after cash
What to do as interest rates start to fall.
Inflation is moderating, and market expectations are building for
the US Federal Reserve (Fed), European Central Bank and Bank
of England to all cut interest rates in June. Should deposit rates
continue to come down, cash will become less attractive, while,
at the same time, a falling interest rate environment has typically
been supportive of both bonds and equities.
Remi Olu-Pitan, head of multi-asset growth and income, Roberta
Barr, head of value ESG and fund manager, Equity Value, and head
of strategic research, Duncan Lamont, discuss how investors
should respond to the changing investment environment.
How have bonds and equities performed in past ratecutting
cycles?
Duncan Lamont: On average, the stock market does very well
once the Fed starts to cut interest rates. The average return above
inflation 12 months after rate cuts begin is 11%. Government
bonds outperformed by 5% and corporate bonds by 6%, versus a
Over the next few months the
cash rate is coming down and, so,
to achieve a higher rate of return,
it is time to put cash to work.
2% real (inflation-adjusted) return from cash. So, investing in the
stock market and bonds has produced pretty good real returns,
handsomely beating cash in the process.
Remi Olu-Pitan: The concern of a lot of investors is that the
market has already priced in the expected interest rate cuts,
with the S&P 500 up 23% since October.* While the market has
recovered from what was a very challenging 2022, the idea of
equities still doing very well post-cuts is very important. When
the cuts happen, that opportunity cost of finding places to move
into really takes over.
How should we look at markets outside the US?
Roberta Barr: Beneath the massive outperformance of the S&P
500, you have a lot of companies in normal cyclical troughs on
huge valuation discounts. There’s the saying that it’s always
“darkest before the dawn” and, as a value investor, we are
beginning to see some amazing opportunities. There are quite
high quality, cash-generative, pretty robust businesses, which
you’re getting at a real discount today.
Remi Olu-Pitan: Some clear macro and secular trends have
driven the outperformance of the US relative to other markets, the
large representation of technology stocks and the emergence of
AI are key reasons for this and this theme will continue to support
performance. However, this year, markets in Taiwan and Korea
are doing just as well because of the high representation of
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FINANCIAL PLANNING | Investment
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Sometimes it might feel like
cash is the safe, sensible option,
but it’s value destructive.
technology and semiconductors, which links them to AI. That link
is important and something investors can’t ignore. It is getting
expensive, but the trend is significant.
Outside of the US, the floor for inflation is likely to be much
higher than what we’re used to, which tends to be quite good for
the industrials, the companies focused on activity and trade. This
supports Europe and is one of the reasons why Europe is coming
back, despite all the pessimism around European growth. This
trend supports Japan, so I think we need to focus on the secular
trends and identify the companies that are linked to them.
Markets at all-time highs – a red flag?
Duncan Lamont: It feels uncomfortable to invest with the S&P 500
hitting all-time highs. Intuition says returns are higher when the
markets are cheaper, but it’s wrong, based on my analysis of the
historical data. Over the long term, the market goes up, which
means it is hitting all-time highs on a regular basis. So, while it
feels hard, you would have done better if you’d invested when
the market was high than if you hadn’t.
If you had sat in cash whenever the US stock market was at an
all-time high, waiting for it to fall back before investing, it would
have destroyed 90% of your wealth (over the entire nearly 100-year
study period going back to 1926). Over 10 years, such a strategy
would have destroyed about a quarter of your wealth, over 20
years about a third of your wealth, over 30 years it would have
destroyed about 50%.
Roberta Barr: All-time highs, as a value investor, mean all-time
opportunities given everything else which is going on in a market.
Investing in markets in general is a great idea and investing in a
balanced and diversified way is an even better idea.
In summary
Remi Olu-Pitan: Over the next few months the cash rate is
coming down and, so, to achieve a higher rate of return, it
is time to put cash to work. While equities might seem quite
scary given the current levels, just looking outside of the US or
under the surface is key, as well as investing in other asset classes,
including corporate bonds, commodities, and real assets.
Roberta Barr: Sometimes it might feel like cash is the safe,
sensible option, but it’s value destructive. If you’ve got a longtime
horizon, history suggests you’ll do well by investing in the
markets. Within that, diversify and add a bit of value.
Duncan Lamont: If you’re sitting in cash waiting for the perfect
time to invest you could be waiting forever. It will always feel
uncomfortable. Any knee-jerk reaction to go all in or all out of
the market is risky, to think you can call those tops and bottoms.
A more systematic way of investing will lead to better long-term
returns over time.
*Total return of S&P 500 between close on Friday 29 September
2023 and 20 March 2024, LSEG Datastream, Schroders.
Duncan Lamont, Head of Strategic
Research, Schroders
Roberta Barr, Head of Value ESG and
Fund Manager, Equity Value, Schroders
Remi Olu-Pitan, Head of Multi-asset
Growth and Income, Schroders
www.bluechipdigital.co.za
53

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FINANCIAL PLANNING | Technology
Crypto assets:
an evolving landscape
Part One
In January 2023, I wrote an article for
bluechipdigital.co.za titled The declaration
of a crypto asset as a financial product: how
does it affect financial planners? (The article
is linked to QR1.) The article dealt with the
declaration of crypto assets as a financial product
under the Financial Advisory and Intermediary
Services (FAIS) Act 37 of 2002.
As noted in that article, consumers have a
poor understanding of crypto assets and the
risks relating to investing in crypto assets.
In addition, crypto assets have created
new opportunities for scammers as is evident
from numerous news reports, and Netflix
documentaries like Trust No One: The Hunt for
the Crypto King and Bitconned.
Cryptocurrencies have no inherent value.
Their perceived value is based largely
on supply and demand in the market.
The Financial Sector Conduct Authority (FSCA) continuously warns consumers
against scams and urges consumers to act with care when investing their funds.
Recently, the FSCA warned consumers against transacting with certain persons and
entities, who are using Telegram to render unauthorised financial services, some
who are purporting to be agents or representatives of the Johannesburg Stock
Exchange, or that there is a FSCA guarantee in respect of the transactions.
To mitigate the risks relating to crypto assets, South African regulators have
started creating a regulatory framework around crypto assets, which includes the
declaration of crypto assets as a financial product for purposes of FAIS. However,
the regulatory framework relating to crypto assets is much broader than that, and
it will continue to evolve and adapt as crypto assets evolve.
This is the first part of a series of articles in which I will attempt to provide readers
with a more holistic understanding of crypto assets and the current South African
regulatory framework.
What are crypto assets?
Most crypto assets use blockchain technology. There are several types of crypto
assets. The most common are:
• Cryptocurrencies and stablecoins
• Crypto tokens
• Central Bank Digital Currencies
Hildegard Lombard, Governance, Legal, Risk
and Compliance Management Consultant and
Founder, Luculent Consulting
Cryptocurrencies and stablecoins
A cryptocurrency is a digital or virtual currency. Most cryptocurrencies use
blockchain technology. (To understand blockchain technology, watch the video
linked to QR2.). It is secured by cryptography which makes it nearly impossible
to counterfeit or double spend. Cryptocurrencies are generally not issued by any
central authority, like a central bank. This theoretically allows them to be free of
government interference or manipulation.
Cryptocurrencies have no inherent value. Their perceived value is based largely
on supply and demand in the market. Cryptocurrency architecture decentralises
existing systems and makes it possible to transact independently of intermediary
institutions, like banks, making transactions faster and cheaper.
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FINANCIAL PLANNING | Technology
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Bitcoin and Ether are examples of cryptocurrencies. (To understand
more about how cryptocurrencies work, watch the video linked to
QR3, and to understand more about cryptocurrency wallets, watch
the video linked to QR4.)
The US Securities and Exchange Commission authorised the first
crypto exchange-traded funds (ETFs) early in 2024. Cryptocurrency
ETFs track the price performance of one or more cryptocurrencies.
These funds enable retail investors to gain direct exposure to
cryptocurrency prices without having to own the assets directly.
Stablecoins are cryptocurrencies of which the value is pegged
to that of another currency or commodity, for example, the USD
or gold. Stablecoins provide an alternative to the high volatility of
other cryptocurrencies. The most popular stablecoin is Tether. It is
pegged 1:1 to the USD and backed by gold reserves.
Crypto tokens
Crypto tokens are a digital representation of an asset or interest
in something and are built on a blockchain. They may be used to
raise funds for projects and are usually created and distributed
through an initial coin offering process.
The term “crypto token” is often used interchangeably with
cryptocurrency. However, a cryptocurrency is used for making or
receiving payments using a blockchain. Crypto tokens are used
to facilitate transactions on a blockchain but can also represent
an investor’s stake in a company or serve an economic purpose.
In 2024, BlackRock launched a tokenised investment fund,
the BlackRock USD Institutional Digital Liquidity Fund on the
Ethereum blockchain. The fund pays dividends as new tokens.
There are several types of crypto tokens, like non-fungible
tokens, tokenised equity, security and utility tokens.
Non-fungible tokens (NFTs). Non-fungible tokens are assets
that were tokenised via a blockchain. The connection between
the token and the asset makes them unique. Every NFT also
contains a unique digital signature. Earlier NFTs were mostly
digital art. However, NFTs these days can also include, for instance,
photographs, music and in-game experiences.
The person who holds the private key to the token owns the
rights assigned to the token. Two cryptocurrencies from the same
blockchain are fungible, ie interchangeable, but even though
two NFTs from the same blockchain can look identical, they are
not interchangeable.
The most expensive NFT sold to date is The Merge by Murat Pak,
which sold for US$91.8-million. (An image of The Merge is linked
to QR5.)
Tokenised equity. A business can issue shares in the form of
a crypto token to raise capital. This is usually done through an
initial coin offering. The tokens are issued, bought and sold on
blockchain platforms and held in digital wallets.
Security tokens. A security token represents rights of
ownership, tokenised on a blockchain. It transfers value to
whoever holds the private key to the token. For example, one can
create a security token on the blockchain for the ownership and
registration of a car by using the vehicle identification number
with the owner’s name and address. The token could be sold and
purchased, transferring ownership of the car.
Utility tokens. Utility tokens give the holders access to a
service or product. Even though these tokens can be bought on
cryptocurrency exchanges, they are not designed to be a currency
or a store of value, but rather to provide utility to users of the
platform. For example, the Binance Coin, a utility token, grants
traders discounts on trading fees when using the Binance exchange.
Central Bank Digital Currencies (CBDCs)
A CBDC is the digital form of a country’s fiat currency, issued by
the country’s central bank. They are similar to cryptocurrencies,
but their value is fixed by the central bank and equivalent to the
country’s fiat currency. CBDCs increase transaction efficiency,
promote financial inclusion, reduce costs and provide increased
security and privacy for users.
By the end of 2023, the Bahamas, Jamaica and Nigeria had
already introduced CBDCs, and more than 100 countries are in
the exploration stage, with Brazil, China, the Euro area, India and
the United Kingdom at the forefront.
The above is only a brief overview of the types and nature
of crypto assets. In the next article, I will start unpacking the
regulatory framework relating to crypto assets in South Africa.
QR1 QR2 QR3 QR4 QR5
www.bluechipdigital.co.za
55

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FINANCIAL PLANNING | Medical aid
Medihelp is deeply invested
in members’ health
Empathy is a key differentiator in today’s product, service
and journey design. Putting yourself in the shoes of your
clients – or in our case, our members – enables a translation
of empathy into a meaningful experience. This, we believe,
is what will differentiate and sustain organisations that provide
insurance solutions.
The ability to design and deliver solutions tailored to human
needs is a skill needed in the medical aid industry in particular. By
its very nature, it’s an emotional industry. We interact with members
when they are most vulnerable, when they feel overwhelmed
and when they are stressed, facing critical health conditions.
These feelings are compounded when multiple friction points
hinder their access to healthcare. Overlaying this is Medihelp’s
responsibility to look after the mutual interests of all its members
when allocating funding.
South African businesses are at varying levels of delving
deeper into this science of human connection and understanding
how emotions play a pivotal role in the client journey and user
experience. I don’t think we fully understand yet how to harness
empathy to resonate with our target audiences, create products
that respect consumers and their feelings, and mould touchpoints
to speak to their emotions.
We truly need to understand our clients’ feelings of anxiety and
frustration. Their physical must-haves. Their aspirations. Only
then can we craft bespoke, personalised interactions, services
and incentives to retain customers and turn them into loyal
brand ambassadors.
For the past 118 years, Medihelp has been adapting to
changing circumstances and needs. We have proven that we can
reinvent ourselves time and again by understanding the value
of connection with our stakeholders. To keep meeting the everevolving
requirements, wants and values of South Africans, we’re
now also crafting experiences that will match the emotional and
aspirational necessities – both physical and spiritual – of the human
of today and the future. A personal, empathetic commitment to
our members’ health is what makes Medihelp’s heart-centred,
purpose-driven experience designers different.
For the past 118 years, Medihelp
has been adapting to changing
circumstances and needs.
Journey design with people in mind
The answer, of course – founded in empathy – is human-centred
design. It is, however, in stark contrast to the traditional approach
to designing products and services. For a long time, taking
products to market has entailed designing them and manipulating
consumers to buy through clever marketing. This is regardless of
whether the product or service addressed the consumers’ needs.
Human-centred journey design is different. It goes beyond
satisfying wants and needs and also considers the values and
motivations of consumers and the wider membership’s interest.
For example, a growing number of people – of all ages, not only
millennials – want to see companies give back to communities
and care for the environment. If your target audience has personal
values that align with your business’s values and behaviours, they’ll
support you irrespective of price.
Varsha Vala, Principal Officer: Medihelp Medical
Scheme, Medihelp
56
www.bluechipdigital.co.za

No matter your industry,
Medihelp understands that the
health of your employees is a
priority.
Our hands-on approach
allows us to meet each
employee’s unique needs.
With our 11 medical aid
plans, we can provide your
personnel with quality
healthcare cover nationwide.
We’ve got a plan
for everybody
Our basic, savings, and
comprehensive plans cover
Jacks and Jills of all trades
All our plans offer:
• Premiums to suit everybody
• Private hospital cover with no
overall limit
• Cover for health tests,
screenings, and immunisation
• Access to everyday medical care
Medical Aid
in Action
Scan the QR
code to read
more about
our plans.
Medihelp is an authorised financial services
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BLUE
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PRACTICE MANAGEMENT | Technology
Where to tech, and
when to human
How technology can enhance the value of financial advice.
Technology is transforming the financial advice
industry and the financial planning profession. From
robo-advisors and Artificial Intelligence (AI) to digital
platforms and cloud-based solutions, technology
offers new opportunities and challenges for financial advisors,
financial planners and financial advisory business owners,
from small independent businesses to corporates. Technology
can help financial advisors and planners deliver more efficient,
personalised and holistic advice to clients. It can also help
them streamline their processes, reduce costs and comply with
regulatory requirements. Technology can also help financial
advisors and planners reach new markets, expand their services
and differentiate themselves from competitors.
However, technology is not a substitute for human interaction
and relationship-building. Technology can complement, but not
replace, the human element of financial advice. Financial advisors
and planners need to balance the use of technology with the need
to connect with their clients on an emotional and behavioural
level. They need to know where to tech, and when to human.
WHERE TO TECH
Technology can enhance the value of financial advice in several
ways. Here are some ideas of where to tech:
• Gather and analyse data from various sources, such
as bank accounts, investment portfolios, tax returns
and social media. This can help create a comprehensive
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PRACTICE MANAGEMENT | Technology
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Technology can complement,
but not replace, the human
element of financial advice.
and accurate picture of a client’s financial situation, goals,
preferences and risk tolerance.
• Create and present customised and interactive financial
plans for clients. Use tools such as cash-flow modelling, goalsbased
planning, scenario planning and visualisation to illustrate
the impact of different strategies and options on a client’s life
and financial outcomes.
• Monitor and review clients’ progress and performance.
Tools such as dashboards, alerts and feedback mechanisms
help advisors and planners track clients’ financial behaviour,
provide timely and relevant advice, and adjust plans as needed.
• Communicate and collaborate with clients and other
stakeholders. Use tools such as video conferencing, chatbots,
client portals and digital signatures to provide convenient
and secure access to their services and to enhance client
engagement and satisfaction.
Tech is great for boring, repetitive and time-consuming tasks
and processes.
WHEN TO HUMAN
Technology can improve the quality and efficiency of financial
advice, but it cannot replace the human touch. Human
interaction is essential for building trust, rapport and loyalty
with clients. It is also crucial for understanding and influencing
their financial behaviour and decision-making. Here are some
touchpoints and when to human:
• Understand clients’ personal and emotional needs, values
and motivations. Ask open-ended and probing questions,
listen actively and empathetically and show genuine interest
and care.
• Educate and empower clients to make informed and
confident financial decisions. Explain complex and technical
concepts in simple and relatable terms, provide clear and
unbiased guidance and address clients’ doubts and concerns.
• Motivate and influence clients to act and follow your advice.
Appeal to clients’ emotions and aspirations, provide positive
reinforcement and encouragement and help them overcome
their fears and biases.
• Deal with sensitive and challenging situations, such as
market volatility, life transitions or financial crises. Provide
emotional support and reassurance, show empathy and
compassion and help clients cope and adapt.
Humans are great for creating safe spaces and accountability, two
important aspects for changing and managing behaviour.
TECHNOLOGY AND HUMAN INTERACTION
Technology and human interaction are not mutually exclusive,
but complementary. Financial advisors and planners must
leverage the best of both worlds to deliver optimal value to their
clients. They need to adopt a hybrid approach that combines
technology and human interaction in a way that suits their clients’
needs, preferences and expectations. Here are some tips on how
to balance technology and human interaction for financial advice:
• Assess clients’ level of digital literacy, comfort and trust. Tailor
the use of technology to clients’ capabilities and preferences and
provide them with adequate training and support.
• Segment clients based on their needs, goals and complexity.
Allocate time and resources accordingly, use technology to
automate and standardise the routine and low-value tasks and
focus on the high-value and high-touch tasks.
• Integrate technology and human interaction throughout
the financial advice process. Use technology to enhance data
collection, analysis and presentation, and use human interaction
to enhance client understanding, education and influence.
• Evaluate and measure the impact of technology and human
interaction on client outcomes and satisfaction. Collect and
analyse feedback from clients and other stakeholders and use it
to improve service delivery and the value proposition.
IN CONCLUSION
It is easy to ignore an app, but it isn’t easy to ignore a human.
Then again, tech can do what humans can’t. Technology is a tool
that helps us do what we could not do otherwise so we can have
the time to do the things technology can’t and that truly matters.
Stay curious!
Visit www.propulsion.co.za for more information.
Francois du Toit, CFP®, Founder, PROpulsion
www.bluechipdigital.co.za
59

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PRACTICE MANAGEMENT | Communication
Tired of
playing broken
telephone?
So are your clients
When did you last zone out during a telephone or
video call? If it was within the last few days, you’re
not alone! The Harvard Business Review shared
this not too long ago: “... it’s more pertinent than
ever. In the past two years, most of our work conversations have
moved online – and while meeting times have increased by
10%, research shows that most of them actually decrease the
productivity of employees”. .[1]
But even if we are paying attention, it’s still tough! When I was
a kid, we used to play this game called “Broken Telephone” – I am
sure you know it. I was always amazed and amused that a message
that was whispered ear-to-ear, with no interference, could end
up so different after having passed through 12 to 16 kids. As a
communication strategist, I still think of those kindergarten
memories as I help our clients with their communication because
we still find ourselves getting it wrong occasionally.
And often, it’s the technology that is letting us down. In
the foresty suburb where I live and work, cellular reception is
downright shockingly vacant. I frequently find myself, phone in
hand, wandering around the pool in my backyard, trying to catch
a signal. It is tricky because the water in my pool always looks
so enticing; I spend a lot of time keeping it crystal clear. If it’s a
gorgeous day, and I’m outside on my phone, the glittering ripples
under the sun’s gaze are a quick distraction. I wonder if I should add
more chlorine or wait until I see the subtle traces of light yellow
The clarity of our online
communication should reflect
the depth of our commitment
to those we serve.
and green glinting off the walls. I try to spot goggles, hairbands
and stones left in there by my kids. And this is all while trying to
focus on a call that keeps going in and out of reception.
If the call is clearer than the water, and the conversation
coherent and unbroken, the pool offers little distraction and I have
a productive phone call.
Similar episodes unfold during virtual meetings, where a
poor Internet connection or unplanned loadshedding can turn
discussions into a maddening puzzle. Catching every second
word isn’t just annoying; it is a barrier to genuine connection and
understanding. And this is in a short, focused conversation. What
about communication that happens over weeks, months or years?
What about the conversations we’re trying to spark through our
website, blogs, email campaigns and social media?
In an increasingly digitised communication landscape, the clarity
and consistency of your online communication are paramount. For
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If there is no sustainable online communication strategy in place,
you’re playing Broken Telephone with your clients and prospects.
When it comes to your online brand, your digital avatar, consistency
is your lifeline. It’s what keeps your online brand buoyant and
visible, relatable and relevant.
Whether it’s through insightful blog posts that spark conversation
rather than sell products or regular email updates that keep your
audience informed and engaged, your online efforts should strive
to keep the communication lines clear and uninterrupted.
Your ability to communicate consistently and effectively is not
just about maintaining a signal; it is about making meaningful
connections. As we stride further into the digital age, the clarity
of our online communication should reflect the depth of our
commitment to those we serve. In the art of financial planning,
being fully present – in every blog, email, social media post, video
call and conversation – is the truest form of connection.
[1]
https://hbr.org/2022/07/how-to-lead-better-virtual-meetings
[2]
https://blog.hubspot.com/sales/live-chat-go-to-market-flaw
independent financial advisors (IFAs) in South Africa, where the
digital realm is a vital bridge to clients and prospects, sporadic or
outdated communication can be likened to a broken telephone
line. If your last blog update was a distant memory or your LinkedIn
profile a relic of your past, you are standing in a communication
dead zone.
Recent stats underscore this point, revealing that an
overwhelming majority of consumers now expect digital
engagement from the brands and professionals they trust. A 2021
survey by HubSpot indicated that 82% of consumers expect an
immediate response to sales or marketing questions. [2] For IFAs,
this digital expectation translates to a clear mandate: maintain
consistent, engaging and up-to-date communication or risk losing
connection with your audience.
But what does effective online communication look like for
financial advisors? It goes beyond mere presence; it’s about
crafting and deploying sustainable strategies that resonate with
the who, what and why of your brand. It’s about ensuring your
website and social profiles authentically reflect the current you,
engaging with your audience through regular lifestyle-focused
blogs, monthly email campaigns and daily (or at least tri-weekly)
social media interactions. This multi-channel approach is not just
about broadcasting your message; it’s about creating a space for
two-way engagement where clients and prospects feel heard
and valued.
Tim Slatter, Creator of Contatto and Director,
Slatter Communications
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FINANCIAL PLANNING | Technology
Unbelievable savings: discover the
true low cost of AI
Are you hesitant to embrace AI for your business, fearing it might escalate costs in a challenging financial
landscape? It’s a common concern among many business owners and managers. However, the real surprise
lies in the true cost of AI – or rather, how little it is.
Today, we talk to Zeldeen Müller, CEO of AgendaWorx, an
online board pack tool utilising AI, about a real-world case
study of how much time AI can save companies versus the
surprisingly low cost of AI.
Please explain to our readers how AI is priced.
We will use ChatGPT as an example when discussing the pricing
structure, as I think most of our readers have heard about this
model. Other AI models such as Claude and LLaMA will have
different pricing models.
OpenAI’s ChatGPT operates on a usage-based pricing model,
where users are charged based on the number of tokens processed.
A token is equivalent to a word or a few characters.*
For example, OpenAI’s ChatGPT charges approximately $0.0005
per 1 000 tokens for input, $0.0015 per 1 000 tokens for output and
$0.002 per 1 000 tokens for API usage.
Please provide a real-life example of how much this cost will
be for a typical process.
AI can be used for many
different applications and uses.
Today, we will focus on a case
study where a small business
used AI to create minutes of
meetings, which, for them,
was a time-consuming, and
therefore non-profitable,
Zeldeen Müller, CEO,
AgendaWorx
service provided to clients.
Their current process:
When creating minutes of the
board meetings for its clients,
its secretary would listen to the
two-hour meeting recording
and transcribe what happened
during the meeting. This was a
slow and meticulous process
that took 10 to 16 hours for
every two-hour meeting,
depending on the complexity
of the discussions. After
completing the minutes, she corrected grammar and typos,
and the manager reviewed them for content and grammar. This
cycle of editing and reviewing continued, including layout and
font adjustments and PDF conversion, until the minutes were
ready for distribution.
The true cost for the company was in the time spent by the
secretary and manager, which could be better spent on other
tasks that would boost profitability.
Understood. So how did AI streamline this process? What was
the AI cost?
The AI process involves transcribing the meeting from the video
recording with 99% accuracy for South African accents and
converting the transcription into professionally written minutes.
A rough estimate of the AI costs per set of minutes is:
Process one: Getting the transcription of the video
recording: R1.37**
Process two: Converting the transcription to a set of minutes:
R0.87. Time-saving is 10 to 16 hours for the secretary and one to
three hours for her manager.
This company saved 19 hours of work with one process at a
meagre AI cost of only R2.24.
Yes, that is quite a saving. And the company does five sets of
minutes for clients every month. That is 100 hours saved per month
at a cost of only R11.20. It is a no-brainer.
That sounds great; you mentioned the API costs. Why should
companies use an API as a secure platform rather than allow
their staff to chat with AI directly?
It ensures better control over data privacy and security. When
employees interact directly with AI, they can enable history and
allow AI to train on their prompts and responses, potentially
exposing sensitive information. On the other hand, when using
a secure API, the prompts and responses are kept confidential.
They are not used to train other AI models, providing a safer
environment for handling sensitive data. This approach ensures
that the company’s information remains secure.
* These rates are estimates.
** The length and complexity of the recording determines the transcription cost.
62 www.bluechipdigital.co.za

USE AI FOR EFFORTLESS MINUTES
YOU - upload video recording
AI
- will:
1. Transcribe (99% accuracy with SA accents);
2. Create your minutes from your agenda;
3. Fix formatting (fonts, justification, spacing,
indentation and more); and
4. Number pages, & add hyperlinked bookmarks.
Online Board Packs &
Secure Board Portal
Your minutes done and dusted!
Can you afford not to see a demo?
info@agendaworx.com

BLUE
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FINANCIAL PLANNING | Legislation
How will COFI impact
FSP representatives?
As highlighted in some of my earlier articles, the Conduct
of Financial Institutions Act (COFI) will significantly
impact financial services providers (FSPs) and key
individuals when the new market conduct legislation
is implemented. However, key individuals and representatives
will be relieved to know that, apart from technology innovation,
very little will change in the lives of representatives when they
transition from the Financial Advisory and Intermediary Services
Act (FAIS) to COFI.
This is mainly because many business and legal principles in
our industry have been firmly cemented over the decades. If one
considers that Old Mutual was established in Cape Town in 1845
as South Africa’s first mutual life assurance society, the financial
services industry has been around for almost 180 years.
This means that, as we approach the promulgation of COFI, we
are the beneficiaries of well-established, sound and even timeless
business and legal principles that have sustained successful
FSPs for decades. In addition, under FAIS, legal and compliance
principles that apply to representatives have been tried and tested
over close to 20 years. The same principles will continue to apply
under COFI.
Principles-based market conduct legislation
COFI is based on a set of key principles that will focus more on
outcomes within the spirit of the law (Treating Customers Fairly)
rather than a tick-box approach to compliance according to the
letter of the law (rules-based). Principles-based regulation means
moving away from reliance on detailed, prescriptive rules and
relying more on high-level, broadly stated principles that set the
standards by which FSPs must conduct their business. A classic
example of a principle-based provision is found in section 2 of
the General Code of Conduct, which states that a provider must at
all times render financial services honestly, fairly, with due skill, care
and diligence, and in the interests of clients and the integrity of the
financial services industry.
Principles refer to behavioural standards, for example, “integrity”,
“skill, care and diligence” and “reasonable care” with which FSPs
conduct and organise their businesses and the fairness with which
they treat customers and manage conflicts of interest.
Key issues that will not change for representatives when COFI
is implemented
A few fundamental, timeless principles will never change,
regardless of whether services have been rendered before FAIS,
during FAIS, under COFI or beyond. I highlight some of the most
important ones:
Firstly, trust will remain part of an advisor’s job description.
Regardless of legislation, trust has always been and will always
be the most important ingredient of any relationship between
advisors and their clients. It has always been and will always
remain an economic necessity for advisors to build, establish and
maintain trusted relationships with their clients because every
relationship and every transaction is based on trust. This principle
cannot be over-emphasised.
Secondly, every transaction between advisors and clients in
terms of the common law and under any legislation is based on the
law of contract (agreement) – offer and acceptance. It is a timeless
principle that the law of contract fundamentally underlies the
rendering of all financial services under FAIS, [1] and it, therefore,
comes as no surprise that this principle has already found its way
into the COFI Bill. [2]
It is of fundamental importance for every representative to
understand that advisory and intermediary services in terms
of the FAIS Act and COFI necessarily imply the existence of an
agreement or contract between the person who furnishes the
advice or renders the intermediary services and a client as defined
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Collectively, all the political,
economic, loadshedding, crime
and corruption challenges in
South Africa have harmed the
general productivity of advisors.
in the legislation. Transactions are either based on a proposal by
a representative and acceptance of the proposal by the client,
a request or an instruction (offer) by the client and acceptance
by the representative to execute the instruction. It is for this
reason that the following provision in the FAIS General Code of
Conduct is regarded by legal experts as the foundation of FSP and
representative accountability under the Act, as it states:
The service (advice and/or intermediary service we render to
clients) [3] must be rendered by the contractual relationship and
reasonable requests or instructions of the client, which must be
executed as soon as reasonably possible and with due regard to the
interests of the client which must be accorded appropriate priority
over any interests of the provider. [4]
This principle was further confirmed and recorded by the
Financial Services Tribunal:
The liability of an FSP is usually based on a breach of contract. The
rule is that failure to execute a mandate with the necessary diligence,
skill and care required of a reasonable professional person has to be
resolved on the principles of contract, not delict. [5]
Thirdly, some activities in the client engagement process also
stand the test of time. The 10-step process of professional client
engagement, as illustrated below, has been followed by advisors
in one form or another long before FAIS and during FAIS. They will
continue to do so under COFI and even beyond.
One would think, with the imminent and significant changes
in market conduct legislation, that the compliance standards in
the client engagement process would also change significantly.
Fortunately for representatives, over the last 19 years, the FAIS
Ombud’s office and the Financial Services Tribunal have provided
the industry with many determinations and decisions based on
well-researched and well-debated principles of law.
Therefore, The COFI Act has a library full of supporting material
that contains well-established and tried-and-tested principles that
will be as important for representatives under COFI as they have
been for the last two decades under FAIS. Based on these tested
principles, I do not foresee that the conduct standards under
COFI will differ materially from the provisions contained in the
FAIS General Code of Conduct. My thumb-suck estimate is that
90% to 95% of the principles published in the General Code of
Conduct will find their way into the conduct standards, leaving no
more than 10% of the conduct standards to impact representatives
when COFI is implemented.
In the fourth place, the principles and rules in the FAIS fitand-proper
requirements, as published in Board Notice 194 of
2017, will also be included in the COFI conduct standards with
minimal changes expected. The FAIS subordinate legislation has
laid a sound foundation for the COFI conduct standards still to
be published.
Representatives to embrace technology
Taking a leaf out of Gary Keller’s number one Wall Street Journal
bestseller book, The One Thing, apart from establishing trusted
relationships with clients, the single most important thing that
The 10 steps of professional client engagement and compliance framework
Process Activity Professional Compliance Automation Advisor Client
Standard Standard Digitalisation Experience Experience
Step 1
Step 2
Step 3
Step 4
Step 5
Step 6
Step 7
Step 8
Step 9
Step 10
Prospecting
Setting up appoinment
Professional introduction
Share info and gather client information
Agree on services to be rendered
Conduct an analysis and prepare report
Present proposal/ recommendation/(s)
Agree on financial plan and/or product(s)
Implement financial plan and/or product(s)
Ongoing rendering of (financial) services
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FINANCIAL PLANNING | Legislation
It has always been and will
always remain an economic
necessity for advisors to build,
establish and maintain trusted
relationships with their clients.
representatives will have to do if they want to excel during the
transition from FAIS to COFI and beyond, is to embrace technology
innovation fully. The reason for this statement can be found in the
book, Practice Made Perfect, which was published almost 20 years
ago, when authors Mark C Tienergien and Rebecca Pomering
identified the lack of capacity to service clients as the number one
challenge of advisors, and I firmly believe that this is still the biggest
challenge for advisors today.
Collectively, all the political, economic, loadshedding, crime and
corruption challenges in South Africa have harmed the general
productivity of advisors. In addition, the significant increase in
compliance administration over the years has put further pressure
on advisors’ capacity to service clients. Yet, at the same time, we are
all facing one constant factor, namely, we still only have 24 hours
in a day. When the number of hours in your day is the constant
factor in your practice, and all the other variables and regulatory
requirements escalate, logically, the lack of capacity to service clients
increases. At the risk of stating the obvious, in these circumstances,
the need to find “the one thing” that can close the gap is essential.
Technology has been and will continue to be the game changer
for representatives who want to be more efficient and create better
client experiences in a highly competitive industry. Few successful
advisors, if any, will disagree that technology plays an essential part
in managing an effective, efficient and profitable practice.
Unfortunately, many representatives must still make the paradigm
shift to optimise technology to ensure that they will be able to cope
and excel before, during and after COFI is implemented.
In closing
Although there may be aspects in the client engagement process
that will always remain constant and highly relevant regardless of
legislation, technology innovation, which is always evolving, is here
to stay. Embracing it and keeping up with continuous innovation
must be a key priority for representatives as we face the forthcoming
implementation of COFI. For those, like me, who know that you are
not using technology optimally, I want to encourage you to make
every effort to enhance your skills in this area. We are going to need
it to remain competitive.
[1] Dr Franso van Zyl, Financial Advisory and Intermediate Services Manual
[2] See section 20(2) of the COFI Bill
[3] My insert
[4] See section 3(1)(d) of the FAIS General Code of Conduct
[5] Pieter Cronje Makelaars and Carel Jacobus van Zyl, Hester Dorethea van Zyl and Ombud of
Financial Services Providers and CS Brokers CC and Others v lan Marais and Others Case No.
FAB5/2016
Anton Swanepoel, Founder, Trusted Advisor
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FINANCIAL PLANNING | Support structures
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It is the team that wins
the tournament
There’s no “I” in a team. Teamwork makes the dream work.
Together Everyone Achieves More (TEAM). There is no
shortage of clichés around why being part of a team is
better than trudging forward alone. I was reminded of this
in the second release of the very popular Chasing the Sun.
For those unfamiliar with this docuseries, it focuses on the
Springbok rugby team’s journey to claim their fourth World Cup
title in France in 2023. More importantly, it gives couch coaches
an inside perspective of the meticulous and intense planning and
training that goes into facing each upcoming challenge.
When the coach and player are
on the same team, the greater
goal will be within reach.
What position do you play in the field of investments?
Finance and sport, for most individuals, do not go hand in
hand, if looked at from a slightly unfamiliar perspective, there
are far more similarities than meets the eye. What is the role of
a financial advisor, if not some form of a financial coach for their
clients, keeping track of the latest rules and regulations, playing
conditions and executing a winning formula? The players, or in this
case the clients, need to be able to stick to the game plan and not
deviate from the intended strategy.
For investors, saving towards retirement can be likened to
training. Not one of the Springboks arrived at the World Cup
without training or experience, and managed to hold up the
trophy when the dust had settled. It took them years of hard work
and discipline to reach that point. There was no overnight success.
Investors need to treat their future in the same way. It takes
a long-term vision and years of disciplined saving to eventually
reap the rewards of a successful financial future; however, the
coach’s role in guiding them along the way and ensuring they stay
on the correct path is fundamental to this success. There will be
difficulties, key players get injured, tax laws change and you may
lose a game. Markets crash, but, if the coach and player are on the
same team, the greater goal will still be within reach.
Key support to cover our blind sides
Just like coaches, financial advisors benefit massively from
critical support structures. There are specialists in their fields
Darren Burns, Head: Business Development, Graviton
providing insight and solutions so that wealth managers can
sidestep distractions, ensuring their full, undivided attention
is on their clients.
Big teams employ video analysts, laws advisors, strategy experts,
talent scouts and assistant coaches. In the same way, financial
advisors should be able to rely on the latest systems and technology,
compliance and legal experts, investment solutions, fund managers,
new client lead providers and most importantly, a succession plan
to ensure that their clients are never without support.
Choose your team with the final in mind
Advisor networks, Graviton being an example, provide these types
of specialised support. The financial industry is an increasingly
complex field to navigate and being part of a team ensures
continued alignment across various areas. Financial advisors,
wealth managers and financial planners need to be supported
from start to finish and empowered to grow while always
maintaining their unique, personal look and feel –just ask Kwagga.
Clients expect the best level of service for their investments, and
most importantly, being part of a winning team allows investors
to receive the undivided attention of their leader and the absolute
best financial advice for their unique financial journey.
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INVESTMENT | Behavioural finance
Financial planner as
Choice Architect
A way to help clients take ownership of their choices.
Professor Albus Dumbledore advised Harry Potter, “It is our
choices, Harry, that show what we truly are, far more than
our abilities.” While the wisdom from Prof Dumbledore
comes from one of the greatest fantasy stories of modern
literature, the power of his words is in their application to real
life. We are a product of our choices, good and bad. And when
it comes to our life and money, we face choices daily. The same
applies when a client goes to see a financial planner. Invariably
they are faced with a choice. It may be a choice to do something
or to do nothing. It may have to do with money. It may have to do
with their life: past, present or future.
A key role of a professional financial planner is to help clients
make such choices. In doing so, I believe that financial planners
are playing the role of Choice Architect, a label I first came across
in the book Nudge, in which the authors Richard Thaler and Cass
Sunstein suggest that a Choice Architect “has the responsibility for
organising the context in which people make decisions”. In the last
edition of Blue Chip, I suggested that financial planners play the
role of Thinking Partner to help clients gain insights. As a Choice
Architect, you help them make choices based on those insights. The
role of the Choice Architect builds on that of the Thinking Partner.
The challenge is that humans make choices in both simple
and complex ways. Our limbic system drives quick choices, while
our prefrontal cortex enables us to make considered choices. The
problem is that we often make a limbic-based decision thinking
we are using our prefrontal cortex. We think we’ve thought about
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INVESTMENT | Behavioural finance
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something when all we did was act on a cognitive or emotional
bias. Often it’s not just greed or fear that drives our decisions,
even those to do with investments. We can make cognitive errors
without even knowing we’ve done so. A well-thought-out financial
plan serves as a powerful tool to limit the influence of emotional
and cognitive biases. Developing a financial plan forces clients to
engage their prefrontal cortex.
In helping clients as a Choice Architect, financial planners can
help their clients craft their choices so that their financial plan
matches their ideal life. The challenge with drawing up a plan for
a client’s life is that they are the real experts in their own life. As
such they need to participate actively in the process if they are
to take ownership of the plan. Anyone who has been involved
in renovating or designing a new home or office knows that the
decisions that need to be made seem endless. The architect guides
these decisions, helping the client understand the implications of
each decision from a cost, comfort, functional and aesthetic point
of view. As a Choice Architect, financial planners do the same for
their clients. Each decision the client makes has costs and benefits.
Helping them find the trade-off between the two is central to the
role of the professional financial planner.
The challenge for clients is that they may be exposed to
different types of financial advisors.
Rob Macdonald, Head of Strategic Advisory Services, Fundhouse
For example, we know that robo-advisors make decisions based
on the information provided and their algorithm engine. Financial
advisors who see themselves as salespeople are likely to cheerlead
whatever their client decides if this results in some form of transaction.
An advisor who regards themselves as a technical expert may be
tempted to make the choices for their clients. They may listen to what
the client wants or needs, but ultimately, they see themselves more
as a choice specialist rather than a Choice Architect. They know best.
Ideally, the truly professional financial planner accepts that they work
in that middle ground between technical expertise and the need for
the client to take ownership of their choices.
Professional financial planners advise clients on their choices,
without making decisions on behalf of their clients. They may use
their technical skill to help clients make informed choices, but if they
want the client to take ownership of their choices, the key ingredient
for success is working collaboratively with clients. Collaboration is at
the core of the work of a Thinking Partner. It helps mitigate against
cognitive biases and if done well collaboration harnesses the reality
that each of us sees the world uniquely. Collaborating is recognising
and committing to the possibility that two minds are better than one.
Thaler and Sunstein confirm that if you influence other people's
choices, you are a Choice Architect. But very importantly, they point
out that “since the choices you are influencing are going to be
made by humans, you will want your architecture to reflect a good
understanding of how humans behave”. Being an effective Choice
Architect depends more on good human understanding and skill
than technical knowledge and expertise. This can only be good
news in a world where technology and AI threaten to eat the
lunch of professions (like financial planning) that are built on the
foundation of technical expertise.
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FINANCIAL PLANNING | Mental wellness
Enhancing client well-being
through holistic planning
As financial planners, we often start our conversations
with clients by asking, “What does your ideal life look
like?” and “Do you have a plan for how your money will
enable this?” I propose a third conversation starter: “How
would you describe your relationship with money?” or “If you had to
go to couples therapy with money, what would you say and what
would money say about you?”
These are simple questions, but not ones our clients readily think
about or discuss with others. Our work would be so much more
rewarding if we could guide our clients through these conversations
to give money – and their lives – proper attention. To be adequately
equipped for a life that is financially and mentally wealthy.
Money habits sabotage financial plans
The role of planning is no longer purely based on retiring
successfully but rather on guiding clients to make purposeful
and intentional changes to managing transitions and their holistic
wellness. You cannot move clients forward to personal and financial
well-being if you do not understand the foundation of their money
relationship. It can either be constructive and healthy or boycott
their overall wellness. Unfortunately, many people don’t understand
their relationship with money and most of the clients I meet are
hampered by their money beliefs and habits – how they see, feel
and think about money sabotages their goals and dreams.
I recently met a client who constantly lives in fear, worrying about
money. Gail’s fear is so overwhelming that she continuously invests
in property, driven to see her money grow and accumulate. At the
same time, she overcompensates by spoiling her children and buying
them everything they want, whether they need it or not. This
client is not living her best life. To be so fixated on watching your
money grow, to the detriment of your current circumstances, is
just not healthy.
There is so much value in investing time in understanding (and
then changing) our relationship with money. As Gail and I uncovered
the root cause of her behaviour, we discovered that it all stems from
a severe lack in her childhood. This realisation can help Gail create
a money story and habits to serve her better – and her children.
Separating beliefs from reality
Your money mindset is not always based on reality. You don’t have
to be poor for poverty to be your mindset. Many of my clients have
a sizeable amount invested, but that does not stop this irrational
fear that they can lose it all. That’s because a mindset has to do
with your perception of your reality, not necessarily reality itself.
I recently had a life planning meeting with a client who inherited
a significant amount following her husband’s passing at 35. Tracey,
the client, shared that she felt reluctant to use any portion of her
inheritance and that she constantly fears losing the money that
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her husband left in her care. I prompted Tracey to share the money
stories that have shaped her life and relationship with money,
reflecting on her childhood experiences. She remembered her
father’s financial ruin and reflected on how this experience instilled
a fear of spending and mismanagement. She also struggles with a
sense of detachment from the inherited wealth, feeling that it’s a
burden rather than an asset to be used for her well-being.
As planners, no matter how well we strategise and plan, nothing
will change unless we can help clients understand what their money
beliefs are and what money habits have been formed. The key is
to help clients change money behaviours and beliefs that do not
serve them, and very often, these beliefs are based on fiction rather
than reality.
Tracey needs to separate her money beliefs from reality and let
go of her fear of loss and being poverty-stricken. The reality is that
with careful planning, she can start a fresh chapter, supported by her
inheritance and financial planning.
The meaning of money
I have written about the meaning of money before, and it’s an
interesting topic. We all have clients who attach different meanings
to money and use money for various reasons: control, power, status
symbol or something to be feared and avoided.
I met Lily at a conference last week and this conversation
profoundly impacted her. Lily’s father grew up in poverty, and
as soon as he started achieving financial success, he embraced
a lavish lifestyle. For him, money embodied success and status,
resulting in extravagant expenses on fancy cars, excessive parties
and generous gifts for the community. Unfortunately, this left
Lily responsible for caring for her father in his retirement years.
Lily now finds herself pressured by the community to follow the
same patterns of lavish spending to support her family, extended
relatives and the community.
Your client’s commitment is the true measure of success in a
financial plan. They have to buy into the plan, which often means
changing their money habits and behaviours. The plan will not
be impactful if we, as planners, cannot guide our clients towards
putting money in its rightful place – as an enabler of their lives.
It’s about more than the money
Some clients are so fixated on increasing their wealth that they
overlook the present moment – the life they’re meant to live right
now, not just someday in retirement. Kathleen devoted 10 years
to saving diligently and investing her funds overseas. She held
a deep-seated belief that South Africa was not a safe place for
her life savings and looked for security abroad. After a decade
of putting her life on hold, she moved overseas, only to be
overwhelmed by the isolation and a profound lack of belonging.
As her planner, I must recognise the significance of Kathleen’s
sacrifices to invest her money outside South Africa. While I cannot
expect her to bring the money back, I can help her live her best
life with the money she has. Our life planning meetings included
a vision board, and through this exercise, Kathleen realised her
wish to return to South Africa. This meeting helped her define her
dreams and enable clear goals and intentions for her life ahead.
Conversation starters for planners
I believe helping clients improve their relationship with money will
enhance their wealth and mental wellness. It’s about understanding
their money script and guiding them to reshape their beliefs and
habits to serve them better.
A meaningful conversation starter with a client involves
encouraging reflection on their childhood experiences with money.
In most cases, our money mindset is shaped by the experience and
messages we receive about money throughout our lives, primarily
from our parents. These experiences become internal beliefs that
create self-imposed limitations, often not based on reality. For
example, if you grew up hearing that you would never succeed
because you are not smart enough or have seen a parent struggle
due to financial manipulation by their partner or observed lavish
spending to flaunt wealth, you would have numerous beliefs to
challenge to foster positive money habits.
Our relationship with money is multifaceted, often interwoven
with complex emotions, unspoken beliefs and unconscious habits.
Recognising that beliefs drive behaviour and behaviour drives actions
emphasises the importance of understanding and addressing both
beliefs and behaviours to reshape a money relationship.
Kim Potgieter CFP®, Director, Chartered Wealth Solutions, ICF
Professional Certified Coach, New Money Story® Mentor Coach,
Certified Dare to Lead Facilitator
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FINANCIAL PLANNING | Estate planning
Who do you trust with your
digital information?
“
Digital technology is so broad today that it encompasses
almost everything. No product is made, no person moves
and nothing is collected, analysed or communicated
without ‘digital technology’. Given its overwhelming ‘value’,
digital technology has become an integral part of our lives,” says Louis
Rossetto, founder and former editor-in-chief of Wired magazine.
Before the digital age, we maintained paper records in a file
in a filing cabinet or desk drawer. When someone passed away,
all a family member had to do was locate the file and hand it to
the appointed executor. And, important documents, investment
statements and policy documents were delivered by post, for
easier filing.
Given the ubiquity of digital technology, these documents
are now either emailed (with password protection), available on
a password-protected app or retrieved from a service provider’s
platform, which requires login credentials. As a result, most of us
store our information either on our laptops or via a cloud storage
facility, tax information is accessed via our e-filing profiles and
banking information on banking apps or personal profiles.
It is easy to see how quickly one can amass a long list of
usernames and passwords – the average person has between 10
and 50 credentials to maintain. This is in addition to the passwords
or biometric access protection on our phones or iPads.
Who do you trust to access your digital information, if something
happens to you?
What impact has digital technology had on estate planning?
Without access to records and information that is digitally stored, it
can be difficult for an executor to know who to contact regarding
a client’s assets and potential claims against an estate. In some
instances, an executor may overlook an asset if a record cannot
be found.
Safe password storage can be challenging, and we know it is
not a good idea to write your passwords down at the back of a
notebook, but who can, or should access this vital information
if you are not able to? With the introduction of dual-factor
authentication, your password and username may not even be
enough to give someone access to your information.
There are several password lockers, such as OnePass, Enpass,
Authenticator or you can store your credentials in your Apple,
Google or Microsoft account. Most of these lockers allow you to
export data, but then what? How does an executor access this
information, which is critical for efficient estate administration?
“You could create a shared folder to store what we at Private
Client Trust call your ‘going away file’ information, which contains
the important information to be accessed on your death and
how to access it (where to find the correct passwords, etc). We
do, however, advise great caution when it comes to who this file
is shared with,” says Sarah Love, a Fiduciary Specialist at Private
Client Trust.
An alternative that the fiduciary team at Private Client Trust
recommends is a comprehensive estate planning exercise with
a fiduciary professional. “In this way, we can ensure that all your
affairs are in order and that access to information is shared with
the right people on your death,” says Love.
During the estate planning process, a fiduciary professional
will collect all the necessary information regarding a client’s
assets, liabilities and policies. “This puts us in a sound position
to administer the estate as we know what is included. This also
provides the client with a solid base for drafting their Will,” says
Love. Private Client Trust regularly
partners with CERTIFIED FINANCIAL
PLANNERS®, enabling them to
effectively assist their clients with
their estate planning needs in a
digital age.
“While saving and storing
important information digitally is
highly appropriate, don’t forget
that your Will must still be signed
with a pen on paper and must
comply with the formalities of
the Wills Act for it to be valid,”
cautions Love.
If you would like to speak to a
fiduciary professional about your
client’s estate planning needs,
please contact Sarah Love, CFP®, at
sarah@privateclient.co.za or visit
www.privateclienttrust.co.za.
Sarah Love, CFP®, FPSA®,
TEP, Fiduciary Practitioner,
Private Client Trust
PRIVATE CLIENT HOLDINGS IS AN AUTHORISED FINANCIAL SERVICES PROVIDER. Private Client Holdings – FSP 613, Private Client Trust has taken care to ensure that all the information provided herein
is true and accurate. Private Client Trust will therefore not be held responsible for any inaccuracies in the information herein. The above article does not constitute advice and the reader should contact
the author for any related concerns. Private Client Trust shall not be responsible and disclaims all loss, liability or expense of any nature whatsoever which may be attributable (directly, indirectly or
consequentially) to the use of the information provided.
72 www.bluechipdigital.co.za

PRIVATE CLIENT HOLDINGS IS AN AUTHORISED FINANCIAL SERVICES PROVIDER.
The licenses we hold with the Financial Sector Conduct Authority (FSCA) are: Private Client Holdings – FSP 613,
Private Client Portfolios – FSP 399 78 and Private Client Wealth Management – FSP 399 79.
PRIVATE CLIENT TRUST . BLUE CHIP MAGAZINE 2022

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FINANCIAL PLANNING | Legislation
Money issues in divorce
The proprietary settlement.
Divorce statistics are rising, so most financial planners will
find themselves with a divorcing client at some stage.
While the divorce process is regarded as the domain
of lawyers, in practice it’s often the financial aspects of
divorce that create the complications.
Financial planners who familiarise themselves with some of the
financial complexities that inevitably arise from divorce can add
immeasurable value to their clients’ lives at a difficult time.
In any divorce, three money issues have to be addressed and
resolved: the proprietary settlement; maintenance for the children
and possible spousal maintenance.
In this article, I intend only to deal with Money Issue 1: the
proprietary settlement. I will deal with the Money Issues 2 and 3
(child and spousal maintenance) in future articles.
this gives rise to a manifestly unfair result on divorce, a court can
now order the spouse with the bigger pot to share some assets –
see my article in Blue Chip Issue 90, titled “Some important changes
in the world of divorce law”.
Out of community of property with accrual. The accrual
system creates a financial partnership between spouses, where
they agree that whatever wealth is created during the marriage
MONEY ISSUE 1: the proprietary settlement (who gets what
out of the marriage)
In simple terms, this issue turns on understanding:
- What’s in the pot (that must be shared)?
- What’s not in the pot for sharing?
- What’s the pot for sharing worth?
- How many other pots are there?
- Who ultimately gets what out of which pot?
What’s in the pot, what’s not in the pot and how many pots
are there?
The starting point here is the couple’s marital regime. Are they
married in community of property (the default regime under South
African law) or did they sign an antenuptial contract (also known as
an “ANC” or “pre-nup”) excluding community of property? If they
have an ANC, does the accrual system apply?
In community of property. If the couple is married in
community of property, then the marriage creates one big
common pot (or “joint estate”) and everything owned or owed by
the parties falls into it, irrespective of the date or manner the assets
were acquired (so assets and liabilities arising before the marriage
come into the pot too, as do inherited assets). Each party owns a
50% undivided share of everything in the common pot and this
pot has to be divided equally upon divorce.
Out of community of property without accrual. If the couple
is married out of community of property without the accrual
system, then the parties have specifically agreed to opt out of any
kind of financial partnership in their marriage. They each have
their own “pots” of assets and liabilities in their own names and
neither gets to claim anything from the other’s pot at the end of
the marriage. (It’s not quite as simple as this any more, because if
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Financial planners who are
prepared to engage with their
clients on these kinds of issues
can add enormous value.
will be shared between them at the end. Within the marriage, each
party has their own pot of assets and liabilities (which they don’t
have to share) but when the marriage ends, a notional third pot
is created (let’s call it the “accrual pot”) representing the wealth
created during the marriage. The value in the accrual pot is what
must be shared between the spouses on divorce, according to the
accrual calculation. This usually means that there has to be some
transfer of assets between the spouses’ pots on divorce, to give
effect to their agreement that wealth created in the marriage is
to be shared.
In theory, the accrual calculation is quite straightforward. In
practice, it can get tricky. Two respects in which it can get tricky
are listed below:
Trickiness #1 – dealing with excluded assets
The Matrimonial Property Act 88 of 1984 (“the MPA”) sets out a
couple of things that it stipulates should not fall into the accrual
pot. Inheritances and gifts exchanged between the parties are two
examples referred to in the MPA. In addition to these standard
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FINANCIAL PLANNING | Legislation
exclusions, the parties’ ANC may stipulate other things the parties
agreed would be excluded from the accrual pot.
Problems arise in divorce when one spouse wants to argue for
the exclusion of a particular asset from the accrual pot (based either
on the provisions of the MPA or the terms of the ANC) but does
not have the proper records to prove the basis for the exclusion
of that asset or the value of the exclusion. Many an acrimonious
battle has been fought (and lost) by spouses unable to provide a
satisfactory paper trail with assets they were hoping to exclude
from the accrual calculation.
Financial planners who are alive to the various categories of
possible exclusions from the accrual pot can help their clients
enormously:
- By making sure they are familiar with the provisions of the
client’s ANC as well as the relevant provisions of the MPA
(specifically with assets to be excluded from the accrual)
- By reminding clients of the relevance of those exclusions when
it comes to dealing with excluded assets in their personal
financial plans, as well as investment decisions relating to
those excluded assets
- By helping and reminding clients to keep detailed records of
any and all transactions relating to excluded assets
- Where possible helping clients avoid unnecessary co-mingling
of excluded assets with assets falling into the accrual pot
- If co-mingling of excluded assets with other assets is
unavoidable, by advising and helping clients to keep a proper,
detailed paper trail of the extent and terms of any co-mingling.
Trickiness #2 – compiling a comprehensive schedule of all the
assets and liabilities
Spouses are obliged by law to disclose all their assets and liabilities
in divorce proceedings (including those they claim should be
excluded from the accrual pot). Financial planners can play an
important role by helping their clients to compile comprehensive,
up-to-date schedules of their assets and liabilities. Our courts take
a dim view of divorcing parties who fail to make full disclosure
of all their assets, so you definitely don’t want to find yourself
in a situation where you are aiding and abetting a client’s
non-disclosure.
What’s the stuff in the pot worth?
Irrespective of whether a divorcing couple is married in community
of property or out of community of property, current values must
be attributed to all assets and liabilities. This can be another cause
of conflict in divorce proceedings. The following sorts of issues
often arise:
- Deciding on a fair basis for valuing immovable property (and
then whether that value should be adjusted for, among other
things, unrealised Capital Gains Tax)
- Deciding on what exchange rate to apply to offshore
investments and obligations
- Identifying an appropriate basis for valuing business interests
and/or shareholdings in private companies
- Deciding how to treat and value share options of various kinds
- Valuations of loan claims
- The adjustment of valuations of pension interests and
retirement annuities to make provision for tax
- Deciding how to deal with and value investments in
cryptocurrencies, non-fungible tokens and other poorly
understood asset classes
Financial planners who are prepared to engage with their clients
on these kinds of issues can add enormous value to their divorcing
clients by offering sensible, reasonable and practical financial
advice, insight and information on these topics, helping the
client make informed, measured decisions about their position
and conduct in divorce proceedings.
Who gets what?
Once a divorcing couple has identified all the assets and liabilities
in the various pots and settled upon appropriate valuations, the
actual calculation of what they should each be entitled to take
away from the marriage shouldn’t be too difficult to calculate. If
they are married in community of property, they are each entitled
to walk away with 50% of the joint estate; if they are married
with the accrual system, the actual accrual calculation is pretty
straightforward (once you have all the figures). The challenge
usually is that the calculation only spits out a number: it’s how
that number practically gets settled between the parties that is
often the trickiest financial step of all in a divorce.
An astute financial planner can add immeasurable value to
their divorcing clients by helping clients devise financially sound,
practical mechanisms for dividing up their assets equitably and
effectively upon divorce, in line with the financial calculations
prescribed by their marital regime.
Hannah Wilson, Director, Simplifi Law
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The rights of trust beneficiaries
High expectations of trust beneficiaries to demand
benefits from a trust are unrealistic, as in the common
type of trust, a trust beneficiary is not given any rights
to the property or benefits thereof.
Suppose the trust is a discretionary trust (which is the most
common type of trust in South Africa). In that case, the trustees
have the discretion when, with how much, and if they want to
benefit a particular beneficiary. It will be within their powers to
offer a benefit to one of the beneficiaries and not to another. The
beneficiary can only hope that the trustees will decide in their
favour and offer a benefit.
If the beneficiary previously received a benefit from the trust, it
further does not mean that they can demand another benefit. They
only had a right to the benefit they previously accepted. Again,
they can only hope that another benefit will be distributed to
them. The trustees would be free to amend the trust as stipulated
in the trust deed without the consent of the beneficiaries, as they
have no say in the trust administration (see R van Zyl 2019 SALJ
Vol. 136(4). “The question of rights, acceptance and amendments
of inter-vivos trust in terms of the stipulatio alteri”).
If a trustee offers a benefit to a beneficiary, the beneficiary
can decide to decline or accept the benefit. If he/she accepts
the benefit, the beneficiary gets a vested right to that particular
benefit. No changes can be made by the trustees to the trust that
would affect the pending benefit that the beneficiary accepted
while the benefit is made over.
Trustees must be cautious if the benefit offered to the
beneficiary is a recurring benefit, such as a “monthly” payment
(Crookes v Watson 1956 (1) SA 277 (A)) or a “rotational” visit (Griesel
v De Kock 2019 (5) SA 896 (SCA)) to a farm. Once the beneficiary
accepts this recurring benefit, they get a vested right to the
recurring nature of the benefit as well. This cannot be taken away
from them without their consent.
In a vested or a bewind trust, a beneficiary would have vested rights
at the creation of the trust, and the trustees are bound to deliver
the benefits to them as stated in the trust deed. The trustees, in
this case, do not have the discretion as to how much or when the
benefits must be delivered but are bound by the proportion or
description stated in the trust deed.
If a condition is set in a trust deed for an uncertain future event
to occur before the beneficiary can receive the benefit, ie turning
It is imperative to understand
the different rights that could
be given to trust beneficiaries.
a certain age or getting a certain qualification, the beneficiary
has more than a hope to benefit. The beneficiary now has a
“contingent right” that must be protected while the condition
plays out. The trustees would not be free to handle the benefit
in a way that would negatively affect the beneficiary’s right to
the benefit. In these cases, the beneficiary’s consent would be
needed to make any amendments to the trust that would affect
their particular benefit.
In drafting a trust deed, it is, therefore, imperative to understand
the different rights that could be given to trust beneficiaries. The
intended rights should correspond with the aim of the trust to
prevent trust beneficiaries from gaining control of the trust, which
may never have been the intention of the trust founder.
Dr Rika van Zyl, CFP®, FPSA®, School of Financial Planning Law, UFS
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INVESTMENT | Book review
The 7 Pillars of Financial Health
Reg Thomson, director at DTB Wealth, reviews Rob Macdonald’s latest book about how we need to rethink
our approach to money.
Based on insights gleaned from coaching and consulting
with hundreds of financial and investment advisors over
a career spanning 25 years, Rob Macdonald, Head of
Strategic Advisory Services at Fundhouse, has recently
published a book, The 7 Pillars of Financial Health.
Macdonald outlines why we need to radically rethink how
we approach money in this compelling read, which is highly
recommended for advisors who want to remain relevant in their
professions. Similarly, it contains practical information that clients
could use in the process of dealing with investment concerns. As
Warren Ingram writes in the foreword, The 7 Pillars of Financial
Health is not only aimed at professional planners: “Whether you’re
a seasoned investor, a young professional just starting out, or
simply an individual seeking financial well-being, this book will
revolutionise your understanding of money and its role in shaping
a fulfilling life.”
Macdonald suggests that money ranks as a leading source
of relational conflict and household stress in surveys worldwide
despite the abundance of information and technology to help us
manage it. In the introduction, he says that we go wrong by failing
to recognise how completely interconnected and interdependent
our lives and our money are.
Macdonald uses the analogy of our physical health. We all
know what to do to be physically healthy – eat healthily, exercise
regularly, get enough sleep and limit our stress levels. But we
struggle to do this because we are human. We are tempted by
chocolate cake, delicious wine and the fact that Netflix is much
more fun than going to the gym. He says, “The foibles of being
human are summed up by the quip that ‘we spend our health
to gain our wealth then spend our wealth to regain our health’.”
To overcome the challenges of being human while developing
financial health, he enlarges seven skills that we need to work on
throughout our lives.
Pillar 1. Clarity
Two succinct CS Lewis quotes underpin this principle. First, “If you
don’t know where you’re going, any road will get you there” and
second, “You can’t go back and change the beginning, but you can
start where you are and change the ending”.
For Macdonald, the primary pillar is that of clarity. Clarity is both
the starting point and the ending point of financial health. One
needs to be clear on what one wants from your life and money.
This enables a financial planner to craft a sound financial plan and
be able to give the required appropriate advice. Financial planning
is more dynamic than simply setting goals and meeting them. It is
an ongoing process of not only making decisions about our lives
and money but also implementing them. Because our lives change
all the time, clarity will need to be revised constantly.
Macdonald addresses the issue as to how we get the clarity we
need. Three trends influence this issue. First, there is the misplaced
concept that technology will replace financial planners. Secondly,
financial planning as a discipline is evolving. Money is not the sole
preoccupation. Life is now a vital consideration. Thirdly, when it
comes to money, human behaviour is unfortunately not evolving.
Attention needs to be paid to behaviour modification rather
than pure money management in isolation.
As to the areas in which we need clarity, Macdonald sets out
some sound principles. These include a better understanding
of how our perception of time influences us. Together with this,
our relationships are important, as well as our sense of control
in making decisions. But to gain clarity, we need the other six
essential skills for financial health.
Pillar 2: Confidence
This principle brilliantly addresses how confidence is relevant to
financial advice. Importantly, as humans, according to Anais Nin,
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INVESTMENT | Book review
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The resultant collaboration is a masterpiece. Macdonald attests
that it is helpful to understand what drives our decision-making.
Given the complexity of us as human beings and our need to
simplify our complex worlds, Macdonald uses The Bermuda
Triangle of Financial Behaviour framework to help us understand
what’s at the core of the three key influencers on our decisionmaking:
cognitive biases, emotional responses and social pressure.
This helps advisors to get a clear sense of our relationship with
money because, as Macdonald says, “We all have a money story.”
Rob Macdonald holds an MPhil (Management Studies) from
Oxford University and is a former MBA programme director
at the Graduate School of Business. Macdonald is Head of
Strategic Advisory Services at Fundhouse, co-organiser of the
Humans Under Management South Africa conference and is
the editorial advisor to Blue Chip. He is a sought-after speaker
and writer and a qualified coach and counsellor.
we don’t see things as they are. We see them as we are. This is
an example of the hidden jewels contained in this book.
Macdonald develops the notion that confidence is key for
a financial advisor to see their value in giving advice and not
simply offering a financial product. Concomitant with this, he
sets out four kinds of financial advisors. Any serious advisor
needs to try to understand where they are positioned: the
salesperson, the technocrat, the computer (robo-advisor)
and the professional (trusted advisor). Confidence requires
a coaching approach. The future of financial planning is not
expert advice only. It is helping clients engage in financial
change, guided by the concept that financial health is both
behavioural and emotional.
Pillars 3, 4 and 5. Connection, Curiosity and Collaboration
These pillars interrelate perfectly. The key quote here that sets the
framework is from a distinguished economist, Minouche Shafik, “In
the past jobs were about muscles, now they are about brains and
in the future, they are about the heart.”
According to Brené Brown, connection is “the energy that exists
between people when they feel seen, heard and understood”.
Macdonald believes that the starting point is for the financial
advisor to establish a connection, and this is enhanced by
developing the concept of curiosity.
For curiosity, he uses another powerful quote, this one by
Charles Mackesy in The Boy, the Mole, the Fox and the Horse: “Isn’t it
odd we can only see our outsides, but nearly everything happens
on the inside.” Some wise discussion is given of the various types
of conversational flow that facilitate curiosity.
Pillars 6 and 7. Communication and Courage
These final principles offer practical insight into the skills that
financial advisors need to attend to. Communication with
clients needs to be consistent, relevant, concise, clear, timely
and transparent. Some good practical insight is of great value
to advisors.
Lastly, all the pillars require courage. This principle is the
crowning apex of Macdonald’s book. He explains that our money
and lives are inextricably linked so when we consider how to
ensure our financial plan suits our life, it is important to have the
courage to engage with our life and our money in equal measure
and to work out what we want from each.
However, when it comes to our lives and money, we can
sabotage ourselves and this is why working with a professional
financial planner is important. Macdonald argues that financial
planners protect us against self-sabotage and prevent us from
making the decisions we later regret.
From gaining clarity on our priorities to building strong
connections with trusted advisors, Macdonald demonstrates
how the seven skills (pillars) empower individuals to manage their
financial health. The best gift any advisor can buy for themselves is
this book. A volume of astute insight, captivating anecdotes and
practical strategies that will enhance your practice, your skill and
most importantly, your relationship with money.
Reg Thomson, Director, DTB Wealth
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FINANCIAL PLANNER | ASISA profile
Making a positive impact
Blue Chip speaks to Nonhlanhla Nxele, CFP®, founder and CEO of Esteemed Financial Solutions, who has
participated in a business development and growth support programme run by the Association for Savings
and Investment South Africa (ASISA).
Please provide a brief career history to this point.
After finishing my degree, I secured a permanent position at
Investec Private Bank. Subsequently, I ventured into a financial
advisor role at Liberty to accumulate experience. Later, I joined
Investec Asset Management, now known as Ninety-One, and
then returned to Liberty as an employee financial advisor.
Eventually, I transitioned to entrepreneurship and established
my own business.
What inspired you to become a financial planner?
My journey into financial planning began at a young age when
I played the role of the minister of finance within my family. My
mother entrusted me with overseeing her savings and sought
my advice on various financial matters. This early responsibility
sparked my interest in understanding and navigating the details
of managing money. Witnessing the impact of informed financial
decisions on my family’s well-being inspired me to pursue a career
as a financial planner. I am motivated by the opportunity to help
others achieve financial security and make informed choices to
shape their financial futures positively.
What prompts clients to come to you? Do you have a niche or
distinctive value offering?
Clients are drawn to our services for several reasons. Firstly, the
appeal lies in the convenience of having all their financial needs
addressed in one place. Our one-stop solution eliminates the need
for clients to navigate through multiple service providers. This
streamlined approach saves them time and effort.
Secondly, clients seek us for the peace of mind that comes
with knowing their entire portfolio is managed cohesively. Our
comprehensive financial planning ensures that every aspect
of their financial situation is considered, reducing the stress of
managing various financial components separately.
I am motivated by the
opportunity to help others
achieve financial security.
How would you describe your ideal client?
Our ideal clients value a personalised and strategic approach
to financial planning, irrespective of their life stage or financial
situation. I aim to assist them in achieving their unique goals,
whether it be accumulating wealth, preparing for retirement,
managing a business or securing their family’s financial future.
How do you charge for your services?
Consultation and implementation fees.
What role does technology play in your practice?
Technology plays a vital role in our practice, serving as a
cornerstone for our processes and contributing significantly to
their seamless execution. Our reliance on advanced tools and
technologies enables us to stay ahead in our industry, providing
efficient solutions and maintaining a high standard of service for
our clients.
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What do you enjoy most about being a financial planner?
The opportunity to make a positive impact on individuals’ lives.
I enjoy working closely with clients to understand their unique
financial goals and challenges. Crafting personalised financial
plans that align with their aspirations and witnessing tangible
improvements in their financial well-being brings me great
satisfaction. Building strong relationships with clients and being
a trusted partner on their financial journey is another aspect of
the job I value.
What is the biggest change you have seen in financial planning
during your career?
The technological transformation has improved the speed and
accuracy of financial planning and enhanced accessibility
for clients. Online portals and mobile apps now empower
individuals to monitor their financial portfolios in real time,
fostering a more collaborative and transparent advisor-client
relationship. While the human element remains crucial in
understanding the aspects of individual financial situations,
the incorporation of technology has undeniably reshaped and
elevated the financial planning profession.
provided by the programme. Building connections with peers,
mentors and industry experts can significantly contribute to your
growth as a financial planner or business owner. It is a valuable
investment in your professional development.
The ASISA IFA Programme is designed to invest in the
strategic growth and development of selected blackowned
IFAs in order to equip their businesses with practical
practice management toolkits, skills and knowledge.
The main programme sponsors are: Coronation Asset
Managers, M&G Investments, Allan Gray and Ninety One.
What advice would you give a young graduate considering
entering the profession?
This profession can be rewarding therefore it requires dedication,
continuous learning and effective communication skills. You need
to grow or have a strong professional network that will be the
foundation of building your career.
What’s your wish for the future of the FP profession?
The industry needs to start creating case studies or content that
speak to the black community so they can relate to this financial
planning process we keep telling them about.
ASISA IFA PRACTICE MANAGEMENT PROGRAMME
You have completed the ASISA IFA Practice Management
Programme. How did you benefit from the programme?
The programme has equipped me with the knowledge and skills to
streamline our practice management, enhancing efficiency and
effectiveness. The support provided by experienced coaches
has been invaluable in guiding us through these practices.
I have learned to leverage various tools and strategies to
optimise day-to-day operations, ultimately contributing to the
success of our business.
What advice would you give to other financial planners
considering this programme?
They must embrace this opportunity to enhance their proficiency
in practice management, as it forms the foundation for a
thriving business. The programme offers valuable insights into
client relationship management, compliance, governance and
operational efficiency. Take advantage of networking opportunities
Nonhlanhla Nxele, CFP®, Founder and CEO, Esteemed
Financial Solutions
www.bluechipdigital.co.za
81

ds
THE OFFICIAL PUBLICATION OF THE FINANCIAL PLANNING
INSTITUTE OF SOUTHERN AFRICA (FPI)
ABC-certifi ed distribution through:
• Major fi nancial planning events
• Financial planning workshops
• Direct distribution to all Certifi ed Financial
Planners and other FPI members
+ BLUE CHIP ONLINE
Advertising queries: sales@gan.co.za
www.bluechipdigital.co.za
The South African Journal
for Financial Planners

Calling
ALL
Financial
Advisors
Branded Reporting and Portfolio
modelling at your finger tips
Fund Research
Comparison & Analysis
Portfolio Modelling
Presentations & Reports
A ProfileData / FE fundinfo joint venture
For further information, please contact Tracey Wise
011-728-5510 / 079-522-8953 or email: tracey@profile.co.za
www.profile.co.za/analytics.htm

Convention
FPI Professional’s
Cultivate Growth, Harvest Excellence

13-14 August 2024
Century City Conference Centre
Cultivate Growth, Harvest Excellence

Are you ready to elevate your
career and make a lasting
impact in the world of finance?
Seize the opportunity to distinguish yourself as a
CERTIFIED FINANCIAL PLANNER ® professional (CFP ® ),
FINANCIAL SERVICES ADVISOR ® (FSA ® ), or
REGISTERED FINANCIAL PRACTITIONER ® (RFP ® )
this July.
CFP ® Exam: 11 & 12 July 2024
FSA ® & RFP ® Exam: 11 July 2024

FINANCIAL PLANNERS | Profiles
BLUE
CHIP
Profiling financial planners
Ever wondered how others in the profession think, what their perspectives are or how they charge their
clients? Blue Chip speaks to CERTIFIED FINANCIAL PLANNERS® and gives you the inside scoop.
Jana Human, CERTIFIED FINANCIAL PLANNER®, JWR Group
What do you believe is the most important thing you do
for clients?
The most important thing we can do for our clients is to try our best
to understand them before we give advice. I believe that financial
planning is a two-way street. My role is not to make decisions for
my clients but to be their thinking partner. For me, building a
collaborative relationship with my clients is the key to a successful
financial plan.
How do you charge for your services?
In our practice, we’ve adopted a tailored fee structure that
combines initial financial planning and ongoing fees, based on a
client’s financial needs and the complexity of their financial plan.
What role does technology play in your practice?
We use technology in every aspect of our business. It allows us to
operate more efficiently, be more client-centric in our processes
and provides valuable insights into our business on a practice level.
Overall, it helps us to be better financial planners. Our focus is
always to improve and personalise the experience for our clients.
We use technology to empower
our people and allow them to
get on with their work without
being told what to do.
Rudolph Geldenhuys, CFP®, Senior Financial Planner, WealthUp
What do you believe is the most important thing you do
for clients?
We are accessible, responsive and engaged.
Accessible. Our clients can reach us when they need to.
Responsive. We are emotionally and physically consistent
when we respond to our clients’ requests or needs.
Engaged. We take an interest in our clients and we are present
with them.
How do you charge for your services?
We have split our value offering into two parts and charge
differently for each.
Jana Human, CERTIFIED FINANCIAL PLANNER®, JWR Group Rudolph Geldenhuys, CFP®, Senior Financial Planner, WealthUp
www.bluechipdigital.co.za
87

BLUE
CHIP
FINANCIAL PLANNERS | Profiles
• The first part of our value offering is to take clients on a four-step
journey to create their personalised financial plan. We charge an
upfront financial planning fee via invoice.
• The second part of our value offering comes into play when clients
want to appoint us as their ongoing financial planning partner to
help implement their financial plan and to help keep their lives in
order. For this, we charge an assets-under-advice fee.
What role does technology play in your practice?
Technology adds significant value to our business and our clients.
We are more efficient because of technology and thus more
available to better serve our clients.
Tom Brukman, CFP®, Director, Chartered Wealth Solutions
What do you believe is the most important thing you do
for clients?
I provide them with an unbiased and honest perspective of their
transitions. Communicating this to suit everyone is where a lot of
this value lies.
How do you charge for your services?
We charge an ongoing financial planning fee on the assets we help
manage for the client. We also charge for our time when it comes
to tax, trust, legal, etc advice.
What role does technology play in your practice?
Technology is crucial in us being able to deliver all our value and
services to our clients. Our clients want instant communication
and as much detail as they need within a few clicks and at all times
of the day.
Without technology working for us, this is not possible.
In saying this, technology cannot replicate the human connection
and interaction that is the heartbeat of our roles.
Barry O’Mahony, CFP®, Founder, Veritas Wealth Management
What do you believe is the most important thing you do
for clients?
I believe I give them a sense of understanding of their financial
affairs and put them in control of their money. Importantly, I help
them achieve their desired lifestyle by putting their hard-earned
money to the best use possible.
How do you charge for your services?
We charge a rand-based fee for a financial plan and then charge
a percentage of assets under management which is based on a
sliding scale.
What role does technology play in your practice?
We use technology to empower our people and allow them
to get on with their work without being told what to do. We
believe this helps develop a much healthier culture in our
business, so that everyone knows they are trusted, valuable
and respected.
Visit www.bluechipdigital.co.za for the full financial
planner profiles.
Tom Brukman, CFP®, Director, Chartered Wealth Solutions
Barry O’Mahony, CFP®, Founder, Veritas Wealth Management
88 www.bluechipdigital.co.za

A Multi Asset Approach: Achieving Real Returns
The overarching objective of the multi-asset team is to achieve real (i.e., inflation-adjusted) returns of
three to five percent over the medium term, while also limiting negative returns over a rolling thirty-sixmonth
period.
A multi-asset approach to achieve this objective offers two potential avenues for generating returns.
Firstly, it enables tactical allocation among asset classes (such as equities, fixed income, and cash) when
disparities in relative valuations emerge. Secondly, it allows for the selection of the top-performing assets
within each asset class. When constructing portfolios, the team is largely unconstrained by benchmarks.
Each individual security included must significantly contribute to performance while also maximising the
number of independent or non-correlated positions in the portfolio to mitigate concentration risk.
Delivering through diversity
An authorised financial services provider (FSP 46405)