Blue Chip Journal Issue 76

Blue Chip is a quarterly journal for the financial planning industry and is the official publication of the Financial Planning Institute of Southern Africa NPC (FPI), effective from the January 2020 edition. Blue Chip publishes contributions from FPI and other leading industry figures, covering all aspects of the financial planning industry.

Blue Chip is a quarterly journal for the financial planning industry and is the official publication of the Financial Planning Institute of Southern Africa NPC (FPI), effective from the January 2020 edition. Blue Chip publishes contributions from FPI and other leading industry figures, covering all aspects of the financial planning industry.


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Issue 76 • July 2020


The Official Publication of the FPI

Blue sky investing

The nonconservative

approach to investment


Living annuities

The good news on the

latest amendments

Developing a



Florbela Yates, Momentum

Investment Consulting


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JULY 2020


Message from the CEO






The Financial Planning Institute surveyed CFP® professionals

to find out what’s happening on the ground






Recent developments are set to provide clarity in terms of financial

advisor titles and regulatory certainty for financial planners in South Africa


It is now possible for retirees to amend their drawdown

rate during the year for a limited period


Change is inevitable. The FPI is updating its brand to become

more inclusive and accessible to all South Africans

04 08












Milestones, news and snippets


Interview with Florbela Yates, Momentum Investing Consulting


Are we overly conservative in our assessment of investment opportunities?


Responsible investing during the Covid-19 crisis


Using evidence-based investing principles to meet investment goals


As a consequence of Covid-19, the future will look very different from what we now imagine


A crisis often presents both tragedy and opportunity


Nevathee Moodley imparts her wisdom on sustainable financial strength


Natasja Hart, Financial Planner of the Year 2010, on a decade of change


Changing the way we connect with clients







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


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


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.




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

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.


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



Global Africa Network Media (Pty) Ltd

Company Registration No:


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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The School of Financial Planning Law at the University of the Free

State offers students the unique opportunity to acquire the necessary

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The Advanced Diploma in Estate and Trust Administration is also the

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The Diploma put graduates on the road to become full members of this

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Postgraduate Diploma in Financial Planning

This qualification will enable students to obtain the highest academic and

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This qualification will also open doors to

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On the money

Making waves this quarter

Satrix is still the people’s choice


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!


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,


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


14-million South Africans struggle to put food on the table


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.



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”.



The Covid-19 pandemic

has seen the regular fixtures

on the financial planning

events calendar going virtual.


The second annual Humans Under Management conference

will take place on 8 September 2020, from 09h30 to 17h30.



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




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.


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

South South Africa Africa

(Virtual) (Virtual) Conference Conference

A Conference By Advisers, For Advisers

A Conference By Advisers, For Advisers


8 September 2020

Financial planning is a noble profession. Some say it is the

most important profession of the 21st Century.

Financial planning is a noble profession. Some say it is the


most important But profession we face an of almighty the 21st Century. challenge. Advising people on what

Cost: R500

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Behavioural coaching is the single most important way that

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a financial planner adds value.

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Venue: Virtual

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developing their This behavioural isn’t a fad financial or a phase advice - this practices. is who we are.


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Individually we can’t, together we can.

“I believe the greatest advantage that financial planners have over technology, is

the ability to connect with people at a deeper, human level. It is this connection

“I believe the greatest that advantage will enable that us financial to solve real planners problems have on over a sustainable technology, basis. HUM is a great

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Warren Ingram - Galileo Capital


8 September 2020


12 www.bluechipdigital.co.za




in a global



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.




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 (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


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.


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





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.


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


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).



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.


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.

18 www.bluechipdigital.co.za


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




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



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..


Blue sky


Are we overly conservative

in our assessment

of investment opportunities?


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





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





he evolution

a portion of your savings to 36ONE

hedge funds can improve your portfolio longevity

of savings


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


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:







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.


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:





Since Inception

Return p.a.



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


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





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.


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


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


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.




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


80% 80%

• Protect capital


60% 60%

An evidence-based investor approaches 100%


40% 40%

this problem by first starting with the

40% 80%

20% 20%

“controllables”. These are decisions we



make based on reliable data and history 60%


– such as asset allocation, diversification


and fees.

We try to avoid making decisions based 20%

on the “uncontrollables” or speculative


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


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




Keeping the goal in mind: Does The Tactical


Importance Asset


of Allocation Equity improve performance?


Does Purchasing Tactical Power Purchasing Power Asset Allocation 50% improve 40% performance?


40% 50%


Purchasing Power Purchasing Power

Impact of TAA Impact on return of TAA predictability on return predictability 32,05%



THE 90%





DOES 60%



Purchasing Power Purchasing Power




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%


62% 50% 62% 50% 30%


Purchasing Power



80% 60%

75,67% 75,67% 62% 20% 60% 62% 30% Impact of TAA on return 20% predictability




62% 62% 40% 62%


40% 20%



40% 60% 40%




36,90% 36,90%

32,05% 10% 32,05%




30% 30% 10%

0% 48,18%












Average Manager TAA Consistency

Average M

Average Manager TAA Consistency


0% 0%

20% 20% 62%

Manager SAA TAA Consistency Consistnecy

Average Manager SAA Consis



20% 20%


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 +


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



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).



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.


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


South S&P


S&P 50 Africa




South 50 Africa


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


ping the

100 100

goal in mind: Lowering Manager with selecting Selection an active Risk manager. The







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








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%



25% 25% 25%

29% 29% 29%

40% 40% 40%



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


versus one of the bottom performers


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


300 300


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


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.



200 200



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



2012/03 2010/07


2012/08 2010/12


2013/01 2011/05


2013/06 2011/10


2013/11 2012/03





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








2015/07 2017/08

2019/09 2018/01

2020/02 2018/06





The Alpha








The Alpha


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.


9 Feb 2020, ASISA General Equity fund category.






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.






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


The Alpha


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.




A better

– and very different –


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


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


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



Source: Visual Capitalist, 2019






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.



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










S&P 500 (USD) USD/ZAR S&P 500 (ZAR)




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.




Could Covid-19

have changed

financial planning


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


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.


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






Day Weekend.

a combination

He aspect









much behavioural

that they


were the











money. The



“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.


in the fact that in the past


hear financial




and experts

laptops, cellphones overload and and international email, has actually


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


and personal certain



He suggests

of the world.




that clients






what the






has clarified




us that


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]







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.


[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




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.



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.


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


What has been your biggest challenge as a blackowned


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





with flexibility


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


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




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


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


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

Note: White logo must please be used on colour backgrounds


25, 26 & 27 August






* Subject to FPI final agenda approval

Brought to you by:



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


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.




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


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.



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.


Maintaining more frequent communications

with clients and prospects.

Working remotely.


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,










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




48 www.bluechipdigital.co.za


made to living

annuities It

is now possible for

retirees to amend

their drawdown rate

during the year for

a limited period


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









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


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


Advertising queries: sales@gan.co.za


The South African Journal

for Financial Planners



fuels true client


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


We generally only show surface emotions to the world – the

part that we’re comfortable sharing and allow ourselves to feel.


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


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


• 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




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.


54 www.bluechipdigital.co.za


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


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


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


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 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.


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.





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



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

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