Blue Chip Journal Issue 76

Issue 76 • July 2020
www.bluechipdigital.co.za
The Official Publication of the FPI
Blue sky investing
The nonconservative
approach to investment
opportunities
Living annuities
The good news on the
latest amendments
Developing a
post-Covid-19
INVESTMENT STRATEGY
Florbela Yates, Momentum
Investment Consulting

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CONTENTS
JULY 2020
WHAT’S HAPPENING AT THE FPI?
Message from the CEO
ISSUE
76
02
44
THE IMPACT OF COVID-19 ON CFP® PROFESSIONALS AND THEIR CLIENTS
The Financial Planning Institute surveyed CFP® professionals
to find out what’s happening on the ground
44
46
48
50
WHAT IS IN A NAME? WHY PROFESSIONAL NAMES MATTER
Recent developments are set to provide clarity in terms of financial
advisor titles and regulatory certainty for financial planners in South Africa
AMENDMENTS MADE TO LIVING ANNUITIES
It is now possible for retirees to amend their drawdown
rate during the year for a limited period
MOVING BRANDS
Change is inevitable. The FPI is updating its brand to become
more inclusive and accessible to all South Africans
04 08
PUBLISHER’S NOTE
12
22
26
28
30
34
36
42
52
ON THE MONEY
Milestones, news and snippets
BUILDING MOMENTUM IN A GLOBAL SLOWDOWN
Interview with Florbela Yates, Momentum Investing Consulting
BLUE SKY INVESTING
Are we overly conservative in our assessment of investment opportunities?
SEEKING OPPORTUNITY THROUGH AN ESG LENS
Responsible investing during the Covid-19 crisis
CONTROLLING THE “CONTROLLABLES” IN UNCERTAIN TIMES
Using evidence-based investing principles to meet investment goals
A BETTER – AND VERY DIFFERENT – TOMORROW
As a consequence of Covid-19, the future will look very different from what we now imagine
COULD COVID-19 HAVE CHANGED FINANCIAL PLANNING FOREVER?
A crisis often presents both tragedy and opportunity
INNOVATIVE WEALTH MANAGEMENT
Nevathee Moodley imparts her wisdom on sustainable financial strength
SOME THINGS NEVER CHANGE
Natasja Hart, Financial Planner of the Year 2010, on a decade of change
EMPATHY FUELS TRUE CLIENT CONNECTION
Changing the way we connect with clients
34
www.bluechipdigital.co.za
22
12
1

FOREWORD
Lelané Bezuidenhout CFP®, CEO, Financial
Planning Institute of Southern Africa
What’s happening
at the FPI?
In the last week of April, we surveyed more than 750 CFP®
professionals across Southern Africa on the effects of the
pandemic on their businesses. The results make for fascinating
reading. The full story is on page 44, but here’s a taster…
Greetings from my home office. So much has changed since I last wrote to you.
I hope you are all coping with the ever-changing “new normal” we find
ourselves in. The Financial Planning Institute of Southern Africa (FPI) is blessed
to be able to work remotely. We’ve been more productive than ever! I’d like
to take this opportunity to thank every single member of my fantastic team for their
incredible productivity during this trying time.
We asked our members how they’re coping with the pandemic
Underlining the fact that our industry has not been as hard hit as some, 56% of respondents
said the pandemic would not change their long-term professional or personal goals.
Sixty-one percent of financial planners believe that there will be a growing demand
for financial advice in the wake of Covid-19. Until that time, however, the advice of more
than two-thirds of Mzansi’s CFP® Professionals is to “sit tight and wait until volatility
decreases before making any major financial decisions”. As you were.
We are helping to feed vulnerable South Africans
As the economic impact of the pandemic deepens, we all need to do everything we can
to assist those in need. When the lockdown was announced, the FPI decided to put our
weight behind FoodForward SA (www.foodforwardsa.org), a ground-breaking charity
which distributes surplus food from supermarkets, farms and factories to over a quarter
of a million needy South Africans.
Two months down the line I can honestly say it was one of the best decisions we
have ever made. With hunger rates soaring, the charity is now more relevant than ever,
and I would like to personally urge anyone who can afford to donate, to do so now.
FoodForward’s innovative model means that every R1 you donate puts R15 worth of food
in the mouths of the people who need it most. It’s tax-deductible too.
We have taken our annual convention online
When the pandemic first reared its head, we acted decisively to postpone our FPI
Professionals Convention and to extend the deadlines for entry into our various award
categories. The entire event will now take place online on 27 and 28 October 2020.
The FPI is committed to doing the right thing – for the country and the health and
safety of our members. The convention’s theme – Future Proof Your Business – is
61%
of financial
planners believe
that there will
be a growing
demand for
financial advice
in the wake
of Covid-19.
2 www.bluechipdigital.co.za

now more relevant than ever. I can’t wait to hear what our stellar line-up of speakers,
including Bruce Whitfield, Rob Macdonald and Juanita Vorster, will have to say about
taking the financial planning industry forward in a post-Covid world.
We have applauded two positive changes to Linked Living Annuity legislation
As a body that is deeply concerned about the financial wellbeing of all South Africans,
we are grateful for further tax relief measures introduced by the government to
try to combat the effect of Covid-19 on household budgets. The FPI supports the
(temporary) proposed changes to Linked Life Annuity (LLA) regulations which give
retirees more control over drawdown rates.
While the changes are only supposed to last for the duration of the pandemic, we
will be engaging with National Treasury via the FPI’s advocacy arm and public policy to
make some of the changes permanent. We believe that South Africans deserve more
freedom in deciding what to do with their hard-earned retirement savings (like keeping
the minimum drawdown rate at 0.5% p.a.).
Another exciting matter is the precedent-setting Montanari Supreme Court of
Appeal case (1086/2018 (2020) ZA SCA) in which the Supreme Court of Appeal of South
Africa (ZA SCA) overturned findings of the High Court with regards to living annuities and
the calculation of accrual claims at the date of divorce. The case has a noteworthy impact on
the future treatment of living annuity income payments in the case of divorce and makes it
clear that the value of an annuitant’s future annuity payments is regarded as an asset in
his/her estate to calculate the accrual at the date of divorce.
We have launched a Brand Ambassador Programme
As part of our ongoing mission to make all South Africans aware of the value of the
financial planning process and the CFP® certification, we are launching a Brand
Ambassador Programme. Ambassadors will promote the financial planning profession
in the mainstream media, on social media and at conferences and events. The first wave
of ambassadors are all previous winners of the Financial Planner of the Year award, but
we’ll soon be expanding the net to ensure that our ambassadors are engaging with people
from all corners of the Rainbow Nation.
We are dreaming of a brighter future
The Covid-19 crisis has galvanised us to work even harder to grow the financial planning
industry in South Africa. I wholeheartedly believe that our industry has a pivotal role to
play in helping South Africans to deal with the economic fallout of the pandemic. If you
or any of your friends or family need the assistance of an FPI professional, please visit
www.letsplan.co.za to find a trusted expert in your area.
Wishing you good health during these turbulent times,
Lelané Bezuidenhout CFP®
CEO, Financial Planning Institute of Southern Africa
The FPI is
committed to
doing the right
thing – for the
country and the
health and safety
of our members
SAVE THE DATE!
FPI Professionals Convention
This year our FPI Professionals
Convention will take place entirely
online. Members can log in to the
event on 27-28 October 2020.
Visit fpi.co.za and download the
awards guide for more information.
www.bluechipdigital.co.za
3

PUBLISHER’S NOTE
New at
Blue Chip
The impact of the Covid-19 pandemic has been felt strongly
in the media industry, as it has across most sections of the
economy, with many long-running magazines and journals
closing down or moving to purely online channels. Global
Africa Network Media has continued to print and distribute the Blue
Chip journal directly to the country’s Certified Financial Planners, and
has now added a variety of online options to allow broader access
to the high-quality content we publish. These include a new website
at www.bluechipdigital.co.za, which also hosts an ebook edition of
the print journal; a presence on LinkedIn; and, launching in July 2020,
the Blue Chip Digital monthly e-newsletter. The e-newsletter is sent to
every member of the FPI, and access to subscribe to the newsletter
can be found on the Blue Chip Digital website. Follow Blue Chip on our
online and social media channels to receive regular news and updates
which will complement the quarterly print journal.
Appropriate for this Women’s Month issue of the journal, Blue Chip
also welcomes a new editor from this edition in Alexis Knipe. With
over 23 years spent working with leading publishers and conference
owners, Alexis has gained extensive knowledge and experience
in all aspects of business-to-business media, with a focus on editorial
and high-level content production. Chris Whales, Publisher
blue-chip-journal
Blue Chip Journal
The official publication of FPI
Blue Chip is a quarterly journal for the financial planning industry and is the
official publication of the Financial Planning Institute of Southern Africa
NPC (FPI), effective from the January 2020 edition. Blue Chip publishes
contributions from FPI and other leading industry figures, covering all aspects of the financial
planning industry.
A total of 10 000 copies of the publication are distributed directly to every CERTIFIED FINANCIAL
PLANNER® (CFP®) in the country, while the Blue Chip Digital e-newsletter reaches the full FPI
membership base. FPI members are able to earn one non-verifiable Continuous Professional
Development (CPD) hour per edition of the print journal (four per year) under the category of
Professional Reading.
Special advertising packages in Blue Chip are available to FPI Corporate Partners, FPI Recognised
Education Providers and FPI Approved Professional Practices.
ISSUE 76
JULY 2020
Publisher: Chris Whales
Publishing director: Robert Arendse
Managing director: Clive During
Editor: Alexis Knipe
Online editor: Christoff Scholtz
Art director: Brent Meder
Designer: Simon Lewis
Production: Lizel Olivier
Ad sales:
Sam Oliver
Gavin van der Merwe
Jeremy Petersen
Bayanda Sikiti
Venesia Fowler
Administration & accounts:
Charlene Steynberg
Natalie Koopman
Printing: FA Print
PUBLISHED BY
www.bluechipdigital.co.za
Global Africa Network Media (Pty) Ltd
Company Registration No:
2004/004982/07
Directors: Clive During, Chris Whales
Physical address: 28 Main Road,
Rondebosch 7700
Postal address: PO Box 292,
Newlands 7701
Tel: +27 21 657 6200
Fax: +27 21 674 6943
Email: info@gan.co.za
Website: www.gan.co.za
No portion of this book may be reproduced without written consent of the
copyright owner. The opinions expressed are not necessarily those of Blue Chip,
nor the publisher, none of whom accept liability of any nature arising out of,
or in connection with, the contents of this book. The publishers would like to
express thanks to those who support this publication by their submission of
articles and with their advertising. All rights reserved.
4 www.bluechipdigital.co.za

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Advanced Diploma in Estate and Trust Administration
The School of Financial Planning Law at the University of the Free
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academic qualification and skills to become fiduciary practitioners who
will be able to provide advice on a multitude of platforms, including
administration of trusts, estate planning, administration of deceased
estates, drafting wills, and legislative issues around the fiduciary
services industry. This is the only qualification that is currently
endorsed by the Fiduciary Institute of Southern Africa (FISA) as the
academic requirement in the process to be awarded the Fiduciary
Practitioner of South Africa ® (FPSA ® ) designation.
The Advanced Diploma in Estate and Trust Administration is also the
only South African accredited diploma that meets the academic
requirements of the Society of Trust and Estate Practitioners (STEP).
The Diploma put graduates on the road to become full members of this
global professional association as Trust and Estate Practitioners (TEP).
Postgraduate Diploma in Financial Planning
This qualification will enable students to obtain the highest academic and
professional levels of competency and to become eligible for professional
membership of the Financial Planning Institute of Southern Africa (FPI).
The FPI is the leading membership association in South Africa, and
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This qualification will open doors to further study opportunities for
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Postgraduate Diploma in Estate Planning
The Postgraduate Diploma in Estate Planning intends to deliver
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This qualification provides students with an academic qualification and
the necessary skills to become experts in the field of estate planning.
Graduates will be able to provide leadership and expert advice in
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about legislative issues surrounding the estate
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This qualification will also open doors to
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working in this specific environment, but
who lack formal qualifications.

On the money
Making waves this quarter
Satrix is still the people’s choice
SATRIX CLINCHES TOP SPOT IN SEVEN AWARDS AT SALTA
The third annual South African Listed Tracker Funds Awards
(SALTA) was held at the Johannesburg Stock Exchange in
March 2020 and Satrix was awarded the top spot in seven
categories on the night. While Satrix is proud of all the awards
they received, the one which stands out for them is The People’s
Choice for the favourite ETF among the investing public won
by Satrix 40 ETF.
The coveted People’s Choice award is decided by the public
who vote via an online poll. The Satrix 40 ETF proved to be the
favourite ETF among South African investors.
Says Satrix CEO, Helena Conradie (right), “Winning ‘The
People’s Choice’ three years in a row is a huge honour for us.
This award signifies the core of what Satrix is: a means for the
people of South Africa to own the market, with ease and at
low cost. We’d like to thank our investors, our stakeholders and
the SA ETF industry for taking this 20-year journey with us.
I couldn’t be prouder!”
“This award
signifies the core
of what Satrix is:
a means for the
people of South
Africa to own the
market, with ease
and at low cost.”
– Helena Conradie
Save the date!
FINANCIAL PLANNER OF THE YEAR 2020 COMPETITION IS OPEN
To be the FPI Financial Planner of the Year is the highest award a
professional financial planner can achieve as it recognises the top
professional financial planner in the profession. The 2020 competition
is now open.
• Visit fpi.co.za and download the awards guide for more information.
New group sales
director for Carrick
Carrick is delighted to welcome aboard
Bradd Bendall (right), who will take up
his new appointment as group sales
director at the Carrick Group, effective
1 July 2020. Fresh from his position as
general manager: operations at Pam
Golding Properties, the Cape Town
father of three describes himself as
servant leader by nature. With a diverse
background that saw him part study civil engineering before building
a business in logistics, followed by a stint at African Life Assurance
and then 14 years at the Ooba Group before his move to Pam Golding
Properties, Bendall has fine-tuned his ability to spot new opportunities.
New sections of POPI Act
to be implemented
With the new sections of the Protection of Personal Information
Act (POPIA) being implemented, businesses need to tighten their
cybersecurity. The Act aims at protecting the personal information
of consumers and that of employees by holding businesses
accountable should their information be compromised.
For companies to comply, organisations need to assess where
personal information is being used, identify cybersecurity threats
and weakness that could compromise the integrity of the data and
put appropriate measures in place to mitigate any risks identified.
According to a study conducted by the South African Banking Risk
Information Centre, South Africa has lost over R2.2-billion through
cyberattacks in 2017. Businesses will be under pressure to comply
with the POPIA. Compliance failure will have severe penalties.
8 www.bluechipdigital.co.za

On the money
Making waves this quarter
Covid update: Private sector feeds the poor
Heeding President Ramaphosa’s call for a united response to the
Covid-19 crisis, 15 professional bodies from the finance industry are
putting their weight behind a ground-breaking charity that distributes
surplus food to a quarter of a million vulnerable South Africans every
day. If your business is lucky enough to continue to operate
during lockdown you should consider making a tax-free
donation to FoodForward SA.
What does FoodForward SA do?
FoodForward SA “connects a world of excess
to a world of need,” says MD Andy du Plessis,
by collecting surplus food from farms, factories
and supermarkets and delivering it to beneficiary
organisations. What’s more, over 80% of the food they
distribute is considered nutritious.
FoodForward SA currently feeds 255 000 South Africans
every day but one look at the numbers shows that the possibility for
change is endless. In addition to operating a conventional supply
chain where they collect, store and redistribute the surplus produce,
WORLD OF EXCESS
1/3 of all food produced in South Africa ends up in landfills
FoodForward SA has developed a digital technology platform
that takes out the middleman by virtually connecting beneficiary
organisations to nearby retail stores and food outlets. With this scalable
model, FoodForward SA feeds urban and rural communities in six of
South Africa’s nine provinces.
FoodForward SA’s innovative model means that
every R1 you donate puts R15 worth of food in the
mouths of the people who need it most. It’s taxdeductible
too. What does all of this have to do
with the finance community? In normal times,
organisations like the Financial Planning Institute
(FPI) and the Institute of Risk Management
(IRMSA) put all of their energies into representing
their members and growing their industries to
ensure a brighter financial future for all South Africans.
“These are not normal times,” says Lelané Bezuidenhout, the
FPI’s CEO: “As the world battles the coronavirus pandemic, we all need
to do everything we can to assist those in need.”
• For more info, email linda@fincommunications.com
WORLD OF NEED
14-million South Africans struggle to put food on the table
MEET THE MANAGERS
Meet The Managers allows
financial planners access
to short and concise
presentations and discussions
from 28 fund managers over
three days, 25, 26 and 27
August 2020, either via live
streaming or through the
virtual event site which is open
until the end of September.
www.meetthemanagers.co.za
FPI PROFESSIONALS CONVENTION
2020 sees the hosting of the 31st FPI Professionals Convention which
includes the announcement of the Financial Planner of the Year.
The event is scheduled to take place online on 27-28 October 2020.
The theme of the event for this year is “Future Proof Your Business”.
EVENTS GO
VIRTUAL
The Covid-19 pandemic
has seen the regular fixtures
on the financial planning
events calendar going virtual.
HUMANS UNDER MANAGEMENT
The second annual Humans Under Management conference
will take place on 8 September 2020, from 09h30 to 17h30.
www.humansundermanagement.com/southafrica2020
IRFA CONFERENCE
The Institute of
Retirement Funds
Africa (IRFA) has taken
its annual conference
for 2020 and its 2021
events online:
19-20 November 2020
Virtual conference, exhibition
and Master Class sessions
11-12 March 2021
Virtual conference, exhibition
and Master Class sessions
5-7 September 2021
Hybrid on-site and virtual
conference, exhibition and
Master Class sessions
www.irf-conference.co.za
www.bluechipdigital.co.za
9

On the money
Making waves this quarter
SARS Commissioner breathes sigh of relief
The Minister of Finance delivered an Emergency Budget in June
2020, which can be described in diplomatic terms as gloomy
and uneventful. Most notably, despite speculation by some to
the contrary, the Minister did not impose any new taxes, which
leaves SARS with no respite as it faces a mighty revenue shortfall
of around R300-billion.
The Minister has indicated that the funds will be sourced by
other means, seemingly letting SARS off the hook to a degree.
From here onwards, one foresees SARS embarking on two possible
paths in the coming fiscal year, or a hybrid of the two.
The obvious, but difficult, answer to this equation is to try
to stem the tide by prioritising collections – most taxpayers
and their tax advisors appear to expect SARS to be extremely
aggressive in its collection of taxes in the coming months, given
the government’s desperate need for more funds.
SARS may take an alternative approach to the crisis. It may
decide to not participate in Covid-19, instead of deploying its
resources to extract taxes from a limping tax base, it may use the
year of famine as an opportunity. The Commissioner has lamented
the lack of capacity within SARS. If SARS uses this opportunity
wisely, we may just see a more resilient and assertive revenue
authority emerging from the debris of the pandemic.
• By Jean du Toit, Admitted Attorney & Head of Tax Technical at Tax
Consulting SA
Balancing economy and health
Infections in the country’s economic heartland of Gauteng
appear to be on the rise. On the economic front, the Emergency
Budget tabled in June by Minister Tito Mboweni makes the dire
fiscal reality very clear. The economic devastation caused by the
lockdown has reduced tax collections while increasing calls on
the fiscus. Reducing the economic burden on citizens and their
dependents is critical not least from a socio-political viewpoint:
if people cannot discharge their obligations to dependants, civil
disobedience may follow.
REBUILDING THE SOCIAL COMPACT
To combine economic revitalisation and health or safety, the
government must successfully transfer responsibility from the
state (lockdown and all its attendant laws) to civil society, both
individuals and corporates. This is a difficult exercise to pull off
at the best of times, but the government has squandered a lot of
the trust it originally enjoyed. The public has grown cynical about
the myriad regulations that have eroded trust.
Perhaps most important of all, the extreme slowness with
which the much-heralded aid to citizens and companies has been
rolled out, and the growing suspicion that corruption is occurring,
has reduced the propensity to follow the government playbook.
The government has consistently indicated that Covid-19 is with
us for the foreseeable future, yet its plans have seemed ad hoc and
short term in focus. If civil society can be convinced that a long-term
and carefully constructed plan exists, then we may yet win through.
• By Professor Rashied Small, Executive: Centre of Future Excellence
(CoFE), South African Institute of Professional Accountants (SAIPA)
Construction industry hit hard
The construction industry has been touted as one of the key sectors the
government should prioritise to ramp up job opportunities to revive the
South African economy. It’s an industry employing hundreds of thousands
of workers that was hit hard by the Covid-19 pandemic. There have been
suggestions that the impact could result in a year-on-year contraction of
18%, which represents 4% of GDP.
Potentially, this could mean the loss
of up to 140 000 formal jobs, according
to construction market intelligence firm
Industry Insight.
In response to Covid-19, the construction
sector has formed a Construction Sector
Covid-19 Task Team composed of contractors,
built professional services firms,
property developers, regulators, professional
associations and manufacturers.
It has submitted a comprehensive shortto
medium-term plan to the government
for actionable reforms to help the sector
recover and is working with the government to develop an industryspecific
Covid-19 Construction Health & Safety Protocol.
Cobus Bedeker (above), MD of Evergreen Property Investments, says:
“The construction sector is already working together to ensure the
sustainability of this industry over the coming months to play its part in
our country’s economic recovery.
“There are huge opportunities in this property class in South Africa,”
says Bedeker. “Too many of our elderly population are living in inadequate
homes when they could be living in an estate offering a sense of support
along with a ream of services and amenities.”
10 www.bluechipdigital.co.za

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A Conference By Advisers, For Advisers
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that will enable us to the solve real real world problems with real on clients. a sustainable This is a basis. day well HUM spent is a on great honing your edge as a
event for providing financial new insights planner from and experts it might who even practise make what you they a better preach human in being!”
the real world with real clients. This is a day well spent on honing your edge as a
financial planner and
Warren
it might
Ingram
even make
- Galileo
you
Capital
a better human being!”
Warren Ingram - Galileo Capital
Date:
8 September 2020

COVER FEATURE
12 www.bluechipdigital.co.za

COVER FEATURE
Building
momentum
in a global
slowdown
In
the post-Covid-19 transformed
world of business, remaining flexible,
supportive and resilient is vital.
Florbela Yates, Head of Momentum
Investment Consulting, shares her
advice on how to keep a long-term
view through short-term volatility.
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13

COVER FEATURE
Florbela, you joined Momentum Investment Consulting in
January 2017 as the head of Momentum Investment Consulting.
Please describe the path that led you to this point.
I started my career as a consultant in the healthcare space at
Alexander Forbes. I transferred to Investment Solutions after six
years. That’s where I became involved in investments, even though
I was mainly involved with the institutional side of investments.
When I worked for the group previously (for the division that is now
Momentum Global Investment Management, but was then RMB
International Multi-Managers), I got my first insight into retail investments.
So I guess that’s the start of the path that led me to this point.
What are the defining highlights of
your career? One would have to be
the year that the institutional team
at Investment Solutions brought in
R10-billion in assets. There is no better
feeling than knowing that a client has
seen the value that your team can
add. Securing a client and then jointly
growing assets with them would be a
career highlight for me regardless of
where I have worked over the years. Also,
heading up various new business teams
and being involved in partnership JVs
with advisors would be other highlights.
What do you deem to be the most critical component to
financial success? I believe that the best place to start in securing
your personal financial success is to appoint a financial advisor and
together go through a budget exercise to determine your short-,
medium- and long-term financial goals. Once this is clear, it’s easy
to evaluate the different investment options likely to get you to
those goals. Without a plan or goal, it’s difficult to measure how
successful or unsuccessful you have been.
Advisors should remain
objective and not allow
their subjectivity or
own personal views on
markets, the economy
or the virus to drive
the formulating and
planning process.
MOMENTUM INVESTMENT CONSULTING
Momentum Investment Consulting (MIC) was
launched in 2008 to minimise the pressures of
determining asset allocation and fund choices
for client portfolios – and today MIC manages
assets in excess of R7 billion. What do you
attribute this success to? Our understanding
of the financial advice process is one of our key
strengths. Our team is made up of CFA charter
holders, actuaries and certified financial planners,
allowing us to consider the various effects of
decisions taken in managing client portfolios.
We are a client-centric business. Our clients
often cite our regular communication, transparent
and detailed reporting, and flexibility in the
execution of our investment skill, as the things
that they value most.
What is the baseline factor the makes MIC’s financial services
and products so popular? I think our outcome-based investing
(OBI) philosophy works well in an advice-led investment world. It
makes it easy for us to construct portfolios that are closely aligned
to clients’ own investment goals over their investment terms.
Please outline areas of growth in the past two years. We have
segmented the retail clients into different markets, allowing us
to price appropriately and competitively regardless of client size.
The evolution in the advice market and the expected effect that
legislation such as the Retail Distribution Review (RDR) will have
on advisors has resulted in us develop-
ing a more flexible offering so that both
Category I and Category II advisors have
more choice in the services that they can
get from us.
In what areas do you see the company
expanding in the short term?
Although the majority of our advisors
have historically wanted to be involved
in all aspects of building solutions for
their clients, this year we have seen a
trend towards outsourcing the full asset
management service to us.
We are also seeing an increase in
appetite from other Category II licensed
advisors and advisor networks wanting to partner with us to
enhance their existing offering. I suspect this is where the majority
of the growth will come from once RDR comes into effect.
As a result of these trends, we have accordingly restructured
our team to ensure specialisation. We need to remain scalable
and flexible. The biggest focus has been on the automation of
our processes and the development of more tools to enhance the
value for our clients.
14 www.bluechipdigital.co.za

COVER FEATURE
Please tell us about the industry benchmarks that MIC has
fashioned. Momentum Investments is the South African market
leader in building outcome-based or goal-based investing
solutions. MIC has adopted this philosophy and most of our
clients use an OBI benchmark over a suitable measurement period.
Consistency is the measure that we place the biggest emphasis
on. Although we aren’t peer-cognisant, we do always report back
to clients showing both our benchmark as well as the relevant
peer group benchmark. We encourage our clients to measure us
against both benchmarks in terms of consistency and our hit rate
(or realised probability of reaching the benchmark).
don’t stick to their longer-term strategies lose value. As shown in
the table on page 16, missing out on the best return day in every
year over the past five years can harm a client’s returns. Missing
the top 20 performing days has a significant effect.
How does outcome-based investing align with active or
passive investment management? Outcome-based investing
is the overarching investing philosophy. When we execute, we do
this through the use of active, passive or smart-beta strategies
depending on the appropriateness and availability of each of these
in various asset classes.
OUTCOME-BASED INVESTING PHILOSOPHY
What makes the outcome-based investing philosophy
revolutionary in the investment management space?
This philosophy allows us to build portfolios that we
can adapt to client-specific needs rather than trying to
fit all clients into a balanced fund regardless of their
varying needs.
How can you ensure that a financial advisor’s advice
process is aligned with the outcome-based solutions
you offer? When we first engage with an advisor, we
spend a lot of time understanding their advice process
and what their particular clients require. We then build
portfolios that specifically align with the advisor’s advice
process, which give advisors flexibility in using the range
of portfolios to cater to their clients’ varying needs.
There is no
better feeling
than knowing
a client has
seen the value
that your team
can add.
How equipped is the advisor to deliver a goal-based
service to their clients? All the research we have seen
both globally and locally shows that clients benefit from
advice. One study showed that advised households
accumulate 2.73 times the amount of assets than those
that don’t have an advisor. At MIC, we believe hugely in
the value of advice. I’d say that many of the advisors that
we deal with already advise in such a way as to assist
their clients in achieving their particular individual goals.
What skills do financial advisors need to be able to
help clients stay the course to achieve their goals?
I believe that our advisors have all the necessary
skills and training to give advice, but if they can
then overlay this with an understanding of client
psychology (especially during times of crisis), they
can then have even more powerful conversations with
their clients.
Over the past two years, we have spent a great deal
of time researching the effect of client behaviour on
investment returns. We all know that timing the market
is impossible. When you overlay this with the insights
that show how clients make decisions based on fear and
greed, you get a great perspective into why clients who
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15

COVER FEATURE
DISCRETIONARY FUND MANAGERS
Why use a Discretionary Fund Manager? A Discretionary Fund
Manager (DFM) should become an extension of the advisor’s
practice. They become the advisor’s investment team, giving him
access to specialist investment skills, which should improve their
clients’ investment outcomes.
YEAR 2015 2016 2017 2018 2019
ALSI Market Return 5.13% 2.63% 20.95% -8.53% 12.05%
Miss Top Trading Day 1.96% -0.34% 18.55% -11.81% 9.76%
Miss Top 5 Trading Days -7.89% -9.34% 11.60% -21.37% 2.50%
Miss Top 10 Trading Days -16.65% -18.00% 4.52% -29.24% -4.68%
Miss Top 20 Trading Days -28.47% -30.61% -5.94% -39.60% -15.43%
or fund changes simultaneously across all advisors through
their ability to bulk switch, whereas a Category I advisor would need
to meet with each client and get their signed consent to make these
changes. Although advisors with a Category II licence can legally
provide these services, many are smaller firms without the necessary
skills to provide the full range of services. In these instances, they
often appoint a DFM in a sub-advisory
role. MIC offers a range of services
ranging from manager research,
portfolio construction, attribution,
performance monitoring, portfolio
optimisation, asset allocation, reporting
and execution, allowing other Category
II licence holders to enhance their value
to clients.
In a market that is preparing itself for the Retail Distribution
Review (RDR) regulatory framework, MIC’s tailored DFM
capability applies to both Category I and II financial service
providers. Please expand on this. Category I advisors often
partner with a DFM to help them with portfolio construction,
manager or fund selection and the efficiencies that a Category
II licence brings. For example, a DFM can apply asset allocation
Without a plan or goal, it is difficult
to measure how successful or
unsuccessful you have been.
What changes would you like to see happen in the industry
over the next five years? I would like to see the industry becoming
more professional and transparent in terms of both fees and
skills. I am encouraged by the suggested licensing requirements
for different categories of licences that we saw under the latest
RDR proposals.
What are the latest developments, trends and innovations
in this market that pertain to your business directly?
Consolidation and digitisation are two big trends that I believe will
continue for the foreseeable future. Compression on fees is another
trend that I’m seeing especially in a low-return environment.
I also believe that RDR will have a significant effect on advisors
and asset managers.
EFFECT OF COVID-19
MIC combines traditional and alternative
asset classes to meet the specific risk and
return objectives of clients. This approach
is based on asset classes that are defined
by their different responses to changes
in economic conditions. The effect and
unexpected response in the economy that
Covid-19 caused has been unfathomable.
Were the predictions in terms of responses
to economic fluctuations adequate? We
build diversified and resilient portfolios that
will consistently deliver on their objectives
or outcomes over the relevant time frames,
regardless of short-term volatilities or crises.
Risk management forms part of the portfolio
construction process. We don’t believe that all
managers have skills in all asset classes, and
so we prefer to select best of breed managers
per asset class. We use a combination of active,
passive and smart-beta solutions in asset classes
where this makes sense.
16 www.bluechipdigital.co.za

BRAVE/5776/MMI/E
Momentum Investment Consulting
will help you build sustainable
investment solutions to help your
clients achieve their goals.
We provide discretionary fund management services to both
Category I and Category II financial services providers and advisory services
to Category II financial services providers. Our expertise includes everything
from mandate design, asset allocation, strategy optimisation, risk management,
fund research and manager selection to customised reporting.
For more information contact us at mic@momentum.co.za
investment consulting
Momentum Investment Consulting is an authorised financial services provider (FSP32726).

COVER FEATURE
SWOT BOX
Florbela Yates, Head of Momentum Investment Consulting, offers her
SWOT analysis of the South African investment landscape.
STRENGTH On the whole, financial advisors are professional and
research shows that advised households tend to have higher savings
rates than those that don’t use a financial advisor.
WEAKNESS
The average age of advisors in South Africa is 56 years
and the majority are white. We need to encourage transformation and
make it attractive for younger advisors to join the industry.
OPPORTUNITY By simplifying their investment offering, advisors
can unlock huge efficiencies in their practice and free up time to sell
their book, buy a new book, grow their business, or align different
investment books.
THREAT Change is inevitable. Technology is changing both the
advice and asset management business. If you don’t keep up, you open
yourself up to competition from those who are changing with the times.
Our risk process places a greater emphasis on downside risk
in the more conservative portfolios, and a greater emphasis on
getting to the goal in the more aggressive portfolios where we
have the luxury of time. We have optimised our portfolios to
have a greater focus on quality factors, and so we went into the
crisis with exposure to more resilient companies and higherquality
credit, which we believe gives us better protection in the
current market environment.
I’d love to say that our portfolios weren’t affected by the crisis.
But the reality is that the extreme moves in yields, spreads, listed
property, inflation-linked bonds and equities experienced
towards the end of February and March, did result in portfolio
values falling. The good news is that diversification gave us some
protection and we saw some recovery in April and into May.
We remain committed to outcome-based (or goal-based)
investing as an overriding philosophy. The biggest step in our
process is the strategic asset allocation, and that looks through the
cycle and ignores current crises or events. However, we do consider
making tactical calls at the margin where
we feel that certain assets are mispriced or
showing obvious over- or undervalued steps.
The coronavirus has led us to re-evaluate
the current positioning, and given the
expected volatility over the next few months,
we have made some tactical changes relative
to our longer-term strategic positions.
Consistency is the
measure that we
place the biggest
emphasis on.
We believe that our portfolios are still
positioned to make their targets over
the longer term.
What significant changes, if any, have
been made to the portfolios? We have
slightly underweighted the positions
to the more aggressive asset classes
given the current and expected market
volatility and uncertainty over the shorter
term. We have also evaluated our
exposure to credit and positioned the
portfolio towards higher-quality equity
and credit counters.
What is MIC’s perspective on how
long we can expect the volatility that
we have seen in markets to continue?
It’s difficult to say exactly how long this
volatility will continue. Given that we
haven’t yet seen a peak in the infection
rates locally, the fact that the lockdown
has been extended beyond the original
period added to the knock-on effects to
various industries, I would say it’s safe
to expect this to continue for at least the
next six months.
Depending on the fall-out that
we see and how significant the effect is on the economy and
unemployment, as well as the effect of greater liquidity being
injected by governments across the world, it could potentially
continue for longer.
The current slowdown in global economic growth coupled with
South Africa’s sluggish economy and increasing government
debt is extraordinary. What strategies should clients adopt?
Yes, our economy faces many challenges. I expect growth to
remain weak over the short term, but some asset classes will
continue to deliver real returns despite this. Make sure you partner
with someone who understands markets and can build resilient
and diversified portfolios.
How do you manage client behaviour in an era where fear
steers every decision made by every individual? Over the
last two years, Momentum as a group has spent a lot more
time researching and trying to understand the effect of client
behaviour on their investments. The best
that we can do is to continuously share
these results with the market to get clients
to stick to their investment goals and not
make decisions based on emotions. Our
clients have started to see the value of this
research and we are starting to see them
questioning their decisions.
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COVER FEATURE
We build diversified and resilient portfolios
that consistently deliver on their objectives
or outcomes over the relevant time frames,
regardless of short-term volatilities or crises.
Please outline the dynamic behaviour of asset markets during
high-stress events. What advice can you share with the industry
on how to manage through this trying time? The coronavirus
has had a dramatic effect on financial advisors in two key ways:
1) a fall in their revenue due to the fall in investment markets
and the difficulty of generating new business in the lockdown;
2) clients who have been affected financially – either through job
loss or a temporary fall in income or the value of their investments.
From an investment perspective, I would suggest that those
clients who can, stay invested and consider other alternative
sources of income. For example, many insurers have allowed
clients to consider reducing cover or even take some payment
holidays for the next few months. If there are any assets that they
don’t need, selling these could also release some capital. I would
suggest reducing debt and saving more.
For clients who have lost their jobs or experienced
a reduction in income, and need to disinvest to
meet their costs of living, I would suggest that
disinvesting from the more liquid money market
or income portfolios while leaving their longterm
portfolios the time to recover. Partner with
a financial advisor that can help you identify your
investment and income goals over the short,
medium and long term. Revisit them at least
yearly and make sure that your investments keep
pace with your changing life. It has been tough,
and we expect the volatility to continue for some
time to come. In South Africa, the government
has projected that we will only see a peak in
infections in August or September, so I don’t
think the bad news is over yet.
What advice would you give to advisors about
how to manage their clients who are currently
going through a difficult time? I recommend
that advisors stay true to their clients’ financial
needs and plan accordingly. Many of their
clients’ financial needs may be changing due to
changes in their circumstances and advisors need
to update their investment plan accordingly.
Implementing the changes in planning should
be done in such a way as to limit the effect on the
client’s returns, such as locking in losses.
Advisors should remain objective and not
allow their subjectivity or own personal views
on markets, the economy or the virus to drive
the formulating and planning process.
Should strategic asset class preferences
change during and after Covid-19? Strategic
asset allocation forms the cornerstone of our
investment process. It looks through current
markets and focuses on the expected returns of
each asset class through the cycle. Although it should be reviewed
at least yearly, to ensure that our expectations still hold, we wouldn’t
recommend making changes based on shorter-term movements,
as a result of a crisis. Where asset prices are depressed, this may
present an opportunity to rather make some tactical changes. It
is very important to have a disciplined approach to tactical asset
allocation as you don’t want to make such big changes that you
erode the value of your strategic asset allocation.
What are the fundamental factors that Momentum Investment
Consulting considers when planning to build investment
portfolios that are resilient to financial market shocks?
We apply a disciplined process and build diversified portfolios
that are better able to consistently deliver on their objectives.
Risk forms part of our portfolio construction process. We tend to
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19

COVER FEATURE
place a greater emphasis on asset managers with specialist skills
and a greater focus on quality factors in both the equity and fixed
income space. We constantly monitor and evaluate decisions taken
and ensure that every manager is delivering on their appointed
strategy and mandate.
How does the global economic effect of Covid-19 affect
offshore investments? The effect of the pandemic also affects
retirement savings that are invested offshore. How so? What
do you advise people in this predicament? Although we follow
the same process locally and internationally, we do rely heavily
on our international team based in London to guide us on the
international market as they are a lot closer to it than we are. For
the offshore portion of local portfolios, we believe that the biggest
detractor of performance has been fees. In model portfolios,
the costs of feeder funds and performance fees often result in
underperformance. We prefer to execute using mainly passive
or smart-beta strategies. For hard currency solutions, we would
once again prefer to use specialist managers in each asset class
and can execute through active, passive and alternative strategies
depending on their appropriateness in each portfolio.
To what extent have advisors who have had a DFM during the
pandemic benefitted? I think the biggest benefit is probably the
ability for us to implement any decisions simultaneously across
all the portfolios. Our Category II licence allows our discretion to
make changes to both the underlying asset classes and funds. All
our clients benefit from this advantage at the same time.
What is the silver lining, if any, in what has happened to
investment markets? Markets that were overvalued have come
off. The sell-off in March presented this opportunity for our clients
Improved
communication
is key during
these times of
increased volatility.
who were waiting for the correct time to
get into the market. We saw large flows of
assets transitioning into model portfolios
as the capital gains tax (CGT) effect of
switching out of other assets reduced.
Please give a message of motivation
with regards to financial investments
during this Covid-19 term. Markets go
through cycles and if your investment is
worth less now than a few months ago,
remember that you have not lost money
until you disinvest and lock in those losses.
Patience and discipline in your investment
goals result in success. If the lockdown has
prompted you to save money on items
that you usually spend on (eg fuel, beauty
treatments, etc) invest this now, so you can
build a bigger reserve. If you are forced to
supplement your income, start by selling
assets that you don’t need or use. Then only
start using savings. Use this opportunity to revise your budget
and to find ways to be disciplined in saving again, once your
circumstances change.
Momentum’s brand proposition is: “Keep your clients focused
on their goals, even as the world around us changes”. How
has MIC helped advisors in keeping their clients focused on
their goals? The MIC team has increased our interactions with
advisors. We have been writing a lot more articles (literally every
week) explaining the effect of movements in local and offshore
assets on their portfolios.
As an investment team, we have also increased the frequency
of our interaction with asset managers and clients alike. Improved
communication is key during times of increased volatility. We have
implemented changes this quarter by increasing our exposure to
the quality strategy and reduced our vulnerability to funds with
high exposure to credit and listed property – an area that we
believe the risks of defaults has increased.
As August is Women’s Month, what advice do you give to
women in the finance industry? Our deputy CEO, Jeanette
Marais, always says that “A man is not a plan”. I’d like to expand
on this by saying that you shouldn’t rely on anyone else to have
your best interests at heart. Make sure that you start saving early,
continue to save and have sufficient money for life’s surprises.
For women entering the financial industry, you have the
opportunity to contribute and shape it in the same way that your
male counterparts have done. Join an employer who offers equal
opportunities, the flexibility to continue working when you decide
to have children and the ability to add value throughout your
working career. And then give back by being an inspiration and
mentor to younger women.
20 www.bluechipdigital.co.za

I believe that the sum of the parts is better than each individual’s
contribution and so everyone has an equal voice. – Florbela Yates
What were your aspirations as a child? As a child, I think I just
wanted to be the best at whatever I did and personal recognition
was very important. I think it was all about how “I” did.
And now? As an adult, I’ve realised the value of partnerships and
focusing on others rather than me. Now, I aspire to make a real
difference in the lives of others – my children,
my husband, my friends, my colleagues and
my clients. Knowing that I have succeeded
in helping them achieve their financial or
in my career. Howard Walker sensed my impatience and boredom
with what I was doing and created the opportunity for me
to grow by suggesting I go into investments. Since then, there
have been numerous people who have inspired me to dream big
and aim to be the best at whatever I do. Some within our industry,
personal goals is how I define my success. I really would like to
leave this world a better place than I found it.
What was the motivating factor that made you choose this
profession? I don’t think it was initially a choice, more where my
career took me. The reason I chose to stay is seeing the direct
effect that investment decisions have on people’s lives. Knowing
that we can help clients realise even some of their goals is a
great feeling.
How has your career created value in your life?
I enjoy a challenge and having something to look forward to
every day. It has made me realise why saving is so important and
how having goals keeps you focused and driven. I meet amazing
people every day who enrich my life and teach me so much.
As long as I am learning, I know that I am still living. Also, my
career doesn’t leave much time for me, which has made me much
better at managing my hours and to value the time I do have, for
personal relationships and hobbies.
Who has been your biggest influence in business and your
career? There hasn’t been one single person, but rather various
people throughout. Probably starting with my mom. She was
a working mom but always made time for us. She taught me
to set realistic goals. Then, I’d have to say it was one of the first
leaders that I had the privilege of working with quite early on
including Laurie Dippenaar,
Paul Harris, GT Ferreira, and
Adrian Gore, and others outside
it, like Steven Covey, Malcolm
Gladwell and Nelson Mandela. Lastly, I’d say that a personal
inspiration in my life were my grandparents, who constantly
reminded me why it is important to start saving early and
the importance of doing the right thing, even if it benefits
someone else first.
What is the best advice that you have ever received? Don’t be
scared to make mistakes, because that’s how you learn and grow.
And remember, “This too shall pass”.
What does the word “family” mean to you? Family starts with the
people closest to me, who know the most about me and still love
me despite this! In my world, these are the people that make me
want to be a better person and whom I would fight to protect at
all costs. My husband, Mike, my children, my dad, my brothers,
my best friend and my godchildren. I have two girls aged 17 and
15 whom I love with all my heart. I can’t imagine my life without
them. They are the best decision Mike and I ever made.
The second layer of family would be my close friends and people
who have had a significant impact on my life. In recent years, there
are some work colleagues and clients that I would include in a
third circle. People that enrich my life and who I would go to great
lengths to protect and stay connected to.
What do you love doing most when not at work? Running or
reading a really good book and spending time with my family at
my happy place in St Francis Bay.
What book are you currently reading? Dare to Lead by Brené Brown.
Life statement? Love with all your heart.
Blue Chip advice? You should see the partnership with a financial
advisor in the same way you do marriage. Your advisor is there to
help you set a strategy for life, celebrate with you during the good
times and support you during the challenging ones. Make sure
you choose someone who shares your values and ethical code..

GROWTH MANAGERS
Blue sky
investing
Are we overly conservative
in our assessment
of investment opportunities?
A
s investors, we are trained to be
conservative, to expect less in
future, and to avoid the hype of
the moment. This conservative
mindset underpins an industry which
has the responsibility of managing other
people’s money. Could it be though, that
this conservative mindset is a net cost to
the same investors we are aiming to serve?
The early founders of modern investing
– the likes of Benjamin Graham and David
Dodd – put forward a sensible approach,
premised on “not overpaying”, which lies
at the heart of a valuation-based approach.
This approach is useful in the case where
a company’s prospects are known, its
operating costs established and its profit
margins observable through analysis
over long periods. The Graham and Dodd
approach encouraged diligent fundamental
analysis. Investors would then do well to buy
those shares which were undervalued and
sell those which became overvalued.
If diligent analysis is required, then this
assumes a company and the industry in
which it operates are broadly understood.
What happens when a company or industry
is entirely new and is set to disrupt the status
quo going forward? Where these companies
have the potential to put the long-standing
companies from the Graham and Dodd
world entirely out of business, and to
become future leaders?
This segment of the share market – the
“blue sky” investment opportunities – often
requires a different mindset. Research by
Hendrik Bessembinder [1] highlights that
just 4% of shares ever listed in the US have
created all of stock market wealth, and just
90 companies out of over 24 000 listed
since 1925 have created half of all wealth.
The number of truly successful companies
is simply very small over time.
There are two significant examples of blue
sky investing, both from the US over the past
20 years. The first is Amazon, founded by Jeff
Bezos, which initially displaced Barnes and
Noble as the leading book retailer. Amazon’s
business model enables it to target an everincreasing
spread of industries as the world
of e-commerce becomes broadly accepted.
The number of truly successful companies
is simply very small over time.
Martin Eberhard and Marc Tarpenning
founded Tesla in 2003. The primary initial
investor was Elon Musk. Originally set up
to manufacture electric cars, it now has its
sights set on all forms of mobility, powered
by electric energy. With Tesla reporting
profit for the first time in late 2019,
the share price responded by increasing
materially since June 2019.
As a result, Musk may now qualify for
a payday of over $346m (given he is paid
entirely in shares should the company reach
its ambitious targets).
Do investors rejoice in the fact that
the potential for this company to start
disrupting the world’s largest automakers
is starting to bear fruit? Well, for the most
part, they don’t. Tesla is not a share favoured
by most investors. The following attributes
provide some insight as to why not:
• The business has not made a full-year
profit, ever.
• No dividends have ever been paid.
• Debt levels are high and climbing (peaking
at 80% of total business value).
• Productions targets have consistently
been missed.
Typically, these traits would be a no-go
zone for most investors. As Graham and Dodd
would likely attest, how do you perform
diligent research when it’s not possible to
observe any reasonable financial outcome
for the business? Tesla has one of the highest
“short interests” [2] , indicating most investors
think the share is wildly overvalued. Why
is it so difficult to invest in shares like these?
We provide possible reasons next:
22 www.bluechipdigital.co.za

GROWTH MANAGERS
1
2
3
1. You don’t know what you are buying
As an investor, you are not buying
established businesses with observable
business models that are easy to value. You
are buying businesses that are generally
early in their business cycle; are disrupting
incumbents and driving new business
models; have no established market as they
are often creating new markets; don’t know
their client base yet; are often making a loss
and have very little foresight of margins. You
are buying an idea, often with a visionary
leader leading the charge.
2. Very few companies are successful
The nature of these “high-risk start-ups”
means that failure rates are high, so
the selection is very important. A study
performed in the US between the period
2008 and 2018 tracked 1 119 US tech
start-ups that received seed funding
between 2008 and 2010. The study found
that by the end of 2018, 67% of those
companies had failed and less than 1%
had become “unicorns” (a market cap of
over $1bn). [3] Some of these companies
are the most-hyped tech companies of
the decade, including Uber, Airbnb, Slack,
Stripe and Docker. It is not surprising then
that the behavioural bias of risk aversion is
hard for managers. No-one wants to be the
fund manager who has a share go to zero.
3. You need to be a long-term investor
The nature of these businesses, the stage
of their business cycle when you generally
first invest, and the fact that selection is so
important means that once you choose to
invest you need to be invested for the long
term. It may take years for the business
model of these businesses to materialise.
Often, further capital investments are
needed as the company requires funding.
Leaders require guidance (or removal, as in
the case of Uber’s Travis Kalanick).
Why do traditional investors miss these
opportunities? Traditional active investors
can be separated into two broad types:
■ Quality investors look for businesses
which have strong market positions, a
stable client base and a defendable longterm
product or service. They look for
businesses that have a demonstrable
business model. They want to see reliable
earnings and margins, and determine,
with a certain degree of comfort what a
business will look like in five years. They
are generally not as concerned with the
price they are paying if the business can
protect and grow its earnings above the
market average.
■ Value investors are typically looking
for established businesses which are at
a cyclical low, or where a specific event
has meant they are trading below their
fair value.
What types of investors can capture this
type of return?
We identify investors who get excited about
businesses like Tesla, as growth investors.
Growth investors at their core are trying
to identify businesses where expected
earnings growth is significantly higher
than average and believe that even an
expensive price to pay is justified given
the potential outcome. They are generally
optimistic by nature as they make decisions
with little or no sight on earnings or
business model. They put a big emphasis
on the “what ifs” of an investment case. They
are risk-taking rather than conservative
as they ride the winners rather than sell
them down and generally have a very low
turnover of holdings.
They require a very deep level of research
and insight into a business, particularly
given the business is still finding its growth
path. Rather than research being focused
on financial statements, they have a focus
on emerging industries, changing behaviours
and innovation to inform their views.
They also need to be comfortable
making mistakes, as often they have more
losers than winners in their portfolios.
Because of the types of businesses they
are investing in (businesses that can grow
to many multiples of their current size),
the contribution of the winners often
far outweighs that of the losers. Growth
managers refer to this as asymmetric
returns, where you can lose a maximum of
100% of your capital on the losers, but you
can make back multiples of your capital
on the winners.
What should you expect from a growth
manager’s portfolio?
There is a high failure rate in the pool of
companies they are investing in, and the
concentration risk is high as a large portion
of the portfolio returns are generated by
few holdings. Often the businesses in the
portfolios are still driven by their founders
and there is significant key man risk. How
much of Tesla’s success is due to Musk, or
what does Amazon look like without Jeff
Bezos? Because of this, investors in these
funds should expect higher real returns
with bigger drawdowns and more volatility.
Moreover, there are very few professional
investment managers that can successfully
manage this sort of portfolio, given how
difficult it is to get the selection right as well
as the career and business risks attached.
In our efforts to ensure our clients
are fully exposed to the full range of
investment opportunities in the market,
we seek out managers who can deliver on
this sort of potential, to complement the
overall portfolio. To invest successfully,
we need to come to terms with our own
behavioural biases and cast our perspective
wider than the more conservative stance
that often pervades.
[1] Do Stocks Outperform Treasury Bills, 2017.
[2] Short sellers bet on, and profit from, a drop
in a share’s price. Therefore, if an investor
believes the share price of a company will
decrease in the future they will “short sell”
that share.
[3] CB Insights
Peter Foster, CIO, Fundhouse
www.bluechipdigital.co.za
23

T
PROFILE
he evolution
a portion of your savings to 36ONE
hedge funds can improve your portfolio longevity
of savings
Allocating
Markets are intrinsically volatile and for investors
making regular withdrawals, this volatility is
particularly relevant. If the value of your retirement
savings falls near the outset of drawing an income,
the amount withdrawn will represent a bigger portion of your
investment than if your savings had grown over this period.
The impact is that the base continues to decline with each
additional withdrawal leaving less savings to grow. The risk
involved in withdrawing money from a volatile portfolio, termed
sequence-of-return-risk, is lower when portfolio volatility is lower.
The recent market capitulation has highlighted the value of having
the right mix of portfolios in reducing this type of risk without
compromising too much on longer-term growth.
The 36ONE hedge funds can produce positive returns in both
rising and falling equity markets (due to their combination of long
and short positions). Investing in the 36ONE hedge funds can limit
the impact of market volatility on a portfolio and reduce sequenceof-return
risk.
Example: An investor with a R2-million lump sum invests
R1 million in the 36ONE SNN QI Hedge Fund (36ONE Hedge Fund)
and R1 million in the FTSE/JSE All-Share Index (ALSI) at the start of
April 2006 (36ONE Hedge Fund launch date). The table summarises
portfolio values on May 31 2020 in nominal terms:
SCENARIO 1: LUMP-SUM SCENARIO
End
Portfolio
Value
Since
Inception
Return p.a.
36ONE Hedge Fund R8 123 300 15.9%
ALSI R3 771 500 9.8%
Difference R4 351 800 6.1%
Source: Bloomberg, 36ONE Research
The client would have been substantially better off if he had
invested the full lump-sum amount in the 36ONE Hedge Fund,
as the hedge fund outperformed the ALSI by 6.1% per year over
the period.
DISCLAIMER
Source: Bloomberg, 36ONE Research; Performance
to 31 May 2020. The information presented here is
Extending the example: Assume that he invested the R2 million
but needs to draw R7 500 monthly, increasing at 6% p.a. The table
summarises portfolio values on May 31 2020 in nominal terms:
SCENARIO 2: INCOME-PRODUCING PORTFOLIO SCENARIO
End
Portfolio
Value
Since Inception
Return p.a.
(after
withdrawals)
36ONE Hedge Fund R5 718 700 13.1%
ALSI R2 179 100 5.6%
Difference R3 539 600 7.5%
Source: Bloomberg, 36ONE Research
When you compare the end values of the income-producing
portfolios, the 36ONE Hedge Fund outperformed the ALSI by 7.5%
a year. This is higher than the lump sum scenario where the 36ONE
Hedge Fund outperformed the ALSI by 6.1% a year. The reason
for this is simply volatility. Over the +14 years, the 36ONE Hedge
Fund was substantially less volatile than the ALSI. The hedge fund
also experienced much lower drawdowns during the period.
While the above scenarios are simplified, they show the impact of
volatility on income-producing portfolios.
As is evident, higher volatility can act as a drag on performance
in income-producing portfolios and can result in clients not meeting
their income objectives over the lifespan of their retirement.
We are living longer, which
means time in retirement is longer
and therefore more money is
needed. Having to draw an income
from your retirement savings
for longer needs an appropriate
investment strategy.
Stash Martins is an Investment
Consultant at 36ONE Asset
Management
not intended to be relied upon for investment advice. Various assumptions were made.
See our full disclaimer here: https://www.36one.co.za/articles/disclaimer
24 www.bluechipdigital.co.za

HAS YOUR PORTFOLIO EVOLVED THROUGH
THE TIMES? IT’S TIME TO CONSIDER
HEDGE FUNDS

GREEN ECONOMY
Seeking opportunity
Responsible investing
during the Covid-19 crisis
through an ESG lens
At the time of writing, the Covid-19 crisis is wreaking
havoc across international markets, interrupting global
supply chains, drying up demand and, of course, taking
a massive personal toll on affected families. Given the
scale of the devastation, some investors might ask, why worry
about Responsible Investing or ESG (environmental, social and
governance) issues issues at this stage? Surely it makes sense to
just focus on the ‘important’ investment numbers and rather leave
the soft ESG stuff for after the crisis? In this article, I’ll argue that:
1) The current Covid-19 crisis has many important lessons that
strengthen the case for responsible investing;
2) The current downturn provides early but compelling evidence
that ESG is not just a nice to have but it is also good to have; and
3) The ‘green economy’ has real potential to deliver long-term
win-win outcomes.
LESSONS FROM COVID-19
Lesson 1: We’re all interconnected
One of the founding principles of Responsible Investing (RI) is
the interconnected nature of our social, biophysical and market
eco-systems. Importantly RI recognises the impact of unpriced
externalities on the safe operation of the market, society and the
environment. Examples include the social and environmental costs
from burning fossil fuels or societal health impacts of high calorific
foods. By considering externalities in its approach the RI field
essentially asks all participants in the investment value chain to
consider the wisdom of pursuing short-term returns at the expense of
long-term resilience of social and environmental systems. The
Covid-19 crisis has laid bare the very real interconnectivity between
our social, environmental and market systems. The lesson here is
don’t neglect interconnectivity and long-term system resilience.
Lesson 2: Shared value
Professors Kramer and Porter of Harvard Business School
penned their famous article on Share Value in the early 2000s.
In it, they argued that the best business strategy to adopt in a
world with increasing social and environmental pressures was
one that generated profits while solving for long-term social and
environmental resilience. They proposed a stakeholder inclusive
model for capitalism which encourages value to be shared across
participating stakeholder groups. In effect, this type of strategy
requires company management to carefully consider a broad
range of stakeholders and the associated business impacts. For
some management teams, this is a sharp departure from the
age-old adage that, the business of business is business.
Covid-19 puts a sharp focus on management approaches to
human capital management, corporate culture, and the treatment
of customers. Corporate responses around these issues can
potentially have lasting impacts for all company stakeholders.
For investors that are ESG literate, it’s no news that workforce
management, employee satisfaction and corporate culture, have
a long-term impact on productivity, share price performance
and returns. Similarly, companies’ treatment of customers is
an important driver of brand equity and improved customer
relationships over time. How management teams respond in this
time of crisis will be telling for their long-term profitability.
Aside from management practices, the Covid-19 crisis also
exposes the underlying business model, specifically what goods
and services do the company provide. As we are collectively finding
out, essential services mean something very specific. It redefines
what we can and can’t do without and what we are prepared to pay
for. Business models that solve for food security, connectivity, online
education, entertainment, sustainable mobility, finance, water,
energy, sewage, waste, health care, etc have prospects for growth.
Those investment teams with deeply integrated ESG processes
will no doubt be attuned to these issues. They will have a view of
which business models and management teams are therefore best
placed to retain value through the cycle.
Covid-19 has been indiscriminate in whom it infects, and doing
so it has become everyone’s problem. Those with the best chance
of fighting it are doing so collaboratively across a broad range of
stakeholders. The Covid-19 crisis reminds us of the power of working
proactively with all stakeholders to achieve shared value outcomes.
Lesson 3: Understanding the science
As a consequence of its focus on ESG issues, the field of RI relies
on scientific data to make the business case for sustainability.
Most asset managers with a focus of RI will thus have a clear
understanding of the science behind climate change and
the attendant risks and opportunities. Notwithstanding this, in
the current age of populist politics, the role of science has
increasingly taken a back seat.
Despite being one of the most scientifically peer-reviewed
publications produced by humanity, the Intergovernmental
The Covid-19 crisis reminds us of the power of working proactively
with all stakeholders to achieve shared value outcomes.
26 www.bluechipdigital.co.za

GREEN ECONOMY
Panel on Climate Change assessment reports failed to inspire
political leadership. Although the Covid-19 crisis is more near
term compared to climate change, it is instructive to see how
rapidly political leaders, despite
their differing views, have fallen
in line with prevailing medical and
scientific consensus.
The lesson of Covid-19 is don’t forget the science. Importantly
those asset managers with these specialist skills will be well placed
to look ahead. As tough as the lessons from Covid-19 crisis are we
expect that they will strengthen RI as an approach to investments.
ESG is a good to have
Like all funds, sustainable equity funds suffered large and sudden
losses of value in the first quarter of 2020 due to the global
coronavirus pandemic. Direct Morningstar report that sustainable
investment funds held up better than conventional
funds during this period. They report
that seven out of 10 sustainable
equity funds finished in the
top halves of their Morningstar
categories, and 24 of 26 environmental,
social, and governancetilted
index funds outperformed
their closest conventional
counterparts.
ESG funds favour companies
with better ESG credentials and
as such, they can be expected
to manage their environmental
impacts, treat their stakeholders
well, and ethically govern themselves.
It appears that such
busi-nesses have been more resilient during this crisis and are
showing themselves to be the new ‘quality companies’ of the
21st Century. Strangely, the Covid-19 crisis has provided a good
litmus test for the quality management argument around ESG
investing and provides further support to the idea that ESG
integration is not just a nice to have, but it is also a good to have.
Perusing Green Growth
As society seeks to rebuild in a post-Covid-19 world, we expect
the idea of Green Growth to continue to gain traction. The notion
of Green Growth rose in the aftermath of the last financial crisis
as alternative growth path, one guided by climate awareness,
resource efficiency and social inclusion. At a global level, Green
Growth features in national growth strategies and the EU is
putting in place legislation to drive and incentivise these kinds of
outcomes. At the local level, National Treasury recently published
a technical paper on Financing a Sustainable Economy and work is
underway to develop a Green Economy taxonomy for South Africa.
Green Growth is not only a scientifically bounded economic idea
but is also as a set of globally consistent consumer preferences, as
more and more consumers align with the sustainability agenda.
Doing more with less has always been a good idea, as has caring
for the environment along with being a good neighbour.
The lesson of Covid-19 is don’t forget the science.
What next?
It is not clear what’s next, the Covid-19 pandemic is unprecedented
in modern times. There is much we don’t know about how this
plays out however what we do know is that the world will be
much changed. Our sense of interconnectivity will be enhanced,
we’ll have learnt that it’s not just returns that matter and that
business-focused term shared value outcomes will survive.
For too long we have bought into the notion that short-term
market relief while extending long-term social and environmental
decline, is a good idea. The current moment provides aninteresting
opportunity to align Covid stimulus packages with longterm
sustainable outcomes. Is this the moment the world
decides to shift towards a global economic path that is low
carbon, resource-efficient and socially inclusive?
Jon Duncan, Head of Responsible
Investing, Old Mutual Investment
Group. Jon has over 23 years of
experience in the field of sustainability
research and engagement.
He has led the Responsible
Investment Programme at Old
Mutual for the past 10 years.
His focus is on driving the
systemic integration of material
environmental, social and
governance (ESG) issues into
the products and services of
Old Mutual Investment Group.
www.bluechipdigital.co.za
27

INVESTMENT STRATEGY
Investors have been saddled with far
greater responsibility in recent decades
as defined contribution schemes
replaced defined benefit schemes.
Along with investors living longer, this
creates a challenge for retirement planning.
CoreShares Asset Management took
a fresh look at this challenge through a
scientific lens. Evidence-based investing
is an investment strategy that is not
influenced by short-term market trends or
predictions. Instead, it relies on accurate
facts and credible analysis (published
and peer-reviewed) – to make calculated,
unbiased decisions. The result for an
investor is a higher likelihood that they will
achieve their investment goals.
events like the Covid-19 crisis. Here, we
have explored an approach that is focused
on key controllables across asset allocation,
cost management and diversification and
uses Smart Beta to align client goals with
the portfolio.
The evidence: asset allocation
CoreShares assessed the inflation goal
and converted it into a target of CPI+3%.
We saw that across any rolling seven-year
period over the last 118 years, equity
outperforms this benchmark 76% of
the time, while bonds only have a 37%
chance of beating it. We concluded that
to provide inflation protection, a longterm
asset allocation needs enough risky
We also weighed up the effectiveness of
using tactical asset allocation (or “tilting”)
to take advantage of any short-term market
trends to improve performance. We examined
15 years’ performance history in the
(ASISA) Low Equity category and found
that managers lowered their chances of
beating a CPI+3% benchmark by using
tactical asset allocation (only overthrowing
the benchmark 32% of the time). Had they
simply stuck to their long-term strategic
asset allocation, they would have beaten
this benchmark 48% of the time.
The evidence: costs
There has been plenty of focus on costs
in recent years, especially as local equity
Controlling the “controllables”
in uncertain times
Using evidence-based investing principles to meet investment goals
Approaching the investment challenge
We started with the assumption that, in
retirement planning, advisors must help
investors work out the amount of income
they can draw, and how much they can
increase this each year to maintain their
lifestyle (i.e. inflation protection). They must
also help investors choose investments
that are unlikely to result in permanent loss
of capital. These investment goals are to:
• Create enough income
100% 100%
• Protect against inflation
100%
80% 80%
• Protect capital
80%
60% 60%
An evidence-based investor approaches 100%
60%
40% 40%
this problem by first starting with the
40% 80%
20% 20%
“controllables”. These are decisions we
20%
0%
make based on reliable data and history 60%
0%
– such as asset allocation, diversification
40%
and fees.
We try to avoid making decisions based 20%
on the “uncontrollables” or speculative
0%
forecasts, for example, trying to predict
short-term market performance or macro
28 www.bluechipdigital.co.za
assets to deliver the required returns with
a high level of probability. While equity is
considered a “risky” asset, and will certainly
introduce higher levels of volatility into a
portfolio in the short-term, the risk of
having too little exposure to this ‘risky’ asset
class is of failing to beat the benchmark and
satisfy the goal of inflation protection over
Keeping Keeping the goal the in mind: goal in The mind: Importance 60% The Importance of Equityof Equity 60%
Keeping the Keeping goal the in the mind: long goal term. The in mind: Importance The Importance of Equityof Equity
60%
markets have delivered a disappointing
performance, with investors scrutinising
where each basis point of their performance
has gone.
Some investors still argue that they are
Does Tactical Asset Allocation improve
Does Tactical Asset happy Allocation to pay Does higher improve Tactical fees performance?
Asset to a Allocation manager that improve performan
Does Tactical Asset Allocation improve performance?
Does Tactical delivers Asset superior Allocation performance. improve performance?
But is this
Impact of TAA on return predictability
Impact of TAA on return predictability
necessarily the case? 60% Impact of TAA on return predictability
Morningstar says that
Impact of TAA on return predictability
Does Tactical the goal The of
“the Does single Tactical Asset Impact largest Allocation Asset of TAA on determinant 50% Allocation return predictability improve improve of performance?
a fund’s performance?
Keeping the Keeping goal in mind: in The mind: Importance The Importance of Equityof Equity
48,18%
48,18%
50%
Keeping the goal in mind: Does The Tactical
60%
Importance Asset
50%
of Allocation Equity improve performance?
48,18%
Does Purchasing Tactical Power Purchasing Power Asset Allocation 50% improve 40% performance?
48,18%
40% 50%
40%
Purchasing Power Purchasing Power
Impact of TAA Impact on return of TAA predictability on return predictability 32,05%
100%
KEEPING 100%
THE 90%
GOAL IN MIND: 90%
32,05%
THE IMPORTANCE Power
OF EQUITY 60%
DOES 60%
TACTICAL ASSET ALLOCATION
32,05%
Purchasing Power Purchasing Power
40%
30%
IMPROVE PERFORMANCE?
90% 90%
75,67% 75,67% 30% 40%
30% 32,05%
80% 100% 100% 90% 75,67%
80% 90% 75,67% 90%
32,05% Impact of TAA on return predictability48,18%
48,18%
62% 50% 62% 50% 30%
20%
Purchasing Power
60%
75,67%
80% 60%
75,67% 75,67% 62% 20% 60% 62% 30% Impact of TAA on return 20% predictability
80%
90%
60%
62% 62% 40% 62%
36,90%
40% 20%
10%
36,90%
40% 60% 40%
10%
60%
20%
36,90% 36,90%
32,05% 10% 32,05%
48,18%
50%
75,67%
30% 30% 10%
0% 48,18%
20%
36,90%
40%
20%
36,90%
40%
50%
0%
36,90%
10%
0%
Average Manager TAA Consistency
Average M
Average Manager TAA Consistency
Average
0% 0%
20% 20% 62%
Manager SAA TAA Consistency Consistnecy
Average Manager SAA Consis
40%
0%
20% 20%
0%
Equity Equity
Bonds Bonds
Average Manager Source: TAA Consistency
Morningstar. Historic probability of Average relative three Manager year rolling outperformance SAA Consistnecy relative to CPI +
40%
Source: Morningstar. Historic probability of relative
Equity Equity
Bonds Bonds
Average three 32,05% Manager year rolling Source: outperformance TAA Consistency
Morningstar. relative Historic ASISA CPI probability +3%. Multi-Asset of Average relative Low Equity three Manager Category year rolling for outperformance the SAA period Consistnecy
July 2005 relative to end to CPI December +3%. 2019
ASISA Multi-Asset Low Equity
0% 0%
10% Category for the 10% period July 2005 to end ASISA December Multi-Asset 2019 Low Equity Past Category performance the is period not an July indication 2005 to of end future December performance. 2019
Past
30%
performance is 32,05%
not an indication of future performance. Source: Morningstar. Past Historic performance probability is not of an .
relative indication three of year future rolling performance. outperformance relative to CPI +3%.
Probability Equity of Maintaining Probability Purchasing of Equity Maintaining Equity Power Purchasing Probability Power . of Bonds Maintaining Probability Purchasing of Maintaining Bonds Bonds Power Purchasing ASISA + 3% Multi-Asset Power . Low Equity + 36,90%
Source: Morningstar. Historic probability of relative three 3% Category year rolling for outperformance the period July 2005 relative to end to CPI December +3%. 2019
Probability of Maintaining Probability Purchasing of Maintaining Power Purchasing Probability Power 30% of Maintaining Probability Purchasing of Maintaining Power Purchasing + 3% ASISA 0% Multi-Asset Power + Low 0% 3% Equity Past Category performance the is period not an July indication 2005 to of end future December performance. 2019
Past performance is not an . indication of future performance.
Average Manager Average TAA Manager Consistency TAA Consistency Average Manager Average SAA Manager Consistnecy SAA Consistnecy
.
Probability of Maintaining Probability Purchasing of Maintaining of Power Purchasing Probability Power Power of Maintaining Probability 20%
Purchasing of Maintaining of Power Purchasing + 3%
Power Power + 3% + 3%
Source: Morningstar. The 1901-2019. Source: evidence Morningstar. Historic probability 1901-2019. of shows Historic 20% outperforming probability CPI that returns of outperforming over the a 7 year CPI rolling goal returns period. over a of 7 year inflation rolling period. protection can be met with greater
certainty by using an appropriate asset allocation (enough risky assets) and sticking
to it (only Equity using strategic asset allocation and no Bonds tactical asset allocation).
0%
0%
Average Manager TAA Consistency
Average Manager SAA Consistnecy
Probability of Maintaining Purchasing Power Average Manager Probability TAA Consistency of Maintaining Purchasing Average Power Manager + 3% SAA Consistnecy
Source: Morningstar. Source: Historic Morningstar. probability Historic of relative probability three year of relative rolling three outperformance year rolling outperformance relative to CPI +3%. relative to CPI +3%.
Source: Morningstar. 1901-2019. Source: Morningstar. Historic Past performance probability 1901-2019. of is outperforming not
Historic Past an performance indication
probability CPI of returns is future
of not outperforming an over performance. indication a 7 year CPI of rolling future returns period. performance. over a 7 year rolling period.
ASISA Multi-Asset ASISA Low Equity Multi-Asset Category Low for Equity the Category period July for 2005 the period to end July December 2005 to 2019 end December 2019
Past performance is not Past an indication performance of future is not performance.
indication of future performance.
10%
Past performance Past is not performance indication is not of future an indication performance. of future performance.
Source: Morningstar. 1901-2019. Source: Source: Morningstar. Historic Morningstar. probability 1901-2019. 1901-2019. of outperforming Historic Historic probability probability CPI returns of outperforming of over outperforming a 7 year CPI rolling returns CPI period. returns over a over 7 year 7 rolling year rolling period. period. .
.
Past performance is not Past an indication performance Past performance of future is not performance.
is not indication indication of future of future performance. 10% performance.
Source: Morningstar. Historic probability of relative three year rolling outperformance relative to CPI +3%.
ASISA Multi-Asset Low Equity Category for the period July 2005 to end December 2019
Source: Morningstar. Historic probability of relative three year rolling outperformance relative to CPI +3%.
Past performance is not an indication of future performance.
ASISA Multi-Asset Low Equity Category for the period July 2005 to end December 2019
.
Past performance is not an indication of future performance.
Source: Morningstar. 1901-2019. Historic probability . of outperforming CPI returns over a 7 year rolling period.
Past performance is not an indication of future performance.

future success is the costs it charges” and
our research shows that on average, the
most expensive funds underperform.
In the chart on page 29 (top left), we
divided the low equity managers into
quartiles based on fees. The most expensive
quartile only beat the benchmark 25% of
the time, while the cheapest quartile beat
the benchmark 46% of the time. This might
effective and efficient way for investors to
implement the appropriate strategic asset
allocation is to use low-cost funds as the
building blocks, where indexation (aka
passive investing) plays an important role.
This is particularly useful in the low-yield
environment in which South Africans have
found themselves in recent years: every
basis point counts.
The evidence: capital protection
Harry Markowitz claimed that “Diversification
is the only free lunch in investing” and
this certainly applies to capital protection
in the world of multi-asset investing. By
making sure portfolios are sufficiently
diversified across geographies, industries
and companies, we can limit exposure to
any possible unforeseen company failure
or event particular to a region or sector.
Using passive strategies as the building
blocks to implement the asset allocation
decision is a precise and accurate way to
Helping investors “stay the course” and not panic-sell during volatile periods
adds significant value to a client’s total return in the long term.
&P PIVA: South S&P SPIVA: SPIVA: Africa
look
South S&P
like
S&P 50 Africa
a
South
negative
South 50 Africa
correlation,
Africa 50but 50it is a make sure you get the exact exposure you
causal link and not a correlation. The higher have chosen and remain well diversified.
fees erode the performance that investors Using index strategies as the building
receive. We conclude that the most blocks also brings a second benefit:
S&P South S&P African South 50 S&P African index S&P South outperformed 50 South African index African outperformed 50 index over 50 index 96% outperformed of over 96% added of over over 96% increased 96% of of certainty. By using a
South Africa South Equity Africa Funds South SPIVA: Equity South S&P over Africa SOUTH Funds Africa a 5 Equity AFRICA year over Equity 50 period Funds a 5 Funds year over period over a 5 year a passive 5 year period period fund, we avoid the risk that comes
100
ping the
100 100
goal in mind: Lowering Manager with selecting Selection an active Risk manager. The
goal
90
in
90
mind:
90
Lowering Manager 96,2Selection most recent Risk 96,2S&P Index V Active (SPIVA)
80 80 80 97,9 97,9 97,9 97,9
ind: 85,3Lowering Manager 85,3 85,3 Selection Risk reports that over 96% of active managers
70 70 70
in South Africa have underperformed
the Top 50 index over a five-year period
ended 31 December 2019. [1] The difference
60
50
40
30
20
10
0
Predictability && & Cost: Cost: Impact of of cost of cost cost on on on achieving CPI CPI CPI goals goals goals
3,0% 3,0% 3,0%
2,5% 2,5% 2,5%
2,0% 2,0% 2,0%
1,5% 1,5% 1,5%
1,0% 1,0% 1,0%
0,5% 0,5% 0,5%
0,0% 0,0% 0,0%
PREDICTABILITY & COST:
IMPACT OF COST ON ACHIEVING CPI GOALS
25% 25% 25%
29% 29% 29%
40% 40% 40%
Avg Avg TER Avg TER TER
Consistency
Source: Source: Morningstar. Source: Morningstar. Morningstar. Historic Historic probability Historic probability probability of relative of relative of three relative three year three year rolling year rolling outperformance rolling outperformance outperformance relative relative to relative CPI to +3%. CPI to +3%. CPI +3%.
ASISA ASISA Multi-Asset ASISA Multi-Asset Multi-Asset Low Low Equity Low Equity Category Equity Category Category for the for July the for 2005 July the 2005 July to end 2005 to December end to December end December 2019. 2019. 2019.
Past Past performance Past performance performance is not is not is indication an not indication an indication of future of future of performance. future performance. performance.
60 60
50 50
40 40
The Alpha
30 30
between picking The Alpha Dream
one of the top performers
20 20
The Alpha
Dream
versus one of the bottom performers
Dream
10 Keeping 10 the goal in mind: Lowering introduces unnecessary Manager uncertainty Selection into a Risk
0 0
multi-asset portfolio.
1 Year 1 Year 1 Year 3 Years 1 3 Years 3 Years 5 Years 3 5 Years 5 Years 5 Years
350
300 300
KEEPING THE GOAL IN MIND:
th Source: Africa SPIVA 30 June South 2019 Source: Africa Source: SPIVA 30 June South SPIVA 2019Africa South 30 Africa June 30 2019 June 2019
250 250
KEEPING THE GOAL IN MIND:
is Past not performance indication is Past of not future Past indication performance.
LOWERING is of not future an is indication not performance.
MANAGER indication of future SELECTION of performance.
future performance.
LOWERING MANAGER SELECTION RISK
RISK
200 200
150
150
46% 46% 46%
The evidence shows that using lowcost
passive funds that deliver better
performance helps meet the goal of
creating reliable income streams,
as well as inflation protection.
50% 50% 50%
45% 45% 45%
40% 40% 40%
35% 35% 35%
30% 30% 30%
25% 25% 25%
20% 20% 20%
15% 15% 15%
10% 10% 10%
5% 5% 5%
0% 0% 0%
The Alpha
Risk
2013/11
2012/03 2010/07
2014/04
2012/08 2010/12
2014/09
2013/01 2011/05
2015/02
2013/06 2011/10
2015/07
2013/11 2012/03
2015/12
2014/04
2010/02
2012/08
2016/05 2010/07
2014/09 2013/01
2016/10 2010/12
2015/02 2013/06
2017/03 2011/05
2015/07 2013/11
2017/08 2011/10
2015/12 2014/04
2018/01 2012/03
2016/05 2014/09
2018/06 2012/08
2016/10 2015/02
2018/11 2013/01
2017/03 2015/07
2019/04 2013/06
2017/08 2015/12
2019/09 2013/11
2018/01 2016/05
2020/02 2014/04
2018/06
2014/09
2016/10
2018/11
2015/02
2017/03
2019/04
2015/07 2017/08
2019/09 2018/01
2020/02 2018/06
100
100
2015/12
2016/05
The Alpha
Risk
2018/11
2016/10
2019/04
2017/03
2019/09
2020/02
The Alpha
Risk
2010/02 2010/12 2011/10 2012/08 2013/06 2014/04 2015/02 2015/12 2016/10 2017/08 2018/06 2019/04
S&P SA 50 Worst Fund Best Fund
S&P SA 50 Worst Fund Best Fund
S&P SA 50 Source: Morningstar. Worst Fund 10 Years cumulative Best returns Fund ended 29 Feb 2020, ASISA General Equity fund category.
Past performance is not an indication of future performance.
Worst Fund Best Fund
orningstar. 10 Years cumulative returns ended 29 Feb 2020, ASISA General Equity fund category.
ormance is not an indication of future performance.
mulative returns ended 29 Feb 2020, ASISA General Equity fund category.
ation of future performance.
GRAPHICS COMPILED BY CORESHARES. DOWNLOAD THESE STATS AND FACTS FROM OUR WEBSITE –
9 Feb 2020, ASISA General Equity fund category.
ce.
www.bluechipdigital.co.za/featured/controlling-the-controllables/
2017/08
2018/01
2018/06
The evidence shows that using reliable, well-diversified
strategies (such as an index) as building blocks to implement the
asset allocation helps meet the goal of capital protection.
2018/11
2019/04
2019/09
2020/02
INVESTMENT STRATEGY
Meeting the goal mechanically
Much work has been done to quantify the
multi-faceted role that financial advisors
play, from tax advice to withdrawal strategies
and behavioural coaching, to name
but a few. For example, helping investors
to “stay the course” and not panic-sell
during volatile periods like the Covid-19
crisis, adds significant value to a client’s
total return in the long term. Morningstar
has termed this advisory role “gamma” and
calculates the value to be around 1.59% per
year. [2] Advisors must retain their margin
and keep delivering a high-quality professional
service in this way. Cutting fund
fees is a simple and effective way to improve
the investor’s bottom line, while the advisor
retains a well-deserved margin. Advisors
can bring more certainty to retirement
planning by minimising the moving parts
and using evidence-based investing
principles to meet investment goals
mechanically, with greater certainty.
[1] According to SPIVA reports published
from December 2014 to December 2019
(a total of 11 five-year review periods),
active managers have, on average, underperformed
the benchmark 87% of the time.
[2] Morningstar Report: “Alpha, Beta, and
Now… Gamma” by David Blanchett, CFA,
CFP & Paul Kaplan, Ph.D., CFA, published
28 August 2013.
The Alpha
Dream
The Alpha
Risk
Michelle Noth, CFA, Client Coverage Executive
at CoreShares Asset Management. CoreShares
offers a range of multi-asset funds that employ
the principles discussed in this article.
www.bluechipdigital.co.za
29

INVESTMENT TRENDS
A better
– and very different –
tomorrow
As a consequence
of Covid-19,
the future will look very different from what we now imagine
Following the endless stream of
Covid-19 headlines, extended
lockdowns and associated economic
hardships, we are all suffering
from Armageddon fatigue. It is easy to
become pessimistic in the face of the very
real challenges we are grappling with.
But history teaches us that periods of
disruption and uncertainty go hand-inhand
with innovation, sparking a wealth
of investment trends and opportunities.
The Covid-19 pandemic will force
sectors to fast-forward changes, which
otherwise may have taken years to come
about, and industries are likely to be either
materially reformed or made redundant.
As Dr Peter Diamandis and Steven
Kotler note in their book, Abundance,
artificial intelligence, robotics, digital
manufacturing, nanomaterials, synthetic
biology and other rapidly developing
technologies will enable us to make
greater gains in the next two decades than
we have made in the last 200 years.
The sweet spot of
investing remains
unchanged: investing
in good companies
at great prices.
Consider, for instance, that in the 1900s,
around two-thirds of the Dow Jones
Industrial Average was made up of railroad
stocks. Today, a large portion of the
US index is instead made up of technology
and healthcare companies –
companies whose roles have become
even more prominent amidst new social
distancing norms and the hunt for a
vaccine, and whose agility, scalability
and automation lead us into the future.
By contrast, it will come as no surprise
that stocks in ”BEACH” industries (booking,
entertainment and live events, airlines,
cruises and casinos, and hotels and resorts)
have declined by more than $332-billion
this year. (To put this in perspective, that
figure is equivalent to the GDP of Israel.)
The graph above illustrates just how far
global travel and entertainment companies
have fallen.
Some have speculated that once a
vaccine is available, pent-up demand and
millions of would-be travellers suffering
from cabin fever will result in a V-shaped
CHART 1: BEACH STOCKS
recovery. On the other hand, this may
be hampered by significant job losses
in these sectors and beyond, and just
the threat of a global recession could
hamper a recovery in consumer spending
for some time to come. Depending on
how optimistic or pessimistic you are,
the shape and timing of a recovery is
anyone’s guess.
Source: Cannon Asset Managers, 2020
Where to invest for the future?
While no one knows exactly what the
future may hold, seeking to identify broad
themes or mega-trends may offer investors
a powerful advantage in decision-making,
as long-term investment success is all
about having a view of the direction in
which you think the world may be headed.
To this end, we see a future dominated
by more people – as people live longer
due to improvements in healthcare – and
more machines. And given the changes
30 www.bluechipdigital.co.za

INVESTMENT TRENDS
brought on by Covid-19, it is especially
worth considering the rapid digitisation of
industries worldwide.
In terms of investment trends, digitisation
of sectors is key. One local example
of this tucked away in the mid-cap sector
of the JSE, is Altron. As people rush to work
and socialise remotely, Altron’s security
and digital transformation services will
likely be much in demand for the foreseeable
future. And their acquisition of
Ubusha Technologies (the largest identity
security company in Africa) in 2019 has
proven prescient. The group is on an
undemanding price multiple of 11 times,
and with increased opportunities in a post-
Covid-19 world, this is an example of a great
investment case and an attractive price.
The payments sector is also ripe for
digitisation. For instance, Al Kelly, CEO of
Visa, notes that 56 countries have lifted
contactless payment limits this year to
support social distancing measures. While
e-commerce has traditionally comprised
14% of retail spending, we expect this to
increase dramatically globally. And while
Visa faces some headwinds due to a slowdown
in economic activity, it is wellpositioned
to capitalise on the digitisation
of payments.
With the limelight on healthcare,
these shares have generally enjoyed the
benefits of share price appreciation, a
streak of bullish earnings growth, as well
as high price-earnings ratings. Boston
Samantha Steyn, CFA
®
, Chief Investment
Officer, Cannon Asset Managers
Scientific, on the other hand, has not quite
shared in the uplift. This is mainly due to the
deferment of many elective procedures and
surgeries as healthcare workers respond
to a rise of critical patient care. These companies
have collaborated with hospitals,
universities and industry peers in an
attempt to find innovative ways to meet
the urgent demand for personal protective
equipment (PPE) and ventilators.
With an undemanding multiple of 14
times, a gross operating margin of 70% and
ROE of 41.6%, Boston Scientific is a great
investment opportunity, in the thick of the
economic fog. While speaking of structural
drivers, there is at least one caveat that
Yanga Nozibele, Investment
Associate, Cannon Asset Managers
must be considered. Crucially, the sweet
spot of investing remains unchanged:
investing in good companies at great prices
Amazon is a great example of a company
that will likely see increased or even
exponential growth. However, this is a
widely acknowledged fact, and therefore
the prospects are very much priced in.
Ultimately, the search for investment
returns will be found in those companies
that can benefit from the structural drivers
that will shape tomorrow’s investment
landscape, without paying for years of
sometimes inflated and – pandemic or no
pandemic – always uncertain, forecasted
earnings.
CHART 2: 20/20 HINDSIGHT
Source: Visual Capitalist, 2019
www.bluechipdigital.co.za
31

INVEST
GLOBALLY,
LOCALLY.
With Satrix, investing globally is as easy as investing at home. Our global exchange-traded
funds track the MSCI World Index, MSCI Emerging Markets IMI, S&P 500 ® and the Nasdaq-100 ® .
Access the power of these global markets at www.satrix.co.za.
Satrix Managers (RF) (Pty) Ltd (FSP no. 15658) is an authorised financial services provider and a registered and approved
manager in terms of the Collective Investment Schemes Control Act. A schedule of fees is available from the Manager.
OF INNOVATION

OFFSHORE INVESTMENTS
The currency and your ETF
A guide to helping your clients understand investing globally, locally
Have you ever wondered why the performance of your
global (exchange-traded fund) ETF sometimes looks like
it is moving in the same direction as the global index it
tracks and at other times it doesn’t?
If an investor holds the Satrix S&P 500 ETF, the Rand is used
to purchase this ETF and earns US dollar returns. There are,
however, two primary drivers of the performance of this ETF:
the Rand performance of the S&P 500 Index in US dollars, and
the Rand performance versus the US dollar. When investing
offshore, two levers need to work in your favour:
• The underlying asset needs to appreciate (i.e. the S&P 500), and
• the currency you are investing in should strengthen (or the
Rand weaken). If the Rand strengthens, this will offset any
growth achieved in the S&P 500.
Real-world example
Let’s assume you wanted to buy yourself a high-tech drone that
was not available in South Africa. You would probably use your
credit card and purchase this through a retailer in the USA.
Suppose the Rand/dollar exchange rate was R10/$1 and the
drone was priced at $1 000. Your purchase would cost you R10 000.
Assume a year later, you wanted to sell your drone. The price for it
in the USA has increased to $1 100, but the value of the Rand
has strengthened to R9/$1. In Rand terms, it is now only worth
R9 900, even though in dollar terms it has increased in value
to $1 100.
The weakening of the dollar (strengthening of the Rand)
would have devalued your purchase, even though it is worth
more in dollar terms. You probably wouldn’t find many
buyers at R11 000 ($1 100 x R10/$1), as they would be able to
purchase it for R9 900 at the current exchange rate, directly
from the retailer.
The same approach is used when valuing ETFs, except
this occurs on a real-time basis throughout the JSE’s
trading hours. To illustrate the performance of the Satrix
S&P 500 ETF we have plotted the following chart (see
opposite). Each line represents the cumulative compounded
performance starting at the close of 31 Dec 2018 through to the
close of 14 May 2020. A description of each line follows:
S&P 500 (USD) This is the performance of the S&P 500 Total
Return Index in US dollars, and is the performance we want
from our underlying investment in US dollars. It cumulatively
returned 17% over this period.
USD/ZAR This is the performance of the dollar versus the Rand.
On 31 Dec 2018, it closed at R14,38/$1 and strengthened to
R18,60/$1 (Source: IRESS).
S&P 500 (ZAR) This is the performance of the S&P 500 Total
Return Index in Rands. This is what our investment is tracking. It is
calculated by multiplying the S&P 500 Index level by the
exchange rate, as we did in the real-world example above. Over
the period it cumulatively returned 51,2%, because the weakening
Rand relative to the dollar added to the growth in the S&P 500
in dollar terms.
Investing offshore is a great way to diversify your investments,
but it does introduce currency risk, particularly if the currency
you have invested in gets weaker. Investing for the long-term and
having a disciplined approach to saving each month are timeless
strategies to grow wealth.
– Kingsley Williams, CIO, Satrix
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
S&P 500 (USD) USD/ZAR S&P 500 (ZAR)
51.2%
29.3%
17.0%
Satrix Managers (RF) (Pty) Ltd (Satrix) a registered and approved Manager in Collective
Investment Schemes in Securities and an authorised financial services provider in terms of
the FAIS. Collective investment schemes are generally medium- to long-term investments.
Unit Trusts and ETFs the investor essentially owns a “proportionate share” (in proportion to
the participatory interest held in the fund) of the underlying investments held by the fund.
With Unit Trusts, the investor holds participatory units issued by the fund while in the case
of an ETF, the participatory interest, while issued by the fund, comprises a listed security
traded on the stock exchange. ETFs are index tracking funds, registered as a Collective
Investment and can be traded by any stockbroker on the stock exchange or via Investment
Plans and online trading platforms. ETFs may incur additional costs due to it being listed on
the JSE. Past performance is not necessarily a guide to future performance and the value
of investments / units may go up or down. A schedule of fees and charges, and maximum
commissions are available on the Minimum Disclosure Document or upon request from the
Manager. Collective investments are traded at ruling prices and can engage in borrowing
and scrip lending. Should the respective portfolio engage in scrip lending, the utility
percentage and related counterparties can be viewed on the ETF Minimum Disclosure
Document. The Manager does not provide any guarantee either with respect to the capital
or the return of a portfolio. The index, the applicable tracking error and the portfolio
performance relative to the index can be viewed on the ETF Minimum Disclosure Document
and or on the Satrix website. Performance is based on NAV to NAV calculations with income
reinvestments done on the ex-div date. Performance is calculated for the portfolio and the
individual investor performance may differ as a result of initial fees, actual investment date,
date of reinvestment and dividend withholding tax. Some funds may hold assets in foreign
countries and could be exposed to risks such as potential constraints on liquidity and the
repatriation of funds, macroeconomic, political, foreign exchange, tax risks, settlement risks
and potential limitations on the availability of market information.
www.bluechipdigital.co.za
33

GLOBAL VULNERABILITY
Could Covid-19
have changed
financial planning
FOREVER
A crisis often presents both tragedy and opportunity
The Spanish Flu of 1918 was the
deadliest pandemic in history.
Estimates are that over 50-million
people died or 3 to 4% of the
global population. Over 60% of the South
African population was infected with
between 300 000 and 350 000 people
dying. According to Howard Philip [1] , a
South African historian of epidemics, South
Africa’s estimated mortality rate of 4.4%
made it the fourth worst-hit country in the
world after Western Samoa (22%), India
(6.2%) and Gambia (5.7%).
Mortality from the Spanish Flu mainly
afflicted those aged 18 to 35. Many young
families were left destitute by the death
of a breadwinner and many children were
orphaned. It took a tragedy of this nature to
“drive home the need for life insurance with
extraordinary sharpness” [2] . Life insurance
had been available in South Africa since
1835 but the Spanish Flu boosted the
industry to the next level. Arguably it
did the same for financial advice in the
form of the insurance broker, the primary
distribution channel for life insurance.
Many clients still see their insurance broker
as their financial planner. But the two
are not the same. I believe the Covid-19
pandemic provides the opportunity to
clarify this once and for all.
According to the World Economic
Forum [3] , anyone with the job title
“broker” will become redundant in the
21st century. Technology is disintermediating
brokers at a rapid rate. As Melitta
Ngalonkulu puts it, “The Covid-19 crisis
has triggered an unexpected change in
the insurance industry. Aside from making
people more aware of their mortality,
it’s also seeing them get cover through
digital channels” [4] .
Ngalonkulu reports that one local digital
provider of life insurance has seen a 40%
increase in business during the pandemic.
What the World Economic Forum predicted
is happening. It means selling, masquerading
as financial planning, is on the
way out. But I believe Covid-19’s impact
could be even more dramatic than simply
adding impetus to this shift. I think it could
redefine the role of the financial planner,
just as the Spanish Flu redefined the role
of life insurance in people’s lives.
The World Uncertainty Index is now
at unprecedented levels, double that
of the 2008 Global Financial Crisis.
It is no surprise then that a recent
FPI Survey [5] of financial advisors
found that 80% of respondents
said their clients are “stressed” or
“very stressed”. Research by Gallup [6]
suggests that levels of worry and
stress have risen dramatically
in the United States. Recently
I have worked with various
groups of financial planners, most
of whom indicated their clients were
experiencing real emotional exposure.
Financial risk, too, is now at levels
perhaps never seen before. Unemployment
is at record levels around the world.
Even your clients who have not lost their
jobs or businesses are probably concerned
about savings and investments. 58% of
the FPI survey respondents reported that
their clients have raised concerns about
unemployment or reduced income; debt
management and protection of assets.
Neuroscientists tell us we are emotional
creatures who try to think. The response
globally to the Covid-19 pandemic is
evidence of this. Panic buying of toilet
paper perhaps best captures the emotions
of panic and fear that unfolded around
the world. The S&P 500 had its fastest fall
?
34 www.bluechipdigital.co.za

into the bear market territory in history.
Physical and financial risk combined with
clients. In contrast, the research found that
investors rated “Helps me stay in control
improved from dramatically.
As you think about innovating to keep
GLOBAL VULNERABILITY
up with constant change, don’t get stuck
on technology and forget about your
people. They may just end up working for a
business of life insurance, that has found but that’s a real not way all. to It has make
a magnified dent in traffic what congestion! it means to be human.
fear. A lethal cocktail of vulnerability. Brené of my emotions” the least important of 15 We are emotional creatures. We are social
no surprise, Brown, then, researcher that Ricardo and author Semler, whose a TED R20k, attributes and that the of a process financial usually advisor’s involved service.
highly successful, Talk on the innovative power of vulnerability industrialist is one four Before meetings. the pandemic, The potential clients client – it seemed had
and entrepreneur of the most from viewed Brazil, YouTube wrote TED a Talks experienced – valued technical so much skills value over in human just one skills.
References
creatures. We crave connection. We can
David experience Rock, The collective Neuroscience vulnerability. of Leadership And
– how Improving we feel Organisations impacts the decisions by Understanding
we make
book entitled
ever,
The
suggests
Seven
that
Day Weekend.
a combination
He aspect
of
of
Yet,
the
there
first
is
meeting
much behavioural
that they
finance
were the
about
Brain,
our
Talk
life
at
and
FPI
our
Convention,
money. The
2012
Covid-19
“uncertainty, risk and emotional exposure” research to show how investors’
encourages employers to think differently moved to ask if this was R20k per meeting Morgan Housel, The advantage of being a
equals vulnerability [7] . Few have escaped emotions get the better of them The virtual HUMANS UNDER MANAGEMENT
about how they manage their people, and – not because they didn’t want to pay the little underemployed, www.collaborativefund.
this feeling during the pandemic.
when investing and working SA CONFERENCE on 8 SEPTEMBER 2020
more importantly, how to get the best out fee but because they thought given the com, 17 May 2017
We have probably experienced, for towards financial goals. The offers financial planners the opportunity
of people. the He first argues time, that a dose technology of collective that global value importance they had already of this experienced, work is this Ricardo Semler, The Seven Day Weekend,
was supposed vulnerability. to make Prompted life easier by such information as was a reflected possibility.
to
in the fact that in the past
Penguin
hear financial
Publishing,
planners
2004
and experts
laptops, cellphones overload and and international email, has actually
share
travel that 20 years, three experts in the field:
Robert relevant Booth, Four-day insights week: about trial and finds the lower
encroached helped on the people’s virus travel free time. to almost all corners The value Daniel in Kahneman, people Vernon Smith application stress and of increased relevant productivity, human skills www. in their
But as of he the says, world. this The can last be time a good large thing sectors In of a knowledge-based and Richard Thaler economy, have received when you engagements theguardian.com, with 9 clients. February Find 2019out more
if you have society the autonomy shut down to in get this your way was work during are providing the Nobel a Prize professional for Economics service for based at www.humansundermanagement.com
McKinley Corbley, Microsoft Japan Recently
done on the your Second own terms World and War. to But blend the your effect was on knowledge, their work in experience, the field. It thinking seems and Gave their Employees a 4-day Week – and
work life
only
and personal certain
life.
parts
He suggests
of the world.
that
And
interpersonal
that clients
skills,
don’t
to
know
quantify
what the
anything
experts
Productivity
pandemic
Skyrocketed
has clarified
by
for
40%,
us that
www.
it is a
even countries in the heart of the conflict, know…yet.
non-negotiable for financial planners to
innovative employers will eventually realise in terms of time – be it your employees’ goodnewsnetwork.org, 8 November 2019
such as Britain, were able to send their The challenge for financial planners is develop the human skills that help clients
that people may be more productive if they working hours or the time spent with a LinkedIn Talent Solutions, 2019 Global Talent
children off to the countryside to escape to demonstrate to clients how important not only manage their emotions but make
have the flexibility to decide for themselves client – is a disservice to the value that Trends Report, 2019
the traumas of the war. In 2020, children human skills are to the service they provide. and implement sensible decisions about
when to have work been and in play, lockdown rather around than the the world. financial planners and their staff potentially Samantha their life and McLaren, money. How And these for the 4 Companies
clients of
employer There deciding. has been Rather no escape than from time the in, impact can add to Empathy their clients’ lives. drives are financial Embracing planners Flexible who work don’t – and have Why these You
employers of ideally Covid-19. should This focus experience on value of out. collective So the opportunity is ripe for the picking Should human Too, skills, www.businesslinkedin.com, the choice to go the Robo 22
connection, and
The vulnerability importance presents of the value challenge was and to innovate with respect to how you get May advice 2019 route will be easy.
highlighted the opportunity for me recently for financial when planners I met to and emotional keep people and connection
make them more
with a financial redefine planner their role who with related clients. how productive. LinkedIn’s 2019 Global Talent
they helped Recent a potential research client by PortfolioMetrix resolve a Trends [8]
Report
is
indicates
what
that
clients
over 30% of
dilemma suggests about their that financial future retirement.
advisors believe job-seekers are will turn desperately
down a job if there are
empathy is the most important attribute
They helped the client assess retirement not flexible work arrangements. Computer
or service that they offer clients. This makes
options in a more rigorous and creative giant Dell needing implemented in flexible the work
sense as Brené Brown suggests a remedy
way than if the client had simply tried practices in 2009. US healthcare company
for vulnerability is empathy. She believes wake of Covid-19.
to do it empathy on their drives own. connection, No doubt and emotional the Humana did the same in 2016, using
experience connection and thinking is what that clients this are planner desperately technology The collective to enable vulnerability call-centre we workers have all
had done needing over in many the wake years of Covid-19. made this to work experienced from home. in the Covid-19 pandemic may
meeting very Pre-pandemic impactful. research by Morningstar [9] More just have recently made that Microsoft challenge a in little Japan easier.
When found it came that to discussing financial advisors the financial believe that experimented Spanish with Flu accelerated a four-day the week growth for of
planning helping fee, the their planner clients mentioned stay in control that their of the employees. life insurance Without industry, an adjustment
and Covid-19 Rob Macdonald, Head of of Strategic Advisory
the upfront their financial emotions is planning a key service fee they was offer in remuneration. will remind us The again result? of the Productivity
importance Services at Fundhouse
[1] ‘Black October’: The Impact of the Spanish Influenza Epidemic of
1918 on South Africa. By Howard Phillips, Archives Year Book for
South African History, Government Printer, Pretoria, 1990.
[2] Assessing the Impact of a Pandemic on the Life Assurance Industry
in South Africa. A paper by Andre Dreyer, Grete Kritzinger and
Jethro de Decker, presented to the 1st IAA Colloquium, 10-13
June, 2007, Stockholm, Sweden.
[3] The Future of Jobs Report. The World Economic Forum, 2018.
[4] Covid-19 is shaking up the insurance sector. Article by Melitta
Ngalonkulu published on Moneyweb, 23 June 2020.
44 www.bluechipjournal.co.za
[5] The Impact of Covid-19 on CFP © Professionals and their Clients.
Financial Planning Institute of Southern Africa. April 2020.
[6] Gallup Health and Wellbeing Index & Gallup Panel, 2019 & 2020.
[7] Dare to Lead. Brené Brown. Penguin, Random House, London.
2018.
[8] The Insider’s Guide to the Value of Advice. A PortfolioMetrix White
Paper. May 2020.
[9] The Value of Advice. What Investors Think, What Advisors Think,
and How Everyone Can Get on the Same Page. Morningstar. The
Investor Success Project. 2019
www.bluechipdigital.co.za
35

FINANCIAL PLANNING
What inspired you to leave the corporate world to start your
own business?
Forty years ago, I started my career in financial planning and realised that
the idea of starting my own business would be a captivating concept
and would leave a legacy for my family. That’s when I decided it was time
for me to leave the corporate world and pursue my passion, by offering
support to the financial industry. The journey of building my own business
four years later has left me with no regrets in leaving the comfort of the
corporate world.
My sincere appreciation and gratitude to my husband Ravi, and
children Surushka, Tisha and Keagan, for my inspiration to allow me to
follow my dreams and who had believed in me; the mere fact that I have
been able to turn my passion into a successful career is greatly down
to their continuous encouragement. I get to decide the measures of my
success. Whatever limits that exist is my creation.
What is unique about your business and the service you offer?
STK Advisory Connect came together to build an innovative wealth
management company to offer a distinctive business, one built on values
and understanding a code of ethics with a focus on people’s needs,
innovation and creating meaningful impact.
Our belief is that if you get the culture right most of the other aspects
such as superior customer service or building a long-term brand or
empowering passionate employees and clients will form on its own.
We drive efficiencies, manage risk and compliance and achieve client
outcomes to enable profitability and reduce costs.
Our mission is to employ graduates who intend to enter the financial
services industry or are considering it as a career, so that they can become
accustomed to this environment. This forms a platform to apply and
extend their knowledge base from tertiary level to that of the real world.
Our vision is sustainable financial strength for all South Africans
because in this industry we choose to stand up rather than stand by;
deep roots, strong mindset, clear vision and empowering positive growth.
INNOVATIVE
WEALTH MANAGEMENT
Our mission is to employ
graduates who intend
to enter the financial
services industry or are
considering it as a
career, so that they can
become accustomed
to this environment.
SUSTAINABLE FINANCIAL STRENGTH
Blue Chip interviews Nevathee Moodley,
Director of STK Advisory Connect, a femaleand
black-owned business that provides a
support service to financial planning businesses
primarily around the use of technology

FINANCIAL PLANNING
What has been your biggest challenge as a blackowned
business?
The industry that we support has primarily been a maledominated
world. I am assured that we can take our rightful place
alongside our male counterparts, understanding fully that we need
collaboration and respect for each other. The Covid-19 pandemic
has shown once again how countries governed by women have
had the lowest statistics, managed in a strategic and proactive way.
Bias, stereotypical thinking and gender inequality are all
limitations and have no place if we want to empower, grow,
become people of integrity and set the path as role models;
become worthy examples for the younger generation.
What are the challenges currently facing independent
financial planning businesses?
Financial advisors have a myriad challenges facing them in
their practices. I believe their biggest challenge is probably
moving from commission to fee-based business. In addition,
the other key drivers for improvement are compliance and
regulatory requirements. Advanced technology will therefore
be a significant enabler. Businesses need to evolve and to be
relevant with the rest of the world in order to be successful.
What is the biggest challenge in providing support to
financial planners?
Streamline operations and automation. The Covid-19 pandemic
has accelerated changes in how we work. The biggest challenge to
support financial planners, wealth and portfolio managers would
be that time is money.
Another is changing the mindset of moving away from
spreadsheets and manual processes, to embracing the benefits
of improved technology.
Other challenges include:
• Data management
• Legacy systems
• Streamline operations and automation
How do you think technology is going to influence the role of
financial planning going forward?
Technology and innovation will play a key role in the industry,
which is rapidly changing. Digital transformation brings a whole
new world of opportunities. We have to embrace this age of
technology and use it to our fullest advantage especially in terms
of understanding trends and competing with global markets.
Technology will have major ramifications on accessibility,
information sharing and communication, and we need to
continuously use media and technology to become innovative
in our applications.
Please share an inspiring message for Women’s Month.
In this month dedicated to women, we as a female-owned and
managed enterprise would like to offer these words to encourage
you to follow your dreams and aspirations to reach those heights.
Know that the challenges that you face can only serve to build
you and make you even stronger. Face them with grace and
determination. Keep your inner sense of value and integrity close
to all decision-making in a “somewhat ruthless and cold” world.
There are many opportunities which await the eager and
fearless, if you allow them to be just that – opportunities. See
opportunities in everything. Never ever allow anyone to take
away your passion, energy and drive or
to dim your light. Shine in all that you
endeavour to achieve, without compromise,
malice or greed – the very vices
which plague our world today.
Always give back, realising that we
are all but part of a big puzzle and that
the spirit of Ubuntu has to be central
in all our greatest achievements.
Our vision is sustainable financial strength for all South
Africans because in this industry we choose to stand
up rather than stand by; deep roots, strong mindset,
clear vision and empowering positive growth.
Nevathee Moodley,
STK Advisory Connect
www.bluechipdigital.co.za
37

RETIREMENT
Retire
with flexibility
LIFESTYLE CHOICES FOR THE MODERN RETIREE
While all our lives have been put on hold for at least a few months as
a result of the lockdown caused by the Covid-19 pandemic, decisions
about our futures still have to be made, and this includes older people
making choices about the way they will live in their retirement.
38 www.bluechipdigital.co.za

RETIREMENT
Making the big decision to move to a new home
can be one of the toughest aspects of ageing. It is,
understandably, hard to consider moving out of a
home where you have spent years, or an entire lifetime,
creating memories with your family.
It is human nature to cling to what is familiar and to even be
averse to moving to new surroundings. However, at some point,
there inevitably comes a transition point where seniors either
choose full-blown retirement or decide to adjust their lifestyle to
allow for more flexibility. For most retirees, this means moving out
of the family home.
Today, it is the Baby Boomer generation that is looking to retire.
They are, according to Prieshka Taylor, Head of Marketing for
Evergreen Lifestyle Villages, “confident, optimistic, independent
individuals who value innovation, self-reliance, accomplishment
and change”. Taylor explains that they are still living active lives and
showing no signs of slowing down.
“We are seeing a trend in the retirement industry in terms of
which the Baby Boomer generation wants more flexibility from
their retirement options. They want to lead active lives, and many
of them still work in some capacity and want to be able to downsize
in stages,” she says.
The traditional retirement home model – the aged home – does
not fit these requirements. Instead, the focus must be on matching
the lifestyle of the modern retiree with their personal life stages.
Demand for modern retirement estates
“It is for these reasons that retirement lifestyle estate developers
are providing villages with far more flexibility to meet the needs,
requirements and constraints of today’s working retirees,” says Taylor.
“Developers must stay on the ball to ensure retirees feel
comfortable about moving into a new environment, knowing that
they have everything they need to live a full and active life.”
She adds that one of the main concerns of retirees is financial
security. Evergreen Lifestyle estates operate on the life rights model,
Making the big decision to move
to a new home can be one of the
www.bluechipdigital.co.za
39

RETIREMENT
and equipped care centres with 24-hour
nursing, frail and dementia care, offering
peace of mind should the need for these
facilities arise.
“The options are very flexible for our
residents,” explains Taylor. “They are able to
downsize from the family home and later
have the option to easily shift from a house
to an apartment within the same village.”
Access to amenities
Evergreen Lifestyle Retirement Villages
have good locations in different regions of
South Africa. Some homes are surrounded
by natural wetlands; others are located in
a quiet cul-de-sac overlooking majestic
in terms of which residents do not own the property
but rather acquire the right to live in the home for the
remainder of their (and their partner’s) life. Evergreen
villages also offer top security along with an array of
activities and amenities that encourage wellness, a sense
of community, access to continuous healthcare and
exceptional hospitality to residents.
“I’ve been here for four years and never looked back,”
says Sophia McKeller, a resident at an Evergreen Lifestyle
village. “People sometimes cling to things, afraid to make a
mind shift or to move away from what they know. You have
to take a leap of faith – I did, and I recommend it.”
Technology is essential
Many people of retirement age choose to continue working and
may do so until well past 65. Up-to-date technology in retirement
villages allows them to work from their retirement homes. This
option works well: the household-maintenance burden of staying
in the family home is removed, and the older person can live life
as they wish.
“Many of our residents are working well into their 70s, entering
this phase with a need to connect with their world,” says Taylor.
“They want to be active, fit and productive. The Baby Boomer
generation is looking for an environment that enables them to
fully enjoy their years, to function effectively and to remain vital.”
Flexibility is key
With this in mind, the new wave of retirees is not looking to go
straight from full-time work to a traditional retirement model.
Modern retirement estates meet this challenge by offering mature
residents the adaptability to downscale their accommodation
according to their changing needs over time.
Whatever property they select, all residents have access to
support such as personalised home-based and primary healthcare,
Making the
big decision
to move to
a new home
can be one of
the toughest
aspects of
ageing.
mountains. What they have in common are spaces that afford
their residents privacy, peace and a great quality of life along with
easy access to amenities and various community-centred exercise,
sporting and social activities.
Overall, the benchmark for a retirement offering should
be a place where lifestyle meets secure living in an environment
that combines
residential,
recreational and
quality healthcare
facilities so that
you can truly enjoy
the best years of
your life.
Prieshka Taylor is
Head of Marketing
at Evergreen
Lifestyle Villages
40 www.bluechipdigital.co.za

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FINANCIAL PLANNERS
Some things just
never change
Natasja Hart, Financial Planner of the Year 2010, looks back on a decade of change
The world in 2010 was a quite different place to the one
it is now, especially since Covid-19 ousted many of our
certainties. But even without that particular black swan,
much has changed, from the geopolitical to the purely
social. Back in 2010, the big news here in South Africa was the
Soccer World Cup, and the mad rush to get all the stadiums built
as well as the hotels and B&Bs refurbished. Planeloads of people
from all over the planet. Huge and happy crowds.
In at least one respect, the more things change, the more they
stay the same. One unchanging feature of the investment world
is the important – perhaps key – role that a financial planner plays
in helping individuals build and maintain an effective, successful
financial plan. Both planner and plan are essential to ensuring
financial stability precisely because so much else has changed.
To understand why the financial
planner, the plan and the long-term
relationship between advisor and
client remain so critical, one must
understand the profound nature of
the changes that have occurred.
South African investors
have developed a healthy
appetite for global markets.
The growing role of technology. The continuing and rapid
march of technology now defines both life and business.
Consumers generally are much more demanding than they
used to be, and they also expect similar levels of personalised
service from all their service providers, not just some. In the
context of financial planning, this means that clients expect
quicker, more direct access to their financial advisors and planners
across a range of channels.
Another key aspect of the digital revolution is that we have
all become accustomed to accessing unparalleled amounts
of information and, increasingly in these days of artificial
intelligence (AI), to interrogate it. In our world, this means that
clients want to have direct digital access to their portfolios
and plans at will. Increasingly, they are looking to their
advisors and planners also to provide
them with tools that make it easy to
test scenarios and alternative plans.
Both of these developments are
to be welcomed because they help
ensure that clients remain engaged
42 www.bluechipdigital.co.za

FINANCIAL PLANNERS
with their investment strategies, and thus more likely to
stick to them. Financial planners and investment advisors who
cannot meet these expectations will soon find themselves
losing clients. The forced virtualisation of so much of business over
the Covid-19 period has accelerated this trend, and even older
clients have become noticeably more digital.
The concept of tools that can be used to test various scenarios
raises another set of technology-related issues that impact on
our industry: the increasing use of AI has given rise to some
speculation that so-called robo-advisors might replace human
advisors someday soon. These predictions are somewhat
fanciful. On the one hand, there is no doubt that planners and
their clients will increasingly use smart technology like this to
help them, but I do not see any way to replace the human
element. Complex decisions
– and financial decisions are
getting more and more
complex – cannot be made
solely on logic and probability,
especially where humans
are involved.
Only a human advisor can empathise with a client’s strategy
and understand that there is more to it than just its parts, and only
a human can see the illogical connections that offer a solution.
And only a human planner/advisor, one should add, can help
a client overcome his or her emotional bias to make decisions
based on the short term despite their long-term implications.
A good example of this was the share price drop associated
with Covid-19 which, allied to the dire prognostications about
the long-term financial impact, caused a huge sell-off in equities
just a few weeks ago. It’s the human planner who can persuade
her client to stick with the plan, but also to adjust it when necessary.
One way in which technology has not delivered a promised
change is the long-heralded shift to paperless business. Quite
the opposite – it seems like technology has simply made it easier
to generate even more paper.
Markets have changed. A quick way to get a sense of the scale
of the change is to consider the Top 40 index on the JSE – the
companies on the list have changed and so have their rankings.
In 2010, BHP Billiton was the share with the highest weighting
(13.47%), followed by Anglo American and SABMiller. This
year, the top-weighted share is Naspers (18%), a communications
company, followed by BHP Group and Richemont, with
Anglo American having retreated to No. 4. Steinhoff, of course,
featured on the 2010 list.
Globally, the shift towards technology and communications
stocks has been much more profound than on the parochial
South African bourse. Recent moves have seen the technologyintensive
Nasdaq overtake the Dow Jones in terms of initial public
offerings, clearly mirroring the onward march of technology to the
centre of business as outlined above.
As the Fourth Industrial Revolution builds momentum,
companies associated with artificial intelligence, robotics,
machine learning and cybersecurity will grow in importance in
business – and investment portfolios. Biotechnology is another
hot area, and then there is the elusive promise of the
cryptocurrencies. Another big change is the growing interest in
socially responsible investing centred on environmental, social
and governance (ESG) criteria.
South African investors are going global. In 2010, the JSE
was still the focus for South African investors even though the
lifetime allowance of R4 million had been eased to R4 million per
year. It now stands at R10 million per year, plus the R1-million
discretionary allowance and South African investors have
developed a healthy appetite for global markets.
Regulations are affecting the industry. Financial markets
are highly regulated, and regulatory changes have supported
consumers’ desire to have
greater access to informa-
Both planner and plan are essential
to ensuring financial stability precisely
because so much else has changed.
tion as noted earlier, in the
technology section. Information
about fees and
commissions is now also
freely available.
Locally, a big change has been the emergence of the Financial
Service Conduct Authority (FSCA) which has oversight over the
whole industry. This is not an exhaustive survey of what has
changed, and the pace and scale of change simply seem to
increase. In tandem, so does the complexity.
In this constantly shifting environment, the security of a trusted
advisor who has expert knowledge and your financial wellbeing
at heart is more essential than ever before.
Natasja Hart, CFP®, FPI Planner of the Year 2010.
www.bluechipdigital.co.za
43

FPI
The impact of Covid-19 on CFP®
professionals and their clients
The Financial Planning Institute surveyed CFP® professionals
to find out what’s happening on the ground
A
n impressive 761 CFP® professionals completed the
online FPI survey conducted during April 2020 throughout
Southern Africa. Most responses came from Gauteng,
the Western Cape and KwaZulu-Natal, but all nine
provinces and several neighbouring countries were represented.
The survey underscores the FPI’s commitment to ensuring
that South Africans have access to the services of competent
financial planners who adhere to a professional code of ethics.
Making the most of the “new normal”
The survey provided concrete evidence that the financial planning
industry was hit to some extent by the pandemic but not as
hard as many other sectors of business. While the pandemic has
changed how all CFP® professionals work, a heartwarming 56% of
respondents said the pandemic would not change their long-term
professional or personal goals. “My business remains the same,
I just have to be nimble and able to adjust the way I do it!” said one
44 www.bluechipdigital.co.za

One thing that unites all CFP® professionals is their conviction that
the pandemic – and the associated economic impacts – has made
the financial planning profession more important than ever.
especially chipper respondent. Meanwhile, 19% of those surveyed
said Covid-19 caused them to consider postponing their own
planned retirement date and working longer.
Regarding the challenges presented by the pandemic, a full
quarter of respondents listed establishing relationships with new
clients as their primary concern while a further 21% stated planning
for the upcoming economic recession as their biggest worry.
The responses underline the fact that financial planners who
are open to technology – specifically digital marketing, cloudbased
software and video conferencing technology – have found
the fallout of the pandemic easier to manage. As one respondent
put it, “Change is inevitable. It is a great opportunity to see ‘crisis
management plans’ in action and to see where we can improve on
processes. Obviously, we do expect challenging times, but there
will also be a lot of new possibilities.”
Advice amid the pandemic
Many readers will be wondering how they should react in the face
of tumbling share prices and seesawing exchange rates. More
than two-thirds of the 761 CFP® professionals who completed the
survey say that their advice to clients is to “sit tight and wait until
volatility decreases before making any major financial decisions”.
Proving that financial planning is as much about people as it is
about numbers, more than four-fifths of respondents expressed
concern at their clients’ mounting stress levels.
Across the board, the five biggest client concerns are:
• Unemployment or reduced income
• Protecting assets
• Managing debt
• Liquidity/cashflow
• Rent/mortgage payments.
“When everything you’ve worked so hard to achieve is
disappearing before your eyes, it can be very tempting to try
to take financial planning matters into your own hands,” says
the FPI’s CEO, Lelané Bezuidenhout. “Clients should resist the
temptation to do this and speak to their financial planner and
if they do not have a planner, to visit www.letsplan.co.za to
find an FPI professional member in their area.”
Now is the time to sit tight
and wait until volatility
decreases before making
any major financial decisions.
FACTORS TROUBLING CFP ®
PROFESSIONALS IN SOUTH AFRICA
Conducting client meetings by phone
16% or video conference and not in person.
The emotional factor. Clients are
11% leaning on me as a therapist first.
Balancing the needs of my clients
11% with my own personal/family needs.
9%
Maintaining more frequent communications
with clients and prospects.
Working remotely.
8%
A huge responsibility awaits
One thing that unites all CFP® professionals is their conviction
that the pandemic – and the associated economic impacts – has
made the financial planning profession more important than ever.
A whopping 91% of respondents agree that South Africans with a
financial plan are more likely to make progress towards their goals,
even during these uncertain times.
As a result, 61% of financial planners
believe that there will be a growing
demand for financial advice delivered
by a professional in the wake of Covid-
19. Already, over a third of respondents
have seen an increase in client queries,
but this is set to grow exponentially as
the public health crisis makes ways for
an economic one.
“This is a tough time for all,” says
Bezuidenhout, “but CFP® professionals
around the country are not shying away
from the challenge of improving the
financial wellbeing of all South Africans
and their families even during turbulent
times like this.”
We wouldn’t want it any other way.
Lelané Bezuidenhout,
CEO, FPI
www.bluechipdigital.co.za
45

FPI
WHAT
IS IN A
NAME? WHY
PROFESSIONAL
NAMES MATTER
Recent developments
are set to provide clarity
in terms of financial advisor
titles and regulatory certainty for
financial planners in South Africa
“
Arose by any other name would smell as sweet,”
said Juliet to her off-limits Romeo. While this may
be true for star-crossed lovers, it doesn’t apply
for professions. If I were to introduce myself
as Dr David Kop, you would immediately place me as
a qualified medical doctor, with a professional status.
You would know instantly that I had been through a
rigorous process of education and training, that I had
pledged an oath to act ethically towards my patients and
that I am “regulated”.
In December 2019, the Financial Sector Conduct
Authority (FSCA) released its long-awaited discussion
document on the categorisation of advisors. Among other
matters, the paper deals with the title(s) that advisors
may use – a hotly debated topic since the release of the
original Retail Distribution Review document in 2014.
Clarity for financial advisors
While the Financial Advisors and Intermediary Services
(FAIS) Act has provided consumer protection and
increased the competency and ethical requirements for
financial advisors, it only regulates advice around financial
products. If a person stops short of recommending a
particular financial product, they will fall outside of the
definition of financial advice in FAIS.
Notably, FAIS does not protect the job title of financial
advisors. There is, in fact, a growing global community
of people who call themselves financial planners and
financial advisors (or some other variant of this) who,
because they do not advise on financial products, fall
outside of the regulatory net.
This is problematic as it creates confusion in the
consumer’s mind about who and what a financial
advisor is and what competency level they can expect from
a financial advisor. This is frankly dangerous: consumers
need protection from exploitation by unqualified and
unethical individuals. The FSCA, therefore, wants to ensure
that the title used by financial advisors will promote
consumer understanding of:
• The scope of products and services the advisor
may recommend, and limitations on that scope. For
example, whether a range of products from different
suppliers can be offered or only those of a particular
supplier or group.
• The type of relationship between the advisor and the
product supplier/s.
• Which entity (advisor, supplier, or both) may be
held accountable for the advice provided and the
performance of the product concerned.
At the FPI, we believe that it would be almost
impossible to meet the objectives outlined above with
46 www.bluechipdigital.co.za

In a Global FPSB survey into financial planning, 60% of South
African consumers either answered no or were not sure
whether financial planning was regulated in this country.
only a title, and would require additional
disclosure (that is already covered by
FAIS in any event). We feel strongly that
an advisor’s title should indicate which
activity they are licensed for, and not who
they do it for.
We have proposed the following titles
for financial advisors:
• Financial Product Advisor
• Financial Advisor
Splitting advisors into these categories
will allow for different competency
frameworks. This will also have the bonus
of creating established career paths and
attracting more talented youngsters to
our profession.
The legislation must also include
sanctions for anyone who uses these titles
without being duly licensed to perform
these activities.
What about financial planning?
In a Global FPSB survey into financial
planning, 60% of South African consumers
either answered no or were not sure whether
financial planning was regulated in this
country. If there’s confusion in the financial
advice space, this is doubled when it comes
to the financial planning profession.
There is likewise no current legislation
around who is allowed to call themselves
a financial planner or to describe their
services as financial planning. Unlike the
medical profession, we have so-called
financial planners ranging from the
minimum education requirement to
license as a financial advisor right through
to financial planners who hold the globally
recognised Certified Financial Planner®
professional designation.
Hopefully, this is about to change in
South Africa. The discussion document
contains the following proposal:
“One of the desired outcomes of our
RDR reforms is to enhance standards of
professionalism in financial advice and
intermediary services to build consumer
confidence and trust. To this end, the FSCA
confirms our intent to acknowledge the
professional status of qualified financial
planners by reserving the use of the
designation ‘financial planner’ for those
holding a formal professional designation
in this discipline. Persons designated as
a CFP® professional, who therefore meet
the standards and requirements set by
the Financial Planning Standards Board
(FSPB), would meet this criterion... In
South Africa, the relevant organisation
is the Financial Planning Institute, which
is also recognised by the South African
Qualifications Authority as the professional
body for the financial planning profession
in South Africa.”
We are pleased to see the recognition
of the CFP® designation. Financial planning
is a relatively young profession, having
started only 50 years ago. In that period
the Financial Planning Standards Board
has done much to ensure that financial
planning meets the generally recognised
characteristics of a profession (recognising
that the legal protection offered to most
other professions is missing when it comes
to financial planning). This proposal would
make South Africa one of the few countries
in the world that recognise the professional
status of financial planning.
We believe that the protection of
the terms financial planner, financial
planning and financial plan is important
for consumer protection.
The protection of the title of “Financial
Planner”, as proposed, is more than just title
protection. It allows for the adoption of a
uniform oversight of financial planners that
includes adherence to a world-class code
of ethics, requiring a fiduciary standard
of care, and a set of professional practice
and competency standards developed
from empirical research into the practice
of financial planning.
Financial planners, through their professional
bodies, will need to demonstrate
professional competency and commitment
by meeting initial and ongoing education,
examination, experience and ethics
requirements. This approach will protect the
public and allow for recognition of financial
planning as a true profession.
The bottom line
For too long now, consumers have been
befuddled by the variety of titles used in the
financial advice industry and the financial
planning profession. Both financial advice
and financial planning are vital to the
economic growth of South Africa.
We believe that affording legal
protection to certain titles can only
enhance consumer trust in financial advice
and financial planning.
David Kop, Executive Director for Relevance, FPI
www.bluechipdigital.co.za
47

RETIREMENT
48 www.bluechipdigital.co.za
Amendments
made to living
annuities It
is now possible for
retirees to amend
their drawdown rate
during the year for
a limited period

W
e have seen some important
changes in living annuities
over the past couple of
months. One of these
changes was brought about by Covid-19
and its impact on capital values (reduction
in share prices) of living annuities and
another was brought about by the 2020
Montanari Judgement in the Supreme
Court of Appeal.
Looking at the first amendment to living
annuities, it is now possible for retirees to
amend their drawdown rate during the
year for a limited period, where before,
they could only make this amendment
once a year (on the anniversary date of
their policy).
The income band has also widened,
from 2.5% and 17.5% to 0.5% and 20%
respectively, as part of Government’s
temporary regulatory changes to ease the
pain. Covid-19 has affected and will, for a
long time, affect local and international
markets and therefore returns earned on
underlying investments.
This change to the income band of living
annuities is important because some
retirees may decide to reduce the income
drawn from their living annuities to align
with the actual return on the capital
invested and therefore not draw down
capital itself. Some retirees may not be
able to live on the income they have drawn
before, and although not advisable, decide
to increase their income drawdown rate,
which will result in the capital value being
drawn down, to make ends meet.
The second important change in living
annuities was brought about by the 2020
Montanari Judgement in the Supreme
Court of Appeal.
A life annuity is far
easier to value than
a living annuity.
In the past, only the value of retirement
funds and not the value of a living annuity
could be taken into account for a divorce
settlement. This relates to the clean break
principle and allows the non-member
spouse to access their former spouse’s
retirement fund benefit and have an
amount or percentage (as stipulated by
the divorce decree) paid out or transferred
to another fund.
The argument was always that the living
annuity income could not be considered
as a right to an income with a capitalised
value, as the funds were owned by the
insurer, and not the person receiving the
income. The courts had ruled previously
that the income could only be taken into
account for a maintenance claim, not a
divorce settlement.
This has all changed with the 2020
Montanari Judgement in the Supreme
Court of Appeal which acknowledged that
the annuity does have a capital value and
can be taken into account when dividing
assets after a divorce.
The Montonari Judgement is a major
step in the right direction. However,
there is still a problem in that the person
receiving the income has the right to
vary the drawdown from 2.5 % to 17.5 %
(during Covid, between 0.5% and 20%),
and can reduce the drawdown to lower the
capitalised value of the income.
Although this case dealt with the right to
living annuity income, the principle would
apply similarly to a right to income from a
guaranteed life annuity. A life annuity is far
easier to value than a living annuity.
One final change to living annuities is
that previously, smaller annuities with a
value of up to R50 000 (where a third had
been taken in cash) and up to R75 000,
where no cash amount had been taken,
could be withdrawn in full.
This threshold has been increased to
R125 000 across the board. This change
will be permanent and ongoing.
Considering the above changes and
deciding what is best for you and your
family is a daunting process. We suggest
you consult a Certified Financial Planning®
professional who will be able to look at
your situation objectively and suggest the
best course of action.
Cluhein Trubshaw, Technical Specialist, FPI
www.bluechipdigital.co.za
49

Moving
brands
ing
bran
A
VERY BRIEF HISTORY OF BRANDING
Branding has been around, in some form or another,
for millennia, writes Adrian Room in Brands: the New
Wealth Creators, an influencing work on the topic.
“The Greeks and Romans and other large trading nations before
them had various ways of promoting goods, and even services,
whether they were wines, pots, metals or ointments.”
Branding, as we know it, made a quantum leap in the 20th
century, causing us all to form deep relationships with brands
and products. These relationships have adapted over the years
from meeting brands in-store via packaging, through advertising
in newspapers, radio and television and now onwards to yet more
fragmented and rapid encounters through social media, the web
and mobile apps. Soon we’ll even be experiencing branding
through augmented reality like that of ‘lenses’, which Google and
Apple are launching in 2021.
Reimagining the FPI’s brand
Today, branding isn’t just about products on shelves, it is interwoven
into the essential component of all successful businesses,
organisations and even individuals. The FPI is no exception. To
herald the start of a new decade, the FPI is embarking on a drive to
meet the needs of current members, future custodians of personal
finance and consumers throughout Southern Africa. In the coming
months, we will be refreshing our brand logo, revitalising our look
and feel and modernising the way we interact with our members.
Our inclusive digital ecosystem will make it much easier for
members and consumers alike to access the deep knowledge
pools that reside within the FPI.
Our first big test – the digital convention
In October 2020, as our commitment to lead the way in both ethics
and innovation, the FPI will be taking our convention online. For
us, going digital is an opportunity to showcase the great strides
50 www.bluechipdigital.co.za
Change is inevitable. The FPI is updating its brand to become
more inclusive and accessible to all South Africans
we have made in giving our brand a 21st-century makeover. The
FPI will be bringing a new edge to the convention calendar by
showcasing that even in disruptive times the FPI is innovative and
is lean and able to adapt to ensure networking and sharing of
information. International will be brought local and those ‘water
cooler’ moments will be enjoyed with challengers, trendsetters and
policymakers at this ground-breaking digital event. The movement
to start enriching the environment through collaboration and
continuity is vital. The rebranding process is about so much
more than a new communication style – it’s about redefining the
responsiveness of the FPI to the needs and requirements of its
members as well as to new environments burgeoning globally
and staying switched on to change.
The movement to start enriching
the environment through
collaboration and continuity is vital.
The way ahead
The FPI brand experienced by members and consumers alike will be
evoked, not only ensuring that our ethics and professional values
are reflected but that the journey of consumer and professional
covey a more connected and demonstrative environment to all
stakeholders. The FPI is evolving, and we look forward to sharing
the next milestones with you in the upcoming months. As a
member organisation, we welcome your feedback on the process.
We look forward to developing this new journey together and
moving things forward, bringing innovation and rejuvenation to
a long valued organisation.
Louis Friderichs is the Financial Planning Institute’s newly appointed
Marketing Manager

ds
Reach financial planners
and associated practitioners
The official publication of the Financial Planning Institute (FPI)
ABC-certified distribution through:
• Major financial planning events
• Financial planning workshops
• Direct distribution to all Certified Financial Planners
PLUS BLUE CHIP ONLINE
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www.bluechipdigital.co.za
The South African Journal
for Financial Planners

MEETING WITH CLIENTS
Empathy
fuels true client
connection
Changing the way we
connect with clients
Our relationships with clients
are changing, and the
Covid-19 pandemic has again
highlighted the need for
planners to connect with clients differently.
We have all been interacting in new
virtual ways, and most of our time is spent
helping clients navigate the financial and
emotional impact of volatile markets and
long-term planning. I have spent a significant
portion of my lockdown time running
webinars for financial planners; teaching the
skills of life planning, coaching and empathy.
We need to show up differently with our
clients, and I believe that incorporating life
planning, combined with coaching and
the skill set of empathy, is financial planning
Financial planners
simply have to revise
their value proposition
to remain relevant.
done properly. It’s also heartening to see
that FP Canada has revamped their entire
curriculum to focus on the human element
of financial planning. Financial
planners simply have to revise their value
proposition to remain relevant. We need to
connect with our clients as humans, and
empathy lies at the core of this connection.
Pioneering in the field of vulnerability
and empathy is Dr Brené Brown. She
has spent 20 years studying courage,
vulnerability, shame and empathy and
recently completed a seven-year study on
brave leadership.
Before attending her Dare to Lead
programme, I believed that I knew what
empathy was. But the training made me
realise that there were many parts to
empathy that I needed to unlearn.
Unlearning old behaviour
The first step to unlearning old behaviour
is to stop giving advice in the initial
client meeting. Be curious instead. It is
not our role to dominate the conversation
and immediately share solutions to fix
client problems.
52 www.bluechipdigital.co.za

MEETING WITH CLIENTS
We generally only show surface emotions to the world – the
part that we’re comfortable sharing and allow ourselves to feel.
THE FIRST MEETING
The real value of the first meeting
is truly connecting with the client –
creating a space of non-judgement
and emotional bonding; a space
where clients feel listened to and
understood.
A quick check is to think about
how you feel when sharing something
deeply private with someone
else. Would you like them to:
• Make eye contact
• Look away so you don’t feel
self-conscious
• Reach out to hug you
• Give you space
• Respond right away
• Listen intently and hold the
space with you?
Empathy holds a huge amount of power
and communicates “that incredible healing
message of, ‘You’re not alone’” - Brené Brown.
Connection misses
Although the definition of empathy is clear,
it is still easy to fumble our responses while
trying to interact meaningfully with clients.
Let me share some stumbling blocks to
keep in mind.
Mistaking sympathy for empathy is a
common error. Sympathetic responses
include statements like, “I feel sorry for
you”; “You poor thing”; or sentences
starting with, “At least…” These types of
responses leave clients feeling shame and
regretful for having shared personal and
vulnerable information.
Don’t confuse connection with the
opportunity to “one-up” your client, for
example by saying something like, “Listen
to what happened to me.” Your seemingly
worse story does not cultivate connection,
but rather makes the client feel undermined
and insignificant.
Instead, use your listening skills to
encourage empathy.
Connecting to the emotions that
underpin the experience
Empathy is to understand what someone
else is experiencing from their perspective
– seeing the world through their eyes. It’s
about understanding where your client is
coming from, how they got to where they
are today, what their unique challenges
and experiences have been up to now,
and how it’s affected them emotionally
and financially.
You don’t have to have physically
experienced the emotion; the important part
is to spend time listening and understanding
the emotions as best you can.
Explore your own emotions
It is challenging to understand a client’s
emotion if you are not able to understand
your own. Most of us are short on emotional
literacy and we have been taught to bury
our emotions, or that showing emotion is
a sign of weakness.
We generally only show surface emotions
to the world – the part that we’re comfortable
sharing and allow ourselves to feel. The
root cause of our actual emotions are often
hidden, and it represents the full version
of how we’re feeling. Research tells us that
we are capable of feeling more than 40
emotions. We just don’t have the sensitivity
to identify the full range of them any more.
It is helpful to start identifying your own
emotions as a prelude to connecting with
client emotions. A good read on this topic
is Permission to Feel by Dr Marc Brackett –
the book encourages readers to stop being
ashamed of their feelings and provides
helpful tips on how to upskill emotionally.
Cultivate new skills
I encourage planners to practise their
listening skills. Advice can only be effective
if it speaks to the client; if the client buys
into the plan and if the client feels
understood, respected and valued. Practise
hearing your client and listen with empathy
in mind.
A helpful tip is to communicate back
to the client what you heard them say
in your own words. Communicate your
understanding of the emotion, without
judgement and solutions – the result is
true connection.
The new virtual way of connecting
has placed a huge emphasis on empathy.
If you’re meeting with clients online,
remember to make eye contact, ensure that
you’re in a safe, quiet space and that you’re
not distracted by email or phone alerts.
If you are serious about truly connecting
with your clients, you have to be fully
present, curious and listen with intent.
Kim Potgieter CFP®, Director at Chartered
Wealth Solutions | ICF Professional Certified
Coach | New Money Story® Mentor Coach |
Certified Dare to Lead Facilitator
www.bluechipdigital.co.za
53

ADVERTORIAL
Petroleum Agency SA is a
key player in a vital sector
South Africa’s oil and gas exploration and production sector an excellent investment
As stated in the National
Development Plan (NDP), the
government’s intention is to
“enable exploratory drilling
to identify economically recoverable
coal seam and shale gas reserves,
while environmental investigations will
continue to ascertain whether sustainable
exploitation of these resources is possible.
“If gas reserves are proven and
environ-mental concerns alleviated, then
development of these resources and gas-to
power projects should be fast-tracked.”
The plan also calls for the need to
incorporate a greater share of gas in South
Africa’s energy mix, through importing
liquefied natural gas (LNG), using shale
gas if reserves prove commercial, and
developing infrastructure for the import
of LNG, mainly for power production, over
the short to medium term.
Opportunities for
gas lie in the
realisation of
South Africa’s NDP
and the Integrated
Resource Plan (IRP)
Petroleum Agency SA plays an
important role in developing South
Africa’s gas market by attracting qualified
and competent companies to explore for
gas in the country, as well as monitoring
and regulating their activities. In addition
to ensuring operators always comply with
the law, a major area of focus is increasing
the inclusion of historically disadvantaged
South African-owned entities in the
upstream industry. South Africa needs
large discoveries of indigenous gas as well
as fair access to opportunities and social
licence to develop a healthy gas market.
Currently, natural gas supplies about
just 3% of South Africa’s primary energy.
71 SOUTH AFRICAN BUSINESS 2019
54 www.bluechipdigital.co.za

ADVERTORIAL
A significant challenge facing the
development of a major gas market in
South Africa is the extreme dominance
of coal as a primary energy source, and
industry’s historic reliance on coalgenerated
electricity.
A lack of extensive gas transport and
reticulation infrastructure goes hand in
hand with this, while other challenges
include uncertainty about volumes of
indigenous gas available to industry;
security of supply; switching and conversion
costs; gas pricing; and negativity around
the ongoing use of fossil fuels. End users
require certainty before committing, while
explorers look for a guaranteed market.
On a more positive note, opportunities
for gas lie in the realisation of South Africa’s
NDP and the Integrated Resource Plan (IRP).
Both call for indigenous hydrocarbons –
conventional and unconventional – and
independent power production to play an
increasing role in the nation’s energy mix.
The national power utility also intends
to replace coal-fired power stations with
gas-fired counterparts, in line with the
vision of the NDP. The advent of gas-fired
power stations will represent a ready,
indigenous market for operators that
make discoveries of gas in South Africa,
ensuring it will be far easier to monetise
smaller discoveries that may otherwise
have remained undeveloped.
As custodian, Petroleum Agency SA
ensures that companies applying for
gas rights are vetted to make sure they
are financially qualified and technically
capable. Applicants also need to have a
good track record in terms of oil and gas
exploration activity, as well as regard for
the environment. This applies to both
local and foreign companies. Oil and gas
exploration requires enormous capital
outlay and can represent a risk to workers,
communities and the environment.
Applicants are therefore required to prove
their capabilities and safety record and
must carry insurance for environmental
rehabilitation.
Social and labour plans
In addition, all planned activities can
only be carried out after completion of
an environmental impact assessment
and under an approved environmental
management plan, after consultation with
the public as well as interested and affected
parties. Explorers are also required to
contribute to skills development through
the agency’s Upstream Training Trust.
Oil and gas exploration in South Africa
is regulated in terms of the Mineral and
Petroleum Resources Development Act
In today’s world, oil and gas remain
the most critical of energy resources.
(MPRDA) of 2002, which stipulates that
applicants for production rights are
required to submit social and labour plans
(SLPs) to assist in transforming the industry,
promoting employment and advancing
social and economic welfare in South
Africa.
Applicants must develop and implement,
where applicable, comprehensive
SLPs that cover human resourcesdevelopment
programmes, community
development, housing and living
conditions, and employment equity.
In addition to the MPRDA, other acts
also regulate the sector – including the
National Environmental Management
Act, the Royalties Act, the Mining Titles
Registration Act and the National Water
Act. These acts and regulations have served
DRIVING THE SECTOR
Driving South Africa’s emerging gas
sector while ensuring a well-regulated
and responsible environment is a key
mandate of Petroleum Agency SA, as
is assisting operators with monetising
smaller discoveries that may otherwise
remain undeveloped, through
advertising these opportunities to
potential partners.
Our Vision
A diverse upstream industry contributing
to energy security through sustainable
growth in exploration and development
of oil and gas.
Our Mission
To promote, facilitate and regulate
exploration and sustainable development
of oil and gas contributing to
energy security in South Africa.
the upstream industry well and are all in
line with international standards.
Minister of Mineral Resources Gwede
Mantashe and President Cyril Ramaphosa
have recently stated that oil and gas
exploration and production activities
should have their own standalone
legislation, separate from that applicable
to hard mineral mining. This legislation is
being drafted and the agency is part of
the team at the Department of Mineral
Resources working on it.
In today’s world, oil and gas remain
the most critical of energy resources, and
Petroleum Agency SA is in full support of
those entering the South African oil and gas
exploration and production industries. The
Agency is fully committed to ensuring that
our government and policy-makers sustain
the sector for the benefit of all involved and
will do everything in its power to advance
the industry.
ABOUT PETROLEUM AGENCY SA
Petroleum Agency SA was established in 1999 by Ministerial
directive and is mandated through the Mineral and Petroleum
Resources Development Act, 2002 (Act No.28 of 2002) together
with the National Environmental Management Act, 1998 (Act
No.107 of 1998). These Acts provide for Petroleum Agency
SA to evaluate and promote oil and gas potential exploration
and production activities in South Africa, to regulate oil and
gas exploration and the production industry and to archive all
geotechnical data produced through oil and gas exploration.
The Agency acts as an advisor to the government on issues
regarding oil and gas exploration and production and carries
out special projects at the request of the Minister.
www.bluechipdigital.co.za
55

WEALTH MANAGERS
LEADING GLOBAL
financial services
South African wealth manager chosen for global Top 100 list
Every year the global Top 100
independent advisers are selected
by International Adviser, a Londonbased
publication. The awards
honour the industry’s most influential
wealth managers and shine a light on those
wealth managers who are successfully
meeting the challenges of global
regulatory shifts, technological advances
and the ever-changing needs of clients in
the financial services sector.
There have been some seismic changes
within the industry in recent times but there
are many long-standing influential figures
across the world who have stood out from
the crowd to make up this Top 100 list.
The diverse spread of names ranges from
leading financial advisers, heads of trade
bodies, international life company CEOs,
platform heads and specialist product and
service providers to technical gurus and
regulators. These are the leading figures in
the global financial services arena.
This year, Andrew Ratcliffe CFP® of
Cape Town-based wealth management
firm Private Client Holdings, was selected
as one of the Top 100 of the industry’s
most influential independent advisers
in the world. Ratcliffe, Director of Private
Client Holdings and head of the wealth
management division, acts as a family
officer. He has had extensive exposure to
asset management (both domestic and
offshore), international tax, accounting,
share portfolio management and fiduciary
needs of private clients for more than
two decades. He is passionate about the
financial well-being of his international
high-net-worth clients and their families.
Of his career highlights, Ratcliffe says
that together with partner Grant Alexander,
transforming Private Client Holdings from a
small company focused on tax advice into
an award-winning full-service, multi-family
office with more than 100 staff is definitely
at the top.
Private Client Holdings was founded
as a corporate tax consultancy in 1990.
Since then it has developed into a full
spectrum asset and wealth management
company and multi-family office with six
specialist divisions and offers a complete
range of professional services to handle
every aspect of their client’s financial life,
including wealth and asset management,
tax, accounting, cash and fiduciary services
– which together provide a multi-family
office service.
“From humble beginnings, Private
Client Holdings is now taking the lead
in Southern Africa when it comes to
providing high-net-worth families with an
all-inclusive wealth management solution.
In the past year alone, we have won several
awards from the likes of the Intellidex Top
Private Banks & Wealth Managers Awards
as well as the London-based Capital
Finance International Awards. However, it
is not the awards that we are after. What
is important to us is our relationship with
our clients and ensuring that their personal
wealth management and growth goals are
consistently met.
“I am humbled to have been selected as
one of the Top 100 of the industry’s most
influential by International Adviser and
feel honoured that Private Client Holdings
is recognised as providing a globally
relevant service. That South African wealth
management standards can really compete
globally,” says Ratcliffe.
The life-altering effects of the Covid-19
pandemic sweeping the globe have added
many pressures to everyone’s lives – not
least of which is economic and financial
disruption. Now more than ever it is
important to partner with a wealth manager
who understands the current market
landscape, the need to keep on course
towards one’s long-term financial and life
goals despite the current uncertainty, and
to not fall victim to market noise.
Private Client Holdings has consistently
grown the wealth of their clients and
their assets under management through
the various market upheavals over the
past 30 years – including events such
as the Asian financial crisis in 1997 and
the global financial crisis in 2008 (for
example) – and the Covid-19 pandemic will
be no different.
Andrew Ratcliffe, director of
Private Client Holdings
For more information on the IA100 awards visit https://international-adviser.com/ia-100/ or contact
Private Client Holdings and Andrew Ratcliffe at andrew@privateclient.co.za or on 021 671 1220.
56 www.bluechipdigital.co.za

SUCCESS IS BETTER,
SHARED. *
We’re proud to be allocating our largest Profit-Share yet, to our members.
Our 2019 financial results are proof of our unwavering commitment
to our members. As the only business in South Africa that caters
exclusively to graduate professionals, we allocate all our profits
to our members with qualifying products – because we believe
success is better, shared.
Visit pps.co.za for more information or contact your PPS accredited financial adviser.
PPS is an authorised FSP
*Past performance is not necessarily indicative of future performance