Blue Chip Journal Issue 76

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