Blue Chip Issue 81

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 takes this opportunity to wish the FPI a happy 40th anniversary. Congratulations!

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 takes this opportunity to wish the FPI a happy 40th anniversary.


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<strong>Issue</strong> <strong>81</strong> • Oct/Nov/Dec 2021<br />

www.bluechipdigital.co.za<br />

The Official Publication of the FPI<br />



Meet the Financial Planner<br />

of the Year finalists<br />



Lelané Bezuidenhout,<br />

FPI CEO<br />





Your clients<br />

work hard for<br />

their money.<br />

Let’s make it count.<br />

GROW their money<br />

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young professionals achieve their goals by providing the flexibility and pricing they can afford.<br />

PROTECT their lifestyle<br />

Clients with established careers are focused on improving their earning potential in order to secure their<br />

family’s future. At this stage of their lives, they are looking to protect their money to ensure they stay afloat,<br />

no matter what, as well as to provide a good education for their children.<br />

MAXIMISE their wealth<br />

Mature professionals are at a stage in their lives where they have accomplished their career goals despite<br />

possible setbacks, like the loss of a partner or the loss of income. They are looking for value and want to<br />

maximise their savings, reduce their risk and build a legacy for when they retire - not just for themselves,<br />

but for their loved ones as well.<br />

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This material does not constitute tax, legal, financial, regulatory, accounting, technical or other advice. The material has been created for distribution to intermediaries only and is not for distribution<br />

to the public. The material does not contain any personal recommendations and, while every care has been taken in preparing this material, no member of Liberty gives any representation,<br />

warranty or undertaking and accepts no responsibility or liability as to the accuracy, or completeness, of the information presented. If there are any discrepancies between this document and the<br />

contractual terms and conditions the terms and conditions will prevail. Any recommendations made by an adviser or broker must take into consideration the client’s specific needs and unique<br />

circumstances. For more details about benefits, definitions, guarantees, fees, tax, limitations, charges, premiums/contributions or other conditions and associated risks, please see the product<br />

terms and conditions. Liberty Group Ltd is a Licensed Insurer and Authorised Financial Services Provider (no. 2409). T’s & C’s Apply.

Digitally speaking<br />

<strong>Blue</strong> <strong>Chip</strong> speaks to Bongani Khulu, senior executive at the Liberty Group, about why<br />

digitisation is driving the future advice model – “human-augmented advice”.<br />

The value of human advice has a digital dimension<br />

It is not a controversial thing to say that the future of advice is digital<br />

using all the best advantages offered by emerging technologies<br />

which are continuing to evolve at an astonishing pace.<br />

This means we are in an age where clients are expecting a lot<br />

more from us in terms of what we offer both in the practical quality<br />

of advice and the way we use technology to create efficiencies to<br />

make their lives better through embracing digital tools. In doing<br />

this, we need to find harmony between the digital and the human<br />

dimensions of these interactions. Clients have a lot of choice, they<br />

know what they want, and we need to offer cutting-edge service<br />

and advice that allows confident decision-making.<br />

Financial planning is about two commodities, the value of<br />

advice, which is the critical commodity, and the commodity of time,<br />

which is a form of efficiency. To build trust, both these elements<br />

need to be a key part of the relationship-building process.<br />

Our decisions are based on creating a brighter future: part of<br />

this is a goals-based approach to deliver on the outcomes that we<br />

set out in our philosophy.<br />

Liberty’s advice philosophy<br />

At the core of what we do at Liberty is our advice philosophy<br />

which places the customer at the centre of what we do,<br />

empowering them through the delivery of a human, living<br />

and outcomes-oriented experience. In the first instance, our<br />

advice must be human: in making the connection with clients<br />

we must be aware of the humanity in what we do. Secondly, it<br />

must be living. The living part speaks to the journey we want<br />

to take with our clients, but also the advice that we give must<br />

navigate our clients through their lives in a way that makes a<br />

significant difference. And finally, our advice must deliver the<br />

desired outcomes. When we speak about the desired outcomes,<br />

it is what clients have asked for at the beginning of the process.<br />

Ultimately with the smart enablement that we have been<br />

building, partnered with the likes of Microsoft, Salesforce and<br />

other global tech players, the resulting outcome will be a collective<br />

“human experience” delivered through the relevant channels,<br />

underpinned by a modern, digital, human-augmented platform,<br />

supported by personalised client solutions.<br />

Artificial intelligence and big data are driving Liberty’s value<br />

of advice<br />

Using artificial intelligence and<br />

big data has several advantages<br />

if used correctly. It improves<br />

responsiveness, optimises client<br />

engagement and improves the<br />

client experience so that it is more<br />

focused on individual needs.<br />

Human augmentation is still<br />

attractive to the client as it provides<br />

both personal and balanced<br />

advice – balanced in terms of time<br />

and digital engagement. In terms<br />

of advisor productivity, it provides<br />

the commodity of time because<br />

of its efficiencies. At this level,<br />

adoption is critical to help build<br />

an advice culture which helps<br />

financial advisors win. <br />

Bongani Khulu, Senior Executive,<br />

Liberty Group<br />

This article does not constitute tax, legal, financial, regulatory, accounting, technical or other advice. The material has been created for information purpose only and does not<br />

contain any personal recommendations. While every care has been taken in preparing this material, no member of Liberty gives any representation, warranty or undertaking and<br />

accepts no responsibility or liability as to the accuracy, or completeness, of the information presented.<br />

Liberty Group Ltd is a licensed Insurer and an Authorised Financial Services Provider (no. 2409). Terms and Conditions, risks and limitations apply.

<strong>Blue</strong> <strong>Chip</strong> takes this opportunity to wish the FPI a happy 40th anniversary.<br />

Congratulations!<br />

Rob Macdonald, Fundhouse, writes in his first of what we hope will be many<br />

columns (page 17) that the FPI’s vision of Professional Financial Planning for All<br />

is noble but he believes that if this vision is to be achieved, financial planners need to<br />

re-imagine how they see themselves and the profession.<br />

In an exclusive interview with Lelané Bezuidenhout, CEO of the FPI, on page<br />

20, she tells us that a big change that she would like to see in the industry within<br />

the next five years, is that financial management forms part of the South African<br />

high-school curriculum. She feels that we need to teach children from a young<br />

age how to work with money to address the poor savings culture in South Africa.<br />

Many adults are struggling with financial strain, which has been compounded by<br />

the effects of Covid in the last 18 months. Financial strain can be largely attributed<br />

to a lack of financial knowledge. Our article on consumer education (page 107) tells<br />

us that a lack of financial knowledge leads to high levels of debt, low savings rates<br />

and little to no investments. Financial literacy is the ability to make sound decisions<br />

regarding how much to save, when to invest and when (and not) to get into debt.<br />

Globally, investors are aligning their portfolios with their ESG beliefs. While<br />

South Africa has lagged this trend to some extent, ESG investing is taking hold as<br />

investors look to bolster their risk analysis processes and generate more sustainable<br />

returns over the long term. Old Mutual writes about climate science and why it is<br />

important for long-run capital allocation (page 62). Momentum Investments speaks<br />

to us about the Sustainable Development Goals (page 34) and Sonja Saunderson,<br />

CIO, Momentum Investments, gives us her take on responsible investing (page 35).<br />

Chris Rule, CoreShares, takes the passive vs active debate to a new arena on page 64.<br />

Dr Gizelle Willows, Nudging Financial Behaviour, writes about the perils of risk<br />

tolerance questionnaires. She says that understanding your client’s capacity for risk<br />

is key to advising them on a sound investment strategy. Questionnaires remain the<br />

simplest and most common method of assessing risk tolerance but take heed of Dr<br />

Willows’ sage advice on page 86 before using them. Failure to use questionnaires<br />

correctly may result in an excessively risky portfolio. On page 88, Kim Potgieter<br />

writes about helping clients through unexpected transitions.<br />

Do not miss our in-depth interviews throughout this edition of <strong>Blue</strong> <strong>Chip</strong>.<br />

Enjoy!<br />

Alexis Knipe, Editor<br />


In this<br />

issue<br />

<strong>Blue</strong> <strong>Chip</strong> Journal – The official publication of FPI<br />

<strong>Blue</strong> <strong>Chip</strong> is a quarterly journal for the financial planning industry and is the official publication of the Financial<br />

Planning Institute of Southern Africa NPC (FPI), effective from the January 2020 edition. <strong>Blue</strong> <strong>Chip</strong> publishes<br />

contributions from FPI and other leading industry figures, covering all aspects of the financial planning industry.<br />

A total of 10 000 copies of the publication are distributed directly to every CERTIFIED FINANCIAL PLANNER® (CFP®)<br />

in the country, while the <strong>Blue</strong> <strong>Chip</strong> Digital e-newsletter reaches the full FPI membership base. FPI members are able<br />

to earn one non-verifiable Continuous Professional Development (CPD) hour per edition of<br />

the print journal (four per year) under the category of Professional Reading.<br />

Special advertising packages in <strong>Blue</strong> <strong>Chip</strong> are available to FPI Corporate Partners, FPI<br />

Recognised Education Providers and FPI Approved Professional Practices.<br />

blue-chip-journal<br />

ISSUE <strong>81</strong> |<br />

OCT/NOV/DEC 2021<br />

Publisher: Chris Whales<br />

Editor: Alexis Knipe<br />

Online editor: Christoff Scholtz<br />

Designer: Tyra Martin<br />

Production: Aneeqah Solomon<br />

Ad sales:<br />

Sam Oliver<br />

Gavin van der Merwe<br />

Jeremy Petersen<br />

Bayanda Sikiti<br />

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Vanessa Wallace<br />

Managing director: Clive During<br />

Administration & accounts:<br />

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Printing: FA Print<br />


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Directors: Clive During, Chris Whales<br />

Physical address: 28 Main Road,<br />

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www.bluechipdigital.co.za<br />

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No portion of this book may be reproduced without written consent of the<br />

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or in connection with, the contents of this book. The publishers would like to<br />

express thanks to those who support this publication by their submission of<br />

articles and with their advertising. All rights reserved.


ISSUE<br />

<strong>81</strong><br />

OCT/NOV/DEC 2021<br />

01<br />


<strong>Blue</strong> <strong>Chip</strong> speaks to Bongani Khulu,<br />

senior executive at the Liberty Group, about<br />

why digitisation is driving the future advice<br />

model – “human-augmented advice”<br />

02<br />


By Alexis Knipe<br />




Message from the CEO of the FPI<br />

10<br />



University of the Free State SFPL<br />

12<br />

16<br />


Milestones, news and snippets<br />



Column by Florbela Yates, Head of<br />

Momentum Investment Consulting<br />

17<br />



Column by Rob Macdonald, Head of Strategic<br />

Advisory Services, Fundhouse<br />

18<br />


The FPI celebrates its 40th year<br />

anniversary this year<br />

20<br />



<strong>Blue</strong> <strong>Chip</strong> speaks to Lelané Bezuidenhout,<br />

CEO of the FPI<br />

26<br />


Meet the three Financial Planner of<br />

the Year finalists<br />

29<br />


Francois du Toit, Director, PROpulsion<br />

Podcast on winning an FPI award last year<br />

30<br />

32<br />


A look at why awards matter<br />


Special-Purpose Acquisition<br />

Companies are the latest frenzy, by Fundhouse<br />

34<br />



By Mike Adsetts, Deputy Chief Investment<br />

Officer, Momentum Investments<br />

35<br />



By Sonja Saunderson, CIO, Momentum<br />

Investments<br />

36<br />



By Motlatsi Mutlanyane, Head of Alternative<br />

Investments, Momentum Investments<br />

38<br />


<strong>Blue</strong> <strong>Chip</strong> speaks to Hymne Landman,<br />

Head of Momentum Wealth and Momentum<br />

Wealth International at Momentum Investments<br />

42<br />



By Natalie Harrison, Global Fund Specialist,<br />

Momentum Collective Investments<br />

44<br />


<strong>Blue</strong> <strong>Chip</strong> speaks to Ferdi van<br />

Heerden about Momentum Global Investment<br />

Management’s latest acquisition of Seneca<br />

Investment Managers Ltd.<br />



<strong>Blue</strong> <strong>Chip</strong> met up with Scott Cooper,<br />

Marriott Investment Managers<br />

50<br />




Capex levels have slumped in recent years, which<br />

has led to supply-side problems. By Schroders<br />

52<br />


<strong>Blue</strong> <strong>Chip</strong> speaks to Andreea Bunea, Head<br />

of Global Equity at Old Mutual Multi-Managers<br />

56<br />



The online investment platform powered by<br />

OUTsurance, now allows financial advisors to offer<br />

uncapped global equity exposure to their clients<br />

58<br />




Investing in well-diversified portfolios that comprise<br />

more than just one asset class offers the most<br />

appropriate route to navigating a challenging<br />

investment environment. By Coronation<br />

60<br />



Glacier International offers access to<br />

international investment opportunities.<br />

4 www.bluechipdigital.co.za

COVID-19 vaccine<br />

misinformation can harm<br />

your health and financial<br />



ISSUE<br />

<strong>81</strong><br />

OCT/NOV/DEC 2021<br />

61<br />

62<br />


NOW MORE<br />


Climate science and<br />

why it’s important for long-run<br />

capital allocation<br />

64<br />


Taking the passive versus active<br />

debate to a new arena<br />

66<br />


<strong>Blue</strong> <strong>Chip</strong> speaks to Brendan de<br />

Jongh, Head of Research at PortfolioMetrix,<br />

about their Sustainable World Equity Fund of<br />

Funds launching in South Africa<br />

68<br />




70<br />

72<br />


No smoke or mirrors<br />


Discovery Invest making sense of the<br />

retirement landscape. Part 3<br />

74<br />


PASA discusses the latest draft<br />

of the Upstream Petroleum Resources<br />

Development Bill<br />

76<br />




1nvest speaks about the evolution in<br />

the index landscape<br />

78<br />


<strong>Blue</strong> <strong>Chip</strong> speaks to Paul Fouché,<br />

Chief Investment Officer from New Road<br />

Capital<br />

80<br />




By Rob Macdonald, Head of Strategic Advisory<br />

Services, Fundhouse<br />

82<br />



By Old Mutual Wealth<br />

84<br />



<strong>Blue</strong> <strong>Chip</strong> chats to Rory Brachner from<br />

DoshGuide, a site to connect people that need<br />

personal finance advice with a community of<br />

flat-fee financial advisors<br />

86<br />



Where you (the financial planner)<br />

can bridge the gap<br />

88<br />



By Kim Potgieter<br />

90<br />


The new book by Matthew<br />

Blackman and Nick Dall<br />

92<br />


Momentum Financial Planning tells<br />

us that Covid-19 vaccine misinformation can<br />

harm your wellbeing<br />

94<br />




96<br />



Discovery Invest making sense of the<br />

retirement landscape. Part 4<br />

98<br />

100<br />





<strong>Blue</strong> <strong>Chip</strong> sat down with atWORK’s chief<br />

technology officer, Werner Koekemoer, to<br />

discuss the biggest IT challenges facing<br />

financial planners<br />

102<br />



We caught up with atWORK’s business<br />

development executive, Trevor Stacey<br />

104<br />

106<br />


Breaking the barriers<br />



Ancillary Financial Services informs us on<br />

compliance under POPIA<br />

107<br />

IBC<br />


By Novare<br />





6 www.bluechipdigital.co.za

We’re No. 1<br />

Thanks to our incredible staff.<br />

And we will do<br />

even better<br />

We won’t be happy until every client is.<br />

Metropolitan is part of Momentum Metropolitan Life Limited, a licensed life insurer and<br />

authorised financial services (FSP44673) and registered credit provider (NCRCP173)


Lelané Bezuidenhout CFP®<br />

CEO, Financial Planning<br />

Institute of Southern Africa<br />

Relationships,<br />

rebranding and<br />

future plans<br />

The CEO of the Financial Planning Institute looks<br />

forward to the imminent FPI Professional Convention<br />

and other exciting industry developments.<br />

How quickly has 2021 gone? It seems like we<br />

were grappling with the chaos of 2020 only<br />

yesterday, now 2022 is suddenly around the<br />

corner. I am just glad that summer is on its way,<br />

and hopefully a bit of “normality” along with it.<br />

Reflecting on the year fills me with pride for everything<br />

that the FPI has achieved, despite the constant challenges<br />

that present themselves in these upside-down times.<br />

None of it would<br />

have been possible<br />

without the support<br />

of our members, our<br />

corporate partners<br />

and our professional<br />

practices. Thank you<br />

and thank you again.<br />

It is all about trust. A financial<br />

planner who achieves the CFP®<br />

designation demonstrates that<br />

he or she has all the necessary<br />

education and experience<br />

to give advice impartially,<br />

professionally and ethically.<br />

Knowledge is power<br />

By the time you<br />

read this, Financial<br />

Planning Week will be<br />

done and dusted. It’s<br />

an ongoing consumer initiative designed to highlight how<br />

important financial planning is in a healthy society. Every<br />

October, the FPI coordinates a range of initiatives to drive<br />

home this message, including events, media interviews,<br />

articles and social media posts.<br />

It is all about encouraging everyone in the industry to<br />

promote the benefits of comprehensive financial planning,<br />

to highlight the value of FPI professional membership, and<br />

to distinguish between proper, holistic financial planning<br />

and product-orientated financial advice.<br />

New look, same focus<br />

FPIMYMONEY123 is the FPI’s financial outreach programme,<br />

launched in 2012.<br />

Over nearly a decade, it has touched the lives of thousands<br />

of people, helping<br />

them with personal<br />

financial management,<br />

budgeting and saving,<br />

and showing them how<br />

to deal with debt.<br />

The time had come<br />

to take the programme<br />

to the next level, so we<br />

enlisted the creative<br />

brains at The Agency to<br />

breathe new life into the<br />

brand. As Sage Bassett,<br />

head of design and<br />

strategy, explains: “The rebrand called for a new approach,<br />

including a refreshed logo and visual identity, a full website<br />

redesign and the building out of brand assets like social<br />

media campaigns.”<br />

The redesign is guaranteed to take FPIMYMONEY123<br />

to new heights and will hopefully empower thousands<br />

more South Africans to take control of their finances.<br />

8 www.bluechipdigital.co.za

While technology is a fantastic way of facilitating the<br />

client and advisor relationship and driving efficiency,<br />

it can never replace the human connection.<br />

Why professionalism matters<br />

In September, we ran a print campaign to remind the<br />

community of the tremendous value of the CERTIFIED<br />

FINANCIAL PLANNER® designation. The CFP® designation<br />

is internationally recognised as the professional standard<br />

for financial planning professionals and gives consumers<br />

confidence that the financial planner they’re dealing with<br />

is suitably qualified and up to date with developments in<br />

the industry.<br />

It is all about trust. A financial planner who achieves<br />

the CFP® designation demonstrates that he or she has all<br />

the necessary education and experience to give advice<br />

impartially, professionally and ethically.<br />

Full steam ahead<br />

For our premier event of the year, the 2021 Professional<br />

Convention on 25 and 26 October, the FPI has taken the<br />

decision to go 100% virtual, partnering with The Conference<br />

Company to bring you a truly engaging online experience.<br />

The decision ties in perfectly with the theme of the<br />

convention, “The Future is Human”. The theme was<br />

chosen by our members, and it reminds us of the crucial<br />

relationship between client and advisor, which is at the core<br />

of every financial plan. While technology is a fantastic way<br />

of facilitating that relationship and driving efficiency, it can<br />

never replace the human connection.<br />

Get ready for live polls, Q&A sessions and fun, gamified<br />

elements that will enable attendees to interact at all times.<br />

Message other participants directly using the Meeting Hub,<br />

or even have a one-on-one video meeting. And because<br />

all the presentations will be available for 30 days after the<br />

convention, attendees can go back and watch what they<br />

missed – and earn CPD points while they’re at it!<br />

Of course, a conference is nothing without a stellar<br />

line-up of speakers. Going 100% virtual has allowed the<br />

FPI to pick the best of the best. Highlights include worldrenowned<br />

cognitive neuroscientist Dr Caroline Leaf,<br />

internationally acclaimed future strategist John Sanei, and<br />

transformation coach Nick Elston, who will share his own<br />

inspirational story of overcoming adversity to inspire you<br />

to prioritise self-development.<br />

If you haven’t already done so, book your seat now at<br />

www.fpi.co.za/events.<br />

What’s next?<br />

As always, we are constantly updating and amending our<br />

strategy to ensure that the FPI remains relevant to our<br />

members during these ever-changing times. And we’re<br />

getting ready for 2022 – time flies.<br />

I hope to see you at the Professional Convention or at one<br />

of our upcoming workshops.<br />

Until next time,<br />

Lelané Bezuidenhout CFP®<br />

CEO, Financial Planning Institute of Southern Africa<br />

www.bluechipdigital.co.za<br />


On the money<br />

Making waves this quarter<br />

Collaborative partnerships, professional convention and midlife money makeover<br />



The Collaborative Exchange and the Association of Black<br />

Securities and Investment Professionals (ABSIP) have<br />

entered into an agreement, whereby both parties have<br />

agreed to work together in areas of their respective<br />

businesses where such opportunities are identified.<br />

ABSIP is the lead custodian in transformation in the South<br />

African financial services industry. Both parties have<br />

identified several projects that are mutually beneficial.<br />


The Financial Planning Institute of Southern Africa (FPI) Convention<br />

2021 goes virtual – prepare to be wowed. The FPI’s 2021 “The Future is<br />

Human” Convention will be held as a pure digital event. Due to Covid-19<br />

restrictions and the vast demand for convention seats, the FPI is hosting<br />

1Life, an alternative solution<br />


for financial Date: advisors<br />

25 and 26 October 2021<br />

its 2021 convention as a digital-only event. To ensure that attendees get<br />

the maximum benefit from the convention, the FPI has partnered with The<br />

Conference Company and world-leading digital events software provider<br />

EventsAIR to bring you a truly mind-blowing digital experience.<br />


The FPI decided to give attendees what they really wanted at this<br />

year’s convention, and asked its members to choose the theme,<br />

topics and speakers. “The Future is Human” was selected as a theme<br />

because now, more than ever, financial planners and advisors are<br />

using technology in every aspect of their practices, from practice<br />

management to financial modelling.<br />

Venue: Online<br />

Time: 08h00 – 17h00<br />

CPD: 12.5 verifiable hours<br />

COST<br />

FPI member: R2 500<br />

Non-member: R3 000<br />


by Kim Potgieter<br />

I wrote Midlife Money Makeover in the middle of the Covid pandemic.<br />

While this pandemic has taught us many things, it also highlighted<br />

the many difficult challenges clients of the financial services industry<br />

face. I have listened to heartbreaking client stories and have had many<br />

discussions with planners about the tough conversations with clients<br />

going through momentous changes.<br />

With this book, I wanted to find a way to help clients and planners,<br />

no matter the type of transition – whether it’s midlife, death, divorce,<br />

loss of income, retirement or any other. It’s about pausing, tuning<br />

in and really listening to what’s going on in your client’s head and<br />

heart; 12 and then www.bluechipdigital.co.za<br />

guiding them through practical steps to formulate<br />

a sustainable plan for reinvention.<br />

There is a certain liberation in knowing that you have choices for<br />

every aspect of your life – including your money. And when clients<br />

decide to own that power and start to consciously create a life that they<br />

are excited to live, chances are they will end up living their best lives.<br />

This book is a call to action to take control of both your life and your<br />

money – and to put money where it belongs – as<br />

an enabler of your life.<br />

The Change in Mindset Journal accompanies<br />

the book. It is designed as a workbook and<br />

contains many additional exercises to guide<br />

people in healing their relationship with<br />

money and create their best lives.<br />

Midlife Money Makeover and the Journal are available for<br />

purchase on Kim’s website www.kimpotgieter.com, in all<br />

good bookstores and e-tailer websites.

On the money<br />

Making waves this quarter<br />


The number of umbrella funds available, as well as the assets under<br />

management in umbrella funds, has grown significantly over the last five<br />

years as smaller standalone funds seek to manage costs and administration<br />

procedures more efficiently, according to a recent Financial Sector<br />

Conduct Authority (FSCA) report. Employers who decide to transition<br />

from a standalone arrangement to an umbrella fund are tasked with<br />

choosing retirement fund solutions that lead to the best outcomes for their<br />

employees. This can prove challenging, as the available service offerings<br />

vary considerably.<br />

Understand the governance of the fund<br />

Each umbrella fund is governed by a board of trustees tasked with<br />

performing an oversight function and making decisions that ensure the<br />

best possible outcomes for members. Hazel Hopkins, senior partner at<br />

Axiomatic Consultants, advises employers to examine the structures of these<br />

boards, paying careful attention to the balance between sponsor-appointed<br />

trustees and independent trustees, and to ascertain whether members have<br />

any input when it comes to appointing trustees.<br />

Adv. Christi Franken, business development executive at Efficient Benefit<br />

Consulting, agrees and says it is important to identify any conflicts of interest<br />

that the trustees may have – particularly when dealing with “one-stop<br />

shops”, as trustees should be able to make unfettered decisions.<br />

Vusi Maswili, director at ASI Financial Services, says that in addition to<br />

testing the credibility of trustees, one should examine the annual financial<br />

statements and reports, explore the fund’s track record, find out how many<br />

complaints have been lodged against the fund and whether there have<br />

been any non-compliance issues. This can help paint a picture of how well<br />

a fund is managed.<br />


The Hamburg-headquartered German software developer, novomind<br />

AG, has started to intensify its activity in the South African market.<br />

With a local presence in Cape Town, and the cooperation of local<br />

partners, novomind ensures customer proximity. According to the<br />

novomind claim, “Customer focused. Technology driven”, proximity to<br />

customers and a consistent focus on their unique needs, has always<br />

been key to novomind’s success.<br />

Being a German and European technology leader in its specific field<br />

of expertise, novomind develops efficient software solutions for fast,<br />

modern and high-performing online operations in commerce and<br />

customer service. Among novomind’s customers are institutions and<br />

associations, as well as government agencies of all sizes, financial services<br />

providers, mid-sized companies and international conglomerates.<br />

While novomind’s software is partly cloud-based and on-premises,<br />

the company’s SaaS (software as a service approach) means that it can<br />

be integrated flexibly in almost any environment. “With our software<br />

technology, we are enabling our customers to continuously increase<br />

their number of digital customer relationships across all channels and<br />

to strengthen the value of these relationships”, says Michelle Greeff,<br />

novomind Business Development Manager in Cape Town. “We are<br />

passionate about South Africa and would like our software solutions to<br />

create an impressive digital footprint all across the country.”<br />


Company directors in South Africa feel predominantly negative about<br />

economic conditions facing South Africa in coming months and are<br />

also increasingly concerned over a shortage of skilled labour as well as<br />

sometimes onerous union demands.<br />

That’s the top line from the 2021 Institute of Directors in South Africa<br />

(IoDSA) Sentiment Index – the sixth iteration of the study. The survey<br />

seeks to gauge how South African directors view the current operating<br />

climate. The survey was conducted earlier this year when South Africa<br />

was on a national adjusted Level 3 lockdown due to the rising cases<br />

of Covid-19. The IoDSA’s Vikeshni Vandayar says: “Governance and<br />

corporate services who oversaw the report say while serious macroeconomic<br />

concerns understandably remain around the boardroom<br />

table, there is a welcome upside in that the perception of general<br />

business conditions has improved from 2020.” She believes this may<br />

be because of the positive adaptation to the so-called new normal<br />

conditions of remote and virtual working.<br />

This year’s survey included key questions around technology and its<br />

uptake given the Covid-19-driven move to a virtual workplace. It’s an issue<br />

that patently needs more top-level attention with just 46% of respondents<br />

believing boards are devoting enough time to discussion around technology<br />

and its future role. Only half of those surveyed believed that directors had a<br />

high-level understanding of cybersecurity risks. Vandayar says while directors<br />

are learning to live with the flux and mutability caused by the pandemic,<br />

most respondents still feel the uncertainty of the South African economy has<br />

impacted their business the most. To that end, corruption and inadequate<br />

government service delivery remain in the top-ranked challenges affecting<br />

business. Energy security is not as much of a concern as it was two years ago<br />

but still ranks highly along with inadequate government service delivery.

On the money<br />

Making waves this quarter<br />

Educating your journey<br />


When you choose to study with Milpark, you do not merely have us<br />

as an education provider, but as a partner on your journey. Within the<br />

School of Financial Planning and Insurance, we have an excellent team<br />

of lecturers, who all have years of practical industry experience giving<br />

advice to clients.<br />

We offer the perfect combination of academic, theoretical and<br />

practical – exactly what you need in such an applied field as financial<br />

planning. We also have strong ties to industry and regularly involve<br />

other subject matter experts in our teachings, to ensure that you get<br />

exposed to more than just one way of thinking<br />

and providing advice.<br />

Our alumni have proven to excel in the FPI’s<br />

Professional Competency Examination for CFP®<br />

professionals, achieving an 18% higher pass rate<br />

than our next competitor in the recent March<br />

2021 exams. Partner with Milpark Education<br />

on your journey to becoming the best financial<br />

planner you can be for your clients.<br />

Head of School: Financial<br />

Planning and Insurance,<br />

Pietro Odendaal<br />

AN<br />


LIFE<br />




Choose Milpark Education’s School of Financial Planning & Insurance as<br />

your partner on your learning journey to becoming a<br />

Certified Financial Planner ® Professional.<br />

Our Postgraduate Diploma in Financial Planning offers:<br />


Register for your PG Dip in Financial Planning by contacting us on:<br />

086 999 0001<br />

studentservices@milpark.ac.za<br />


International<br />

Investment Portfolio<br />

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Licensed Financial Services Provider

COLUMN<br />

How do we build<br />

your portfolios?<br />

By Florbela Yates, Head of Momentum Investment Consulting<br />

As a discretionary fund manager<br />

(DFM), our clients look to us to<br />

construct robust and diversified<br />

portfolios that will perform<br />

through the cycle regardless of which<br />

asset class or investment style is in favour.<br />

We are also expected to reduce volatility<br />

wherever possible. In delivering on our<br />

promise to clients – building portfolios to<br />

achieve their unique investment goals over<br />

a pre-determined time frame – we follow a<br />

disciplined and proven investment process.<br />

Florbela Yates<br />

We call this process outcome-based investing<br />

and follow three main steps.<br />

The most important step is determining which asset classes we<br />

need exposure to in order to maximise the probability of getting<br />

to our investment objective (or performance outcome) over the<br />

relevant investment horizon. Research done by our investment<br />

teams in both South Africa and the UK shows that most investors<br />

can’t stomach big bouts of volatility and disinvest when portfolios<br />

are perceived to be too volatile. We therefore make sure that<br />

we do not put too much of the client’s capital at risk over any<br />

one-year period. Our modelling focuses on achieving the ideal<br />

balance between capital protection and getting to the outcome,<br />

to make it palatable for clients to remain invested.<br />

The next step is to identify which styles will further increase<br />

the probability of achieving the investment outcome. The<br />

first choice in this step is whether to invest actively or<br />

passively, and the two are not mutually exclusive. For some<br />

asset classes it makes sense to invest via active strategies<br />

while others may be better suited to a passive strategy.<br />

Unless we are satisfied that active funds will consistently<br />

outperform their benchmark after fees, we would prefer to<br />

access that style using a passive or smart-beta strategy. But<br />

the decision to do so is an active one.<br />

We then determine the appropriate allocation to different styles<br />

(such as value, quality or momentum within equities) to ensure<br />

that the overall blend outperforms through the cycle, regardless<br />

of which style is in favour.<br />

Where we do use a passive strategy, the three main<br />

considerations for going passive include:<br />

• Costs: Even though passive fees are generally lower than<br />

active funds, the rule remains that we look for consistent<br />

outperformance after all investment fees. That means, after the<br />

passive index fees as well as the DFM or multi-manager fees.<br />

• Predictability or consistency: Does the passive fund increase<br />

the predictability of that strategy within a portfolio? Consistency<br />

is important. We do not chase an outcome at all costs, but rather<br />

try to ensure that we consistently outperform over the relevant<br />

investment horizon.<br />

• Diversification: Nobody can predict which asset class, investment<br />

style or sector is going to be the best performer over the period.<br />

We focus on building diversified and robust portfolios designed to<br />

perform through the cycle.<br />

The third step involves identifying managers that are experts in a<br />

particular strategy. We believe in using specialists and when we<br />

select the funds to execute on a particular strategy, we make sure<br />

that they are, in fact, able to do so. We also ensure that there isn’t<br />

too much overlap between the underlying strategies, sectors or<br />

stocks they are invested in. So, when we look through the portfolio,<br />

we can better determine both the level of diversification as well as<br />

the expected performance during various market scenarios.<br />

Another factor that has gained importance is environmental,<br />

social and governance (ESG) issues and their impact on<br />

investment portfolios. Our manager research process includes<br />

an ESG filter, and we determine the integration of their ESG<br />

policy in their investment process. We take our corporate<br />

activism seriously and believe that ESG is an integral part of<br />

any investment decision.<br />

There are many moving parts in any investment decision. And<br />

they are often integrated. Understanding the interaction between<br />

funds and the impact on the investment journey is a complex task<br />

and requires skillful resources.<br />

Understanding investment markets can be complex. But so<br />

are human beings. Our clients are unique – they have varying<br />

investment outcomes, different investment horizons and<br />

liquidity requirements.<br />

We understand this and we build solutions that cater for their<br />

different needs. Because with us, investing is personal.<br />

For more information, please contact your financial advisor or<br />

Momentum Investment Consulting at mic@momentum.co.za <br />

Momentum Investment Consulting (Pty) Ltd is an authorised financial services<br />

provider (FSP32726) and part of Momentum Metropolitan Holdings Limited and<br />

rated B-BBEE level 1.<br />

16 www.bluechipdigital.co.za

COLUMN<br />

Professional financial<br />

planning for all<br />

An opportunity to re-imagine our profession<br />

Rob Macdonald, Head of<br />

Strategic Advisory Services,<br />

Fundhouse<br />

Rob Macdonald has held<br />

several senior positions in<br />

the investment industry.<br />

At Fundhouse, he acts as<br />

a consultant and coach<br />

to financial advisors and<br />

develops and facilitates<br />

training programmes in<br />

behavioural coaching and<br />

practice management. Before<br />

joining the financial services<br />

industry, Macdonald was<br />

MBA director at the UCT<br />

Graduate School of Business.<br />

He is co-author of the book<br />

Rethinking Leadership and has<br />

consulted, written and spoken<br />

widely on a range of topics.<br />

Macdonald has a Master’s<br />

degree in Management<br />

Studies from Oxford University<br />

and is a CFP® Professional.<br />

The FPI’s vision of Professional Financial<br />

Planning for All is noble. But I believe if<br />

we are to achieve this vision, financial<br />

planners need to re-imagine how they<br />

see themselves and the profession. I was recently<br />

reminded of this challenge in conversation with<br />

two financial planners.<br />

One planner shared how he had spent<br />

over 60 hours doing work for a potential<br />

client. The client complimented him on the<br />

quality of his work and his advice but decided<br />

to implement the recommendations himself.<br />

The planner had not agreed a fee upfront for<br />

the work.<br />

The second financial planner shared her<br />

frustrations about a proposal for a R30-million<br />

client. The planner was frustrated she had<br />

not followed her normal advice process. The<br />

client had insisted on getting an investment<br />

proposal with recommendations upfront. The<br />

planner usually only talks about investments<br />

towards the end of her process. Even if the<br />

client agrees with the recommendations,<br />

they may not use the services of the planner<br />

to implement them and definitely won’t pay<br />

for the proposal.<br />

Some might argue that these were two<br />

difficult clients. Or were they just smart? Getting<br />

professional expertise and advice for free.<br />

Contrast the experience of the two planners<br />

with that of the cardiologist I recently consulted<br />

due to an irregular stress ECG. After a physical<br />

examination, the cardiologist sent me for a CT<br />

scan. Days after the cardiologist’s bill had been<br />

settled, I got the news that I was fine. Payment<br />

was not dependent on the outcome of the<br />

cardiologist’s report. Imagine if we only paid<br />

medical bills if we liked the results we got. And<br />

yet many professional financial planners operate<br />

like this. They do an analysis and present a report<br />

or proposal in the hope that the client likes what<br />

they see.<br />

If professional financial planners working<br />

with wealthier clients don’t get paid for all<br />

the work they do, what hope is there for the<br />

poorer sectors of our society to get professional<br />

financial planning?<br />

A few years ago, independent financial<br />

planner Gregg Sneddon and I approached<br />

the then FSB with a proposal to realise the FPI<br />

vision of Professional Financial Planning for<br />

All. We envisioned a replication of the medical<br />

model which gets health services to the poor,<br />

through government-backed public hospitals<br />

and clinics.<br />

Last year, I saw first-hand the power of<br />

the medical model when my neighbour’s<br />

housekeeper had a heart attack while jogging.<br />

Treated in a public hospital she made a full<br />

recovery. As a “poorer” member of society, she<br />

didn’t have to pay for the world-class treatment<br />

she received, but those treating her got paid<br />

for their work. The public health system has<br />

doctors who range in ability from worldrenowned<br />

specialists to new graduates doing<br />

community service.<br />

Applying the medical model to financial<br />

planning, newly qualified financial planners<br />

could do their “community service” within<br />

public financial planning clinics. Like doctors,<br />

they could choose to go into public service or<br />

private practice. More experienced financial<br />

planners could work in the public or private<br />

sectors, or straddle both. And they would<br />

be remunerated in both sectors, probably at<br />

different rates.<br />

Financial planning for poorer sectors of<br />

society is often nothing more than selling a<br />

funeral policy. The broader financial health<br />

of the individual is not considered. Through<br />

a private-sector lens, it’s not economically<br />

viable to do more than this. To achieve the FPI’s<br />

vision of Professional Financial Planning for All,<br />

we need a public financial planning service. It<br />

will also ensure financial planning rightfully<br />

becomes a respected profession, where the<br />

value lies in the financial planner’s expertise<br />

and advice, not in the product. <br />

www.bluechipdigital.co.za<br />


FPI<br />

Life begins at 40<br />

The FPI celebrates 40 years of financial planning excellence this year!<br />

The Financial Planning Institute was founded as a nonprofit<br />

organisation called the Institute of Life and<br />

Pension Advisors (ILPA) in 19<strong>81</strong>. Despite the name<br />

change, it has always had one primary aim: ensuring<br />

high professional standards in the vital field of financial advice.<br />

In the 1980s, the life insurance industry in South Africa suffered<br />

from a poor public image and a lack of trust in its frontline<br />

personnel. While there was a general recognition in the industry<br />

that something had to be done, it took a few individuals with the<br />

necessary passion and commitment to bring ILPA into being. They<br />

had a vision of creating a professional body along the same lines as<br />

those of which already existed for accountants, actuaries, lawyers<br />

and doctors.<br />

A global trend<br />

Although it was formed as an independent South African<br />

initiative, the ILPA was not conceived in isolation. On the<br />

contrary, its birth was part of a worldwide trend towards<br />

professionalising the financial advice sector. The increasing<br />

complexity of financial support and investment mechanisms<br />

and the scandalous behaviour of a small minority of ruthless<br />

rogues who robbed people of their life savings had made<br />

professionalisation a priority.<br />

This global movement was born in America, but it wasn’t long<br />

before other professional financial planning bodies sprung up<br />

across the globe. The early pioneers of the profession in South<br />

Africa looked to the US, the UK and Australia for inspiration.<br />

Through travel and research, they were able to establish a<br />

professional standards body to rival the best in the world.<br />

One of the results of this research was the introduction of the<br />

Certified Financial Planner® mark to South Africa. The “three most<br />

important letters in financial planning” are reserved for financial<br />

planning professionals who have attained an internationally<br />

benchmarked standard of knowledge that is backed up with<br />

18 www.bluechipdigital.co.za

sufficient practical experience and high<br />

ethical standards. The introduction of the<br />

CFP® designation played a major role in<br />

professionalising the industry in South Africa.<br />

The FPI was a founding member of the<br />

international Financial Planning Standards<br />

Board (FPSB), which is today the custodian of<br />

the CFP® designation. The FPSB is dedicated<br />

to managing, developing and operating<br />

certification, education and related programmes<br />

for financial planning organisations around the<br />

world, including the FPI.<br />

Local is lekker<br />

While the ILPA was born out of a desire to<br />

bring international standards to South Africa,<br />

the industry in this country has more than<br />

held its own when it comes to innovation.<br />

The FPI has made its several invaluable<br />

contributions to financial products and<br />

professional standards, not least the<br />

development of two local trademark levels<br />

of membership: Associate Financial Planner<br />

(AFP) and Registered Financial Planner (RFP). These two<br />

designations serve as vital stepping stones for aspiring advisors,<br />

while also reassuring the public that these advisors meet a<br />

guaranteed standard of professionalism, expertise and ethics.<br />

The FPI is uncompromising in establishing and maintaining<br />

professional financial planning standards in Southern Africa.<br />

It plays a major role in ensuring that the public has access to<br />

competent financial planners who are professionally qualified,<br />

are experienced and have agreed to abide by its code of<br />

conduct, ethics and practice standards.<br />

Many top financial institutions have adopted the FPI as an<br />

independent standards partner and its members include both<br />

general practitioners and specialists in particular branches<br />

of financial planning. The FPI is recognised as both a SAQA<br />

Professional Body and a recognised controlling body of SARS.<br />

Since its origins, the FPI has widened its scope by turning its<br />

attention towards creating a profession that includes people<br />

representative of our diverse South African nation.<br />

The FPI continues to focus on robust consumer education<br />

around financial matters and the benefits of dealing with an FPI<br />

professional member. The Institute also places major importance<br />

on ensuring that its competency standards remain relevant to the<br />

ever-changing regulatory environment and keeps up with the<br />

latest trends in technology and behavioural science.<br />

Onwards and upwards<br />

The global pandemic has shown that Southern African financial<br />

planners are a young, agile and hungry group of professionals<br />

who are all for embracing change and the advances of the<br />

Fourth Industrial Revolution. Here’s to the next 40 years! <br />

This article is an excerpt of Mike Aldridge’s fascinating book, The History of the FPI.<br />

The FPI is<br />

uncompromising<br />

in establishing<br />

and maintaining<br />

professional financial<br />

planning standards<br />

in Southern Africa.<br />

www.bluechipdigital.co.za<br />



Making a<br />

difference in the<br />

lives of others<br />

After a journey of over 20 years, Lelané Bezuidenhout is now the CEO of the FPI where<br />

she makes a difference in people’s lives by serving the FPI’s vision of professional financial<br />

planning and advice for all. <strong>Blue</strong> <strong>Chip</strong> was honoured to interview this esteemed leader.<br />

20 www.bluechipdigital.co.za


Lelané, you were appointed as CEO of the FPI in June 2019.<br />

Please describe the trajectory that led you to this point.<br />

I started my career in the financial services industry 22 years ago.<br />

I have always had a passion for finding solutions to problems and<br />

strengthening processes that complement business needs. From<br />

a young age, I was a natural leader. My strengths are positivity, and<br />

being a mentor, coach and relator.<br />

Reflecting on my journey, I realise that each teaching moment<br />

was necessary to prepare me for role of FPI CEO. There is nothing<br />

glorious about being a CEO, it is a position that comes with great<br />

responsibility and accountability.<br />

Discipline and agility<br />

are two of the most<br />

critical components<br />

of financial success.<br />

What are the defining highlights of<br />

your career?<br />

While I am thankful for all that I learned<br />

there, leaving the corporate world<br />

was one of the defining moments as<br />

it moved me into uncharted waters.<br />

The world outside the security of a big<br />

corporate is different and offers divergent opportunities.<br />

Joining the FPI was another defining moment. It is quite a<br />

humbling and enriching experience, at the same time, to work for<br />

an NPC, as it is most definitely my calling to serve others.<br />

What do you deem to be the most critical component to<br />

financial success?<br />

Having a personalised financial plan with clearly defined goals and<br />

adhering to it. Discipline and agility are two of the most critical<br />

components of financial success. The discipline to stick to the<br />

plan, and awareness of the ever-changing financial and regulatory<br />

environments. We need to understand that while a financial plan is<br />

formed around one’s unique goals and needs, it is not cast in stone<br />

and must change at various life stages.<br />

Please outline areas of growth for the FPI in the past two years.<br />

The FPI has been through the forming, storming, norming and<br />

now performing stages. The area where a lot of progress was<br />

made in the past two years was formulating a robust governance<br />

structure based on King IV principles. Our governance body,<br />

the board, has come a long way in the past two years and is<br />

instrumental in moving the FPI forward, from a strategic point<br />

of view.<br />

The FPI strengthened its stakeholder relationships by ensuring<br />

that we have a multi-layer engagement strategy across the FPI<br />

and not just in the office of the executive. There is a succession<br />

and contingency plan should a key staff member leave. We<br />

became more risk aware and refocused on a robust enterprise risk<br />

management strategy.<br />

We enhanced our digital capability and increased our footprint,<br />

which resulted in a larger audience across all our social media<br />

platforms. This links into the FPI’s strategic objectives in creating<br />

a greater awareness about the value of financial planning and<br />

working with the FPI’s professional members.<br />

The past two years have been challenging for all considering<br />

the Covid environment – but despite these challenges, the FPI<br />

managed to retain 97% of our professional members.<br />

Our consumer education team had massive successes in<br />

moving our FPIMyMoney123 programme online (see FPI YouTube<br />

channel) to ensure that we are there for consumers that need help<br />

with basic financial matters. Another area where we experienced<br />

growth was in our online CPD offerings. We improved the quality<br />

of our speakers as well as the content that speaks to professional<br />

financial advice and planning.<br />

We delivered two very successful conventions in 2019 (faceto-face)<br />

and 2020 (completely virtual due to<br />

the pandemic).<br />

We managed to turn the FPI ship around<br />

while we, as a team, refocused our outputs on<br />

moving the profession forward and focusing<br />

on our vision and mission statements as well<br />

as our strategic goals.<br />

What are the FPI’s core values?<br />

Our core values are none other than the core values that we expect<br />

our members to adhere to, being:<br />

• Client first. Acting in the best interests of our clients<br />

• Competence. We believe in upskilling our staff<br />

• Confidentiality. Information that we hold on behalf of members<br />

is protected<br />

• Diligence. We take pride in what we deliver<br />

• Fairness. We treat others how we would like to be treated<br />

• Integrity. Always be honest, consistent and transparent<br />

• Objectivity. We avoid all possible conflicts of interest<br />

• Professionalism. We are excellent at everything that we set out<br />

to do.<br />

What are the FPI’s near-term objectives?<br />

Leadership<br />

• The FPI leads the financial planning profession and professional<br />

advice space through articulation and implementation of a<br />

robust and well-defined strategy.<br />

• Secure organisational sustainability (GCR, financial, operational<br />

excellence and the FPI’s B-BBEE level).<br />

• Lead diversity and inclusion in the financial planning and<br />

advice profession.<br />

• Grow the number of professional memberships.<br />

Awareness<br />

• Empower consumers by creating awareness of the benefit of<br />

professional financial planning and advice through financial<br />

education and a pro-bono programme fully supported by members.<br />

• The value of professional planning is showcased to consumers<br />

through a brand ambassador programme and media engagement.<br />

Recognition<br />

• Achieve regulatory/legislative recognition and protection of<br />

financial planning as a profession and the FPI as the standardssetting<br />

body for the profession.<br />

www.bluechipdigital.co.za<br />



• The FPI designations, and in particular the CFP®, are must-have<br />

designations for consumers of financial planning and advice.<br />

• The FPI designations are recognised by employers as musthave<br />

designations for employees.<br />

What are the FPI’s long-term strategic goals?<br />

• Leadership. The FPI is the pre-eminent financial planning and<br />

advisory standards authority for competent and ethical financial<br />

planners and advisors. The FPI’s designations represent the<br />

standard of excellence for financial planners and advisors and<br />

their respective disciplines in South Africa.<br />

• Awareness. The public is widely aware of the value of the<br />

financial planning process and of the CFP® certification and<br />

financial advice related designations.<br />

• Recognition. Financial planning is recognised as a profession.<br />

The FPI is recognised by regulation/legislation as the standards<br />

setting body for professional financial planning and advice.<br />

• Standards. The FPI has established standards of excellence<br />

for financial planning and<br />

advice, and members are in full<br />

compliance with our certification<br />

programme standards.<br />

What is your strategy in terms of<br />

membership growth?<br />

Our goal is to grow professional<br />

membership across our advice and<br />

financial planning professional<br />

designations. Focus areas include<br />

attracting and retaining younger professionals as well as a more<br />

diverse membership base.<br />

Engagement with our recognised educational providers,<br />

corporate partners and professional practices are key in<br />

ensuring growth in both independent financial advice and tied<br />

agent environments.<br />

Our focus is on growing our professional competency<br />

examination (PCE) support as we need to increase our pass rate<br />

and improving our mentorship programme.<br />

We are using more agile technology to assist us in managing<br />

our pipeline, as we have quite a few affiliates on our database<br />

who haven’t completed their journey in becoming professional<br />

members of the FPI. This is evident from a study we did together<br />

with SAQA a while back.<br />

Please tell us about the industry benchmarks that the FPI<br />

has fashioned.<br />

The FPI Professional Practice Standards as well as the FPI Code<br />

of Ethics. The Code was reviewed with the assistance of the<br />

Ethics Institute of Southern Africa. The purpose of the Code is<br />

to promote ethical behaviour. The Code incorporates rules of<br />

professional conduct that instill confidence in the members. It<br />

includes the framework for financial planning, known as the “six<br />

steps of financial planning”.<br />

The FPI set clear education standards for both the financial<br />

planner and advisor. We aligned our curriculum and competency<br />

standards with the globally recognised standards of the Financial<br />

Planning Standards Board (FPSB), in which the FPI is the only<br />

licensed affiliate in Africa.<br />

Via robust industry engagement with practicing financial<br />

advisors and academia, we authored and published the curriculum<br />

and competency standards for financial advisors. The curriculum<br />

includes class-of-business training for most, if not all, classes of<br />

businesses as defined in the FSCA’s fit and proper requirements<br />

(BN 194 of 2017).<br />

We published our CPD policy that serves as a benchmark for<br />

many financial service providers who must have a CPD policy as<br />

per FSCA subordinate regulations.<br />

We have published thought leadership papers on robo-advice,<br />

pro-bono initiatives and transitioning to a fees-based financial<br />

planning practice. The FPI members’ focus is advice-led and<br />

not product-led which makes the transitioning to a fees-based<br />

model paper very relevant to<br />

the advice-based community.<br />

The FPI is the pre-eminent<br />

financial planning and<br />

advisory standards authority<br />

for competent and ethical<br />

financial planners and advisors.<br />

From a public policy point of<br />

view: the FPI is very involved, via<br />

our stakeholder engagement<br />

strategy, in matters such as<br />

the Retail Distribution Review,<br />

national health insurance,<br />

treating customers fairly via<br />

active participation in public<br />

comment into the Conduct of<br />

Financial Institutions (COFI) Bill, the retirement and social reform and,<br />

as mentioned, transitioning to a fee-based financial planning practice.<br />

How can you ensure that a financial advisor's advice process is<br />

aligned with the FPI’s code?<br />

The FPI is not a regulator, but a professional body that sets<br />

professional standards that include practice and competency<br />

standards. Our practice standards are aspirational and are<br />

conduct-based rather than rules-based. It is advisable that<br />

financial planners and advisors align their processes to the<br />

practice standards of the FPI as they will inherently comply with<br />

FAIS regulations which are still very rules-based.<br />

What changes would you like to see happen in the industry over<br />

the next five years?<br />

I would like to see the regulatory environment stabilise. Over the<br />

past 20 years, we have been faced with constant regulatory changes.<br />

I would also like to see more guidance from Treasury, the Financial<br />

Sector Conduct Authority and the Financial Sector Transformation<br />

Council on how to develop a more diverse and inclusive industry<br />

that is representative of the demographics of South Africa.<br />

A big change that I would really like to see in the next five<br />

years is that financial management forms part of the South African<br />

high-school curriculum. We need to teach children from a young<br />

22 www.bluechipdigital.co.za


age how to work with money to address the poor savings culture<br />

in South Africa.<br />

What are the latest trends, developments and innovations in<br />

this sector?<br />

The latest developments speak to the digitalisation revolution that<br />

we are experiencing. We have seen robo-advisors developing in<br />

the past few years to such an extent that a definition had to be<br />

written into FAIS regulations (BN 194 Automated Advice).<br />

Advisors and planners are increasingly making use of<br />

technology to improve their practices and relationships with<br />

their clients. More and more, clients prefer to meet online via<br />

platforms such as Zoom, MS Teams and Skype. The pandemic<br />

has accelerated the development of digital strategies within<br />

the industry. This led to the need for skills development in the<br />

use of technology, understanding AI and its risks as well as<br />

behavioural finance.<br />

Please share the FPI’s recent milestones and celebrations.<br />

Milestones: The FPI celebrated the launch of our first integrated<br />

report since adopting the King IV principles. We increased our<br />

social media following and digitalised our FPIMYMONEY123<br />

programme to ensure that consumer education would still<br />

continue throughout the lockdown levels when face-to-face<br />

numbers were restricted.<br />

The FPI is involved in setting a national consumer education<br />

curriculum at regulatory level and continues to be involved in<br />

ongoing discussions around incoming regulations.<br />

The FPI had a fantastic virtual professional conference in<br />

2020 and will have another one in 2021. We took our PCE,<br />

which has always been a face-to-face exam, completely online<br />

by incorporating AI and learning management systems to<br />

ensure security.<br />

Celebrations: The FPI achieved good results despite 2020. We<br />

met all our targets and managed to keep costs down. We are also<br />

turning 40 years old this year!<br />

One of the FPI’s missions is to provide financial planning for<br />

all. How can the FPI grow the pro-bono programme so that it<br />

provides advice to all South Africans?<br />

We need more of the FPI’s professional members to give back to<br />

the community by participating in the pro-bono programme.<br />

Members can claim CPD hours for the pro-bono work they do.<br />

Access to advice and financial inclusion are quite high on the<br />

agenda of FPI as well as the regulators. We need to make it easier<br />

for all South Africans to have access to advice. It would be great if<br />

a tax incentive, such as a tax deduction for paying for advice/fringe<br />

benefit see the light of day.<br />

We also need corporate South Africa, especially the FPI<br />

corporate partners, to contribute financially to the profession via<br />

sponsorships that will enable us to do so much more with our<br />

consumer education outreach and financial literacy programmes,<br />

which are available at no cost to the public.<br />

How does the current pro-bono scheme work?<br />

The FPI developed the material needed for members to present<br />

the FPIMyMoney123 programme to a group of people. Members<br />

of the public, schools, churches and employers, etc that want the<br />

FPI to present the programme can visit www.fpi.co.za to book a<br />

session with a professional in their area.<br />

The FPI professional members that present FPIMyMoney123<br />

may claim CPD points.<br />

In 2021, the FPI celebrates 40 years of financial planning<br />

experience. What does this mean to you personally?<br />

Confirmation that the FPI is part of the greater global community<br />

when it comes to the financial planning profession. It also means<br />

we are a professional body that the members can be extremely<br />

proud of. We have reached many milestones over the past 40 years.<br />

For me personally, it means that we are an agile, young but<br />

robust profession that has so much more to give back to the public<br />

at large as well as being involved in the career journeys of young<br />

upcoming professionals.<br />

In the 1980s, the FPI’s focus was solely on professionality in the<br />

industry. What is the FPI’s focus now?<br />

In the 1980s, the FPI as it stands today, did not exist. The FPI those<br />

days was called the Institute for Life and Pension Advisors (ILPA)<br />

and focused predominantly on the life and pension space. When<br />

we became the FPI we started to focus more on advice-led activities.<br />

We participated in the global job analysis survey earlier this<br />

year and will soon be updating our competency framework and<br />

curriculum to include learning outcomes that include financial<br />

planning technology and behavioural finance.<br />

Our focus is on the professionalisation of the industry at<br />

large, especially the financial planning profession. This will<br />

remain our focus for as long as we have consumers that make<br />

use of the financial advice and planning services delivered by<br />

our professional members.<br />

Please share with us, the importance of the FPI’s strategy and<br />

vision of “Professional financial planning and advice for all”,<br />

against the backdrop of our current disruptive world.<br />

Professional financial advice and planning go together. It is<br />

not possible to separate the one from the other. It is of critical<br />

importance that the FPI, as the standard setter of financial planning<br />

and professional financial advice, continues to set relevant<br />

standards for the profession in the face of the current disruptive<br />

world, always taking our members into consideration.<br />

Since the start of the global pandemic, people lost their<br />

jobs, or had to take salary cuts. Families have lost loved ones,<br />

often with no valid will or life insurance in place, sometimes not<br />

even a funeral policy. The current times that we live in have no<br />

doubt reconfirmed the FPI’s vision and highlighted the critical<br />

importance of speaking to a professional financial advisor. People<br />

can visit www.letsplan.co.za to find a FPI professional member<br />

in their region.<br />

www.bluechipdigital.co.za<br />



How has Covid changed the FPI?<br />

It has accelerated our IT strategy in that we moved faster into a fully<br />

digitalised world. It opened the rest of the world to our members<br />

who can now participate in FPSB webinars and online events.<br />

Covid led to the FPI changing its world-of-work completely – we<br />

work in a hybrid fashion now where staff work a minimum of 15<br />

hours a week in a hot-desk environment and the rest of the week<br />

from their homes.<br />

Covid has changed the way the FPI measures outputs and<br />

engagement with our members. Engagement with members has<br />

increased by more than 50% via our digital tools and platforms.<br />

Lockdown for the FPI did not mean shutdown; it led to an increase<br />

in staff productivity and member engagement.<br />

Our members now have more time to spend time with their<br />

clients via online platforms. Technology platforms also enhanced<br />

a lot of their capabilities that resulted in members doing less<br />

admin as some of the functions were automated. Our FPI members<br />

indicated, via a recent study conducted by the FPSB, that 60-80%<br />

of their client meetings will remain virtual after lockdown is over.<br />

Why has the FPI vision and mission changed to include<br />

professional financial advice?<br />

The FPI stepped into the advice space a few years ago as we<br />

realised there were no real standards or competency frameworks<br />

in the space. We have since developed a competency framework<br />

and curriculum and registered theFinancial Services Advisor (FSA)<br />

designation with SAQA.<br />

We have two career pathways for FPI professionals – one that<br />

is advice-led and one for financial planning. Updating the vision<br />

statement also aligns with our advocacy stance around financial<br />

advice and planning. Advice focuses on professional financial<br />

advice that could include product advice as well, whereas planning<br />

focuses on holistic financial planning linked to life goals, objectives<br />

and long-term planning.<br />

The end of your first year as CEO collided with the pandemic.<br />

What did it teach you as a leader during this time?<br />

It taught me that as a leader, you need your team and cannot afford<br />

to be a lone ranger. When I stepped in, one of my mottos was and<br />

still is, “Where there is unity a blessing is commanded”. I have seen<br />

this manifesting throughout the pandemic as the team worked and<br />

stood together.<br />

It taught me to reach out to other leaders to learn from and<br />

lean on each other. I realised how important it is to take good<br />

care of oneself for the sake of the team. A tired CEO does not help<br />

the team at all!<br />

Why was 2020 a significant milestone for FPI advocacy?<br />

During 2020, we reconfirmed our position in our response to the<br />

draft COFI bill that the term financial planner needs legislative<br />

protection. This is to ensure that a financial planner must have<br />

the necessary abilities, skills and knowledge in place. Completing<br />

a holistic financial plan takes a high level of technical knowledge<br />

that stretches across all the financial planning components as<br />

articulated in the global financial planning curriculum standards.<br />

We need to get this right for the sake of the public at large.<br />

Why is the protection of terms important for consumer protection?<br />

The reason why this is so important from a consumer protection<br />

point of view is that there are a lot of people that profess to do<br />

financial planning and they do not. Selling a product to address a<br />

single need (like a funeral policy) is not financial planning.<br />

Financial planning focuses on the holistic picture that takes into<br />

consideration financial and asset management and investment,<br />

risk, tax, retirement and estate planning. It focuses on professional<br />

financial advice and not product-led advice but may include<br />

product advice as well. It takes a highly skilled individual to<br />

ensure that the relevant qualitative and quantitative information<br />

is collected and analysed using complex financial needs analysis<br />

methodologies to ensure that a custom-fit financial plan is designed<br />

and implemented for each client. One cannot merely copy and<br />

paste one client’s financial plan for another as we all have different<br />

goals, needs and financial objectives in life. <br />


Aspirations as a child?<br />

Primary school – to become a singer. High school – to<br />

become a geologist or graphic designer. None of that<br />

came to fruition, but I am still singing in the shower and<br />

studying rocks that I pick up from all over the world and<br />

arranging them in an artistic way in my garden.<br />

And now?<br />

To be needed where I am. To be present and relevant and to<br />

participate in matters that make a difference in the lives of others.<br />

I am a servant leader and will continue to be one.<br />

Best advice ever received?<br />

Don’t take comments seriously from someone that does not know<br />

you personally.<br />

What does the word family mean to you?<br />

Everything. When no-one else is there, your family is there for you.<br />

What do you enjoy doing when not at work?<br />

Nature walks, studying something/learning something new and<br />

riding off-road bike with my husband (he is a pro, I am not).<br />


After 11 years of working for a large insurer, Bezuidenhout<br />

joined the Office of the Ombudsman for Financial Services.<br />

In this role, it became clear that there is a lot more that the<br />

industry can do to ensure competent financial advisors<br />

and planners serve the public. This is where her journey at<br />

the FPI began, as the certification manager, then the head<br />

of certification and standards. She believes that we have a<br />

great profession that is yet to achieve its fullest potential!<br />

24 www.bluechipdigital.co.za




The Financial Planner of the Year Award, the most prestigious award in the industry, endeavours to<br />

acknowledge extraordinary Certified Financial Planners® from across the nation who demonstrate innovation<br />

and professionalism as well as commitment to their clients. Meet the top three financial planners of 2021.<br />



How has the process of applying for the Financial Planner<br />

of the Year Award benefitted your business? Have you<br />

made any significant changes to your business during the<br />

application process?<br />

I did not make any specific changes to my business during the<br />

application process. For me, the most significant benefit of going<br />

through such a rigorous process is that it made me step back and<br />

appreciate the amazing progress that my practice has made in the<br />

last years.<br />

Do you believe that the FPI can improve the selection process<br />

in any way?<br />

My greatest desire is to get more and more people into the<br />

industry and qualify as CFP® professionals. I suppose emphasis<br />

could be placed on training and mentoring as part of the criteria<br />

for selection. In that case, I believe it will motivate successful CFP®<br />

professionals to assist younger aspiring professionals in obtaining<br />

a CFP® professional qualification and ultimately becoming part of<br />

this wonderful competition and organisation.<br />

What are the changes that you would like to see in the financial<br />

planning industry?<br />

I would like to see better education of financial planning and the<br />

industry at schools. If children are educated about the financial<br />

planning industry while they are young, I do not doubt that it<br />

will ultimately lead to a perception of professionalism and attract<br />

strong candidates to the industry.<br />

What are your long-term objectives – including those on<br />

diversity and inclusion?<br />

In 2018, I built and started a primary school with two of my<br />

clients. We started with nothing and built a school where more<br />

than 120 children are currently receiving the highest quality<br />

education. This made me realise that one of my most important<br />

long-term objectives is to deliver good-quality education<br />

to South African youngsters regardless of their economic<br />

background, race or gender.<br />

Another objective of mine, which goes hand-in-hand with<br />

my passion for education and the training of youngsters, is<br />

the involvement of more junior advisors in my practice. When<br />

a new junior advisor joins my practice, I always discuss the<br />

importance of education in general, and the CFP® professional<br />

qualification in particular. I also make my office and staff<br />

available at no cost to junior advisors to give them a headstart<br />

in the industry.<br />

I chair a national advisors’ forum for over 2 000 advisors,<br />

where I always aim to share my experiences and methods with<br />

other advisors, especially young advisors so that more and more<br />

clients can receive quality advice. I see it as a “pay-it-forward”<br />

system, where the circle of inclusion continues to grow to the<br />

benefit of everyone, including advisors and our clients.<br />

I really hope that I can make a positive difference in people’s<br />

lives. My father started working as a financial advisor more than<br />

40 years ago, and I am genuinely in love with this wonderful<br />

industry, and my passion for<br />

financial advice, advisors and our<br />

clients is in my blood.<br />

I like to have a positive outlook<br />

on life; I also do like to have fun and<br />

spend time with my wife, Alida, who<br />

enables me to thrive in my industry.<br />

I have three kids, Christof (four<br />

years old), Hans and Philip (both<br />

one year olds). Life with twins is<br />

always exciting with lots of time<br />

to laugh with them and teach my<br />

kids about my core values being<br />

integrity, honesty, respect and<br />

always being humble.<br />

Hendrik Spies, Certified<br />

Financial Planner®, Spies<br />

and Associates<br />

26<br />



there is room for improvement. So, for me, it has been a fantastic<br />

journey to find what the values are that I want to hold at the<br />

centre of everything I do and then build a vision for our clients,<br />

our practice and what I want to contribute to the financial<br />

planning community.<br />

Do you believe that the process of selection can be improved<br />

in any way?<br />

In a digital age, the process can be streamlined a lot more by<br />

digitising the application process.<br />

There are some “mental barriers” for people to enter because<br />

they think their practice needs to be “perfect” before entering.<br />

I think the action of entering (or deciding to enter) puts you<br />

on a path to really delve deep into best practice standards and<br />

starts a process of continual improvement in your practice that<br />

sets you up to move from a good to an amazing practice. So,<br />

what can be improved is a message to encourage financial<br />

planners to start the journey because what you learn along<br />

the way is priceless.<br />

What are the changes that you would like to see in the financial<br />

planning industry?<br />

While there have been some great improvements in the way<br />

clients are being charged fees, I think we can do better to align<br />

services delivered with fees charged to clients.<br />

Something great that is starting to emerge is that more<br />

and more financial planners are learning skills to coach and<br />

upskill clients to make better financial decisions and even<br />

change the way they think about, and the associations they<br />

make with money.<br />

Financial planning is key to help education, but a big<br />

part of the population has very limited or no access to<br />

financial education or financial planners. I would love to<br />

see technology being used to give everyone access to basic<br />

financial education.<br />



How has the process of applying for the Financial Planner<br />

of the Year Award benefitted your business? Have you<br />

made any significant changes to your business during the<br />

application process?<br />

When applying for a competition where you know you will be<br />

measured against the best financial planners in the country and<br />

the highest practice standards internationally, I was forced to<br />

look at everything our practice does critically and see where<br />

What are your long-term objectives – including those on<br />

diversity and inclusion?<br />

I want our practice to become one of the best in the country<br />

for clients to work with while adhering to<br />

the highest professional standards and<br />

continually improving our clients’ financial<br />

positions through excellent financial<br />

planning. I want to empower all financial<br />

professionals from all different backgrounds<br />

to build better businesses and achieve<br />

better outcomes for their clients.<br />

I would like to build bigger and better<br />

communities within the financial services<br />

profession between people from all<br />

backgrounds to better understand and<br />

learn from each other.<br />

I want to use technology to give more<br />

people access to financial education.<br />

Henri le Grange, Certified<br />

Financial Planner®,<br />

Le Grange and Associates<br />

www.bluechipdigital.co.za<br />




How has the process of applying for the Financial Planner of the Year<br />

Award benefitted your business? Have you made any significant<br />

changes to your business during the application process?<br />

This is my second year of participating in the FPI Financial Planner<br />

of the Year competition. Last year, I made it through to round<br />

two as well. I thoroughly enjoyed the journey, the process and<br />

competing against like-minded individuals within the financial<br />

planning community.<br />

Over the last two years, we have refined our business systems<br />

by incorporating some of the key financial planning principles<br />

and processes and adjusting our written proposal structures to<br />

focus more clearly on the six-step financial planning process.<br />

Two key roles that I place significant importance on were<br />

confirmed during the application process, namely 1) that a<br />

stringent and regular review process plays a vital role in the success<br />

of a financial plan, and 2) active participation in our investment<br />

committee to enhance my ability to provide up-to-date and<br />

comprehensive investment advice to clients.<br />

Having formed an integral part in growing Hewett Wealth to<br />

where it is today and making it through to the final round of FPI<br />

Financial Planner of the Year highlights the hard work that we have<br />

put in to establish a financial planning practice that I am extremely<br />

proud of. I feel that the industry will benefit from our tried-andtested<br />

processes and procedures.<br />

Do you believe that the process of selection can be improved<br />

in any way?<br />

I understand the severe impact Covid-19 has had on everyone’s<br />

business from a financial and operating perspective, so I<br />

must commend the FPI for managing to keep this annual<br />

competition running.<br />

Other than timeline communication, I thoroughly enjoyed the<br />

application process, presenting my comprehensive financial plan,<br />

and the process of running through the operations of my business<br />

systems and methods during the site visit. I look forward to sharing<br />

my views during the panel discussion.<br />

What are the changes that you would like to see in the financial<br />

planning industry?<br />

Building a truly independent, professional financial planning<br />

and advisory business should always start with the client<br />

in mind – a clear focus on ensuring exceptional outcomes<br />

for clients over the long term and delivering an all-inclusive<br />

client experience.<br />

I would like to see a greater emphasis placed on professionalism<br />

(Certified Financial Planner®) when dealing with clients’ financial<br />

affairs. Secondly, I would like to see the industry move towards<br />

a more sustainable and mutually beneficial business model,<br />

including the move away from the upfront revenue model.<br />

Lastly, access to financial advice for lower-income groups and<br />

appropriately costed models to meet their needs. Historically<br />

these models have been costly, turning individuals away from<br />

saving for the future<br />

What are your long-term objectives – including those on<br />

diversity and inclusion?<br />

When Hewett Wealth was established in 2016, we set out<br />

to establish a truly independent, professional financial<br />

planning and advisory business focussed on ensuring<br />

exceptional outcomes for clients over the long term. We<br />

are proud of what we have achieved as a team over the<br />

last five years. We have established a truly independent<br />

advisory business, with a national footprint, without<br />

compromising the integrity of the advice process and<br />

client experience.<br />

We would like to cater for the diverse South African<br />

population in the long term and we would love our “employee<br />

make-up” to reflect the same. However, given the size of our<br />

business, the short-to-medium focus is to grow my branch in<br />

Cape Town and ultimately expand our reach with a focus on<br />

our target market. Key focus areas highlighted for growth are<br />

as follows:<br />

• Scaling advice through technology<br />

to allow our employees to focus<br />

on providing our clients with the<br />

comprehensive value proposition<br />

and review process they have<br />

become accustomed to.<br />

• Continually enhancing our value<br />

proposition and product offering for<br />

the ever-changing financial climate.<br />

• Hiring employees to enhance our<br />

expected growth.<br />

• Building on service provider and<br />

financial advisor community<br />

relationships.<br />

Ryan McCaughey CFP®,<br />

Executive Head: Western<br />

Cape, Hewett Wealth<br />

<strong>Blue</strong> <strong>Chip</strong> wishes the three finalists the best of luck!

It truly starts<br />

with you<br />

In 2006, it was all about winning, receiving an award, and being<br />

recognised as the top in the country. That focus and mission<br />

turned out to be a bit of a disappointment at the time, but<br />

probably the biggest and best lesson for me.<br />

I attended my company’s annual conference in 2006 and,<br />

sitting in the audience watching the top 10 consultants<br />

receiving their awards, I told myself, “That’s going to be me<br />

next year.”<br />

Lo and behold, in 2007 I made it to the top 10. I had achieved<br />

my goal. My award and recognition were imminent.<br />

The disappointment<br />

All areas of the business came together for the conference at Sun City.<br />

There I was, in my tux, excited beyond measure. I mean, the awards<br />

event was held in the Superbowl. What a moment.<br />

It then took a turn. There were so many people, most of<br />

whom were chatting while the awards were being announced.<br />

We weren’t called onto the stage, but rather asked to stand up<br />

at our table when our names were called. I was behind a rather<br />

large table decoration. No-one knew who I was, or even that<br />

my name had been called. I was devastated. My moment had<br />

been denied me.<br />

The lesson<br />

It was only many years later that I realised that the reason I had been<br />

disappointed was because I had set my sights on the wrong things<br />

for the wrong reasons. It was only then that I was able to let go of<br />

the disappointment.<br />

I realised that focusing on doing good work, doing the right thing,<br />

and serving others is where the real satisfaction comes in. If you’re<br />

recognised for that, then you know it was truly deserved.<br />

If your focus is on winning an award, what is left after you<br />

have done that? What you can do is continue to do great work,<br />

make a positive impact on other people’s lives, and make a<br />

difference, simply because you live out your calling, your<br />

passion, and your purpose.<br />

The journey since 2015<br />

It was only in about 2015 that I managed to figure out my<br />

calling. I began to focus on creating learning content for financial<br />

planners, so as to equip them with the necessary technical<br />

financial planning skills. As the offering and library of content<br />

grew, I started offering CPD-accredited content, and in 2017, I<br />

launched an online learning platform.<br />

I kept creating content. In 2019, I launched the PROpulsion<br />

Podcast to bring fresh interviews with a variety of guests that<br />

would help financial planners even more.<br />

March 2020: A turning point<br />

In March 2020, when President Ramaphosa announced that South<br />

Africa was going into level-5 lockdown, my world came crashing down.<br />

I was stressed and I thought that it was the end of my business. What<br />

was I to do? I couldn’t stop it, neither could I change it.<br />

Inspired by someone I watched on YouTube, I thought that<br />

the best thing to do was something that would take my mind off<br />

what I couldn’t control, and where the outcome was uncertain.<br />

I decided to go live on my YouTube channel every day as<br />

long as lockdown was in place. Twenty-one days became 35<br />

days, became 49 days, and eventually, 75 days. When we moved<br />

to level 3, I went live twice a week, and as we moved to lower<br />

levels, once a week.<br />

The show is still going live every week, and we’ve produced<br />

and broadcast more than 150 episodes of superior quality<br />

content for financial planning businesses.<br />

It’s not about me, but it started with me<br />

The audience grew, and at some point, it evolved from an audience<br />

to a community. The show brought people together, and they<br />

started supporting each other through the very difficult time. So<br />

many people stepped up and introduced me to other people, to<br />

guests, to new ideas.<br />

I made a promise that I would show up every day, no matter<br />

what. That promise led to a place I never expected, and I am<br />

eternally grateful for everything that transpired as a result.<br />

When the Financial Planning Institute of Southern Africa<br />

recognised me for the role that I played over the years in<br />

helping advisors and furthering the Certified Financial Planner®<br />

designation through the “It Starts with Me” award, it was a great<br />

honour and totally unexpected.<br />

The biggest lesson<br />

When we take the focus off our own<br />

self, our needs, our aspirations, and<br />

our goals, and we set out to make<br />

things better for and inspire others,<br />

that’s when we unlock a whole<br />

new world, new experiences, and a<br />

greater level of satisfaction.<br />

Receiving this award was<br />

incredibly special, but it belongs<br />

to everyone who opened doors for<br />

me, who support me, who allow<br />

me to do what I do, and who keep<br />

me going. I appreciate every one<br />

of you.<br />

Francois du Toit, Director,<br />

PROpulsion Podcast<br />

I made a promise that I would show<br />

up every day, no matter what.

FPI<br />



This year marks the 20th anniversary of the FPI Financial Planner of the Year Award – the<br />

most prestigious industry accolade that will change the life and career trajectory of one<br />

talented individual. To mark the occasion, let’s take a look at why awards matter.<br />

“<br />

Winning the competition gave rise to a whole<br />

whirlwind of new experiences,” says Hester van der<br />

Merwe from Ultima Financial Planners, the 2020<br />

FPI Financial Planner of the Year. “On a personal<br />

level I have been connecting with awesome people, doing things<br />

I have never done. For the practice, it has given our business<br />

development team a very positive new angle to work with.”<br />

On 25 October this year, Hester will pass the baton to a new<br />

winner, and they will experience their own “whirlwind of new<br />

experiences” as they spend 365 days in the limelight. That’s the<br />

power of the FPI’s most prestigious award, something that 2013<br />

winner Barry O’Mahony from Veritas Wealth will testify to: “When<br />

we won, the effect on existing clients alone was extraordinary,”<br />

he says. “They were so proud of their own decision to choose us.<br />

Additional business, referrals and public engagements followed.<br />

In the years that have passed, we are still living off the title.”<br />

Financial Planner of the Year was launched in 2000 for<br />

FPI members, and the inaugural winner was crowned in<br />

2001: Debbie Netto-Jonker, the founder of Netto Capital and<br />

Netto Invest. “The whole team was infused with a new sense<br />

of purpose and rediscovered pride in their work,” she says,<br />

remembering that moment. “It’s something that continues to<br />

this day.”<br />

Back when Debbie won, the media was filled with stories about<br />

people suffering the consequences of inappropriate financial<br />

advice. The mainstay of the industry at the time was the sale of risk<br />

and investment products, often recklessly and with disregard for<br />

the people who were buying said products. Financial Planner of<br />

the Year changed that, shifting the focus from commission-based<br />

sales to fee-based advice, with the client’s financial wellbeing<br />

front and centre. The award also highlighted the importance of<br />

professionalism in the industry and went a long way to reverse the<br />

30<br />


When we won, the<br />

effect on existing<br />

clients alone was<br />

extraordinary.<br />

profession in diverse communities. Last year, Didintle Mokonoto, a<br />

writer and financial inclusion strategist, was the winner.<br />

Harry Brews’ Award: Previously the Chairman’s Award, this award<br />

was introduced in 2010 to celebrate a remarkable individual who<br />

has served the financial planning profession over a lifetime. In<br />

2020, the winner was former divisional executive of regulatory<br />

policy at the FSCA, Caroline Da Silva.<br />

It Starts with Me: This award highlights a financial planner<br />

who works tirelessly to promote the CFP® certification. Last<br />

year’s winner was Francois du Toit, the founder and director<br />

of PROpulsion Learning and Technology.<br />

Top Candidate: This award recognises the year’s top-performing<br />

candidate in the FPI’s CFP® Professional Competency exam. 2020’s<br />

brainiac was Brandon Else.<br />

negative public perception that had dogged financial planning<br />

in the past.<br />

Over the years, the competition has evolved to become even<br />

more stringent. Besides the standard client testimonials, finalists<br />

also have to have financial plans assessed, and they are judged on<br />

competency, practice management skills, knowledge of the wider<br />

industry and their ability to be a spokesperson for the profession.<br />


Financial Planner of the Year is not the only FPI award. At this<br />

year’s Gala Dinner, winners in five other categories will also<br />

be announced:<br />

FPI Professional Practice of the Year: BDO were the inaugural<br />

winners of this new award in 2020, which recognises that<br />

successful financial planning is always a team effort.<br />

Diversity and Inclusion: This award honours an individual who goes<br />

to great lengths to raise awareness about the financial planning<br />


The FPI’s awards are important for a number of reasons. By<br />

entering, CFP® professionals become better at what they do.<br />

By pitting themselves against the best in their field, they are<br />

immediately made aware of areas they can improve on, and how<br />

they can better their client service. Should they win, or even<br />

be shortlisted, their reputation<br />

will be instantly enhanced, and<br />

they will benefit from incredible<br />

marketing opportunities. They will<br />

simultaneously begin to attract<br />

top talent to their practice and<br />

existing staff will be motivated to<br />

go the extra mile for clients.<br />

But perhaps most importantly,<br />

the awards move the whole industry<br />

forward. Recognising the outstanding<br />

achievements of colleagues raises<br />

the bar for all financial planners and<br />

practices, and is central to achieving<br />

the FPI’s vision of better financial<br />

planning for all South Africans.<br />

This year’s Gala Dinner is imminent...<br />

Who will be smiling in 2021? <br />

Navin Ramparsad, Chairman<br />

of the FPI Board<br />

www.bluechipdigital.co.za<br />



SPAC Attack<br />

Special-Purpose Acquisition Companies are the latest investment frenzy as investors<br />

ranging from hedge funds to everyday investors rush to access these speculative<br />

assets in the hope that they might be investing in the next Tesla or Amazon.<br />

What is a SPAC?<br />

Special-Purpose Acquisition Companies (SPACs) are essentially<br />

publicly traded companies that have no operations and hold nothing<br />

but cash. A SPAC is a publicly listed shell company whose sole purpose<br />

is to raise capital through an IPO and use those funds to buy a private<br />

company, which in doing so, takes that company public. In effect, they<br />

provide an easier way, a back door, for companies to list on a stock<br />

exchange to be able to access public investors.<br />

The founder of a SPAC is called a “sponsor”. These sponsors are<br />

the face of the company and are responsible for:<br />

• raising the funds that will be used to make the acquisition<br />

• the management of the SPAC in the lead-up to the merger<br />

• finding potential businesses to acquire.<br />

For this, they are typically given a 20% stake in the SPAC with<br />

the other 80% going to investors.<br />

SPACs are also known as “blank-check companies”, because<br />

investors commit funds months before they have any idea which<br />

company the SPAC is targeting to purchase, placing all their trust<br />

in the ability of the sponsor to find a good deal. Since SPACs<br />

do not make anything or own any assets, it is the founders who<br />

are the main draw. Investors bet on founders having the right<br />

connections to identify a future winner, close a deal and bring<br />

it to market.<br />

From the time a SPAC is set up it has two years to complete<br />

a merger, failing which investors can redeem their shares/funds.<br />

If this happens, the sponsor will refund all investors and will<br />

also lose any expenses they have incurred in the setting up and<br />

management of the SPAC, leaving the sponsor out of pocket.<br />

Why have SPACs gained so much popularity recently?<br />

Over the past two years there has been a significant rise in the<br />

number of private companies using a SPAC to list, and last year<br />

they accounted for 56% of all companies that went public in the<br />

US, up from 30% in 2019 and 21% in 2018 [1] . This back door, coupled<br />

with investors’ willingness to take on the speculative investment<br />

risk, has created a market that is now being compared to the tech<br />

bubble in the early 2000s.<br />

Once dubbed “the poor man’s private equity fund”, SPACs give<br />

everyday investors an opportunity to invest in an early-stage<br />

company in a hot sector before it goes public, an opportunity<br />

usually limited to institutional investors and wealthy individuals.<br />

This opportunity, coupled with the recent willingness of investors<br />

to take on the risk of speculative investments in search of the “next<br />

big thing”, has led to an insatiable increase in demand for SPACs.<br />

2020 was a bumper year with SPACs raising more than four times the<br />

amount of capital they did in 2019, and there is no sign of abating<br />

as SPACs have already raised more money this year than in 2020.<br />

Because of this investor demand to invest in the “next big<br />

thing”, SPACs have focused on sectors that have given rise to<br />

some of the most successful and quickest-growing companies<br />

in recent history. It should come as no surprise then that SPACs<br />

have focused on finding opportunities in the technology sector.<br />

Table 1: Sectors SPACs are targeting<br />

Tech* 74% 70%<br />

Cannabis 3% 1%<br />

Energy 7% 7%<br />

Healthcare 11% 15%<br />

Media, Telecom 4% 3%<br />

Sustainability 4% 6%<br />

*Tech” is inclusive of “Tech”, “FinTech”, “Property technology” and “Biotech”.<br />

(Source: https://spactrack.net/)<br />

32 www.bluechipdigital.co.za


“SPACs provide an investment vehicle that benefits all<br />

parties involved. However, like many investments, if the<br />

story sounds too good to be true, then it probably is.”<br />

Although the increase in investor demand is the primary<br />

reason for the rising popularity of SPACs, a SPAC is also very<br />

beneficial for their founders as well as the private companies<br />

they take public.<br />

Founders. In addition to their 20% shareholding, founders<br />

generally receive an option to buy additional shares at a<br />

significant discount at a future date, in exchange for providing<br />

the initial upfront capital. The result of this is that a founder<br />

will receive a sizeable shareholding in exchange for very little<br />

upfront investment.<br />

Private companies looking to list. Taking a company public<br />

via a SPAC is much easier than going through the traditional<br />

IPO process. Firstly, it is quicker, as a standard IPO process can<br />

take anywhere between eight and 18 months, whereas with a<br />

SPAC this can be done in under six months. Secondly, because<br />

the SPAC is already a listed business and has gone through the<br />

IPO process themselves, the regulatory requirement is far less,<br />

as the private company does not need to go through the full<br />

rigorous IPO process. This allows these companies to get around<br />

the upfront regulatory framework.<br />

So far so good then… Not so much<br />

At this point you might be thinking that the story so far sounds like<br />

a good one, as SPACs provide an investment vehicle that benefits<br />

all parties involved. However, like many investments, if the story<br />

sounds too good to be true, then it probably is. Digging a little<br />

deeper, there is evidence that this is generally a case of large<br />

institutional investors benefitting at the expense of the everyday<br />

investor. Below we look at some of the reasons why this is the case.<br />

1. Poor long-term performance<br />

The performance of SPACs between the time of listing and the<br />

actual merger is often very good. A study performed in December<br />

2020 [2] found that out of the 193 SPACs still looking for investment<br />

opportunities, only one was trading below their initial share price.<br />

It is often at this point that everyday investors get lured in by the<br />

hype and the promise of opportunity to invest. This hype is often<br />

created by online message boards such as Reddit and other media<br />

that speculate about the potential of an investment.<br />

Unfortunately for investors, the performance of SPACs after<br />

a merger has been far more disappointing compared to the<br />

pre-merger hype and promise. In fact, a recent study[3] which<br />

examined 47 SPACs that merged between January 2019 and June<br />

2020, found that on average SPACs lost about a third of their<br />

value in the 12-month period following a merger.<br />

Despite this, retail investors remain keen to invest. This is<br />

likely due to the attention drawn by the few SPAC mergers that<br />

have generated significant returns, such as Virgin Galactic and<br />

Draft Kings. These success stories help feed the narrative that<br />

SPAC investing provides an avenue for everyday investors to<br />

profit from access to high-tech, disruptive industries.<br />

This, however, is not the case for founders and pre-IPO<br />

investors (who are largely institutional investors) as the same<br />

study found that 58% of early investors (pre-IPO) sold their<br />

investment prior to the merger and received an average return<br />

of 11.6%. SPAC sponsors did even better by achieving an average<br />

return of 32% for the 12-month period post the merger.<br />

2. Conflicts of interest<br />

One of the biggest criticisms of the SPAC structure is the inherent<br />

conflict of interest that sits between the sponsor and everyday<br />

investors. This conflict arises because a sponsor only gets “paid”<br />

when a deal is made. Therefore, it is in their best interest to get a<br />

deal done and not to drive a hard bargain when negotiating and<br />

risk losing the deal – something that would be in the investor’s<br />

best interests.<br />

This conflict can also lead to situations where a weaker<br />

company that is not able to list via the traditional IPO process<br />

chooses the SPAC route instead. A good example of this is<br />

WeWork, who announced in March 2021 that it planned on<br />

listing via a SPAC called BowX. This comes with its failed IPO in<br />

2019 after it struggled to explain issues raised about its business<br />

model and governance during the due diligence process.<br />

Putting it all together<br />

With such a sharp rise in the popularity of<br />

SPACs and the speculative nature of the<br />

investments, many market commentators<br />

have likened this SPAC mania to the tech<br />

bubble and are predicting this will all<br />

come crashing down. Although the odds<br />

do not seem to be in the end investors’<br />

favour, it is too early to say whether this<br />

will be the case. However, for us one<br />

thing remains true: focusing on the<br />

fundamentals of an investment and<br />

understanding what you are investing<br />

in, versus taking a speculative bet chasing<br />

big returns, will more often than not lead<br />

to a much better investment outcome. <br />

Peter Foster, CIO,<br />

Fundhouse<br />

[1] https://www.pwc.com/us/en/services/deals/library/us-capital-markets-watch.html<br />

[2] https://www.investec.com/en_gb/focus/economy/lost-in-spacs.html<br />

[3] https://corpgov.law.harvard.edu/2020/11/19/a-sober-look-at-spacs/<br />

www.bluechipdigital.co.za<br />



What are the Sustainable<br />

Development Goals?<br />

These days you can barely attend an investment conference or listen to an asset manager<br />

without hearing about ESG and a new acronym, SDG, or Sustainable Development Goals.<br />

In September 2016, the United Nations developed 17 sustainable<br />

goals with 169 targets to address the challenges of promoting<br />

sustainable development around the world. An approach was<br />

sought to align and assist organisations across the government<br />

and private sector to embed sustainability in their value chains.<br />

The SDGs are a call for worldwide action by government,<br />

business and civil society to end poverty, protect the planet<br />

and ensure prosperity for all. The 17 goals are set out in the<br />

diagram below:<br />

Business has a vital role to play in addressing the sustainable<br />

development challenges, and to balance the challenge of reducing<br />

negative impacts while still enhancing shareholder value to the<br />

benefit of all stakeholders.<br />

Over the last few years, business leaders (along with the wider<br />

investment community, regulators and other stakeholders)<br />

have been faced by more of the negative consequences<br />

of industrialisation. Think about climate change, and the<br />

interconnectedness of the global community, as seen by the<br />

current global Covid-19 pandemic and the recent worldwide<br />

disruption to supply chains when the container ship Ever Given was<br />

stuck in the Suez Canal. The need for more balance in sustainable<br />

development around the world is clear.<br />

At Momentum Investments, as part of the broader Momentum<br />

Metropolitan Group, we support the SDGs.<br />

We focus on the goals that align well with our business. These are:<br />

• Goal 3 - Ensure healthy lives and promote well-being for all at<br />

all ages<br />

• Goal 4 - Ensure inclusive and equitable quality education and<br />

promote lifelong learning opportunities for all<br />

• Goal 7 - Ensure access to affordable, reliable, sustainable and<br />

modern energy for all<br />

• Goal 8 - Promote sustained, inclusive and sustainable economic<br />

growth, full and productive employment and decent work for all<br />

• Goal 9 - Build resilient infrastructure, promote inclusive and<br />

sustainable industrialisation and foster innovation<br />

• Goal 13 - Take urgent action to combat climate change and<br />

its impacts<br />

In considering how we approach our infrastructure<br />

development programme and impact funds, these SDGs were a<br />

key consideration in defining how we wanted to step up to the<br />

infrastructure opportunity set.<br />

One of the realities that has come to the fore is considering<br />

the social dimension and impacts of the projects that we<br />

undertake. As a real-world example, our increasing support<br />

for renewable energy projects and the ultimate aspiration<br />

of reducing the South African economic reliance on coal<br />

crucially needs to recognise the social dimension of such<br />

a transition.<br />

In forming part of this transition, we need to engage with<br />

various stakeholders to ensure the<br />

social implications in the workplace<br />

and wider community are managed<br />

responsibly. This is the basis of our<br />

support for a “Just Transition”. As<br />

investors, we can make an important<br />

contribution as allocators of capital<br />

to consider that the transition<br />

produces inclusive and sustainable<br />

development.<br />

At Momentum Investments,<br />

we have extensive experience in<br />

investing in alternative and unlisted<br />

asset classes. Having a strong and<br />

well-capitalised balance sheet<br />

allows us to take a long-term view on<br />

unlisted assets to the benefit of our<br />

investors. When combined with our<br />

integrated approach to responsible<br />

investing, we create differentiated<br />

portfolios with a unique and<br />

compelling value proposition.<br />

Mike Adsetts, Deputy Chief Investment<br />

Officer, Momentum Investments<br />

To find out more visit our responsible investing page at https://www.momentum.co.za/momentum/invest-and-save/responsible-investing or watch our roundtable where we<br />

discussed how we make responsible investing real: https://www.momentum.co.za/momentum/invest-and-save/events/media-roundtables. Momentum Investments is part of<br />

Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider (FSP 6406).

My take on<br />

responsible investing<br />


Responsible investing is a much-talked-about topic in the<br />

investment industry right now, globally and locally. It is<br />

important to not just follow the hype around responsible<br />

investing but also understand the merits ingrained in<br />

this approach when it comes to investment philosophies and the<br />

construction of portfolios. Responsible investing for us is thinking<br />

beyond traditional financial gains but also considering the effect<br />

on society and the environment.<br />

The history of responsible investing<br />

Responsible investing originated from a religious perspective in<br />

the 1920s when some investors placed restrictions on investing<br />

in alcohol and tobacco. From these early roots, it has evolved in<br />

numerous ways taking into account the priorities of the time. More<br />

accountabilities drove a focus on governance, and climate science<br />

has pushed climate change to the fore. With this rich history, my<br />

firm view is that responsible investing is here to stay.<br />

Today, consumers want a greater level of insight into their<br />

investments. They ask about the real-world impact their<br />

investments have. Millennials, for example, think very differently<br />

about investment management. They have social media, apps<br />

and news at their fingertips, making them more informed about<br />

the relevance of investing and its effect on the world.<br />

However, in a world of sceptics and “window dressers” (we<br />

call them “green washers”), responsible investing can get a bad<br />

reputation. “Green washers” are those who negatively implement<br />

the principles for responsible investing. Here are some examples<br />

to illustrate experience1:<br />

• In 2019, British Petroleum (BP) was accused of publishing<br />

misleading advertisements about its low-carbon energy products<br />

when more than 96% of its annual spend was on oil and gas.<br />

• In 2018, Starbucks released a straw-less lid as part of its<br />

sustainability drive. However, with this lid, there was more plastic<br />

in the system than before.<br />

The lesson here is that consumers must ask for transparency<br />

and have an active interest in understanding where their money<br />

is going. There are numerous codes and regulations pushing this<br />

agenda forward that we need to uphold as an industry.<br />

We have been signatories to the United Nations Principles<br />

of Responsible Investing (UN PRI) since 2006. This institution is<br />

a global driver of integrating responsible investment practices<br />

into investment decision making.<br />

There is also ample evidence of the benefits of responsible<br />

investing. A study by Morgan Stanley showed that, in an analysis<br />

of 3 000 US exchange-traded funds and mutual funds, the<br />

funds managed using environmental, social and governance<br />

(ESG) principles considerably outperformed their traditional<br />

counterparts.<br />

ESG investing outperforming the markets<br />

An analysis of more than 3 000 US mutual funds and exchange-traded funds shows that sustainable<br />

equity funds outperformed their traditional peer funds by a median total return of 4.3 percentage<br />

points in 2020. During the same period, sustainable taxable bond funds outperformed their<br />

non-ESG counterparts by a median total return of 0.9 percentage points.<br />

Source: Sustainable funds outperform peers in 2020 during Coronavirus (24 February 2021)<br />

https://www.morganstanley.com/ideas/esg-funds-outperform-peers-coronavirus<br />

In a world where people are grappling with the after-effects<br />

of Covid-19, the interconnectedness of all of us has also driven<br />

growth in interest in responsible investing. There is a growing<br />

cohort of investors who want to make meaningful investments<br />

with real impact for the future.<br />

For me, responsible investing is not charity but a real<br />

opportunity we face daily to deliver investment returns in a way<br />

that actively incorporates ESG principles. Our portfolios take on<br />

the challenge of using capital to<br />

improve our environment and<br />

the people who live in it. This<br />

strategy brings us closer to the<br />

average person, as it informs<br />

them how it can benefit them<br />

and their community. That’s how<br />

we make it personal because<br />

investing is personal.<br />

At Momentum Investments,<br />

sustainable and responsible<br />

investment practices are a<br />

material factor underpinning<br />

our long-term success, as well<br />

as the success of our clients.<br />

To find out more visit our<br />

responsible investing page at<br />

https://www.momentum.co.za/<br />

momentum/invest-and-save/<br />

responsible-investing <br />

Sonja Saunderson, Chief Investment<br />

Officer, Momentum Investments<br />

1Source: 10 Companies and Corporations Called Out For Greenwashing (2 August 2021) https://earth.org/greenwashing-companies-corporations/<br />

Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider (FSP 6406).


Investing with purpose:<br />

going beyond<br />

financial returns<br />

An integrated approach to any investing is critical, if you<br />

are to invest responsibly, explains Mike Adsetts, deputy<br />

chief investment officer at Momentum Investments.<br />

“What that means is that we disaggregate environmental,<br />

social and governance factors, and we think about every single<br />

type of investment we make from multiple perspectives.<br />

“You need to be mindful of what the implications are for<br />

employees if you decommission a fire station or close down a<br />

These portfolios are not only<br />

setting the bar, but they are<br />

beating it and exceeding<br />

even our own expectations.<br />

coal mine, for example. What are the alternative career paths in<br />

the new renewable energy place that you can put them into?<br />

That’s an example of what we consider from the environmental<br />

and social sides.”<br />

Broadly, Momentum Investments’ impact investment<br />

portfolios focus on three areas – alternative energy, social<br />

infrastructure and diversified infrastructure. “Sometimes<br />

this means investing in the unlisted space, which can be<br />

disconcerting to more traditional investors, but we believe there<br />

is real value to be found there.”<br />

Importantly for Adsetts, these investments are closely linked<br />

to very specific United Nations sustainable development goals,<br />

to which Momentum Investments subscribes. “This is a level of<br />

commitment we think is unique – not only in how we’re investing,<br />

but in how we’re matching these investments specifically with<br />

common, international goals for a better, more inclusive world.”<br />

In practice: responsible investing, with great returns<br />

Leading the charge on this is Motlatsi Mutlanyane, head of<br />

alternative investments at Momentum Investments. Mutlanyane<br />

has the complex responsibility of identifying these purposeful<br />

investments, while being sure they are not only right from a<br />

responsibility perspective, but that they will generate good returns<br />

on investors’ money.<br />

“Finding purposeful investments may not be as hard as it<br />

used to be but finding ones that will also generate a strong<br />

return becomes more complex,” explains Mutlanyane. “This kind<br />

of strategic, goal-orientated investing means that our investors<br />

can hold us accountable at the end of the day. I believe it makes<br />

for better decision-making, and better-quality conversations<br />

with our investors.”<br />

So far, Momentum Investments has constructed four local<br />

portfolios, which are all generating strong returns, despite<br />

the Covid-19 pandemic that has negatively affected many<br />

other investments:<br />

• Momentum Alternative Energy Fund. The portfolio is<br />

predominantly invested in unlisted equity instruments but<br />

can also hold unlisted debt instruments of sustainable energy<br />

companies and projects. Equity positions can only be minority<br />

positions. Finance is provided to alternative energy initiatives,<br />

renewable energy and energy-efficient projects in South Africa.<br />

• Momentum Diversified Infrastructure Fund. The<br />

portfolio is invested in unlisted debt-like and equity<br />

instruments. It is predominantly invested in South African<br />

as well as Southern African Development Community<br />

opportunities with positive social and environmental<br />

delivery objectives. Underlying assets have stable and<br />

predictable cash flows as well as strong environmental,<br />

social and governance features.<br />

• Momentum Social Infrastructure Fund. The portfolio is invested<br />

in debt and equity instruments related to social infrastructure.<br />

Social infrastructure refers to student accommodation, quality<br />

affordable housing and non-urban shopping centres.<br />

• Momentum Impact Fund. This is a multi-asset-class portfolio<br />

with an impact focus. The portfolio gains its exposure through<br />

the Momentum Alternative Energy Fund, the Momentum Social<br />

Infrastructure Fund and the Momentum Diversified Infrastructure<br />

Fund. Like the underlying portfolios, the portfolio targets<br />

underlying assets that have a positive societal impact through<br />

addressing social and environmental challenges.<br />

“These portfolios are not only setting the bar, but they are<br />

beating it and exceeding even our own expectations,” explains<br />

Mutlanyane. “The lack of infrastructure development in South<br />

Africa specifically – due to long-standing inequality – is in dire<br />

need of investment. Investing in such economic infrastructure<br />

certainly makes sense, because we’re able to see significant<br />

ripple effects, their job creation at scale. That’s good for our<br />

investors, and good for South Africans in areas where these<br />

developments are.<br />

36 www.bluechipdigital.co.za

Finding purposeful investments may<br />

not be as hard as it used to be.<br />

“Government seems to want to work with the private sector<br />

to fund this kind of development. They’ve identified about 276<br />

projects that they’re trying to get to a stage where they are<br />

bankable, and can be converted into projects that the private<br />

sector would be able to invest in. We’re already involved in<br />

this – and we’re actually hoping that more of our competitors<br />

will also get involved, so we can leverage this for everyone.”<br />

The role of the individual investor<br />

While the positioning of many of these investments does come<br />

across as institutional in nature, individual investors may believe<br />

that infrastructure investments are of less concern to them.<br />

However, this is not the case, as there is a myriad of ways in which<br />

individual investors can influence and gain exposure to these<br />

types of investments. Below are three:<br />

Firstly, it is important to raise the profile and intent with responsible<br />

investments. As advocacy grows, the extent of integration and<br />

availability of responsible-based investments will grow.<br />

Secondly, individuals can exercise choice in the case of<br />

retirement funds with member choice and also engage with<br />

trustees to bring these issues on the agenda as well as influence<br />

which investments the<br />

principal officers and trustees<br />

of retirement funds choose.<br />

Thirdly, there is a wealth of<br />

investment types available that<br />

can have exposure to less liquid<br />

investments, which include<br />

preservation funds, endowment<br />

policies and retirement annuities<br />

– areas where retail investors can<br />

exercise their own discretion.<br />

As the trend and demand for<br />

responsible investments grow<br />

and expand, the availability of<br />

the types of portfolios that can<br />

be invested in will expand. This<br />

is something that Momentum<br />

Investments is excited by and<br />

an area in which the company<br />

will actively expand into as<br />

investment managers.<br />

Motlatsi Mutlanyane, Head<br />

of Alternative Investments,<br />

Momentum Investments<br />

Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider (FSP 6406).<br />

www.bluechipdigital.co.za<br />





In celebration of Momentum Wealth turning 25 years old this year,<br />

<strong>Blue</strong> <strong>Chip</strong> sat down with Hymne Landman, Head of Momentum<br />

Wealth and Momentum Wealth International at Momentum<br />

Investments, to find out what sets Momentum Wealth apart.<br />

38 www.bluechipdigital.co.za


Hymne, please describe the path that led you to your current role.<br />

My love for mathematics, problem-solving and challenges led<br />

me to study Actuarial Science. I joined Momentum Metropolitan<br />

in January 2005, after changing careers from reinsurance<br />

to investments. I had the opportunity to fill various roles at<br />

Momentum and RMB Investment Bank before being appointed<br />

in my current role. In this role I have a unique opportunity<br />

to combine my skill set and experience with my passion for<br />

investments, clients, financial advisors and our industry at a<br />

company that I simply love.<br />

What do you deem to be the most critical component to financial<br />

success – irrespective of income/social standing?<br />

I believe it is important to always understand all aspects of your<br />

personal finances fully and to take personal accountability for it.<br />

While I always strongly recommend partnering with experts to<br />

complement your own skills, I believe that you should understand<br />

the implications of your decisions. And never live above your means.<br />

Think about the future and remember that compound growth is<br />

your friend when you earn it, but your enemy when you pay it.<br />

Momentum Wealth celebrates 25 years of continual innovation<br />

and investment excellence this year. Please share with us a brief<br />

history of the business.<br />

We are proud to celebrate 25 years in the investment industry.<br />

Momentum Wealth started doing business as Momentum<br />

Administration Services<br />

(MAS) in September 1996<br />

and today we are one of the<br />

largest investment platforms<br />

in South Africa. We soon<br />

established the business as<br />

an innovative player in the<br />

industry focusing on product<br />

innovation, efficient administration and a personal approach<br />

in partnering with financial advisors to help clients with their<br />

investment needs.<br />

In the early 2000s, we launched the Momentum Wealth<br />

International platform in Guernsey as an offshore investment<br />

platform for South African and offshore clients. Investing through<br />

Momentum Wealth International gives clients a true offshore<br />

investment experience, diversification from local solutions with<br />

exposure to multiple global markets and solutions that offer<br />

leading estate-planning and tax benefits.<br />

A recent and very exciting development is our partnership with<br />

FNZ, a leading global provider of digital-first wealth management<br />

solutions. We understand that clients and financial advisors<br />

have different requirements than in the past. Advisor firms are<br />

increasingly adopting technology in their practices for ease of<br />

use and to create business efficiencies, and clients want more<br />

convenient access to their investment information. Through this<br />

partnership, we are accelerating the transformation of our retail<br />

investment platforms to better serve the investment needs of<br />

financial advisors and clients in future.<br />

The fact that we are celebrating our 25th birthday this year<br />

doesn’t mean we are old and obsolete! Quite the contrary – we<br />

have a solid track record of partnering with financial advisors<br />

to grow and protect their clients’ wealth and savings. Today, our<br />

business is stronger than ever before.<br />

What sets Momentum Wealth apart?<br />

Momentum Wealth is one of the largest linked investment service<br />

providers in South Africa.<br />

Personal relationships and strong partnerships are in our DNA.<br />

Financial advisors and clients become our friends and they are our<br />

families, our grandparents, our parents, our children, and their<br />

children – we want to make their dreams and aspirations come<br />

to life. Their investment is something personal. It helps them to<br />

achieve their financial goals on their life journey.<br />

When something is personal, it really matters. That is why with<br />

us, investing is personal.<br />

Please outline Momentum Wealth’s areas of growth (including<br />

new offerings, products and services) in the past two years.<br />

We have seen exponential growth across our main solutions<br />

over the past two years. Most notably the increase in demand<br />

for offshore investment solutions and for guaranteed investment<br />

solutions such as life annuities.<br />

From a new business inflow perspective, discretionary<br />

offshore LISP products have always been popular in our industry.<br />

However, current trends<br />

Financial advisors and clients become<br />

our friends and they are our families,<br />

our grandparents, our parents,<br />

our children, and their children<br />

have shown strong support<br />

for offshore life wrappers<br />

because of their potential<br />

tax, succession and estate<br />

planning benefits to clients.<br />

During uncertain<br />

economic times and volatile<br />

investment markets, guaranteed solutions offer the certainty that<br />

clients need while still offering solid returns after fees and tax.<br />

Please provide an overview of Momentum Wealth’s local platform.<br />

The Momentum Wealth local platform provides clients with<br />

investment administration services, as well as access to the<br />

Momentum Investments team’s skill and expertise and those<br />

of other reputable investment managers and discretionary<br />

fund managers.<br />

We offer a diverse range of investment and retirement solutions,<br />

with access to local and global investment markets to suit all<br />

investment needs. Whether the need is to create and grow wealth,<br />

protect it, or earn an income from it, we have a personal investment<br />

solution for each client on their journey to success.<br />

With the help of their financial advisors, clients can choose<br />

from the broadest available suite of local and global investment<br />

components and instruments. From basic unit trusts and<br />

personalised model portfolios to exchange-traded funds,<br />

direct shares and personal share portfolios, as well as other<br />

specialised investment products. With our comprehensive range<br />

www.bluechipdigital.co.za<br />



of tax wrappers, financial advisors can help clients structure their<br />

personal investment portfolios for optimal tax efficiency and<br />

craft them to suit their unique circumstances and goals.<br />

Advisors look to investment platforms<br />

to ensure that investment services<br />

and administration requirements<br />

are handled timeously.<br />

What are Category III Administrative Financial Service Providers?<br />

Category III Administrative Financial Services Providers are<br />

investment platforms that are governed by the Financial Advisory<br />

and Intermediary Services Act. They are generally still referred to as<br />

LISPs, or linked investment service providers.<br />

An investment platform is like a supermarket from which you<br />

can access various types of investment components like local or<br />

foreign currency unit trusts, shares and model portfolios. These<br />

investment components can be accessed through various types of<br />

product wrappers, such as endowments, retirement annuities and<br />

living annuities. The product dictates the legislative rules of the<br />

investment, such as how investment returns in the product are taxed,<br />

the restrictions on withdrawals and if contributions are tax deductible.<br />

These vary for each product wrapper. To summarise, the investment<br />

component would determine the return on the investment, and the<br />

product wrapper would govern other aspects of it like how this return<br />

is taxed and how much of it can be accessed when.<br />

So, in general, an investment is a combination of investment<br />

components within a product, enabled by an overarching advice<br />

process. Given that there are so many options available to clients, the<br />

value that a financial advisor can add is tremendous. Each client’s needs<br />

and circumstances are unique, and so their financial plan should be too.<br />

Investment platforms provide a universe of products and investment<br />

components together with certain investment capabilities to advisors<br />

for them to best meet the needs of their clients.<br />

What, in your opinion, do advisors want from<br />

investment platforms?<br />

Advisors look to investment platforms to ensure that investment<br />

services and administration requirements are handled timeously.<br />

More importantly, they look to platforms to maintain their<br />

regulatory obligations within reasonable costs, especially in<br />

an environment of increasing costs. Our role is to continually<br />

invest and optimise our platform through technology innovation<br />

to ensure that advisors can increasingly remove the burden of<br />

administration from their daily operations. Advisors also look<br />

to platforms to provide a comprehensive suite of capabilities<br />

together with their required range of investment components<br />

to customise solutions for their clients’ specific investment needs.<br />

What makes a successful platform?<br />

A successful platform is one that can efficiently meet the needs of<br />

advisors and their clients, offering a stellar and seamless experience.<br />

It does so by providing a combination of a comprehensive suite of<br />

investment components and capabilities that are enabled by cuttingedge<br />

and reliable technology together with personalised service to<br />

enhance the advice and investment process, execute transactions<br />

efficiently and ensure the best interests of the client and the advisor.<br />

To summarise, there are five ingredients to a successful platform:<br />

• One: to offer a world-class service experience that meets the<br />

requirements and fulfils the desires of advisors and clients,<br />

within the ever-changing world we are living in.<br />

• Two: superior technology. In a digital world, the security and<br />

safety of the system and protection of information are some of<br />

the non-negotiables.<br />

• Three: simple business processes that can easily be adopted,<br />

as well as digitally enabled processes.<br />

• Four: demonstrable innovation and thought leadership<br />

in our product offering. One such example is the use of<br />

behavioural analytics to provide insights to advisors in<br />

different market conditions.<br />

• Five: it should have the ability to bring the investments<br />

ecosystem into a one-stop-shop – some call this a supermarket<br />

for investments. We feel it is more about making sure you do the<br />

things to best partner with advisors and then do it exceptionally<br />

well, offering a stellar experience for all. <br />

Momentum Wealth (Pty) Ltd (FSP 657) is an authorised financial services provider.<br />

Momentum Wealth International Limited (FSP 13495) is an authorised financial<br />

services provider in terms of the Financial Advisory and Intermediary Services<br />

Act No 37 of 2002 in South Africa. Momentum Investments is part of Momentum<br />

Metropolitan Life Limited, an authorised financial services and registered credit<br />

provider (FSP 6406) (NCRCP173).<br />


What were your aspirations as a child?<br />

As a child, my parents gave me the gift of believing that I can do<br />

and become whatever I aspire to do and to be. My interests have<br />

always been vast and diverse, from performing arts and languages<br />

to mathematics and medicine. It was a tough choice to choose<br />

one field.<br />

And now?<br />

I aspire to make a difference in the world and to live life fully. It is<br />

important to me to be kind, to pay it forward in life, and to make a<br />

positive impact wherever I go and to whomever I meet.<br />


Hymne Landman joined Momentum Metropolitan in January<br />

2005. She filled various roles at Momentum and RMB Investment<br />

Bank before being appointed in her current role in 2018. Landman<br />

has extensive knowledge of the retail investments market, with a<br />

particular passion for the LISP industry and the role of platforms in<br />

enabling best financial advice for clients. She holds a BCom Hons<br />

(Actuarial Science, Cum Laude) and qualified as an actuary through<br />

the UK Institute of Actuaries in 2009.<br />

40 www.bluechipdigital.co.za

The reason we have such specialised<br />

solutions and capabilities is that we<br />

have some really special people.<br />

People who understand<br />

that investing is personal.<br />

Momentum Investments provides a multitude of investment businesses, tools,<br />

solutions and capabilities to financial advisers and their clients. We have a diverse<br />

set of investment options to suit each client’s individual needs. Together we then<br />

manage it systematically so that they have the best chance of achieving their<br />

goals. All thanks to our people – a team of passionate experts who understand<br />

that it’s not just about the investments they’re managing, but also the people<br />

investing their money. That’s why we say that with us, investing is personal.<br />

Speak to your Momentum Consultant or visit momentum.co.za<br />

Momentum Investments<br />

@MomentumINV_ZA<br />

Momentum Investments<br />

MI-CL-684-AZ-2571<br />

Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services (FSP6406) and registered credit (NCRCP173) provider.


Finding specialist<br />

global managers<br />

The investment opportunity set available to invest offshore is<br />

vast. There are specialist sectors and regions well positioned<br />

to benefit from growth drivers such as demographics,<br />

innovation, urbanisation and growing consumerism, and a<br />

greater quantum of companies in which to invest and diversify.<br />

There are also thousands of fund managers available globally<br />

that are looking to take advantage of these opportunities to create<br />

long-term growth for their clients. But how do clients decide<br />

which fund managers to choose to manage their capital? Not all<br />

managers are created equal, and the adage of “past performance is<br />

not necessarily indicative of future results” couldn’t be truer within<br />

the realm of asset management, which further complicates the<br />

decision. Within this conundrum lies the benefit of a multi-manager<br />

such as Momentum Global Investment Management (MGIM).<br />

Having established the business in London in 1998, the true<br />

benefit of MGIM is that we have a worldwide perspective. Our<br />

investment universe and our client base are truly global, which<br />

gives us unique insights into international trends, developments<br />

and opportunities on offer. Through this global breadth, we<br />

have spent 23 years creating global, well-diversified portfolios<br />

by carefully selecting skilled managers that we believe can add<br />

significant value over time. This entails looking beyond pure<br />

performance figures to understand the true drivers of returns, the<br />

investment teams behind the portfolio decisions, the style bias<br />

implicit in a philosophy, and the consistency and repeatability of<br />

the investment process.<br />

The success of this process is best evidenced by our core global<br />

equity solution, the Momentum GF Global Equity Fund1. With a<br />

track record going back to 2009, the fund blends nine specialist<br />

managers from around the world, including Robeco, Jennison,<br />

Rainier and Contrarius. Be it high-conviction, active strategies or<br />

data-driven, systematic strategies, the fund combines human<br />

intellect with data science by incorporating carefully selected<br />

managers for their specific investment style approach and some sort<br />

of competitive edge. This brings several advantages for our clients,<br />

including a blend of quality, growth and value investment styles,<br />

lower underlying management fees, and access to specialist global<br />

fund managers that many retail clients may otherwise not have<br />

access to. This large and long-established global equity solution is<br />

already available across the world and is now available to South<br />

African investors.<br />

A world of investment opportunity awaits and through providing<br />

access to specialist global investment managers, the Momentum<br />

GF Global Equity Fund has made investing in offshore equity that<br />

much simpler.<br />

42 www.bluechipdigital.co.za<br />

1 This fund is eligible for investment by the general public as the Financial Sector Conduct Authority has approved the<br />

application for solicitation in South Africa.


A combination of both<br />

active and passive solutions<br />

is key to solving for the<br />

desired investment return<br />

outcomes over time.<br />

Systematic enhanced indexed funds: an attractive alternative to<br />

passive funds<br />

Passive strategies play a valuable role in financial markets today as they<br />

provide access to various market exposures (beta) and are a means to<br />

bring down costs. But passive funds are only a part of the solution,<br />

because in the same way cost does not equal value, passive alone does<br />

not solve for all investment outcomes.<br />

A combination of both active and passive solutions is key to<br />

solving for the desired investment return outcomes over time. There<br />

are now investment vehicles available that use the attributes of<br />

both solutions, combining the low-cost market exposures offered<br />

in passive funds with the positive alpha profile that is associated<br />

with a more active investment process.<br />

These investment solutions, known as enhanced index funds,<br />

employ a systematic data-driven and rules-based investment process<br />

to slightly overweight securities with attractive characteristics and<br />

slightly underweight stocks that are likely to contribute negatively<br />

to performance over time. Unlike passive funds, which closely track<br />

and hence earn the return of the benchmark, these systematic funds<br />

can generate stable outperformance after costs over time with a low<br />

tracking error against the benchmark.<br />

We established the Momentum GF Global Sustainable Equity<br />

Fund2 in May 2020 to provide investors around the world with<br />

access to the advantages of enhanced index funds. Now this fund<br />

is also available for South African investors.<br />

The Momentum GF Global Sustainable Equity Fund is a<br />

diversified, low-cost strategy that is well balanced across companies<br />

that exhibit value, momentum and quality characteristics, as these<br />

style factors have proven to show positive returns over the long<br />

term. Environmental, social and governance (ESG) factors are also<br />

incorporated in the investment process by excluding businesses<br />

deriving significant revenue from controversial business activities<br />

and ensuring a lower environmental footprint than its benchmark.<br />

By overweighting stocks with attractive style factors and reducing<br />

exposure to less sustainable companies, we<br />

believe the fund is more likely to achieve<br />

long-term stable outperformance versus<br />

its MSCI World benchmark. Robeco, a<br />

European-based investment manager<br />

with more than 25 years’ experience in<br />

systematic strategies and two decades<br />

experience in ESG integration, selects and<br />

continuously reviews all positions taken<br />

by the fund. Robeco truly is a world-class<br />

partner for our investors’ assets.<br />

Although passive funds have a place<br />

within investment portfolios, for costsensitive<br />

investors wanting to increase their<br />

chances of outperforming the market over<br />

the long term, enhanced indexed funds are<br />

a compelling alternative to consider.<br />

Speak to a Momentum consultant to<br />

find out more about these funds. <br />

2 This fund is eligible for investment by the general public as the Financial Sector Conduct Authority has approved the application for solicitation in South Africa.<br />

Natalie Harrison, Global<br />

Fund Specialist, Momentum<br />

Collective Investments<br />

The editorials should be read in conjunction with the prospectus of Momentum Global Funds, in which all the current fees additional disclosures, risk of investment and fund facts are disclosed. The Fund is a sub-fund of the<br />

Momentum Global Funds SICAV, which is domiciled in Luxembourg and regulated by the Commission de Surveillance du Secteur Financier. The Fund conforms to the requirements of the European UCITS Directive. FundRock<br />

Management Company S.A., incorporated in Luxembourg, is the Management Company with its registered office at 33, Rue de Gasperich, L-5826 Hesperange, Luxembourg. Telephone +352 271 111. J.P. Morgan Bank Luxembourg<br />

S.A., incorporated in Luxembourg, is the Administrator and Depositary with its registered office at European Bank & Business Centre, 6, route de Trèves, L-2633 Senningerberg, Luxembourg. Telephone +352 462 6851.<br />

MGIM is the Investment Manager, Promoter and Distributor for the Momentum Global Funds SICAV. MGIM is registered in England and Wales No. 03733094. Registered Office: The Rex Building, 62 Queen Street, London EC4R 1EB.<br />

Telephone +44 (0)20 7489 7223 Email: distributionservices@momentum.co.uk. MGIM is authorised and regulated by the Financial Conduct Authority No. 232357, and is an authorised Financial Services Provider pursuant to the<br />

Financial Advisory and Intermediary Services Act 37 of 2002 in South Africa (FSP no. 13494).




During the past 11 years, as CEO of Momentum<br />

Global Investment Management in the UK,<br />

Ferdi van Heerden has been involved in many<br />

mergers and acquisitions. <strong>Blue</strong> <strong>Chip</strong> speaks<br />

to van Heerden about the company’s latest<br />

acquisition of Seneca Investment Managers Ltd.<br />

Ferdi van Heerden, CEO,<br />

Momentum Global<br />

Investment Management<br />

What are the defining moments of your career?<br />

Opportunities brought along by external approaches and internal<br />

group changes and a “career wanderlust” to take bold chances.<br />

These events were major catalysts in my career:<br />

First was probably pre-university, after planning to do<br />

engineering, I ended up with a Sanlam actuarial scholarship.<br />

Joining Momentum at the start of its growth phase back in 1991<br />

was a key moment in my career. The reverse takeover of the business by<br />

Rand Merchant Bank formed great prospects. The creation of FirstRand<br />

and the acquisition of Southern Life and Sage brought choices and<br />

challenges. And an exciting position in Switzerland and the UK.<br />

The key personal lesson for me is always leave on a good note,<br />

which I have been lucky to do and has opened doors again for me.<br />

Please provide an overview of Momentum Global Investment<br />

Management (MGIM).<br />

MGIM is an integral part of our broader Momentum Investments<br />

business in Momentum Metropolitan, but with a truly global<br />

investment outlook and capability set. MGIM was established in<br />

London in 1998 as the international investment management<br />

arm of Momentum Metropolitan Holdings Ltd. We manage a<br />

wide range of investment solutions for a global roster of retail and<br />

institutional investors (advisors and their clients from South Africa<br />

and the UK as well as global IFAs specifically advising expat clients.)<br />

Over the past decade, we have expanded our range of<br />

solutions across several geographic markets, giving clients,<br />

large and small, the benefit of our outcome-based investing<br />

44 www.bluechipdigital.co.za


approach. We have had significant success in growing our client<br />

base by working in close partnership with financial advisors and<br />

wealth managers and we now have relationships in six continents.<br />

All this makes us well-positioned to be the “first port of call” for<br />

advisors when it comes to multi-asset solutions.<br />

We manage multi-asset funds and model portfolios for our<br />

clients, and we have a senior investment team that has been<br />

together for more than 10 years. More specifically, MGIM is:<br />

• A focused multi-asset specialist investment manager, with the<br />

same outcome-focused philosophy as our sister companies.<br />

• A superb, experienced and dedicated team with a wellestablished<br />

diversified, disciplined approach, and a great<br />

collegiate (“boutique”) can-do culture.<br />

• Our business is built on long-term relationships with advisors,<br />

wealth managers, Discretionary Fund Managers (DFMs) and trustees,<br />

including other investment and service providers. We aim to deliver<br />

risk-profiled portfolios with defined outcomes aiming to smooth<br />

the investment journey, and therefore, keep clients invested over<br />

the long term.<br />

• With us, investing is truly personal.<br />

Please tell us about MGIM’s acquisition of Seneca Investment<br />

Managers Limited (SIML).<br />

MGIM and our group invariably has an organic growth culture, but<br />

we have grown through well-executed acquisitions. We attained<br />

a range of model portfolios some years ago in the UK, and more<br />

recently we acquired SIML.<br />

When we were approached to participate in the sale process<br />

of Seneca, the similarities between the businesses in terms of<br />

culture, values and multi-asset investing were immediately<br />

obvious, and SIML offered complementary skills to MGIM.<br />

It has created a springboard for growth for the combined<br />

business in the UK retail marketplace with the additional<br />

benefits of a stronger offering and broader capability to deliver<br />

to clients.<br />

Despite the fact that Covid-19 reared its head so shortly after<br />

initial negotiations, we believe the acquisition happened at exactly<br />

the right time, resulting in a combined £4.7-billion of assets under<br />

management and offices in both London and Liverpool.<br />

The Momentum Multi-Asset Value Trust (MAVT) formed part of<br />

the acquisition. What is its investment objective and approach?<br />

MAVT is an independent entity, listed on the LSE, with an independent<br />

board of trustees. MGIM (through the acquisition of Seneca) has the<br />

investment mandate and distribution responsibilities for the Trust.<br />

MAVT has a similar outcome-based philosophy to that of our multiasset<br />

funds.<br />

Its target is to deliver an annualised return of 6% plus inflation over<br />

a longer investment term of five to 10 years. While it is a challenging<br />

objective, it has been delivered over the past decade, and will<br />

continue to be our focus. Aligned with this objective, is a commitment<br />

to increase the dividend in line with UK inflation over the longer<br />

term and again this historically has been delivered. We define the<br />

investment approach as “refined value” across all asset classes.<br />

The investment trust is unique because it:<br />

• is risk-profiled, to benefit advisor solutions;<br />

• has a discount control mechanism that enables liquidity; and<br />

• has substantial historical reserves from which dividends can be<br />

maintained even in tough times, without compromising on longterm<br />

strategic investment allocation.<br />

SIML’s slant towards out-of-favour companies affected its<br />

performance during the pandemic in 2020 and after. Did this<br />

impact MGIM?<br />

It is true that Seneca is/was more value-focused in its approach.<br />

As we all know, value was out of favour for a long time. However,<br />

it was clear to us that they did not follow a classic value style of<br />

investing, but more aligned to MGIM’s valuation-driven approach.<br />

Value and the UK market saw a great bounce-back with the<br />

announcement of the first vaccines in October/November 2020.<br />

This resulted in the portfolios outperforming and the recovery has<br />

been spectacular.<br />

The two core inhouse Seneca funds have recently been included<br />

in the FTAdviser Investment 100 Club which are the top five funds<br />

in the UK domestic market in each of the 20 investment association<br />

fund categories. Our funds were the leaders in their specific multiasset<br />

groups.<br />

The ex-Seneca investment team focus on finding unique ideas<br />

and investment opportunities and has a track record of delivering<br />

long-term value for their investors. These will be included in all MGIM<br />

portfolios where possible, as they give uniqueness to the funds. Music<br />

royalties, power of battery storage, etc come to mind as ideas.<br />

Why is the deal a win/win transaction for both firms?<br />

There are three audiences to consider:<br />

• Clients (IFAs and investors). We have a far stronger combined<br />

team and solutions range to support them in the UK. Our<br />

solutions in other markets have started to benefit from this.<br />

• Shareholders. An excellent outcome for Momentum Metropolitan<br />

with a good return on the investment foreseen and targeted, and<br />

for the Seneca sellers, a superb way to exit their shareholding to a<br />

firm that can provide growth for staff and clients.<br />

• Staff. There is a similar culture between MGIM and ex-Seneca in<br />

terms of ownership and accountability, as well as the passion of<br />

employees for the business.<br />

Please give an overview of the funds that were rebranded<br />

following the acquisition.<br />

Five risk-profiled funds for the UK market make up the range:<br />

• VT Momentum Diversified Cautious, Moderate, Balanced, Growth<br />

funds, and the VT Momentum Diversified Income fund.<br />

• They target UK CPI+3%, 4%, 5% and 6% respectively over different<br />

suggested investment holding periods.<br />

• These are currently only available to UK investors, as they are not<br />

Section 65 approved in South Africa.<br />

• MAVT, with a similar investment (multi-asset) focus, should<br />

be available from stockbroking platforms in South Africa as<br />

it is LSE-listed.<br />

www.bluechipdigital.co.za<br />



Many of the underlying holdings will be held in the South<br />

African offshore funds of MGIM, being the Momentum Global<br />

Cautious, Global Managed and Global Growth Fund, all of which<br />

have been available to South African investors since their inception<br />

in 2008 (with a great investment track record).<br />

MGIM offers a range of seven risk-profiled managed model<br />

portfolios to UK advisors and their clients, available on multiple<br />

UK domestic fund platforms.<br />

With the expansion of the company is MGIM still able to place<br />

the client’s goals at the centre of the investment process?<br />

Absolutely. Our shared outcome-based philosophy has most<br />

definitely prevailed and is very much hard-coded in to our<br />

investment process. This is the DNA of both MGIM and Seneca. If I<br />

have to say so, even more so than before, especially given our skill<br />

set and range of solutions for advisors in multiple jurisdictions.<br />

The combined SIML and MGIM funds create a comprehensive<br />

offering for advisors and DFMs. What is this offering?<br />

Our MAVT investment trust has gained significant traction with<br />

DFMs effectively recognising our different approach and wishing<br />

to boost diversification within their own client portfolios.<br />

We have a range of inhouse-managed model portfolios for<br />

advisors and DFMs. We provide bespoke solutions where we<br />

partner with DFMs in all our markets (including SA, the UK and<br />

expat regions) as their investment engine.<br />

MGIM has a range of single-asset-class funds that have been<br />

developed over the years to enable our multi-asset solutions and<br />

are now all in a UCIT vehicle and will soon be available in all our<br />

markets to advisors and DFMs. These will make excellent additions<br />

to DFM propositions and/or client portfolios across our markets.<br />

Mostly, we are well-positioned and resourced to partner<br />

with more advisor firms and DFMs to help them construct<br />

investment offerings.<br />

Where do you see MGIM expanding in the short term?<br />

We will continue to focus on what we do best, which is our<br />

outcome-based multi-asset and single-asset solutions, working<br />

in partnership with and in support of advice-led investing. So, that<br />

means really focusing on enabling offshore investing for South<br />

Africans where they need this in their diversified portfolios, and for<br />

our multiple international advisors. And gaining far more traction<br />

in the UK domestic market and building on the recent acquisition<br />

of Seneca is key.<br />

We will grow our investment consulting practice, and work with<br />

trustees of large pension schemes and charities.<br />

What are the latest trends in this market that pertain to your<br />

business directly?<br />

New ways of work have emerged over the past 18 months. Digital<br />

enablement and mobile execution are important, especially from<br />

an advisor and investor perspective. For MGIM, this means working<br />

closely with fund platforms to enable this. Climate focus and are<br />

also very important and we have recently launched a number of<br />

new funds following demand from our advisor network.<br />

Closer to home, consolidation in distribution and end-to-end<br />

vertical integration. Is this the end of independent advice? As a<br />

firm, we drive advice-led investments; and work with and hope<br />

to enable investment propositions of advisors.<br />

In multi-asset management, finding asset classes that are<br />

uncorrelated and can deliver a balanced outcome and a smoother<br />

journey. The traditional 60/40 portfolio split is not appropriate for<br />

the world of today, and hence we need to truly explore alternatives.<br />

Analytics and the ability to source information globally across<br />

multiple data sources. <br />


Management style?<br />

I do as I expect others to do. I am hands-on and do what is<br />

needed. I enable people to develop their best selves, by giving<br />

and creating opportunities.<br />

Do you want to be liked or respected?<br />

I have never aspired to win a popularity contest. I wish to be<br />

respected for what I do, how I behave, and how I lead people and<br />

the business. And hopefully, it will show that sometimes unpopular<br />

decisions have popular outcomes.<br />

Personal best achievement?<br />

Most definitely convincing my wife to be my partner, supporter<br />

and encourager in life.<br />

Perhaps the biggest gratification comes from the people that<br />

I appointed and saw achieving their own best outcomes. For me,<br />

satisfaction comes from enabling people and seeing them flourish<br />

and be successful – like how I was given opportunities in my career.<br />

Currently reading?<br />

Morality, by Jonathan Sacks. It is about restoring the common good<br />

in divided times and about a Cultural Climate Change in the world<br />

that needs urgent attention. The rise of selfishness, loss of trust, shift<br />

from us to me. A progressive culture of inclusivity and diversity in<br />

business is critical for success.<br />

<strong>Blue</strong> <strong>Chip</strong> advice?<br />

Stay true to who you are. Promote positive stories and responsible<br />

behaviour. The world has enough challenges.<br />


Van Heerden joined MGIM in 2010 after the position as CEO of a<br />

start-up insurance venture in Switzerland for three years. He has held<br />

several senior executive positions in both Momentum and Momentum<br />

Metropolitan Holdings Limited, and the FirstRand Group, both listed<br />

companies on the Johannesburg Stock Exchange. During his career of<br />

almost 20 years with the Group, his responsibilities included heading<br />

up Momentum’s individual life operation, the private pension fund<br />

administration business, as well as FirstRand’s consumer banking<br />

division. Van Heerden has 35 years’ experience in the life insurance and<br />

investment industries in South Africa, the UK and Europe.<br />

46 www.bluechipdigital.co.za

Looking for a true<br />

global investment partner?<br />

Momentum Global Investment<br />

Management (MGIM) has a long<br />

heritage of partnering with and<br />

supporting financial advisers with their<br />

investment management needs.<br />

MGIM, Momentum Investments’ international investment business based in<br />

the United Kingdom, focuses on designing, building and managing<br />

outcome-based investing products, delivered through multi-asset, single<br />

asset and tailored client solutions.<br />

We follow a true partnership approach with financial advisers.<br />

Because with us, investing is personal.<br />

Momentum Global Investment Management Ltd (FSP 13494) is an authorised financial services provider.




INCOME<br />

<strong>Blue</strong> <strong>Chip</strong> met up with Scott Cooper, Marriott Investment Managers, to find out what his<br />

take is on the inflation that is, and has been for some time, driving the markets.<br />

What is Marriott’s investment style?<br />

At Marriott, our investment objective is to create financial peace of<br />

mind through more predictable investment outcomes by applying<br />

an income-focused investment style. This investment style requires<br />

the selection of securities that produce reliable dividends (income<br />

streams), ideally growing for the long term.<br />

Please outline Marriott’s portfolio security selection process.<br />

How does it work?<br />

A key discipline of Marriott’s income-focused investment philosophy<br />

is to only invest in companies that produce reliable and consistent<br />

income streams. To assist in this selection method, we apply a<br />

security filtering process:<br />

a. Market Cap Filter. International companies need to be listed on<br />

S&P 500, FTSE 350, FTSE EuroFirst 300. This excludes smaller, more<br />

speculative investments.<br />

b. Dividend Filter. Companies that have not paid dividends over<br />

the last three years are filtered out.<br />

c. Economic Screen. We exclude companies vulnerable to changing<br />

economic conditions.<br />

d. Industry Screen. Companies operating in unpredictable industries<br />

are filtered out, such as commodity producers.<br />

e. Company Screen. We avoid companies with specific risks to<br />

dividends, for example, companies with too much debt or that have<br />

ESG concerns.<br />

f. Yield Screen. Companies offering investors best value are selected<br />

from the remaining pool of securities (Marriott’s investable universe).<br />

A security/investment will only be included in a portfolio if it enhances<br />

the portfolio’s yield/growth trade-off.<br />

Our selection process filters out any security where future<br />

dividends are hard to predict – a process which markedly<br />

reduces the risks typically associated with equity investing.<br />

These companies tend to share five characteristics which<br />

ensure predictable dividend growth: 1) fulfil a basic need;<br />

2) strong brands; 3) pricing power; 4) growing markets and<br />

5) diversification.<br />

By the nature of their business, they will be largely<br />

unaffected by broad governmental, political and economic<br />

decisions. They tend to fare well in both recessionary and<br />

growth phases of the economic cycle as their products are<br />

generally everyday necessities, with market dominance a<br />

function of their brand. With a rapidly growing consuming<br />

class, these companies are well-positioned to take advantage<br />

of a growing demand for trusted brands – invest your money<br />

where you spend your money.<br />

Please tell us about Marriott’s international equity portfolios.<br />

At Marriott, we have two types of international equity<br />

portfolios. Firstly, our international funds. Excitingly, we<br />

have just reduced the minimum on these funds to £1 000 for<br />

the First World Equity Fund and $1 000 for the International<br />

Real Estate and International Growth Funds. These funds<br />

are listed in Dublin and invest in a range of high-quality,<br />

multinational companies.<br />

Secondly, we offer investors UK Sterling denominated<br />

offshore share portfolios that enable investors to hold the<br />

shares directly. Investors can choose between an income<br />

growth and balanced option.<br />

Why choose one of the international investment portfolios?<br />

Investors can select one of two managed discretionary<br />

portfolios, the IIP Income Growth and IIP balanced portfolios,<br />

mentioned above.<br />

48<br />



Income Growth. This portfolio is fully invested in the shares of<br />

high-quality, multinational companies and is designed to produce<br />

inflation-beating income and capital growth due to its high equity<br />

exposure. Capital growth will primarily be a function of income<br />

growth as opposed to capital accumulation. A higher-risk option.<br />

Balanced. This portfolio contains approximately 15% exposure<br />

to our First World Hybrid Real Estate (FWHRE) Fund (which invests<br />

in a combination of direct real estate in the UK and listed real<br />

estate investment trusts) and is designed to produce inflationhedged<br />

income and capital growth through a balanced asset<br />

allocation including equities and real estate. Capital growth will<br />

be a function of both income growth and capital accumulation.<br />

A more moderate risk option.<br />

Most IIP investors benefit from a reduction in US withholding<br />

tax from 30% to 15% on dividends earned from US equities.<br />

The total investment management fee is just 0.75%, reducing<br />

to 0.45% on a sliding scale depending on the investment amount.<br />

The overriding market theme for 2021 has been one of inflation.<br />

Currently, we are facing shorterterm<br />

inflationary pressures. What<br />

is your take on this? Will these<br />

pressures be sustained?<br />

Inflation has been front-of-mind<br />

for investors and asset managers<br />

alike for some time now. There are<br />

certainly two schools of thought<br />

as to whether inflation will be<br />

sustained. We still believe that<br />

it will be transitory, driven by a<br />

range of factors including supply<br />

bottlenecks, base effects, rising energy prices, shipping delays<br />

and other costs associated with the reopening of economies.<br />

These factors are still very evident in recent data releases, for<br />

example:<br />

• Recently, we saw the UK’s CPI jump to 3.2% from 2%, its largestever<br />

increase in the 12-month CPI rate. However, a large part<br />

of this was driven by base effects – in August 2020, the UK<br />

government launched an Eat Out to Help Out scheme that<br />

offered customers half-price food and drink to eat or drink in,<br />

artificially lowering the 2020 baseline.<br />

• Estimated Eurozone inflation, as at the end of August, jumped<br />

to 3%. However, if you strip out the impact of rising energy<br />

prices, the inflation rate is just 1.7% over the last 12 months.<br />

• In the past few months, Consumer Price Index inflation in the<br />

US has reached its highest level in more than a decade. We<br />

have begun to see the headline inflation numbers trending<br />

downwards as base effects and other inflationary pressures<br />

begin to subside.<br />

We also need to recognise that some inflationary pressures<br />

are stickier than others and will continue for several months.<br />

The shortage of long-distance truck drivers in the UK is a good<br />

example of this. The shortage is putting upward pressure on<br />

wages and these additional costs are flowing through to the cost<br />

of transporting goods. Although the shortages will dissipate over<br />

time, they will not disappear overnight.<br />

Overall, we feel inflation will still be transitory, but the<br />

transition may be slightly longer than some market commentators<br />

initially suggested. At Marriott, our key focus remains to identify<br />

companies that are well-suited to the long term but can effectively<br />

deal with the shorter-term inflationary pressures.<br />

In 2020, global debt climbed to an all-time high and the pace of<br />

recovery has been uneven. Should investors be worried?<br />

There is no doubt that the global economy faces a few challenges,<br />

including an increasing debt burden. In 2020, global debt<br />

climbed to an all-time high – approaching $300-trillion. Further,<br />

it has become evident that the pace of economic recovery is very<br />

uneven across the globe. China’s economy managed to surpass<br />

pre-pandemic levels during 2020 and the US has just passed that<br />

mark, but many other countries may not recover until 2023 or<br />

beyond. The elevated debt levels<br />

At Marriott, our key focus<br />

remains to identify companies<br />

that are well-suited to the<br />

long-term but can effectively<br />

deal with the shorter-term<br />

inflationary pressures.<br />

and uneven global recovery are<br />

likely to weigh on global growth.<br />

Should investors be worried?<br />

I think that very much depends<br />

on what they are invested in. Take<br />

Proctor & Gamble, for example, a<br />

company held in our international<br />

equity portfolios, which has an<br />

excellent track record of growing<br />

dividends even through market<br />

and economic turmoil. It has<br />

increased dividends 65 years in a row, including a 10% increase earlier<br />

this year (compared to a double-digit decline globally).<br />

Aside from an excellent track record, the company has a strong<br />

balance sheet, is diversified across countries and product lines, and<br />

holds market-leading positions resulting in powerful brand loyalty<br />

and pricing power. Last year, Proctor & Gamble was able to grow<br />

its organic revenue and core earnings<br />

per share by 6% and 11% respectively<br />

despite the pandemic and, looking<br />

forward, has already announced price<br />

increases for key product lines later in<br />

the 2021 calendar year.<br />

At Marriott, we believe there are<br />

a range of companies that are wellsuited<br />

to the long term and which<br />

can effectively deal with short-term<br />

inflationary pressures. Companies of<br />

this nature tend to be less volatile and<br />

more resilient, meaning that outcomes<br />

for investors are more predictable. Our<br />

international equity portfolios contain<br />

many such companies. <br />

Scott Cooper, Investment<br />

Professional, Marriott<br />

Investment Managers<br />

www.bluechipdigital.co.za<br />


CAPEX<br />

Why capex is key to solving<br />

the supply chain issues<br />

hampering the economy<br />

Capex levels have slumped in recent years, which has led to supply-side problems from<br />

steel to semiconductors and even a shortage of bicycles as well as HGV drivers.<br />

There are many incentives for capital expenditure (capex).<br />

Companies may invest in new technologies that help<br />

boost productivity and allow them to become more<br />

efficient. Or there may be inflationary pressures that<br />

companies want to offset with less<br />

waste, or through new equipment<br />

that will allow them to become more<br />

productive but will also help with the<br />

use of raw materials.<br />

So, there is always an incentive<br />

for capex, but in recent years capex levels have not kept pace<br />

with depreciation, particularly from about 2017. There was<br />

also a significant deterioration in 2020, during the Covid-19<br />

pandemic. As a result, a material underinvestment in capex has<br />

built up in recent years.<br />

A material underinvestment<br />

in capex has built up<br />

in recent years.<br />

Some industries, such as coal and oil, have also consciously<br />

underinvested due to environmental, social and governance (ESG)<br />

pressures from investors.<br />

Underinvestment and supply shortages<br />

We are seeing numerous examples of supply<br />

shortage, from steel to semiconductors, as<br />

well as haulage drivers in the UK and shipping<br />

containers in China. Consequently, there is<br />

a huge tailwind of pressure to respond with<br />

supply-side initiatives, which we think basically boils down to capex.<br />

On top of the need for higher spending by corporates,<br />

governments around the world are set to accelerate their spending<br />

after the Covid-19 crisis. The EU’s recovery package, which will<br />

begin to be spent in 2022, will be tilted towards green initiatives.<br />

50 www.bluechipdigital.co.za

CAPEX<br />

This could be for new infrastructure to charge electric vehicles<br />

(EVs) or for the more efficient transmission of electricity and or<br />

super-fast broadband. And then in the US we have President<br />

Biden’s infrastructure programme, which will be focused on<br />

spending on capital equipment covering renewables, airports<br />

and mass transportation.<br />

Governments around<br />

the world are set to<br />

accelerate their spending<br />

after the Covid-19 crisis.<br />

Perfect storm of inflation pressure and underinvestment<br />

So, there is an underinvestment backdrop, combined with<br />

inflation pressure which is encouraging companies to invest to<br />

improve sooner rather than later. With a high backlog of orders<br />

and supply shortages, we currently have a perfect storm to<br />

encourage capex.<br />

Our forecasts see capex growing by about 12% this year and<br />

then by 8% in 2022, which has only recently been upgraded<br />

by 5%. And this is a conservative estimate; we’ve already seen<br />

revisions to this figure and expect further upgrades. We are now<br />

about to hit peak capex, compared to levels seen in the past.<br />

However, if these figures are adjusted for inflation, we are still<br />

at much lower levels than we should be.<br />

So, while capex is lower than it should be on an inflationadjusted<br />

basis, it is also well below where it should be on a capex<br />

to depreciation basis (ie a company’s total capex versus the rate<br />

at which its fixed assets decline in value).<br />

And then there are also government spending programmes<br />

that are coming through.<br />

What does this mean for investors?<br />

This presents a two- to fiveyear<br />

opportunity for investors.<br />

To benefit from it, investors<br />

are likely to switch away from<br />

companies focused just on<br />

industrial production. Instead,<br />

they will move towards<br />

providers of capital equipment<br />

– covering robotics, process and<br />

discrete automation products,<br />

supporting software, energy<br />

efficiency products, providers of<br />

electrification and storage.<br />

The likes of Siemens, Schneider<br />

and Daikin as well as Caterpillar<br />

or John Deere in the US could be<br />

among the beneficiaries. <br />

Robert Donald, Chief<br />

Investment Officer,<br />

Schroders<br />

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder<br />

Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes<br />

only and it is not intended as promotional material in any respect.<br />

www.bluechipdigital.co.za<br />



Talking Global Equity<br />

<strong>Blue</strong> <strong>Chip</strong> speaks to Andreea Bunea, Head of Global Equity at Old Mutual Multi-Managers.<br />

52 www.bluechipdigital.co.za


Global equity has been the best asset class for local investors<br />

over the past decade. What has been the main driver?<br />

That’s right. Global equity returned 19% per year in rand terms<br />

over the past decade to end August (as measured by the MSCI<br />

All Country World index). Part of the story is rand weakness.<br />

The currency traded at R7 against the dollar 10 years ago. As it<br />

depreciated, it added about 9% per year to the return from global<br />

equity for local investors.<br />

But the main reason has been that global equities performed<br />

well in dollar terms, despite the March 2020 crash. The return in the<br />

10 years to the end of August was in the top 15th percentile of all<br />

10-year periods since 1988.<br />

But this headline performance hides quite a divergence, doesn’t it?<br />

Indeed. We can slice and dice it in many ways, but let’s just look at<br />

it from a regional and a style basis.<br />

On a regional basis, the US has led the way over the past<br />

decade by some distance, while non-US equity returns were<br />

much more muted. The US is by far the biggest market in the<br />

world, accounting for more than half of the major global equity<br />

benchmarks, whether you use MSCI, FTSE or Datastream.<br />

The US S&P 500 returned 16% annualised over the past decade,<br />

compared to 7% in dollars for non-US equities (the MSCI All Country<br />

World ex US index)<br />

Valuations: S&P 500 vs MSCI All Country World Index ex USA<br />

But perhaps the biggest reason for the outperformance<br />

is simply the phenomenal performance of the big Internet<br />

platform companies, sometimes simply called the FAANGs<br />

(Facebook, Apple, Amazon, Netflix, Google) or FAMANGs (adding<br />

Microsoft to the list). These companies have managed to capture<br />

increasing amounts of market share from their more established<br />

competitors over the last decade, using disruptive business<br />

models and technologies.<br />

The same level of success was broadly absent in other parts of<br />

the developed world, driven by a combination of of less permissive<br />

regulation, less access to readily available private capital needed<br />

to support the growth of such disruptive models during their early<br />

stages, and less focus on delivering shareholder returns.<br />

This brings us to the style discussion.<br />

One of the most notable investment trends over the past<br />

decade has been the outperformance of “growth” as an<br />

investment style over “value”. Broadly speaking, “growth”<br />

companies can generate their own earnings growth, often<br />

by taking market share and therefore are not as dependent<br />

on economic growth. The big Internet platform companies<br />

are classic examples of growth companies, as they have been<br />

able to deliver fantastic growth to investors over the last<br />

10 years. Value companies are those unloved shares trading<br />

at cheap valuations but that<br />

typically need a strong economic<br />

cycle to boost profitability.<br />

Now there are several reasons for the US outperformance,<br />

one of which is that the dollar strengthened over this<br />

period, which does depress the returns from outside the<br />

US somewhat. Another reason is that US economic growth<br />

far outperformed that of Europe and Japan over this<br />

period, while commodity producers and emerging markets<br />

disappointed relative to expectations.<br />

How should investors think about<br />

the impact of low interest rates on<br />

growth companies?<br />

In theory, today’s share price reflects<br />

the present value of future cash<br />

flows a company is expected to<br />

generate. Those future cash flows are<br />

discounted back to the present using<br />

prevailing long-term real government<br />

bond yields, with lower rates making<br />

them more valuable today. The key,<br />

however, is that growth companies<br />

benefit more from lower interest<br />

rates as they have a longer runway of<br />

expected cash flows when compared<br />

to value companies, who tend to<br />

enjoy expected cash flows much<br />

sooner. Some analysts even refer to<br />

growth companies as long duration<br />

assets, like long bonds.<br />

This can potentially explain why US shares outperformed<br />

counterparts in Europe or Japan. However, low rates by<br />

themselves are not enough, as both Europe and Japan have<br />

lower prevailing interest rates – negative rates in fact. What<br />

also played in favour of US stocks was a continuous ability to<br />

deliver earnings growth and margin expansion in line or ahead<br />

of expectations, particularly among the tech innovators.<br />

www.bluechipdigital.co.za<br />



Performance of growth vs value<br />

Do you think value can ever make a comeback?<br />

Value companies outperformed their growth counterparts<br />

before the global financial crisis in 2008, supported by a<br />

booming global economy and a continued de-rating of growth<br />

stock valuations from the very elevated levels achieved at<br />

the height of the dot.com bubble in late 1990s. But the tepid<br />

economic growth environment after the 2008 crisis favoured<br />

growth companies, as investors were willing to pay up for<br />

scarce growth.<br />

As a result, the valuation spreads between value and growth<br />

companies have once again reached close to extreme levels.<br />

Add to this a strong global economic recovery and better<br />

fundamentals and growth forecasts for value companies, and<br />

we could see market sentiment continuing to support value<br />

companies going forward. I think the question around the<br />

length of the current market sentiment is a valid one, but very<br />

difficult to predict.<br />

Within this long outperformance of growth over value,<br />

however, there have been mini cycles. Even over the past year,<br />

there were periods when value outperformed, particularly after<br />

news of successful vaccine trials broke in November 2020.<br />

Therefore, diversification across investment styles is<br />

important, particularly in the global equity universe, where<br />

these factors are much more prevalent than locally. This is<br />

because the breadth and depth of global equity markets<br />

allow managers to express their preference for a specific<br />

investment style without increasing the risk resulting from<br />

undesirable concentration levels in their portfolios. With the<br />

small number of companies listed on the JSE, this approach<br />

becomes more challenging.<br />

What about quality as a style?<br />

I should add that different investors<br />

will have slightly different ways of<br />

classifying companies, but broadly<br />

speaking, “quality” is an investment<br />

style where investors focus on<br />

companies with strong balance<br />

sheets and competitive advantages,<br />

such as having very well-known<br />

consumer brands.<br />

These shares tend to be more<br />

defensive in nature, which means<br />

that they hold up better than the<br />

broader market during a selloff, which<br />

is what we experienced during the<br />

March 2020 market drawdown. In a<br />

market environment dominated by<br />

an uncertain future, investors tend to<br />

support the predictability and visibility<br />

of annuity-type earnings streams<br />

characteristic of quality companies.<br />

On the other hand, such companies<br />

tend to lag during subsequent market<br />

recoveries, as investors turn their focus<br />

to areas of the market that are likely to do well in an economic recovery.<br />

How should a typical investor view all these various styles?<br />

Should you jump between them, or just pick one and stick to it?<br />

I don’t think one can successfully time when a particular investment style<br />

will come into favour or fall out of favour, as these shifts in performance<br />

trends tend to only become apparent with the benefit of hindsight.<br />

Moreover, being caught on the wrong side of that trend could be<br />

detrimental to relative performance, given the length of such cycles.<br />

Therefore, our approach in the global equity fund is to combine fund<br />

managers whose investment philosophies and processes tend to be<br />

broadly underpinned by different investment styles.<br />

But I also don’t think that managers need to be purists and cling<br />

dogmatically to a specific investment style, as we acknowledge<br />

that markets dynamics can change over time, and we wouldn’t<br />

want them to miss out on any potential investment opportunities.<br />

So, in our research we look for managers who stick to their knitting<br />

and apply their process consistently over time rather than chase<br />

the latest market fads, but who can also be quite pragmatic in their<br />

investment approach.<br />

Ultimately, we spend most of our time making sure our portfolios<br />

are properly diversified and balanced so that we are not dependent<br />

on the performance of any one style or market cycle.<br />

South Africa is an emerging market. Should South African<br />

investors have a separate allocation to emerging market equities,<br />

or is that doubling up on risk?<br />

I think a separate allocation is warranted and we have emerging<br />

market (EM) specialist managers in our global equity fund.<br />

54 www.bluechipdigital.co.za


There are three reasons for this. South Africa is a small<br />

portion of the global emerging markets universe, accounting<br />

for 3% of MSCI’s emerging markets index (and less than 1%<br />

of the global index). There is a lot of opportunity out there in<br />

the emerging markets universe. It is also worth noting here<br />

that this universe comprises a heterogeneous selection of<br />

emerging markets, with each market offering investors a very<br />

different set of investment risks and opportunities. Taking<br />

South African investments as proxy for emerging market<br />

exposure leaves local investors deprived of many potentially<br />

rewarding opportunities that tend to be unique to other<br />

emerging markets.<br />

Secondly, that EM universe has changed dramatically over<br />

the past decade or so. It is now firmly centred on Asia, and with<br />

a much larger exposure to technology shares and the growing<br />

middle-class consumer in those countries. It is much less of a<br />

proxy for commodity prices, which is what South African equity<br />

is to an extent.<br />

Thirdly, we have long believed that the global equity<br />

benchmarks have too little exposure to emerging markets, only<br />

12% even though emerging markets account for a much larger<br />

share of global economic activity.<br />

There is a concern that global markets look expensive. Is this a<br />

good time to invest offshore?<br />

Overall valuations look stretched by historical standards, but again<br />

we need to scratch beneath the surface. For instance, the forward<br />

price: earnings ratio on the MSCI All Country World index is 18,<br />

which is near a level it last was in the early 2000 in the wake of the<br />

dot.com bust.<br />

But we need to bear in mind that interest rates are much lower<br />

today than in 2000 and this eliminates the potential for either<br />

cash or bonds as a suitable investment alternative to equities. For<br />

instance, the 10-year US government bond yield is 1.3% versus 5%<br />

in 2000. European yields are negative. You can’t ignore that.<br />

Valuations are very different across regions and companies. The<br />

US is most expensive because investors are prepared to pay up for<br />

those growth companies. Other markets are much cheaper.<br />

Finally, global growth is positive, and companies are generating<br />

incredible earnings. In this macro environment, it makes sense to<br />

remain invested.<br />

However, elevated valuations do suggest that the easy money<br />

has been made, and that investors should not necessarily expect<br />

the kind of returns we saw in the previous decade.<br />

How do you find these managers?<br />

We start by doing a quantitative screen, using the global databases<br />

that we have access to. Here we look for some basic characteristics<br />

like track record, size, domicile, benchmark, etc. From this screen we<br />

can do more qualitative research on a short list of managers. The final<br />

step is to spend time with managers to find out what makes them tick.<br />

We really want to understand their philosophy and process. We want<br />

to know who the key people are and how they interact. How do they<br />

generate ideas? How do these ideas end up in a portfolio? When do<br />

they buy and when do they sell? How is risk managed?<br />

Once a manager is appointed, we have regular engagements<br />

with them to monitor performance, but mostly to make sure we<br />

still understand what is behind the performance and whether<br />

that remains consistent with their investment approach. Once we<br />

identify truly talented stock pickers, we tend to stay invested for<br />

the long term and in some cases we have been invested with the<br />

same global manager for over a decade.<br />

The OMMM Global Equity fund was launched in March 2020<br />

as a dollar-based UCITS fund. Despite the recent inception date,<br />

it is worth noting that our expertise in global manager research<br />

expands close to two decades. <br />

You won’t get positive alpha<br />

every day. It is lumpy.<br />

Speaking of managers, where do you stand on the active vs<br />

passive debate?<br />

I think the main thing is that investors need to get value for money.<br />

If you can find active managers who outperform, it is worth paying<br />

somewhat higher fees. If you can’t, indexation is an attractive option.<br />

We believe that skilled active managers earn their fees and then<br />

some. Investors just need to be patient. You won’t get positive<br />

alpha every day. It is lumpy.


Your clients’ wealth<br />

deserves the world<br />

OUTvest, the online investment platform powered by OUTsurance, now allows<br />

financial advisors to offer uncapped global equity exposure to their clients.<br />

The new product is called<br />

the Global Wealth Builder,<br />

and like all options from<br />

OUTvest, it’s as easy as it is<br />

cost-effective. Grant Locke, Head<br />

of OUTvest, says, “Using an ETF<br />

to access global equity exposure<br />

is, we believe, one of the most<br />

cost-effective ways to diversify<br />

internationally for your clients.”<br />

The Global Wealth Builder invests in the JSE-listed CoreShares<br />

Total World Stock Feeder Exchange Traded Fund (ETF), giving<br />

investors exposure to 25 developed and 24 emerging markets,<br />

comprising over 9 000 stocks over 10 sectors – arguably the<br />

most comprehensive global share-based investment strategy,<br />

according to CoreShares. Locke notes, “When sourcing this<br />

product, we paid particular attention to two things – that it<br />

included exposure to emerging markets and was offered at<br />

low cost.”<br />

It adds to five other funds available through OUTvest (four<br />

of which are bespoke), giving advisors the opportunity to<br />

service all types of clients. It also sticks to OUTvest’s low ONEfee<br />

approach, now applied to ETFs. Locke adds, “We have worked<br />

hard with our partners to create a variation of our ONEfee<br />

approach, specifically for ETFs.”<br />

Locke adds, “It was important<br />

for us to make this product as<br />

accessible as possible. It’s why<br />

we’ve incorporated our ONEfee<br />

approach and, like the rest of<br />

our products, made the process<br />

virtually admin-free through our<br />

co-branded platform.”<br />

Through OUTvest, financial<br />

advisors can create an investment<br />

plan and implement it in a single sitting. Ongoing advice is also<br />

simplified, thanks to automated annual reviews and advanced<br />

investment tracking and monitoring technology, which gives<br />

advisors and their clients instant access to information they need.<br />

More information can be found on outvest.co.za, with a<br />

demonstration of the OUTvest for advisors’ platform available<br />

on request.<br />

When sourcing this product,<br />

we paid particular attention to<br />

two things – that it included<br />

exposure to emerging markets<br />

and was offered at low cost.<br />

OUTvest is an authorised FSP. Collective investment schemes are generally medium-<br />

to long-term investments. All investments are exposed to risk, not guaranteed (in<br />

respect to capital or the return) and dependent on the performance of the underlying<br />

assets. Both Exchange Traded Fund(s) (ETF) and unit trusts are collective investment<br />

schemes, however, these products are priced and traded differently. A unit trust is<br />

priced once a day, whereas an ETF is trading continuously throughout the day during<br />

JSE trading hours. Benchmark: FTSE Global All Cap Index. Ts and Cs apply.<br />

56<br />


Service more<br />

clients in less time.<br />

Yeah, it’s possible.<br />

Give upfront advice and implement it in a single<br />

sitting with our white-label investment platform, built<br />

from the ground up for financial advisors. Ongoing<br />

advice? That’s just as easy, thanks to advanced<br />

investment tracking and monitoring technology that<br />

gives you real-time information when you need it.<br />

Even annual reviews are automated.<br />

Are you ready to streamline and scale<br />

your advice practice with OUTvest?<br />

To find out more<br />

sms ‘out’ to 44599<br />

or visit outvest.co.za<br />

OUTvest is an authorised FSP. All investments are exposed to risk, not guaranteed and dependent on the performance of the underlying assets. Ts and Cs apply. Free SMS. OV21/0177/E


Global multi-asset funds: a must-have<br />

moving into a post-Covid world<br />

In an environment where traditional global asset classes are<br />

looking fully priced and many risks dominate the news flow,<br />

investors seeking offshore exposure may be wondering how<br />

best to go about it. It remains our view that investing in welldiversified<br />

portfolios that comprise more than just one asset class<br />

offers the most appropriate route to navigating a challenging<br />

investment environment. Here’s why:<br />

Pressures are building<br />

High starting valuations for developed market equities. Most<br />

developed market economies are amid a robust economic<br />

recovery that has provided tailwinds for their equity markets.<br />

These increases were stoked up by economic data that surprised<br />

on the upside as the post-pandemic recovery, fuelled by monetary<br />

stimulus, was more rapid than anticipated. Especially in the US,<br />

equity markets are looking fully priced at an index level after a<br />

record run since the market meltdown in March last year.<br />

Prospects of higher global inflation. Savings rates are up, balance<br />

sheets are in good shape, interest rates remain low and economic<br />

lockdowns over the past year have meant significant pent-up<br />

demand is waiting to be fulfilled as conditions improve. Against<br />

this backdrop, it is not surprising that inflationary pressures are<br />

building up.<br />

Diversification and active management as a better forwardlooking<br />

strategy<br />

With high starting valuations and the prospect of higher<br />

inflation among many risks facing global investors, we believe<br />

alpha-generation through selectively identifying attractively<br />

priced shares, in addition to diversification into other asset<br />

classes, will be a better forward-looking strategy than just<br />

owning the index. Our multi-asset class portfolios typically have<br />

exposure to 40 - 60 shares, carefully selected out of a universe<br />

of 2 500 - 3 500, which means they don’t look anything like<br />

the index or our peers. This level of diversification is hard to<br />

replicate on an individual basis.<br />

Our multi-asset class funds are further differentiated in<br />

that we hold many investment opportunities outside the<br />

traditional 60% equity/40% bonds multi-asset portfolio to<br />

sweat every basis point of potential returns. Thus, while we<br />

continue to believe that it’s essential to have exposure to<br />

58<br />

One thing is certain:<br />

actively managed<br />

multi-asset class strategies<br />

can add significant value.<br />

www.bluechipdigital.co.za<br />

equities, it is also important to include other assets – such<br />

as infrastructure, high-yield income, global property, and<br />

absolute-return investments – in our multi-asset class funds.<br />

This is especially important in an environment where, in our<br />

view, the global bond index offers a negative real return over<br />

the next several years.<br />

Each of our global multi-asset class funds benefits from exposure<br />

to these non-traditional assets, with the extent of their exposure<br />

in the portfolios dependent on the risk budget of the fund. This<br />

ranges from around 30% in the Global Capital Plus Fund, with a<br />

cautious risk profile, to 25% in the Coronation Global Managed<br />

Fund, a moderate risk balanced fund, and around 15% in the<br />

more aggressive Global Optimum Growth. The same funds have<br />

effective equity exposure of 24%, 55% and 80% respectively, with<br />

the balance held in cash and selected fixed-income instruments.<br />

(Exposure figures are as at end September 2021).<br />








as at 31 July 2021<br />

Equity<br />

Well-diversified portfolios<br />

Building portfolios that span six<br />

asset classes and look nothing<br />

like the index takes extensive<br />

research and a significant amount<br />

of investment experience and<br />

expertise. The combination of our<br />

expertise and our robust triedand-tested<br />

investment approach<br />

enables our multi-asset class funds<br />

to provide investors with exposure<br />

to a wealth of opportunities in<br />

traditional and non-traditional<br />

asset classes. These opportunities<br />

actively balance risk and returns<br />

to deliver on our investors’ various<br />

objectives across the fund range.<br />

Investment-grade<br />

fixed income<br />

Absolute returns<br />

Inflation protection<br />

High-yield fixed income<br />

Real assets<br />

Coronation is an authorised financial services provider.<br />



Christo Lineveldt<br />

Investment Specialist



Glacier International offers access to international investment opportunities. Traditionally,<br />

this was via unit trusts and share portfolios, but investors can now access global market<br />

indices via low-cost exchange traded funds directly through the Glacier International<br />

platform. <strong>Blue</strong> <strong>Chip</strong> speaks to Andrew Brotchie, MD, Glacier International.<br />

Please tell us about the new exchange traded funds (ETFs) that<br />

are available direct on the Glacier International platform.<br />

Clients have always had the ability to buy ETFs, but it required<br />

them to open a custodian account within our platform and then<br />

to trade directly with a third-party provider. We’ve recently made<br />

available a range of ETFs directly on the platform. They can be<br />

traded directly by our clients who have unit trust portfolios.<br />

ETFs are very successful overseas and we do have a way to go<br />

The Global Life Plan, an<br />

offshore endowment, offers<br />

investors financial planning<br />

benefits including estate<br />

planning advantages and<br />

solvency protection.<br />

to catch up with this trend locally.<br />

We feel it was an important step<br />

in our evolution to be able to<br />

offer our clients direct access to<br />

these investment opportunities<br />

on the platform. It’s about us<br />

expanding the ability for our<br />

clients to access the various ways<br />

of gaining international exposure<br />

in their portfolios.<br />

ETFs help clients control their<br />

cost of investing. An ETF is a straightforward option to get access<br />

to international investment opportunities without having to do<br />

research oneself to try to find the best actively managed options<br />

in a foreign country.<br />

Why invest in an ETF?<br />

Cost is a big driver. The other benefit is straightforward index<br />

exposure to different opportunities. It allows quick-and-easy<br />

access from a flexibility perspective. You don’t necessarily have to<br />

research which fund is the most appropriate for a specific area or<br />

sector; you can buy the ETF that covers an index relevant to that<br />

area or sector.<br />

How does Glacier International select its ETFs?<br />

We offer a range of ETFs that our research team has selected.<br />

We have a core offering that covers the major markets around<br />

the world, such as the MSCI World, MSCI Emerging Markets, S&P<br />

500, Euro Stoxx 50, Japan, and Developed Markets Property<br />

Yield indices. We also have thematic (ESG) and specialist ETF<br />

offerings, like gold.<br />

Please provide an overview of the Global Life Plan.<br />

The Global Life Plan, an offshore endowment, offers investors<br />

financial planning benefits including estate planning advantages<br />

and solvency protection.<br />

Glacier International is responsible for the calculation, collection<br />

and administration of any tax due, therefore the investor has no<br />

personal tax administration to take care of. Any tax paid may be<br />

less than they would pay in their personal capacity, depending<br />

on their tax rate.<br />

International estate duty rules won’t<br />

apply in the case of the Global Life Plan.<br />

In addition, the investor can nominate<br />

beneficiaries to receive the funds on their<br />

death, and these funds will not form part<br />

of the winding up of the estate.<br />

Why does an offshore life wrapper – or<br />

endowment structure – make sense?<br />

Traditionally, as South African markets<br />

started opening and people started taking advantage of<br />

international opportunities, they would either go direct or set<br />

up an offshore trust, typically.<br />

Today, offshore life wrappers<br />

are the preeminent vehicle<br />

for investing money offshore.<br />

They offer many of the same<br />

benefits as trusts, often<br />

with significantly reduced<br />

costs, as well as providing<br />

administrative flexibility<br />

to manage international<br />

portfolios that can span many<br />

jurisdictions. Their financial<br />

planning benefits – as set out<br />

above – as well as their ease of<br />

administration really can help<br />

to simplify the management<br />

of a client’s international<br />

investment exposure. <br />

Andrew Brotchie, MD,<br />

Glacier International

Franklin Templeton<br />

is now MORE<br />


At Franklin Templeton, we strive to always deliver more<br />

for our clients. Our recent acquisition of Legg Mason<br />

makes us the sixth-largest independent fund manager<br />

in the world. Together, we bring extensive histories that<br />

now offer more investment experts, comprehensive analytics<br />

and research insights on the ground.<br />

Franklin Templeton brings together an unmatched collection<br />

of independent specialist investment managers (SIMs) to provide<br />

their clients deep expertise and specialisation – within and across<br />

asset classes, investment styles and geographies. And they offer<br />

hundreds of strategies across active, smart beta and passive<br />

approaches – in a full range of vehicles.<br />

Our story<br />

One thing has driven Franklin Templeton’s growth and evolution:<br />

our focus on delivering better client outcomes. It is why we have<br />

built a world-class investment firm that aims to offer the best of<br />

both worlds: global strength and boutique specialisation. And it<br />

is the reason clients in more than 165 countries have entrusted<br />

us with their investments, making us one of the world’s largest<br />

asset managers with US$1.55-trillion in assets under management.<br />

Nimble where it matters<br />

All told, our SIMs comprise approximately 1300 investment<br />

professionals located across 20+ countries, giving us an ear to<br />

the ground in the world’s most significant markets. And they’re<br />

backed by a strong, global infrastructure with at-scale capabilities<br />

in research, data analytics and servicing. This combination of<br />

independent, entrepreneurial SIMs and global strength makes us<br />

uniquely agile.<br />

Unparalleled in our ability to customise<br />

While our structure makes us agile, our scale lets us offer hundreds<br />

of strategies across active, smart beta and passive approaches –<br />

in a full range of vehicles. And we boast extensive multi-asset<br />

capabilities. So, we never need to favour a particular type of<br />

solution. Instead, we can provide options best suited to the unique<br />

needs of every client, institutional or individual. And beyond<br />

our core function of delivering investment returns, we provide<br />

our clients with tailored support through a global distribution<br />

platform, technology-based tools and value-added services.<br />

Guided by long-term value creation<br />

We believe it is just as important to drive long-term success as it<br />

is to seize today’s opportunities. As a closely held public company<br />

with an impressively strong balance sheet, we can invest and<br />

manage our company for the long term. That’s what lets us<br />

keep building on our long track record of developing innovative<br />

products and tools for our clients, fuelled by our Silicon Valley<br />

roots. Our values-based culture means we do the right thing for<br />

our clients and our people. <br />

One thing has driven Franklin Templeton’s<br />

growth and evolution: our focus on<br />

delivering better client outcomes.<br />

All data as of 30/06/21. Assets under management represent combined assets of Franklin Templeton, Legg Mason, and subsidiary investment<br />

management groups. Franklin Templeton acquired Legg Mason on 7/31/20.




Climate science and why it’s important<br />

for long-run capital allocation.<br />

It is now globally accepted that to limit the long-term extent<br />

of global warming and its economic and socio-ecological<br />

consequences, the world must rapidly transition to a<br />

decarbonised economy, beginning now.<br />

In August the United Nations’ (UN) Intergovernmental Panel on<br />

Climate Change (IPCC)1 released its sixth assessment report on the<br />

physical science of climate change.<br />

The report shows unequivocally that the main climate driver is the<br />

accumulation of greenhouses gases (GHG) in the Earth’s atmosphere<br />

which is growing because of the burning of fossil fuels. The main GHG<br />

is carbon dioxide, which represents<br />

some 70% of global emissions,<br />

primarily released through the burning<br />

of coal.<br />

Scientists are observing changes<br />

in the Earth’s climate in every region<br />

and across the whole climate system.<br />

Many of the changes observed in<br />

the climate are unprecedented in thousands, if not hundreds of<br />

thousands of years, and some of the changes already set in motion<br />

– such as continued sea level rise – are irreversible over hundreds<br />

to thousands of years.<br />

The report shows that we have to date warmed the global<br />

temperature by 1.1°C since the mid-19th century. The current<br />

global consensus is that we should limit global warming to well<br />

below 2°C, preferably to 1.5°C, compared to pre-industrial levels.<br />

These ambitions were legally agreed in 2015 by 196 countries in<br />

Paris at COP 212.<br />

Applying a hard screen to<br />

the JSE on primary producers<br />

of fossil fuels would exclude<br />

some 12% of the market cap.<br />

The sixth assessment report provides new estimates of the<br />

chances of crossing the global warming level of 1.5°C in the next<br />

decades, and finds that unless there are immediate, rapid and largescale<br />

reductions in greenhouse gas emissions, limiting warming to<br />

close to 1.5°C or even 2°C will be beyond reach.<br />

The constraints on the management of climate change are not<br />

technological, they are mostly seen as political and social. The main<br />

technological challenge is well understood ie, “Change the way we<br />

generate energy.” Already there are a growing cohort of commercially<br />

viable renewable alternatives at scale. Smart grids, battery technology<br />

and the hydrogen economy all further<br />

extend decarbonisation into energyintensive<br />

sectors such as mining, heavy<br />

transport, rail, cement and steel.<br />

Glasgow will host COP26 in<br />

November and will provide a sobering<br />

lens on government appetite to act<br />

on climate change. Countries such as<br />

the US, Canada, Japan and China have all pledged to reduce their<br />

carbon emissions substantially over the next 10 years.<br />

For investors, climate risk or transition risk is visible at a portfolio<br />

level by way of the percentage exposure to primary producers<br />

of fossil fuels as well as through the weighted average carbon<br />

intensity of earnings and “green revenues” exposure. Alongside<br />

this, understanding the relative sector strengths and the quality of<br />

strategic management response provides investors with a picture<br />

of a fund’s climate-risk positioning. It is of course important to<br />

note that simply shifting investments away from climate-exposed<br />

62 www.bluechipdigital.co.za


counters is not the panacea to managing long-run climate risk.<br />

Notwithstanding this, investors can make a strategic call on how<br />

to manage climate-risk exposure across their portfolios.<br />

As the depth of climate metrics grows, there is also a<br />

corresponding growth in the development and application<br />

of climate-aware benchmarks. Most traditional performance<br />

benchmarks were not designed with carbon constraints in mind<br />

and so it’s no surprise that many of the existing benchmarks have<br />

carbon intensity levels that put the world on a pathway to a greater<br />

than a 2°C outcome, closer to 3°C or 4°C.<br />

The EU, for example, has published benchmarks for funds that<br />

are either 1.5 or two degrees aligned, with specifications for issues<br />

such as percentage holdings of primary producers of fossil fuels,<br />

carbon intensity level relative to a benchmark and rate of carbon<br />

intensity decline on a year-on-year basis. We see growing appetite<br />

in the institutional space for such benchmarks and so expect longterm<br />

capital to flow toward these climate-aware benchmarks.<br />

Alongside this, there is also the growing array of thematic-styled<br />

funds that aim to capture the opportunity set associated with<br />

green economy transition. These thematic funds have gathered<br />

a lot of support in the retail environment of late, and while good<br />

opportunities exist, buyers of such funds must be mindful of green<br />

washing and green bubble risk.<br />

For domestic investors looking to manage their climate<br />

exposure, it makes sense to use differing approaches across asset<br />

classes and geographies, ie:<br />

• Global Equity. Given the depth of the market, investors could<br />

take a hard exclusionary approach or make use of Climate Smart<br />

Index products and/or carbon-constrained smart beta products.<br />

Lastly, global thematic-styled active products that target<br />

beneficiaries of the transition are available. Presently, there’s a<br />

growing array of products across the risk-reward continuum.<br />

Green-washing risk exists and so it will be important for advisors<br />

to keep an eye on the emergence of fund sustainability reporting<br />

regulations such as the EU Sustainable Finance Disclosure<br />

Regulation (EU SFDR).<br />

• Local Equity. The South African economy is carbon intensive,<br />

principally driven by the emissions released through industrial/<br />

chemical process (ie Sasol/ smelters) and emissions associated<br />

with the generation of electricity (Eskom). Applying a hard<br />

screen to the JSE on primary producers of fossil fuels would<br />

exclude some 12% of the market cap. Further to this, over 80%<br />

of the annual emission from JSE comes from 20% of the market<br />

cap. Simply put, the carbon intensity of the JSE means there<br />

are material constraints on the design of 100% decarbonised<br />

investments products for the South African market. Investors can<br />

presently select from a limited number of local equity products<br />

that have hard-coded carbon and climate-risk attributes. Aside<br />

from targeted low-carbon products, at a minimum, investors<br />

should demand that their asset managers are proactively<br />

engaged with climate-change risk.<br />

• Alternatives. This is the most direct way to get exposure to the<br />

renewable theme in the South African economy, an area that<br />

is set to expand as set out in the Integrated Resources Plan.<br />

Access to these investments has traditionally been limited to<br />

institutional investors: however, retail investors could potentially<br />

obtain exposure via Reg 28 compliant balanced funds with<br />

“green” alternatives exposure. An important item to keep an<br />

eye on here is the National Treasury Green Economy Taxonomy<br />

work that is underway. South Africa’s work here is consistent<br />

with what is happening globally. A taxonomy of this nature will<br />

better help policy, and capital and projects to align.<br />

• Fixed Income. Climate bonds are the most direct way to play<br />

the decarbonisation theme in the fixed-income asset class.<br />

The growth in climate bonds globally has meant that there are<br />

now several climate and green bond index products that are<br />

available. Locally, the issuance of green bonds is still nascent,<br />

consequently there is not sufficient depth to support locally<br />

focused green bond investment products.<br />

Most industry trade bodies in South Africa are pushing government<br />

to accelerate climate action. The Presidential Climate Change<br />

Coordinating Commission is playing an active role across business,<br />

government departments and Eskom. There is growing awareness<br />

of the potential for Eskom to access green climate finance as well a<br />

growing appreciation of the nascent opportunity associated with our<br />

world-class solar and wind resources. South Africa’s climate transition<br />

is underway and tracking the intersection of science, policy and capital<br />

flows will be important for investors in the coming years.<br />

What is certain is that the race to decarbonise is on and we<br />

should anticipate enhanced policy support, shifts in capital flows,<br />

and technological disruption. This will have implications for<br />

investors over the coming decade and beyond. <br />

1Established in 1988, the IPCC is a 195-country strong intergovernmental body,<br />

that is self-mandated to provide objective scientific information relevant to<br />

understanding human-induced climate change. The work of the IPCC covers the<br />

natural, political and economic impacts and risks associated with long-range<br />

climate change. The IPCC produced its first assessment report in 1990 and has<br />

released updated summary reports every six to seven years. The 6th assessment<br />

report comprises three volumes – the first is on the physical science aspects and<br />

contains over 14 000 citations and presents the collective work of 234 authors<br />

from 66 countries. A total of 78 007 expert and government comments were<br />

received. Now in its 33rd year, the work of the IPCC is a multidecade human<br />

endeavour that presents the most comprehensive summary of the understanding<br />

of climate science.<br />

2COP – Conference of the Parties to the UN FCCC – https://unfccc.int/process/<br />

bodies/supreme-bodies/conference-of-the-parties-cop<br />

Jon Duncan, Old Mutual<br />

Investment Group<br />

Gontse Tsatsi, Old Mutual<br />

Investment Group<br />

www.bluechipdigital.co.za<br />



ESG investing:<br />

Taking the passive versus<br />

active debate to a new arena<br />

Investment strategies focused on environmental, social and corporate governance<br />

(ESG) metrics have risen to prominence over the past decade.<br />

Globally, investors are aligning their portfolios with their<br />

ESG beliefs. While South Africa has lagged this trend to<br />

some extent, ESG investing is taking hold as investors<br />

look to bolster their risk analysis processes and generate<br />

more sustainable returns over the long term.<br />

Unsurprisingly, this has reignited the “active versus passive”<br />

debate in the investment community, with some arguing that active<br />

fund managers are better placed to address ESG issues. Regrettably,<br />

these debates tend to miss the mark, most notably when they are<br />

focused on new, complex and nuanced ESG considerations.<br />

At the end of the day, clients need clarity, and not emotive<br />

debates, to navigate the already-complex, terminology-heavy<br />

investing world.<br />

Misinterpretations<br />

The concept of ESG investing is often misunderstood – some investors<br />

view it simply as a means to enhance returns, while others believe it<br />

is an opportunity to “do good” while sacrificing returns. On the other<br />

hand, some fund managers and their smart marketing teams see ESG<br />

investing as an opportunity to accumulate more assets by offering<br />

exciting new funds.<br />

Meanwhile, greenwashing – the practice of punting a product<br />

as environmentally conscious but in an insincere manner, often<br />

through naming conventions – continues to make headlines as<br />

fund managers seek to amass assets.<br />

And so, while the intention behind ESG investing is noble,<br />

many investment strategies are not aligned to the bigger picture.<br />

64<br />



Clients need clarity, and not<br />

emotive debates, to navigate the<br />

already-complex, terminologyheavy<br />

investing world.<br />

Active shareholders can influence company behavior through<br />

two primary mechanisms:<br />

• Exercising voting rights: Formally voicing their views by voting<br />

on behalf of clients, usually in line with a well-considered proxy<br />

voting policy. By voting in favour of or against ESG-sensitive<br />

topics, one is automatically an active shareholder.<br />

• Company engagement: Actively engaging companies, either<br />

individually or as a collective, on ESG best practices, thereby<br />

influencing management behaviour.<br />

What is often cause for confusion is that there is no link between being<br />

an active shareholder and an active or passive investor. Importantly,<br />

both passive and active investors can be active shareholders.<br />

Ironically, passive investors are often unable to divest of a<br />

specific company from a portfolio, meaning they are further<br />

incentivised to take on the role of the active shareholder to<br />

influence positive change. This incentive to take action has played<br />

out across the globe, with large passive investment houses such<br />

as BlackRock taking the lead on active shareholder endeavours.<br />

Incorporating ESG<br />

There are a range of approaches to ESG investing, from “benchmark<br />

cognisant” ESG tilts to impact investing in private markets. In our view,<br />

these are the most prominent approaches in the listed equities space:<br />

• Screening: Avoiding certain companies based on undesirable<br />

ESG characteristics. Typical examples include screening for<br />

thermal coal use, or companies that focus on the production of<br />

alcohol, tobacco or weapons.<br />

• Integration: Scoring or ranking companies based on their ESG<br />

metrics, and then allocating the largest weightings to the best<br />

performers in this space.<br />

• Thematic: Investing in companies that are well placed to benefit<br />

from the long-term structural shift towards ESG (a portfolio of<br />

green energy stocks, for instance).<br />

In our assessments of ESG investing, we have drawn a<br />

distinction between the engaged, active shareholder and the<br />

construction of ESG-aligned products.<br />

The engaged and active shareholder<br />

As a starting point, one needs to consider the difference between<br />

an investor and a shareholder.<br />

We believe that as stewards of clients’ capital, irrespective of<br />

whether a strategy is rules-based (passive) or focused on stock<br />

selection (active), one needs to integrate ESG into the entire<br />

investment process. To do so, an asset manager must be an<br />

engaged and active shareholder of all assets within a portfolio, or<br />

all of the companies within a fund.<br />

These approaches can be implemented on their own or<br />

in combination.<br />

Further, the incorporation of ESG factors can be implemented<br />

actively (via stock selection) or passively (rules-based investing).<br />

While the two strategies may have similar<br />

objectives, they may end up with very<br />

different portfolios, regardless of whether<br />

they are constructed actively or passively.<br />

This once again highlights the importance of<br />

researching and understanding the portfolio<br />

and investment approach. As they say, “It does<br />

what is says on the tin.”<br />

At CoreShares, we advocate for a low-cost,<br />

efficient and transparent approach to ESG<br />

investing, underpinned by index tracking and<br />

data. But we are cognisant of the need to be<br />

active stewards on behalf of our clients to<br />

ensure that the companies we invest in are<br />

playing their part. <br />

Chris Rule, CFA, CAIA,<br />

Head of Head of Products<br />

and Client Soloutions at<br />

CoreShares<br />

www.bluechipdigital.co.za<br />



Superior strategy<br />

<strong>Blue</strong> <strong>Chip</strong> speaks to Brendan de Jongh, Head of Research at PortfolioMetrix,<br />

about their Sustainable World Equity Fund of Funds launching in South Africa<br />

Please tell us about the global groundswell to ESG.<br />

Let’s step away from ESG investing as a topic and ignore the<br />

warm, fuzzy feeling one gets from “doing the right thing”. For<br />

some perspective, it is proposed that a new epoch in geological<br />

time is created called the Anthropocene, meaning a period where<br />

changes to the earth’s climate, geological processes, biodiversity<br />

and species extinction are primarily driven through activities<br />

of humans. This impact will ultimately, if unchecked, have a<br />

devastating, interconnected impact on human society. Civilisation<br />

as we know it today is significantly more fragile than our current<br />

response to global challenges suggest.<br />

If we consider sustainability through the lens of how much<br />

one earth can provide, we are currently consuming 1.5 earths,<br />

meaning we are not heading into enemy territory, but are<br />

already far behind enemy lines. We have no time left to dither<br />

in our response. What you are seeing with the ESG groundswell<br />

is simply a rapid catch-up on the realisation that market forces<br />

have failed to factor in the “external costs” of our industrialised<br />

society. We need to be far more assertively pro-active in<br />

our response and, as allocators of capital and overseers of<br />

governance, investors can be a powerful force for change.<br />

What is PortfolioMetrix’s investment proposition?<br />

PortfolioMetrix (PMX) is a specialist investment manager that builds<br />

portfolios around needs, not wealth. We question the suitability<br />

of one-size-fits-all solutions and believe the best client outcome<br />

requires the investment management process to be closely aligned<br />

with the adviser’s process, using well-constructed, precision<br />

engineered portfolios. Our investment proposition is driven by the<br />

understanding that the return path matters and so we focus strongly<br />

on a risk-based approach that emphasises portfolio efficiency.<br />

Brendan, please give an overview of the PortfolioMetrix BCI<br />

Sustainable World Equity Fund of Funds due to be launched<br />

in South Africa.<br />

The fund is designed for clients who wish to generate a positive<br />

social and environmental impact alongside financial returns. It is a<br />

South African Collective Investment Scheme that invests in global<br />

equity markets by selecting underlying managers that specialise<br />

in sustainable equity investing.<br />

What is the fund’s strategy, investment philosophy and process?<br />

The fund follows the same investment philosophy and process as<br />

all portfolios at PMX. This starts with asset allocation and then fund<br />

selection and portfolio construction. However, this strategy only<br />

selects underlying funds that embrace sustainability and positive<br />

change. This means underlying funds only invest in companies<br />

delivering a clear, positive benefit to society and the environment<br />

through their products, services and business practices. This<br />

typically leads to funds that adopt a multi-thematic approach,<br />

often aligned to the UN’s Sustainable Development Goals.<br />

Do ESG influences offer investors long-term performance<br />

advantages when factored into portfolio construction?<br />

There is a lot of evidence that individual companies benefit<br />

from having a higher ESG rating. Numerous studies have found<br />

a higher ESG rating was strongly correlated with a lower cost of<br />

capital (the company could raise both debt and equity on easier<br />

terms) as well as outperformance in a business sense (higher<br />

accounting profits). However, this is not the same as saying that<br />

ESG strategies tend to or will outperform over long periods at a<br />

portfolio level. This holds more mixed results. What we do know<br />

is that, typically, thematic approaches will have biases to certain<br />

sectors and may exclude or have very little of other sectors. This<br />

will produce variability of returns relative to the broader market.<br />

Please tell us about the fund managers selected for the fund.<br />

We have populated the fund with underlying managers that<br />

specialise in sustainability and impact investing within either<br />

developed/emerging markets, listed infrastructure or property.<br />

The fund managers have gone through a rigorous due diligence<br />

process carried out by us and in our view have a superior<br />

investment product within this space. Each fund manager has a<br />

unique philosophy and process and will implement their strategy<br />

differently. This diversity in implementation creates a product that<br />

we believe is uniquely attractive.<br />

Why does PortfolioMetrix prefer active<br />

funds as opposed to passive funds for its<br />

sustainable funds?<br />

We believe that sustainable investing is an<br />

active management process and the use of<br />

passive funds, while cheaper, is less impactful.<br />

This is because applying a comprehensive and<br />

truly impactful solution requires an in-depth<br />

knowledge of a company’s products, services<br />

and business operations to understand<br />

how the company impacts society and the<br />

environment. This process is qualitative as<br />

the data provided by companies is never<br />

comprehensive and often difficult to interpret.<br />

Unfortunately, passive funds are reliant on this<br />

data and therefore are not able to implement<br />

the strategy effectively in our view. <br />

Brendan de Jongh, Head of<br />

Research at PortfolioMetrix<br />

66<br />

www.bluechipdigital.co.za<br />

PortfolioMetrix Asset Management SA (Pty) Ltd is an Authorised Financial Services Provider.

Investment Management by Design<br />

PortfolioMetrix Sustainable World<br />

Our Sustainable World portfolios in the United Kingdom<br />

will soon have a five year track record.<br />

We’re excited to be bringing our global expertise in<br />

sustainable investing to South Africa.<br />

Watch this space.<br />

info@portfoliometrix.co.za<br />

portfoliometrix.com<br />

PortfolioMetrix Asset Management SA (Pty) Ltd is authorised and regulated<br />

financial services provider operating in South Africa, regulated under the Financial<br />

Advisory and Intermediary Services Act 37 of 2002 (FSP No: 42383).


Regulation 38:<br />

creating a silent majority<br />

in umbrella funds?<br />

Regulation 38 effectively required pension<br />

and provident funds to amend their Fund<br />

Rules by no later than 1 March 2019, to<br />

provide that members who terminate<br />

service before retirement become paid up in the<br />

fund, until the fund is instructed by the member<br />

in writing to make payment of or transfer his/<br />

her benefit.<br />

A ”paid-up” member can retain their retirement<br />

savings assets in the fund but will no longer make<br />

monthly contributions to the fund. Normal benefits<br />

in terms of withdrawal, death and retirement would<br />

apply to such paid up members.<br />

It will be interesting to see how Regulation 38<br />

will impact the profile of umbrella funds.<br />

With the new regulations, we<br />

will see an increase in “paid up”<br />

members in these Funds, but even<br />

more than two years later the extent<br />

to which this will happen is unclear.<br />

Historically, most umbrella funds have only had<br />

members who are associated with a participating<br />

employer. With the new regulations, we will see an<br />

increase in “paid up” members in these Funds, but<br />

even more than two years later the extent to which<br />

this will happen is unclear.<br />

There are two categories of members who<br />

will become paid-up members. There are the<br />

genuine defaulters, who exit their employment<br />

and fail to provide an instruction regarding their<br />

retirement savings. Often these are members with<br />

small balances and often with tax issues. They are<br />

probably unaware of the existence of their benefit<br />

and unless they change their approach soon the<br />

umbrella fund will lose contact with them. The<br />

68<br />



second are members who consciously decide to leave their<br />

savings in the fund.<br />

The second group are interesting as possibly they appreciate<br />

that the assets are invested in a lower fee class than is<br />

applicable to retail solutions such as many preservation funds.<br />

The regulations are clear that the paid-up members cannot be<br />

charged a different investment<br />

It will be interesting to see how<br />

quickly the paid-up members<br />

increase as a percentage of the total<br />

members of an umbrella fund.<br />

fee to the contributing members.<br />

Advisors are persuading members<br />

to transfer to preservation funds<br />

presumably because the higher<br />

asset-based fees are offset by the<br />

access to a much wider range of<br />

investment portfolios.<br />

I am not convinced that the umbrella funds are doing<br />

much to make the option of remaining as a paid-up member<br />

an attractive option. Few make provision for the member<br />

to appoint an advisor and remunerate them via an assetbased<br />

fee deduction. Some umbrella funds seem to default<br />

the investor into Trustee default portfolios, which tend to be<br />

the sponsored linked portfolios.<br />

What appears to be happening is that many umbrella funds<br />

remain focused on the participating employers and the consultants<br />

to these participating employers. However, the paid-up members<br />

tend to be “de-linked’ from the participating employer.<br />

They will not receive any communication, which is distributed<br />

via participating employers and their consultants. I question who<br />

is considering the needs of these paid-up members? Is enough<br />

effort going into tracing these members, especially the genuine<br />

defaulters, and proper communication with them once they have<br />

been traced?<br />

It will be interesting to see how quickly the paid-up<br />

members increase as a percentage of the total members of<br />

an umbrella fund. The rate of increase will be much quicker<br />

once National Treasury implements the two-buckets approach<br />

that it recently raised as its vision. The one bucket will have<br />

compulsory preservation and will result in a sharp rise in<br />

paid-up membership. It is only a matter of time before an<br />

umbrella fund could have more paid-up members than active<br />

contributing members. Surely, umbrella funds cannot afford to<br />

keep ignoring the needs of this silent majority.<br />

I would like to see an umbrella fund embrace their paid-up<br />

members, allow them to appoint<br />

financial planners and create an<br />

offering that competes with the<br />

preservation funds and other retail<br />

solutions. It should be easier for<br />

financial planners to include such<br />

paid-up benefits in their total<br />

financial planning exercise.<br />

In the meantime, we can expect to see most employeebenefits<br />

consultants recommending umbrella funds based on the<br />

outcome for active employees. The decision by an employer in<br />

selecting an umbrella fund is probably not going to factor in the<br />

approach the fund has to paid-up members. We can also expect<br />

that financial planners will continue to encourage members to<br />

transfer to preservation funds even if the fees are higher.<br />

Does this defeat the aim of the regulator? Probably not. The<br />

regulator seeks increased preservation of benefits and to ensure<br />

that members’ interests are foremost when trustees make decisions<br />

related to fund governance. I am not sure the regulator is too<br />

concerned as to whether the preservation is in the umbrella fund<br />

or a preservation fund.<br />

For decades, we have had individual life arrangements and<br />

employee benefits/group arrangements. In such a historic<br />

structure, paid-up members are individuals. But surely, we<br />

are in an age when group arrangements can accommodate<br />

individuals’ requirements. Flexible risk benefits and member<br />

investment choice are examples of this. Surely umbrella funds<br />

can adjust to improve their focus on their paid-up members.<br />

Before they do become the silent majority, By Dave Johnson,<br />

Independent Consultant. <br />

www.bluechipdigital.co.za<br />


Hollard Life Solutions launches Life Select –<br />

offering value for money with no bells<br />

and whistles

Hollard Life Solutions has just launched its<br />

Life Select product, a value-for-money, no-frills<br />

product offering life cover, disability, critical<br />

illness and income protection.“Our research<br />

found that both intermediaries and clients want<br />

more simplicity and transparency from their<br />

insurers. In response, we streamlined our<br />

offering, simplified our insurance language,<br />

removed jargon, and created product benefits<br />

that consumers will fully understand and buy<br />

into,” says Willem Smith, Executive Head of<br />

Distribution at Hollard Life Solutions.<br />

In designing Life Select, Hollard Life Solutions<br />

has removed benefits that are hardly used by<br />

clients or sold from the product set and<br />

created a simple product that fits diverse<br />

client profiles. Life Select seeks to solve<br />

the day-to-day insurance challenges that<br />

clients face.<br />

The product is rated according to specific<br />

client variables like income, education and<br />

health, and priced according to each individual<br />

client’s profile and ability to meet their specific<br />

financial requirements and enable access to<br />

financial services.<br />

Some of the product benefits include:<br />

• Life Select offers a client the ability to<br />

customise cover based on their individual<br />

needs.<br />

• Life Select provides the best value for money,<br />

as the cover is structured according to<br />

according to each client’s affordability.<br />

• With Life Select, your client only pays for<br />

what they need.<br />

• The product application process has been<br />

simplified to remove the complexities that<br />

restrict clients in buying insurance products.<br />

“In designing Life Select, we have focused on<br />

three main benefits that appeal to consumer<br />

needs and empower advisors to present the<br />

product to market. These are simplification,<br />

value for money and ease of doing business,”<br />

said Smith.<br />

Simplification<br />

By simplifying the policy language, marketing<br />

material and technical specifications, the<br />

Hollard Life Select product is easily understood,<br />

and there is clarity on the promise and<br />

obligations. The product is easily explained to<br />

the customer by advisors, eliminating complex<br />

benefit interactions and conditional benefit<br />

features, with fewer exclusionary clauses than<br />

most competitors. Additionally, regulatory,<br />

compliance and complaint risks are all<br />

minimised.<br />

Value for money<br />

Other factors taken into consideration in the<br />

design and development of the Hollard Life S<br />

elect offering was to maintain our competitive<br />

pricing. We have put together many more<br />

benefits for less.<br />

No bells and whistles<br />

“No bells and whistles means your client gets<br />

what they see and only pay for what they<br />

really need. This was our focus throughout<br />

the development phase, because we know<br />

that bells and whistles have imposed undue<br />

complexity on the industry and are very seldom<br />

used, so the customer does not really benefit.”<br />

Even with the introduction of new FICA and<br />

POPIA requirements, Hollard Life Select has<br />

one of the shortest application forms in the<br />

market. Customers as well as advisors will<br />

spend the least time completing application<br />

forms. This is designed to minimise the amount<br />

of time spent on complex application forms<br />

and to reduce the risk of error in the<br />

application process.<br />

Hollard Life Select is simply what your<br />

clients need.<br />

studio. 0709/2469<br />

life • disability • critical illness • impairment<br />

hollard.co.za<br />

Hollard Life Assurance Company Limited (Reg. No. 1993/001405/06) is a Licensed Life Insurer and an authorised Financial Services Provider,<br />

FSP No. 17697


The South<br />

African outlook<br />

Making sense of today’s retirement landscape. Part 3<br />

In this series, we have explored how two rapidly advancing<br />

phenomena, longevity and the Fourth Industrial Revolution,<br />

are colliding with an age-old retirement savings conundrum.<br />

As this global metamorphosis occurs it is compelling a radical<br />

paradigm shift when it comes to achieving financial freedom,<br />

throughout one’s life.<br />

Firstly, machines are becoming very smart. As they quickly<br />

take over many of the tasks previously performed by people, the<br />

unfolding workplace revolution is creating incredible efficiencies.<br />

But it is also threatening to worsen<br />

inequality as the work that provides<br />

for the incomes generated by large<br />

parts of society becomes less secure.<br />

For many, it is becoming essential to<br />

continually reskill and relearn.<br />

Secondly, people the world over<br />

are living much longer. Catalysed<br />

by the near exponential advance of medical technologies and<br />

the science of wellness, the ageing revolution is undoubtedly a<br />

cause for celebration. But it also creating immense challenges for<br />

societies and individuals, who need to support the many more<br />

years they have “after work”, as compared to the years spent<br />

working. For most of us alive today, it is becoming essential to<br />

save significantly more.<br />

Whatever you don’t save<br />

for retirement will cost your<br />

children 6.7 times more<br />

once you are in retirement.<br />

These trends clearly create an urgent need for new solutions<br />

from the global retirement savings industry. In South Africa, they<br />

are interweaving with a complex, continually evolving socioeconomic<br />

dynamic, with various idiosyncrasies that create unique<br />

local challenges.<br />

When global trends meet a local dilemma<br />

South Africa’s retirement savings shortfall is both well-documented,<br />

and alarming. The average replacement ratio for South Africa’s<br />

retirement industry is estimated at<br />

just 25% to 30%. This implies that,<br />

on average, people with some form<br />

of retirement savings can expect to<br />

receive the equivalent of just over a<br />

quarter of their income at retirement as<br />

a post-retirement income. People tend<br />

to seriously underestimate the impact<br />

that this implies in terms of their quality of life after work.<br />

Reducing this shortfall is not only essential to alleviate the<br />

burden experienced by state and society – which need to step<br />

in to support those who do not have enough savings to support<br />

themselves in retirement – but it is essential to grow the economy.<br />

However, as machines disrupt our workplaces, this problem is<br />

clearly not going to resolve itself.<br />

72<br />



And while the challenges<br />

that face our society are<br />

unquestionably vast, this shortfall<br />

is, at a fundamental level, heavily<br />

impacted by behaviours –<br />

notably that South Africans are<br />

big borrowers, which is quite the<br />

opposite from being big savers.<br />

So severe is South Africa’s<br />

borrowing rate, that half the<br />

population is shown to have a<br />

net-negative financial position,<br />

with debt acting as a driver of<br />

inequality, according to a recent<br />

comprehensive study on wealth<br />

inequality in South Africa .<br />

As our colleagues at Discovery<br />

Bank have pointed out, a lack<br />

of propensity for savings leaves<br />

individuals significantly exposed<br />

in both the short and long term.<br />

Reducing indebtedness and<br />

creating a savings culture in South<br />

Africa are major socio-economic<br />

challenges facing both individuals<br />

and society.<br />

Although these financial<br />

behaviours are fuelled by the<br />

current economic environment and rising living costs, it is low<br />

levels of awareness that entrenches them.<br />

Then comes the ageing phenomenon.<br />

“Globally, the share of the population aged 65 years or over is<br />

expected to increase from 9.3% in 2020 to around 16.0% in 2050,”<br />

according to the UN’s 2020 World Population Ageing report.<br />

By comparison, South Africa has a relatively young population.<br />

Only 5.4% of South Africans were aged over 65 in 2019, as<br />

compared to a global average of 9.1%. Yet, as all regions in the<br />

world will follow the “unprecedented and sustained change in<br />

the age structure of the global population”, this proportion will<br />

undoubtedly increase markedly in the years to come.<br />

This ageing revolution, abroad and at home, will have a “profound<br />

effect” on what the UN terms the support ratio – the number of<br />

people of working age, as compared to those aged 65 years or older.<br />

In a country such as South Africa, which has one of the highest<br />

levels of unemployment in the world, especially among the youth,<br />

as well as one of, if not the, highest levels of inequality in the world,<br />

this growing support ratio, layered as it is on top of an already<br />

concerning replacement ratio, has profound implications.<br />

The plight of the sandwich generation<br />

At least once a year, when we do inductions of our new staff, we<br />

present to them on the need to start saving for their retirements,<br />

and to start saving early. Invariably, however, we are met with<br />

the response from many of our new recruits that they simply<br />

do not have the extra money available to put away. Aside from<br />

the rising costs of living, one reason often put forward for this is<br />

the pressures faced by those who need to support their families<br />

and communities in retirement. In South Africa, at least 28% of<br />

employed people face this pressure.<br />

Analysis from Discovery Invest Technical Marketing reveals<br />

that whatever you don’t save for retirement will cost your children<br />

6.7 times more once you are in retirement. In other words, for<br />

every rand you don’t save for retirement now, your children may<br />

have to pay up to R6.70 later, in real terms, to cover the financial<br />

shortfall. This is due to the impact of missing out on investment<br />

growth in the years leading to retirement.<br />

Clearly, this creates a knock-on effect: when people don’t save<br />

enough, their families take a massively disproportionate toll in<br />

the long term, and the cycle not only repeats but it exacerbates.<br />

Old problems colliding with modern trends need new solutions<br />

The stubbornness of South Africa’s retirement savings<br />

conundrum – which has remained unchanged for over a<br />

decade – is clear evidence that the solutions provided by<br />

our retirement savings industry aren’t solving the problem.<br />

As the rapid global metamorphosis occurring in the wake of<br />

the ageing, and workplace revolutions collide with a complex<br />

and unique local context, South Africa’s retirement savings<br />

conundrum is set to worsen.<br />

But because it comes down to individuals’ choices,<br />

there’s hope. A powerful behavioural insight reveals that by<br />

rewarding positive savings behaviour, people can change.<br />

The somewhat bleak outlook of the average employee can<br />

be transformed.<br />

Our analysis at Discovery Invest and Discovery Bank shows<br />

that small behaviour changes not only improve a client’s<br />

retirement outcome, but also have the potential to erase the<br />

inter-generational debt cycle.<br />

These behavioural insights lie<br />

at the heart of our shared-value<br />

investments model, deployed<br />

by our teams at Discovery<br />

Invest and Employee Benefits,<br />

who are working to encourage<br />

the good long-term investing<br />

behaviours that a healthy bank<br />

balance affords.<br />

Through shared value, which<br />

creates a positive, economically<br />

expansive, feedback loop between<br />

our clients, our businesses and<br />

our society, Discovery is actively<br />

challenging a defunct status<br />

quo as it seeks to tackle some<br />

of our society’s most pressing,<br />

behaviourally driven, challenges.<br />

Kenny Rabson,<br />

CEO of Discovery Invest<br />

www.bluechipdigital.co.za<br />


OIL & GAS<br />


The latest draft of the Upstream Petroleum Resources Development Bill has been under scrutiny since its<br />

publication in June 2021. The bill comes as South Africa’s upstream oil and gas industry shows some promise.<br />

The Brulpadda and Luiperd<br />

discoveries of gas and condensate,<br />

the largest hydrocarbon discoveries<br />

made locally to date, have opened<br />

a world-class exploration play. These two<br />

discoveries are for only two drilled prospects<br />

in the Paddavissie feature where three further<br />

prospects remain to be drilled. There could be<br />

sufficient gas to feed the Mossel Bay plant at<br />

full capacity for more than 40 years.<br />

The Paddavissie feature is only a fraction<br />

of the Block 11B/12B, therefore these two<br />

gas finds do not even begin to represent the<br />

full potential of the licence block. Further<br />

seismic data to the east has confirmed the<br />

existence of another geological feature,<br />

named Kloofpadda, which consists of several<br />

large and encouraging leads. There are also<br />

prospects identified in the north of the block.<br />


Oil and gas exploration and production is<br />

currently regulated under the Mineral and<br />

Petroleum Resources Development Act, 2002<br />

(MPRDA). The Upstream Petroleum Resources<br />

Development Bill (UPRDB) will repeal and<br />

replace the relevant sections pertaining to<br />

upstream petroleum activities in the MPRDA.<br />

The Draft Bill provides greater policy certainty<br />

and a stable environment for investment in<br />

the South African oil and gas sector. The Bill<br />

offers security of tenure by combining the<br />

rights for the exploration, development and<br />

production phase under one permit.<br />

The aims of the UPRDB are to expand<br />

meaningful black participation; promote<br />

local employment and skills development<br />

as well as to create an enabling environment<br />

for the acceleration of exploration and<br />

production of the nation’s petroleum<br />

resources. The Bill’s key features include<br />

mandated state participation of 20%, 10%<br />

participation by black persons, and the<br />

empowerment of the Petroleum Agency of<br />

SA (PASA) to administer the development of<br />

the upstream petroleum industry.<br />

“The upstream oil and gas exploration<br />

industry requires technological capacity<br />

and is extremely high risk in terms of capital<br />

investment and needs long-term investment<br />

before a return is shown. Because of this,<br />

many countries choose to share with private<br />

companies, and South Africa follows this<br />

model,” says Dr Phindile Masangane, CEO of<br />

PASA. “Government has designated PASA<br />

as the custodian of South Africa’s oil and<br />

gas resources. Its role is to attract these<br />

companies to our investment opportunities<br />

and facilitate their entry into and operations<br />

in the upstream industry.<br />

“All investors want to see a return on their<br />

investment and a reward for taking on risk.<br />

PASA’s approach is to facilitate their activities<br />

and guide them through compliance and<br />

regulatory requirements to achieve the<br />

best outcome for both government and the<br />

investing companies. Advocacy plays an<br />

important role and PASA is concentrating on<br />

communicating the role that the upstream<br />

industry can play in reconstruction and<br />

development of our economy to government,”<br />

adds Dr Masangane.<br />


South Africa has a history of political stability,<br />

the new administration is widely regarded<br />

as business friendly, and the new Upstream<br />

Petroleum Resources Development Bill will<br />

74<br />


OIL & GAS<br />

assist the Agency in expediting exploration<br />

through close management of acreage<br />

allocation and work programmes. The Bill<br />

also empowers the Agency to commission<br />

multi-client or speculative surveys enabling<br />

the acquisition of data to attract investment.<br />

South Africa currently offers an attractive<br />

fiscal framework. These positive factors create<br />

a conducive environment for the Agency to<br />

pursue its mandate of attracting investment<br />

into the upstream petroleum industry.<br />

In terms of the UPRDB, every petroleum<br />

right must have a minimum of 10% undivided<br />

participating interest by black persons. The<br />

BEE participation is on full commercial terms,<br />

and BEE partners will be expected to fully fund<br />

their involvement at both the exploration and<br />

production phase, which is welcome news for<br />

investors. In recognition of funding challenges,<br />

the bill permits the dilution of the BEE interest<br />

to no less than 5% to raise capital. This dilution<br />

will not trigger any requirements to top up the<br />

BEE participation to 10%.<br />

Applicants must demonstrate that they<br />

have the technical capability and financial<br />

resources to carry out the work programmes<br />

agreed, as well as any future development<br />

that may ensue. A track record of experience, a<br />

good health and safety record, environmental<br />

compliance record and adherence to oilfield<br />

practice is essential. Having said that, PASA is<br />

determined to increase involvement of local<br />

companies in our upstream industry and<br />

develop local capacity. One way of achieving<br />

this is through partnerships between<br />

international and local companies.<br />

A further change proposed by the UPRDB<br />

includes giving the state an active role through<br />

joint operating agreements (JOAs) that must be<br />

entered into with the state. The state is entitled<br />

to voting rights corresponding to their 20%<br />

participation. For current rightsholders whose<br />

rights do not provide for state participation,<br />

these state participation provisions will only<br />

kick in when the company applies for approval<br />

to progress to the production phase in terms<br />

of the new bill.<br />


Simultaneously, the role of fossil fuels in the<br />

future of energy is under question considering<br />

the global aspiration of net-zero carbon<br />

emissions by 2050. Notwithstanding the<br />

mounting pressure to reduce reliance on fossil<br />

fuels, the upstream oil and gas sector still plays<br />

a vital role in South Africa’s energy policy.<br />

The transition to cleaner fuels and<br />

renewables is inevitable if the world is to reduce<br />

the negative impact of climate change. South<br />

Africa is a signatory of the Paris Agreement and<br />

has committed to a “Peak-Plateau-Decline”<br />

carbon emission trajectory. The government<br />

policy is to diversify the country’s energy mix,<br />

which is currently coal-dominated, to a lower<br />

carbon future by introducing proportionately<br />

higher renewable energy resources such as<br />

wind and solar, into the energy mix as well as<br />

gas-to-power.<br />

“Gas burns with less than half the CO2<br />

emissions from coal and additionally has no<br />

sulphur oxide emissions. It is thus a suitable<br />

transition fuel towards a lower carbon economy<br />

for South Africa especially since gas-to-power<br />

technologies are flexible and would complement<br />

the intermittent renewable energy being added<br />

to the national grid,” explains Dr Masangane.<br />

The National Environmental Management<br />

Laws Amendment Bill, which was revived in<br />

June 2020, proposes various amendments to<br />

the National Environmental Management Act,<br />

1998. Proposals that may positively impact<br />

upstream petroleum operations include<br />

the provisions empowering the Minister<br />

responsible for mineral resources to delegate<br />

a function entrusted to him in terms of the<br />

Act to any organ of state and designate, as<br />

an environmental petroleum inspector, any<br />

staff member of any other organ of state that<br />

executes a regulatory function.<br />

The Minister in this regard may delegate<br />

certain competent authority functions to the<br />

Petroleum Agency SA, which may improve the<br />

turn-around timelines for making decisions on the<br />

Environmental Authorisation (EA) applications.<br />

Furthermore, designating staff members of the<br />

Agency as environmental petroleum inspectors<br />

means that all compliance monitoring and<br />

enforcement functions prescribed in the Act, as<br />

far as upstream petroleum operations, would be<br />

efficiently executed.<br />

Currently, natural gas supplies just 3% of<br />

South Africa’s primary energy. A significant<br />

challenge facing the development of a<br />

major gas market is the dominance of coal.<br />

Opportunities for gas lie in the realisation of<br />

South Africa’s National Development Plan<br />

(NDP) and the Integrated Resource Plan (IRP).<br />

Held in high regard by the local and<br />

international oil and gas industry that it serves,<br />

PASA plays an important role in developing<br />

South Africa’s gas market by attracting<br />

qualified and competent companies to<br />

explore for gas. The Agency has successfully<br />

attracted major explorers to South Africa and<br />

facilitated the acquisition of many new large<br />

seismic surveys and some exploratory drilling,<br />

through a period affected by legislative issues<br />

and a major oil price crash. <br />

Government has designated PASA as the custodian of<br />

South Africa’s oil and gas resources. Its role is to attract<br />

these companies to our investment opportunities.


How difficult is the South<br />

African equity index decision?<br />

Wehmeyer Ferreira<br />

1nvest Executive Director<br />

We have seen a massive global evolution in the index<br />

landscape and a concurrent growth in index tracking<br />

(“passive”) products and its share in AUM. In South Africa,<br />

we have seen a similar evolution, albeit at a slower pace<br />

– proliferation and product rollout have been less pronounced given<br />

our limited asset class and sub-asset class universe, plus liquidity.<br />

South Africa does have a relatively sophisticated and deep equity<br />

market compared to other emerging market peers. Over the last 20<br />

years, the equity index’s popularity has moved from market capped<br />

weighted, to shareholder weighted (SWIX), and to capped. Since all<br />

three versions are still relevant, the South African equity benchmark<br />

decision is an important one, but by no means an easy one.<br />

There are 239 funds (passive, benchmark-cognisant, and active) in the<br />

ASISA South African General Equity Category. All the funds in the category<br />

track against an index that is based on the universe of shares listed on the<br />

JSE. How does one then decide in which index to invest? Understanding<br />

the actual differences between indices is important. Names of, or<br />

terminology around, indices are not straightforward to understand.<br />

share of each firm competing in the market and then summing the<br />

resulting numbers. Lower numbers imply more concentration.<br />

One can easily deduce that Top 40 is more concentrated than Capped<br />

Swix All Shares, but we need to dig deeper into the Top 40 versus Capped<br />

All Share. It has the most significant contrast – market cap-weighted vs<br />

shareholder weighted; large cap vs total market; and uncapped vs capped.<br />

If we purely look at past performance to decide, then it is a more<br />

obvious decision. The Top 40 outperformed the Capped Swix All<br />

Share by 3.7% per annum over the last five years to the end of August<br />

2021. However, in our mind that would be misguided. It is essential<br />

to understand what is driving the difference between the indices.<br />

At a high level, the sector difference between Top 40 and Capped<br />

All Share is an overweight exposure to Basic Materials and Consumer<br />

Discretionary vs Financials and Consumer Staples. Given the resource<br />

overweight, the Top 40’s outperformance should be no surprise.<br />



(Source: FTSE/JSE, Bloomberg)<br />

(Source: FTSE/JSE, Bloomberg)<br />


Free Float Market Cap. Float adjusting an index means that only<br />

readily available shares to the public are represented in the index.<br />

For example, if companies have shares that are not fully available<br />

for trade on the open market, such as government-held shares or<br />

significant privately controlled holdings, they will be excluded.<br />

Shareholder Weighted (SWIX). The SWIX free float represents the<br />

proportion of a company's share capital held in the South African<br />

share register, maintained by Strate. Basically, it down-weights the<br />

dual-listed shares.<br />

HII. Herfindahl-Hirschman Index, a commonly accepted measure of<br />

market concentration. The HHI is calculated by squaring the market<br />

76<br />

www.bluechipdigital.co.za<br />

Another stat used in discerning just how different these two<br />

indices are, is the active share between the indices, which is a<br />

standard measure used by active funds to show “how far” away their<br />

portfolio is from the benchmark. On 31 August 2021, the active share<br />

between the indices is 34%, which is relatively high.<br />

South African equity indices are distinguished, which exacerbates<br />

their importance in the decision-making process. At 1nvest, we<br />

believe that although there is no one-size-fits-all solution since<br />

investor circumstances and views differ, it is essential to know how<br />

to differentiate indices. For this reason, 1nvest provides a variety of<br />

local and global index tracking funds against major assets classes to<br />

complement most portfolios.<br />

1NVEST Fund Managers (Pty) Ltd is an authorised Financial Services Provider<br />

authorised financial services (FSP6406) and registered credit (NCRCP173) provider.

we do the<br />

same thing<br />

for investing.<br />

1nvest offers award-winning ETFs and Unit Trusts that<br />

will help your money work harder for you. It’s that simple.<br />

And so is finding out how to invest with us.<br />

Just visit 1nvest.co.za<br />

1nvest Fund Managers (Pty) Ltd, an authorised financial services provider. FSP No. 49955.


A differentiated approach to<br />

investment management<br />

A business born out of a recognition that a distinct gap exists between retail clients’ needs and fund<br />

managers’ investment philosophies, New Road Capital offers a truly compelling investment option<br />

for financial advisors looking to provide the most effective investment solutions to their clients.<br />

Garth Nash, Managing Director (left) and Paul Fouché, Chief Investment Officer (right), New Road Capital<br />

Founded by partners Paul Fouché, Chief Investment Officer<br />

and portfolio manager, and Garth Nash, Managing Director,<br />

New Road’s investment philosophy is practical in nature,<br />

acknowledging that retail clients’ emotions often cloud their<br />

judgement when excessive volatility materialises in their investments.<br />

Both Fouché and Nash have a deep understanding of what is<br />

important to financial advisors and their clients when it comes to<br />

constructing investment portfolios.<br />

Fouché initially started his working career as a chemical engineer<br />

after obtaining his Honours degree in Chemical<br />

Engineering from the University of Pretoria.<br />

After a few years of practicing as an engineer,<br />

his entrepreneurial flair and passion for<br />

investments led to him becoming a financial<br />

advisor. He built up a large investment book,<br />

and met his business partner Nash who also<br />

has an advice background and an MBA from<br />

Wits Business School with specialisation in venture capital and business<br />

dynamics from Duke University.<br />

After obtaining his CFA charter, Fouché subsequently moved into<br />

wealth management where he managed personal share portfolios<br />

and model portfolios for clients. He has built up extensive experience<br />

in the realms of both financial advice and investment management<br />

by holding various management roles throughout his career.<br />

Their investment philosophy is built on the fact that clients value<br />

certainty over outsized returns and always weigh downside volatility<br />

more than upside volatility in their decision-making. Hence, clients<br />

tend to become risk averse at the precise moment when a higher risk<br />

appetite is what’s warranted. The result is that clients down-weight<br />

their risk profiles at the wrong times, as evidenced by the recent rush<br />

to income and money market funds just before the strong equity rally<br />

Their investment<br />

philosophy is built on<br />

the fact that clients<br />

value certainty over<br />

outsized returns.<br />

over the last year. Consequently, many clients have missed a strong<br />

period of returns, and are more than likely behind on their specific<br />

investment goals.<br />

New Road Capital deeply understands this dynamic and offers<br />

a range of cost-effective fund of funds (FoFs) schemes designed to<br />

achieve inflation-plus outcomes while minimising volatility. They realise<br />

that clients are sensitive towards their investments and aim to make<br />

conversations among advisors and their clients easier during times of<br />

downward and volatile markets by providing a smoother investment<br />

journey. This minimises the negative impact of<br />

emotional switching and results in clients achieving<br />

their investment goals in the end.<br />

New Road Capital currently offers five solutions<br />

which cater to the full range of client objectives, from CPI<br />

+ 1.5% to CPI + 5%, as well as a global flexible offering.<br />

With clever portfolio construction techniques,<br />

as well as leveraging off the many skilled singlestrategy<br />

managers in the industry, their portfolios have significantly<br />

lower volatility and drawdowns than most of their peers, while still<br />

being able to achieve desired performance during market strength.<br />

“We close the gap between what fund managers are trying to<br />

achieve within their specific funds and what clients and advisors are<br />

expecting from their investments,” says Fouché.<br />

Founded in 2019, the business currently manages assets of just<br />

over R1.7-billion. A tribute to both their differentiated approach as<br />

well as to the strength of the relationships that they have with the<br />

financial advisors who believe in their added value. <br />

Website: www.newroadcapital.co.za<br />

Email: info@newroadcapital.co.za<br />

Phone: 012 880 2773<br />

78 www.bluechipdigital.co.za


NEW ROAD<br />


<strong>Blue</strong> <strong>Chip</strong> speaks to Paul Fouché, Chief<br />

Investment Officer at New Road Capital.<br />

Paul Fouché, Chief Investment Officer, New Road Capital<br />

Why should investors include Fund of Funds (FoFs) in their portfolio?<br />

Most single strategy funds are designed with a specific investment<br />

philosophy in mind, for use in a broader portfolio. They tend to focus<br />

on a theoretical investment philosophy rather than considering<br />

behavioural factors that occur in practice. Hence many of them<br />

have significant tracking errors with higher volatility than their<br />

benchmarks and take on unnecessary risk to provide a small amount<br />

of alpha over time, often unsuccessfully.<br />

FoFs are designed as holistic portfolio solutions rather than<br />

specific portfolio subcomponents. Financial advisors can use<br />

FoFs to ensure that their clients are treated in a uniform and<br />

consistent way across their books and within their risk profiles and<br />

targeted outcomes. While Model Portfolios can do the same, they<br />

generally include an added layer of fees and trigger capital gains<br />

tax (CGT) within client portfolios if underlying funds are switched.<br />

Additionally, their underlying fund allocations are limited by the<br />

specific LISP platform the model portfolio operates on, which<br />

results in a smaller investment universe when compared to a<br />

FoF that has access to any fund if it is regulated. It is for these<br />

reasons that we believe the FoF structure is superior to a Model<br />

Portfolio structure.<br />

The more sophisticated client might also use a FoF as a core<br />

component to their portfolio which provides the basis of the<br />

portfolio and then add some satellite funds around this core for<br />

some additional exposure to a specific theme or sector for example.<br />

And specifically, why include your FoFs?<br />

We differentiate ourselves in two ways:<br />

Firstly, we use a building block approach to portfolio construction,<br />

meaning that we use single asset class funds as underlying<br />

components in our FoFs. This allows us to strictly control our asset<br />

allocations to achieve our second differentiator, which is focusing<br />

on inflation plus outcomes. We structure our asset allocations to<br />

achieve these outcomes while minimising volatility. Hence, we focus<br />

on maximising portfolio efficiency from a risk-return perspective,<br />

and not solely from a return perspective.<br />

We believe this type of strategy is desirable in practice because<br />

it increases the likelihood that clients will remain invested through<br />

volatile market conditions where historically those are the times<br />

that they make the emotional and wrong decisions of switching<br />

out of their long-term asset allocations. This usually happens if<br />

the investor’s volatility is larger than they are willing to endure. By<br />

managing the volatility, we believe the investor will have a better<br />

chance of staying the course.<br />

Many FoFs and discretionary fund managers will use multi-asset<br />

funds as underlying components which we believe waters down<br />

any underlying asset allocation strategy. We don’t believe that this<br />

provides a coherent risk management value add to clients.<br />

You offer FoFs across five risk profiles. Why are these a good<br />

option for the average investor?<br />

Our solutions are designed for advisors to use throughout their<br />

client base and cater for conservative to aggressive clients. The<br />

underlying holdings across our solutions are similar but the<br />

weightings differ depending on risk profile. We have taken both<br />

financial advisors’ and clients’ needs into account and have tied<br />

our return targets to what we believe are realistically achievable<br />

over the medium to long term for a specific risk profile. These are<br />

similar targets that advisors use when conducting financial needs<br />

analyses on clients.<br />

Aren’t FoFs quite expensive?<br />

Traditionally FoFs have been expensive; however, with the<br />

advent of ETFs and other passive strategies it is possible to<br />

reduce costs significantly. We use a combination of passive<br />

and active strategies to achieve our targeted outcomes. We<br />

will generally only use active strategies where the risk-reward<br />

profile is favourable. We are very proud that we have been able<br />

to offer FoF solutions with substantially lower fees than most of<br />

our peers. Our total investment charges (TICs) are in line with<br />

most single strategy funds on offer. So, the investor benefits<br />

from an added layer of governance and risk management<br />

without paying more than by just holding a selection of single<br />

strategy funds.<br />

www.bluechipdigital.co.za<br />



Difficult conversations.<br />

Perhaps the greatest value<br />

you can offer your clients?<br />

Seth Godin observed in a recent blog that, “In medical<br />

school, they spend days teaching people to operate on<br />

lungs, and no time whatsoever helping young doctors<br />

learn how to get their patients to stop smoking and<br />

get vaccinated.” This is a comment that could be applied to<br />

financial planners.<br />

For a financial planner, the equivalent of learning to operate<br />

on lungs is like learning how to do an estate plan, calculate a tax<br />

liability or construct a diversified portfolio. These are important<br />

technical aspects of financial planning.<br />

The ability to do these are key for a sound<br />

financial plan. But just like being able to<br />

operate on a lung is very important to<br />

physical health, no matter how skilful the<br />

doctor, his or her intervention is likely to<br />

be in vain if the patient continues to smoke, or doesn’t want to<br />

get vaccinated.<br />

Yet, as Godin points out, young doctors do not spend any<br />

time learning how to get their patients to stop smoking or<br />

get vaccinated. Why? One possible answer is because it is<br />

too difficult. Having a conversation with someone about<br />

stopping smoking is not easy. It’s a grey matter (excuse the<br />

pun), whereas when you operate on a lung it is the world of<br />

black or white – cut out the growth if it is there. Learning how<br />

to cut something out that you can see is relatively easier than<br />

learning how to have a conversation that shifts behaviour, in<br />

this case smoking.<br />

The same applies to financial advice. Estate plans and tax<br />

calculations are largely black and white. Rules determine<br />

their outcome. Portfolio construction has clear principles:<br />

the higher the expected return of an asset, the higher the<br />

expected volatility. But as with lungs, money is not only black<br />

and white. Smoking is like spending too much, saving too<br />

little or making irrational choices at<br />

Shifting money<br />

behaviour does not<br />

have clear-cut rules.<br />

bad times. Shifting money behaviour<br />

does not have clear-cut rules.<br />

Each person’s motivation for their<br />

behaviour is unique.<br />

One client may spend too much<br />

money because they want to express who they are with<br />

expensive clothes. Another person may spend too much money<br />

on exciting experiences because they don’t attach value to money<br />

or possessions. Constructing a portfolio can have a predictable<br />

recipe. Use historical returns, risks and correlations, add a dash<br />

of expected returns, throw them into the mixer, in this case an<br />

optimiser, and voila you have a portfolio for whatever occasion<br />

you deem fit. Getting someone to stop spending too much does<br />

not have a predictable recipe.<br />

80 www.bluechipdigital.co.za


We all face the continual tension between choices that<br />

give us an immediate reward, versus choices that reward us in<br />

the future. Our susceptibility to the present bias means that<br />

eating chocolate cake today is easier than eating broccoli<br />

– at least for most of us. Saving money is like broccoli.<br />

Not much appeal for now, but lots of benefit in the future.<br />

Having a conversation with your client about this is difficult.<br />

As UK financial planner Andy Hart said at the recent HUM<br />

SA Conference, “Financial advisors are paid to have difficult<br />

conversations with their clients.”<br />

David Kreuger suggests that, “The most important thing<br />

we can do to achieve success is to manage our emotions and<br />

regulate our states of mind.” When it comes to investing, Kreuger<br />

draws on Benjamin Graham’s insight into successful investing:<br />

“People don’t need extraordinary insight or intelligence.<br />

What they need most is the character to adopt simple rules<br />

and stick to them.” How can you help clients do this? Having a<br />

documented financial plan is an important start. A financial plan<br />

is a way of providing a client with rules for decision-making.<br />

But because we are human, this is not enough to make good<br />

decisions. We still have to manage that tension between present<br />

pleasure and future fit.<br />

Managing that tension means having difficult conversations<br />

with your clients. Conversations in which you can challenge your<br />

clients not to eat the chocolate cake, and help your clients to<br />

behave themselves to better financial health. This is hard work.<br />

These are hard skills to learn. The temptation is to stick to the<br />

technical. It is easier. But clients need more than this. Operating on<br />

a lung is useful, but only if a doctor can help the patient to stop<br />

smoking. Developing a financial plan is useful, but only if you can<br />

help a client, “manage their emotions and regulate their state of<br />

mind”. The starting point? Recognise that developing the skills<br />

for difficult conversations is as important, if not more important,<br />

than knowing how to do the technical work. <br />

References:<br />

Andy Hart, “The Story behind<br />

the Story,” Humans Under<br />

Management SA 2021 Virtual<br />

Conference, 15 September 2021<br />

David Kreuger, “Your New<br />

Money Story: The Beliefs,<br />

Behaviours and Brain Science to<br />

Rewire for Wealth,” Rowman and<br />

Littlefield, 2019<br />

Seth Godin, “Seth’s Blog: Gift<br />

cards, serial numbers and hard<br />

technology,” 19 September 2021<br />

Rob Macdonald, Head of Strategic<br />

Advisory Services, Fundhouse<br />

www.bluechipdigital.co.za<br />



Helping you take your<br />

business further<br />

Financial planning requires you to have meaningful conversations with your<br />

clients to get to know them, and to understand their financial goals.<br />

Through personal interaction, you’ll be able to determine<br />

the investment strategy that’s right for them – and<br />

one that has the flexibility to change, just as clients’<br />

needs change. Incorporating an approach that involves<br />

coaching will enable you to ask the right questions to help clients<br />

identify solutions that underpin their investment objectives.<br />

The essence of coaching<br />

As financial planning specialists, we take a very different approach<br />

to dealing with our clients to influence their financial futures. At<br />

Old Mutual Wealth, we have a team of financial planning coaches<br />

that train financial planners to carry out coaching conversations<br />

with their clients. This helps planners to engage in a way that<br />

enables the client to clearly articulate the life they want to plan<br />

for, as well as to contemplate how their money can best support<br />

their plans.<br />

Planners who understand their role as financial coaches allow<br />

clients to independently consider financial planning questions<br />

without influencing them in a particular direction. Coaching is<br />

about asking a correctly structured question to assist clients in<br />

finding their own solutions to the financial situations they are<br />

trying to solve. Questioning has its own benefits and should be<br />

considered a useful alternative to the advice or guidance of a<br />

mentor/consultant role.<br />

What is coaching?<br />

Coaching is not psychotherapy or counselling, as these focus on<br />

resolving deep psychological and emotional issues. Coaching is<br />

also distinct from mentorship. Financial planners often confuse<br />

mentoring with coaching, and this comes as no surprise, as most<br />

planners are comfortable to impart their technical skills in the<br />

form of knowledge, advice and teachings to their clients.<br />

Planners then recommend solutions and outcomes that are<br />

based on their own interpretation of the facts and figures that are<br />

collected, analysed and presented to clients. Coaching moves into<br />

the realm of interpersonal and relationship-building capabilities.<br />

Here, facilitating and demonstrating empathy, good listening and<br />

questioning skills, emotional intelligence and building rapport<br />

82 www.bluechipdigital.co.za


with clients are key. Quite simply:<br />

coaching is a conversation. It is a<br />

conversation that has an impact<br />

on the individual and it engages<br />

with the client directly.<br />

It helps clients to think through<br />

situations, gain clarity and insights<br />

around these situations, and<br />

to ultimately move forward to<br />

achieve a specific outcome or<br />

goal. Coaching is, therefore, the<br />

best method of taking a client<br />

on a journey from where they are<br />

now to where they want to be. The<br />

coach is merely the facilitator, the<br />

guide, the custodian, the steward<br />

and often the partner of the<br />

client who is visually guided on<br />

this journey. Good coaches make<br />

clients the drivers, allowing them<br />

to navigate a clear path to reaching<br />

their ultimate destinations.<br />

Why coaching?<br />

When it comes to talking about<br />

money, we often feel strong<br />

emotions, even stress. When we<br />

feel stress, our limbic system<br />

takes over and we are unable to<br />

think rationally. This can happen to all of us, no matter how selfaware<br />

we are. We ask ourselves, “Should I go offshore? Should I<br />

save more money? Or should I cash in my pension fund?” All too<br />

often these questions come from things we’ve read or maybe<br />

heard other people talking about. A planner’s role is to help<br />

clients through this; to hold up a mirror so that clients observe<br />

what’s really happening.<br />

By asking questions that make sense in the moment,<br />

clients strip out the emotion and talk to the facts rather than<br />

assumptions. In short, coaching helps to bring clients back to<br />

a place where they can make good decisions and manage their<br />

behaviour around money.<br />

Coaching as part of the advice framework<br />

At Old Mutual Wealth, we have entrenched coaching into the<br />

advice process, including the tools and solutions that planners<br />

deliver to their clients. We have developed a client engagement<br />

process that makes up part of the advice-led integrated wealth<br />

planning proposition. We have made our advice framework<br />

available as part of the value proposition we offer to financial<br />

planners. This proposition is successfully in use by accredited<br />

financial planners.<br />

The concepts developed are based on robust, tested and<br />

proven international best practice standards that are continually<br />

reviewed to stay current and relevant. We enable planners to<br />

overlay the advice framework with the “softer skills” of coaching<br />

that will automatically assist them in engaging with clients on<br />

a much deeper level. This means that planners will be able to<br />

differentiate themselves effectively as part of the value they offer<br />

to their clients.<br />

Our coaching programmes<br />

At Old Mutual Wealth, our focus is to help you capitalise on<br />

opportunities and, ultimately, build a profitable practice that is<br />

sustainable over the long term. We offer courses, modules and<br />

workshops designed to incorporate coaching methodologies<br />

and best practices that help to develop and enhance your client<br />

relationships. Our team of qualified financial planning coaches<br />

is professionalising the industry by assisting planners with their<br />

client conversations and processes, and by supporting them in<br />

delivering a unique client experience.<br />

The coaching specialists at Old Mutual Wealth believe that<br />

coach-led financial planning is a life-changing philosophy that<br />

generates passion for possibility, rather than living a life of fear<br />

or limitation. Their approach to lifestyle financial planning is to<br />

champion positive futures every day. They coach, mentor, train<br />

and inspire financial planners to leverage the philosophy of<br />

integrated wealth planning and to give clarity to clients about<br />

their lives and how their finances fit into them. The guiding<br />

principles of the coaching team are to understand, disrupt and<br />

inspire with every opportunity.<br />

By engaging with you to develop client conversations, models,<br />

processes and services that are unique to you and your role as<br />

an advisor/planner, our coaching specialists are able to present<br />

a client experience that is authentic to you, and profitable and<br />

attractive for your business.<br />

Partnering with an Old Mutual financial planning coach will:<br />

• Enable you to recognise your clients’ individuality by focusing<br />

on realising their goals and aspirations over time.<br />

• Allow you to coach, educate and empower your clients to make<br />

informed decisions and keep track of their plans.<br />

• Ensure that you are delivering on promises by providing a plan<br />

and solutions that are directly aligned with your clients’ goals, as<br />

you manage expectations and deliver reliable outcomes.<br />

Contact us to find out more about coaching and how it can benefit<br />

you and your clients by emailing us at futurefit@omwealth.co.za <br />

www.bluechipdigital.co.za<br />





<strong>Blue</strong> <strong>Chip</strong> chats to Rory Brachner from DoshGuide, a site to connect people that need<br />

personal finance advice with a passionate community of flat-fee financial advisors, who<br />

operate in a fundamentally different way to traditional financial advisors.<br />

What is DoshGuide about and what are you trying to achieve<br />

with it?<br />

The idea behind DoshGuide is that many people need help with<br />

their personal finances; they’ve never really been taught how to<br />

manage their money. Unfortunately, it’s difficult to figure out where<br />

to get help and who to trust. DoshGuide is aiming to solve that by<br />

providing a safe place for people to connect with a community of<br />

vetted, rated and reviewed financial advisors.<br />

We believe that flat-fee advice is the best opportunity for nextgeneration<br />

clients to get the help they need. Our goal is to make<br />

it as simple as possible for them to find their ideal flat-fee advisor.<br />

We’re excited for more people<br />

to experience what it feels like<br />

to work with an advisor who is<br />

working for you, and only you.<br />

Equally we’re excited to<br />

provide a platform for advisors<br />

looking to grow a flat-fee business or those looking to diversify<br />

their existing business to include a fee-based model. We focus<br />

on facilitating mutually beneficial longer-term client/advisor<br />

relationships, rather than once-off interactions.<br />

You are not a financial planner, so what is the story that lies<br />

behind you developing this website?<br />

Correct, I’m not a financial planner and quite new to the financial<br />

services industry. Prior to launching DoshGuide I worked at<br />

Google for nine years, so my background is in web and digital<br />

marketing. I quit Google in 2019 and took some time off to<br />

Getting paid less for helping<br />

people be better with their<br />

money doesn’t make sense.<br />

consider potential paths. I loved the idea of going back into the<br />

start-up space and wanted to look at solving problems that were<br />

tangible and meaningful to me, ideally something that could also<br />

benefit from my digital expertise.<br />

In the middle of 2020, I found myself sitting on a video<br />

call with five close friends. We’d all signed up for the same<br />

retirement annuity, which we were realising was a big mistake!<br />

Collectively, we arrived at the painful conclusion that it would<br />

be better to exit the annuity early and lose 25% of the money<br />

paid in, rather than stay in a product with extortionately high<br />

fees, till retirement. It was a painful decision, but it became<br />

clear we needed to pull the<br />

plug. I’d been paying a large<br />

monthly contribution into that<br />

fund for five years. It was a huge<br />

setback. I was angry at myself for<br />

not knowing better and at the<br />

trusted financial advisor who had sold me the annuity.<br />

This and other prior experiences really got me thinking more<br />

deeply about the financial services space. How did five of the<br />

smartest middle-aged people I know get pulled into investing<br />

in a product like this? How is it even possible that a product like<br />

this is available on the market? How many other people in similar<br />

predicaments haven’t realised it or will never realise it? Why would<br />

a financial advisor, in good conscience, be pushing such obviously<br />

flawed products?<br />

I become obsessed with these questions and figuring out how<br />

it could be better. I quickly realised my experience was not unique:<br />

84<br />



unfortunately, there is a growing dissatisfaction and distrust in the<br />

financial services industry. I also realised it didn’t have to be this way<br />

– a solution already existed in the market, especially for younger<br />

clients, but not enough of them knew about it. I started to connect<br />

with a small passionate community of flat-fee financial advisors,<br />

and this is where the idea of DoshGuide took hold.<br />

We’re seeing strong<br />

indications in the market<br />

that the flat-fee model<br />

is growing faster than<br />

AUM-or commissionbased<br />

approaches.<br />

What is your definition of a<br />

“flat fee”?<br />

Where the advisor is paid<br />

by the client directly on an<br />

hourly, project or retainer<br />

basis. There is no third<br />

party or product involved in<br />

advisor remuneration, and<br />

fees are expressed in rands,<br />

not as a percentage of assets.<br />

Many very good and ethical<br />

financial planners charge AUM-based fees. Would they be excluded<br />

from being listed on DoshGuide?<br />

There are plenty of advisors doing a great job on an AUM basis<br />

and there are many platforms and large, established companies<br />

supporting that model. Currently it’s quite easy for people to find<br />

advisors operating on an AUM basis. However, it’s difficult to find<br />

flat-fee advisors; we want to make that simple – that’s our focus.<br />

It’s important to understand that planners who join our platform<br />

can have an existing AUM business, in fact many of them do. We<br />

have no issue with advisors on our platform growing their existing<br />

AUM business in parallel. However, we require that any clients you<br />

gain through our platform are engaged with on a pure flat-fee<br />

basis, so no commission and no percentage of assets. This approach<br />

gives advisors an opportunity to test out a new model without any<br />

impact on their existing AUM business.<br />

What for you is so important about financial planners charging<br />

flat fees?<br />

Ideally, there should be more financial advisors operating like any<br />

other professional service and they should be rewarded appropriately<br />

for their time and expertise without the burden of having to sell<br />

products. Suggesting options like investing in property, paying off<br />

debt, making gifts to children, increasing your cash buffer can lead to<br />

a reduction in an advisor’s fees. Getting paid less for helping people<br />

be better with their money doesn’t make sense.<br />

Flat-fee advisors are disproportionately represented in the<br />

industry, but more people, especially a younger demographic, are<br />

organically seeking out this service. We’re seeing strong indications<br />

in the market that the flat-fee model is growing faster than AUM-or<br />

commission-based approaches. We’re excited to support and<br />

increase that growth while helping more advisors build sustainable<br />

flat-fee businesses.<br />

You seem to be promoting a model where financial planners<br />

only give advice, and that clients are then left to implement<br />

that advice directly with product providers themselves. Is this<br />

correct? What about the many clients who don’t have the time,<br />

energy, experience or expertise to do this themselves and just<br />

want to delegate their affairs to a financial professional?<br />

No, most of our clients need help with implementation, and our<br />

advisors do a great job with that, the only difference is now they<br />

are getting paid on a project or retainer basis to do so. Since<br />

advisors are no longer drawing fees from the product, they are<br />

free to consider all options in the market for their clients, even<br />

self-service providers, where it makes sense. For advisors to be<br />

successful with flat-fee clients, they’ll need to suggest product<br />

providers that keep costs down to a minimum, and help with<br />

implementation, regardless of what providers are selected.<br />

We’re starting to introduce client ratings and reviews for<br />

individual advisors; this rewards those delivering true value,<br />

resulting in more exposure and more clients. In the future, we’ll<br />

also share learnings from the best-performing advisors on the<br />

platform so that everyone can understand how to deliver the best<br />

possible flat-fee client experience. Part of the value DoshGuide<br />

provides is sharing best practice around building this type of<br />

client base.<br />

There is no such thing as a free lunch. How does DoshGuide<br />

make money?<br />

We launched in July, and currently are giving away free lunches!<br />

While we’re in beta for the next several months, advisors who<br />

join can use the platform free of charge. Once we get beyond<br />

beta, our fees will be charged as a percentage of an advisor’s<br />

earnings on the platform. We’re still finalising our fee structure<br />

but we’re aiming at averaging around 10% to 15%, with longer<br />

client engagements dropping to below 10%.<br />

How do people get in touch with you?<br />

I’d love to hear people’s thoughts on what we’ve built, how we<br />

can do better and any questions they may have. Feel free to get<br />

in touch on LinkedIn or email rory@doshguide.co. <br />

If you are interested in becoming an advisor, visit<br />

www.doshguide.co/become-a-guide/<br />

Prior to this, Brachner worked at<br />

Google for nine years, gaining<br />

extensive global experience as a senior<br />

sales and business development<br />

leader, having lived and worked in<br />

London, Singapore and San Francisco.<br />

This included eight years focused<br />

on growing Google's advertising<br />

technology business (DoubleClick,<br />

Google Marketing Platform, Google<br />

Analytics) in various markets and one<br />

year building partnerships for the<br />

Chrome product team.<br />

Rory Brachner, founder<br />

and MD at DoshGuide<br />

www.bluechipdigital.co.za<br />



The perils of risk<br />

tolerance questionnaires<br />

Where you (the financial planner) can bridge the gap<br />

Understanding your client’s capacity for risk is key to<br />

advising them on a sound investment strategy. Failure<br />

to do this correctly may result in an excessively risky<br />

portfolio requiring more frequent rebalancing, or<br />

too conservative a portfolio which doesn’t achieve the client’s<br />

investment objectives.<br />

There are a variety of methods to assess risk tolerance, but<br />

questionnaires remain the simplest and most common. Because<br />

of that, they need to be psychometrically sound. They need to<br />

assess cognitive (thinking) and affective (emotional) elements, and<br />

they also need to be valid, reliable and consistent.<br />

This last point is something that piqued my interest a while<br />

back. Risk tolerance differs from one individual to another and is a<br />

function of socio-economic and other personal factors. Thus, surely<br />

a risk tolerance outcome should be unique to the individual, not<br />

dependent on the type of assessment tool?<br />

So, my team did a little study. We sourced several risk tolerance<br />

questionnaires and created four hypothetical individuals: we<br />

needed someone who was very risk-averse and another person<br />

who was very risk-tolerant, and two others somewhere in between.<br />

To do this, we assigned different characteristics to these individuals<br />

that are predictive of risk tolerance, such as level of financial literacy<br />

and age (to name a few). Then, we completed each questionnaire<br />

four times – once for each individual. We wanted to see whether<br />

the results were in line with the expected outcome for each of the<br />

individuals and whether they were consistent among the different<br />

questionnaires. The results were as follows:<br />

86 www.bluechipdigital.co.za


You would expect the individual to get the outcome that<br />

matches their colour, ie the the low-risk tolerant individual (top<br />

row) should get all (or mostly) dark blue outcomes. But we don’t see<br />

the colours matching. Our low-to-medium risk tolerant individual<br />

(second row) had a high-risk tolerance outcome (turquoise). And<br />

our high-risk tolerant individual (bottom row) only had 25% of its<br />

outcomes matching that risk tolerance.<br />

The questionnaires tended to underweight a person’s risk<br />

tolerance. And there was no consistency.<br />

We also picked up some other problems in the questionnaires:<br />

a lot of redundancy and self-assessment. Self-assessments are<br />

not ideal. No-one knows how they are going to feel about losing<br />

money – until they lose money! Furthermore, there weren’t any<br />

questions that assessed personality type or financial literacy.<br />

Pause for a second here – think about the questionnaires or<br />

tools you are using. Do you think they are appropriate? Are they<br />

getting it right? Think critically about what you are trying to assess<br />

and why.<br />

Risk tolerance questionnaires are flawed. Thus, there is a vital<br />

role to be played by the financial planner. To do that, you need to<br />

read your client’s behaviour, ask the right questions, and manage<br />

your own biases.<br />

And while we are talking about risk tolerance, that doesn’t<br />

necessarily mean it should be the starting point. Let me explain.<br />

If you start with assessing risk tolerance, the next natural step<br />

is to advise an asset allocation based on that. That asset allocation<br />

will then determine the client's return, which dictates their lifestyle.<br />

Let’s switch that around.<br />

What lifestyle does your client want? What returns do they<br />

need to earn to live that lifestyle? What assets do they need to<br />

invest in to earn those returns? And finally, what associated risk<br />

is then required?<br />

surgery, you will push through the pain. Likewise, risk is inevitable.<br />

You need to tolerate it to achieve the returns you want.<br />

This speaks to client education. Running the numbers on what<br />

returns are needed is the easy part. Your value-add to your client<br />

is relational.<br />

3. Don’t give them too many options.<br />

As humans, we struggle with information overload. And when<br />

that information is difficult to understand, it is even more perilous.<br />

Value your expertise! Believe in your ability to advise appropriately.<br />

You know the answer… but your role is to manage your client’s<br />

behaviour and mindset… and that will only come with time (if<br />

you are understanding them properly). But it is well worth the<br />

investment. <br />

Make sure you are<br />

speaking about risk from<br />

the client’s perspective.<br />

This is where it starts to get interesting. If your client’s<br />

risk tolerance matches the risk that is required – there is<br />

no problem. But if that is not the case, how do you manage<br />

that misalignment?<br />

Here are some key things to consider in your client interactions:<br />

1. How do they define risk?<br />

I am generalising, but in most instances, when I talk to someone<br />

about risk, they immediately say things like, “I can’t afford to lose<br />

my money.” That is not risk aversion, right? That is loss aversion. It<br />

is different. It speaks to the client’s capacity to handle a loss.<br />

Make sure you are speaking about risk from the client’s perspective.<br />

Use terms and examples that they understand.<br />

2. Do they realise that risk is inevitable?<br />

If you ask someone if they want to experience pain after surgery,<br />

they will obviously say, “No.” But pain is inevitable. If you need the<br />

Dr Gizelle Willows is an Associate<br />

Professor at the University of Cape<br />

Town and Managing Director of<br />

Nudging Financial Behaviour<br />

www.bluechipdigital.co.za<br />



Helping clients<br />

through unexpected<br />

transitions<br />

Kim Potgieter CFP®, Director at Chartered Wealth Solutions,<br />

ICF Professional Certified Coach, New Money Story® Mentor<br />

Coach, Certified Dare to Lead Facilitator<br />

88 www.bluechipdigital.co.za


As the guardians of our client’s life dreams, goals, fears and finances, we are accustomed<br />

to challenging conversations. But 18 months into the Covid pandemic, our conversations<br />

have become more challenging and difficult conversations – more frequently.<br />

We may be accustomed to helping our clients<br />

through transitions, retirement being one of<br />

them. But as we all face new and demanding<br />

challenges because of Covid, we are increasingly<br />

asked to guide clients through arduous, and often unexpected<br />

life-changing transitions. These stand out for me: death, divorce<br />

and broken careers.<br />

The landscape of our clients’ visions and dreams – and their<br />

money – has changed, and I believe that the test of living with<br />

vulnerability has never been more acute. We are all navigating life<br />

– not sure what tomorrow will bring, and our clients are left feeling<br />

vulnerable and anxious. Now more than ever, our role as planners<br />

is to facilitate difficult conversations, guide our clients through lifechanging<br />

transitions, offer support and provide objective advice.<br />

This is where we add value.<br />

Skills to facilitate difficult conversations<br />

I have found value in Brené Brown’s work on self-awareness and<br />

believe that being comfortable with vulnerability and practicing<br />

empathy are core skills that planners need to<br />

guide clients through difficult times.<br />

Being comfortable with vulnerability is the<br />

first step to being brave. It is difficult listening<br />

to clients going through pain and not be<br />

able to take it away. It helps me to name the<br />

emotion that I am feeling, live into it, and at<br />

the same time, guide my clients to recognise<br />

what they are feeling and move through it.<br />

Empathy is one of the bravest ways to ease someone’s pain<br />

and suffering, and practicing empathy, helps you respond to<br />

clients and feel comfortable knowing that it is okay to not have<br />

all the answers.<br />

“Empathy has no script. There is no right or wrong way to do<br />

it. It’s simply listening, holding space, withholding judgement,<br />

emotionally connecting, and communicating that incredibly<br />

healing message of ‘You’re not alone’” - Brené Brown.<br />

I am adding a third skill to the mix – coaching. I have found that<br />

coaching is often what clients need most when going through<br />

transitions. It helps to know how to ask exploratory questions,<br />

listen attentively and be at ease with long silences and tears.<br />

Conversations about death<br />

Sarah, a 44-year-old client with two small children – age two<br />

and four – came to see me. Her husband was diagnosed with<br />

Covid, had to be ventilated in hospital and was recovering until a<br />

bacterial infection took his life. Sarah and Mark had their second<br />

chapter all planned out. Now, her life plan is destroyed, and she<br />

is left picking up all the pieces alone.<br />

Sarah needed help with winding up the estate and her<br />

financial plan (which now only consisted of one salary and<br />

disrupted dreams.) This is what we, as planners do. And it is<br />

not always easy. How can anyone going through such pain<br />

know exactly what they want or even concentrate on making<br />

decisions? I believe empathetic and patient planners are<br />

better equipped to guide themselves and their clients through<br />

this transition.<br />

Divorce conversations<br />

Covid seemed to have widened existing cracks, and<br />

relationships that struggled before the pandemic are severely<br />

challenged now. I have found that more people are taking<br />

stock of their lives and making changes to live more fully, and<br />

unfortunately, divorce is sometimes the outcome. Divorce is<br />

traumatic, and many clients are so emotionally burdened<br />

that they neglect to consider their<br />

Being comfortable<br />

with vulnerability<br />

is the first step to<br />

being brave.<br />

long-term prospects and lives postdivorce.<br />

To help our clients through<br />

this transition, we need to sift past<br />

all the emotions and help them reach<br />

a fair and objective settlement so<br />

that they can live a significant and<br />

purposeful future.<br />

Loss of income conversations<br />

Some of my entrepreneurial clients have lost not only their<br />

income but their entire companies, while other clients have been<br />

retrenched before their planned retirement. Losing your job is<br />

difficult – losing your job in a pandemic is devastating. Given the<br />

current economic situation, there is little hope for many of these<br />

clients to build enough funds for retirement.<br />

In my experience, these clients often (at first) live in denial –<br />

they don’t change spending habits and deplete investments<br />

too quickly, hoping that things will change. They end up feeling<br />

hopeless and insecure. In these cases, I believe the best way to add<br />

value is to coach clients to reinvent themselves and help them to<br />

find new and alternative means of earning.<br />

Transitions are never easy; these conversations are always<br />

hard. As planners, we are adding more value to clients now than<br />

ever before. With insight into their lives and finances, we can<br />

help clients live their best lives – enabled by their money. <br />

www.bluechipdigital.co.za<br />



Rogues’<br />

Gallery<br />

If you reckon corruption in South Africa began<br />

with Zuma or even with apartheid, it’s time<br />

to catch a wake-up call. As this new book by<br />

Matthew Blackman and Nick Dall shows.<br />

It is hard not to consider the current state of South African<br />

political and economic affairs as being the worst of times. The<br />

dreadful daily news of corruption is so familiar that most of<br />

us simply shrug and go about our daily deeds. One regularly<br />

hears statements like, “Almost every single Department under<br />

this government is in a state of total incompetence,” and the,<br />

“Audit office is a perfect farce.” And it is certainly not unusual<br />

to find a journalist saying, “I believe great irregularity to have<br />

prevailed in the payment of the expenses.”<br />

What might be a surprise to some is that these are not the<br />

words of a modern journalist or contemporary politician but<br />

rather those from a letter written in 1825. The author of the<br />

letter was the colonial auditor Richard Plasket who had been<br />

sent out to the Cape Colony to try to sort out the corrupt<br />

and dysfunctional mess Lord Charles Somerset had made of<br />

the Cape.<br />

In our research for our book Rogues’ Gallery, we<br />

discovered that there were very few eras in South African<br />

history where our politicians did not have their hands in<br />

the cookie jar. Corruption proper began in South Africa<br />

with Governor Willem Adriaan van der Stel, a man who<br />

used state funds, manpower and raw materials to build his<br />

massive fiefdom at Vergelegen, before selling Vergelegen’s<br />

produce to the company he controlled at vastly inflated<br />

prices. And when the locals complained of his corrupt<br />

acts, he threw them into dingy dungeons and presided<br />

over kangaroo courts which got them to recant their<br />

accusations. Remarkably, justice was done, and he was<br />

booted back to Holland in disgrace.<br />

Perhaps the least well-known of all the British governors<br />

of the Cape was Sir George Yonge, an entitled British buffoon<br />

with a serious spending habit. Yonge, at taxpayers’ expense,<br />

adorned his official residence with Moroccan leather and<br />

doubled the tax on brandy. He also helped to run an illegal<br />

and evil slave-smuggling racket.<br />

But he was certainly not the only British governor to engage<br />

in illegal and corrupt acts. Lord Charles Somerset went about<br />

ruling the colony as if government money was his own. He also<br />

had a habit of imprisoning or banishing whistleblowers. Lord<br />

Charles even had his own Nkandla scandal. A scandal in which<br />

he was told to pay back the money. And his rule came to an end<br />

with an all-too-familiar commission of inquiry.<br />



But the king of the castle of corruption in South Africa<br />

was almost certainly that dirty rascal Cecil John Rhodes.<br />

As the political philosopher Hannah Arendt pointed out,<br />

Rhodes was one of the world’s most malignant political<br />

forces in the 19th century. Rhodes wasn’t just an immensely<br />

powerful businessman; he was also the second-longest<br />

serving prime minister of the Cape Colony. And his terms<br />

of office were riddled with tender fraud, bribery, corruption<br />

and war. He also secretly bought out newspapers to spread<br />

fake news and in 1898 attempted to buy an entire election.<br />

And then of course, there was Oom Paul Kruger. Although he<br />

was perhaps less corrupt than some of the other rogues in the<br />

book, Kruger did preside over a rotten-to-the-core concessions<br />

policy which is sadly familiar. And he would certainly not be<br />

the last Afrikaner politician to engage in corruption. Apartheid<br />

was, arguably, corruption’s finest hour in South Africa. The<br />

Broederbond could certainly rival those other broeders,<br />

the Guptas, in acts of malfeasance. The Broederbond set up<br />

a network of companies that benefited from government<br />

business, handing out Eskom coal-mining contracts to their<br />

tjommies.<br />

But for the whole corrupt structure of apartheid to<br />

be exposed we would have to wait until the 1970s and<br />

the Information Scandal. In the biggest scandal to rock<br />

apartheid, we had all the hallmarks of modernity: fake news,<br />

misappropriation of government funds, commissions of<br />

inquiry and a group of hardnosed muckraking journalists.<br />

The stranger-than-fiction machinations of Eschel Rhoodie’s<br />

Department of Information were finally exposed when a<br />

whistleblower and a judge fought back.<br />

As for the homelands during apartheid, they were simply<br />

awash with corruption, which drew every kind of crook and<br />

chancer to their flame. The Matanzima brothers’ spectacular<br />

pillaging of the Transkei state’s coffers was not unlike what<br />

we see today. Add Sol Kerzner into the mix and you have a<br />

perfect pudding of corruption and bribery. Kerzner was also of<br />

The first executive council of the Broederbond in 1918.<br />

course heavily involved with Lucas Mangope’s long reign in the<br />

“independent” Bophuthatswana. In Bop, bribery, self-enrichment<br />

and state wastage were performed on a truly epic scale.<br />

Corruption in South Africa is certainly nothing new, although<br />

Jacob Zuma and the ANC have certainly attempted to make<br />

a perfect art of it. But still we cling onto some hope. South<br />

Africa has (and always has had) some decent and committed<br />

whistleblowers, judges, journalists and politicians. The last<br />

decade has in many ways been the worst of times with regards<br />

corruption. Could the next decade be the best of times? <br />

Rogues’ Gallery: An Irreverent History of Corruption in South<br />

Africa, from the VOC to the ANC is available in all leading<br />

bookshops and online.<br />

President Kruger shifts his capital.<br />

Corruption in<br />

South Africa<br />

is certainly<br />

nothing new,<br />

although<br />

Jacob Zuma<br />

and the ANC<br />

have certainly<br />

attempted to<br />

make a perfect<br />

art of it.<br />

Matthew Blackman (left) and Nick Dall, authors<br />

of Rogues’ Gallery<br />

www.bluechipdigital.co.za<br />



HEALTH:<br />


Covid-19 vaccine misinformation can harm your health and financial wellbeing<br />

As the pandemic continues to upend our lives, South<br />

Africans are facing issues they could never have<br />

predicted two years ago. What started as a health threat<br />

across the world quickly morphed into something much<br />

bigger, not just impacting our physical and mental wellbeing – but<br />

also wreaking havoc on our financial health.<br />

Tragically, those who were most vulnerable to begin with<br />

have been hit the hardest. Ernest Zamisa, financial advisor at<br />

Momentum, says, “The country’s lack of financial literacy has<br />

seriously compounded the impact of this crisis – and now, as<br />

so many South Africans face unprecedented financial stress, it<br />

is imperative that we make health a national priority.”<br />

Light at the end of the pandemic tunnel?<br />

As South Africa’s vaccine rollout programme gradually gains<br />

pace, Zamisa says there seems to be a concurrent and growing<br />

trend of opposition against the use of vaccines, primarily based<br />

on false information. The United Nations (UN) has termed this<br />

misinformation an “infodemic”, with fallacies ranging from<br />

the vaccine altering human DNA, to it causing infertility and<br />

even fatality. “The advent of this vaccine hesitancy threatens to<br />

needlessly hamper the country’s efforts to achieve herd immunity,”<br />

says Zamisa.<br />

Not only could this counter-movement have serious public<br />

health implications, but he says there is a strong case to be<br />

made for the fact that it could damage many consumers’<br />

financial wellbeing.<br />

Vaccine hesitancy on the rise<br />

A survey, published by the University of Johannesburg and the<br />

Human Sciences Research Council, suggests that only about 52%<br />

of South Africans would definitely take the vaccine. Among the<br />

group that expressed their doubts over vaccination, 25% raised<br />

concerns over the potential side-effects and 18% did not believe<br />

that the vaccines were effective. Then there is the 11% that cited<br />

conspiracies or occult reasons for their hesitancy.<br />

“What this means is that variants will continue to spread,<br />

and more people will die. Each Covid-19 case requires weeks<br />

of costly rehabilitation. Even after the pandemic fades, millions<br />

of vaccine refusers could turn into hundreds of thousands of<br />

patients who need extra care, should they come down with<br />

the virus,” says Zamisa.<br />

The growing need for sound decision-making<br />

According to Zamisa, these beliefs are even more insidious than<br />

one may think since there is a very real financial side to opting<br />

out of vaccination. “Financial advisors could play an extremely<br />

valuable role in helping people to look at the information<br />

objectively and help them to come to the right decisions.<br />

Momentum, for one, supports the scientific view of the protective<br />

power of vaccines.”<br />

Consider the fact that the cost of illness (such as Covid-19) can<br />

have a massive impact on one’s finances that far outweighs the<br />

risk of possible vaccine side-effects. He says, “Your ability to work,<br />

save and plan for your financial future could also be significantly<br />

92<br />



impacted if you or a member of your family becomes severely<br />

ill. While there are financial products that cover this risk (and<br />

insurers do not require clients to be vaccinated as a condition<br />

of cover), these products can only do so much. The best way to<br />

ensure your financial wellbeing is to make the right decisions.<br />

This includes having a valid and executable will; dying without<br />

one can have far-reaching consequences.”<br />

People who give into misinformation and refuse to get<br />

the Covid-19 vaccine will have higher healthcare costs, which<br />

means somebody has to pay for that decision: “You’ll pay for<br />

that individual’s decisions in insurance premiums, if he has<br />

a plan with your provider. The vaccine refusers could cost us<br />

billions. Maybe more, over the next few decades, with all the<br />

complications they could develop. And we can’t do anything<br />

about it except hope that more people get their vaccinations<br />

than those who say they will right now.”<br />

Zamisa concludes, “We understand that this is an<br />

unprecedented time and one that can leave you with many<br />

questions unanswered about Covid-19 and its future impact.<br />

For sound and knowledgeable financial advice about how any<br />

eventuality can affect your finances and help or harm you on<br />

your journey to success, it is always good advice to speak to an<br />

accredited financial advisor.”<br />

The latest updates about the Covid-19 vaccine can be found<br />

on the Momentum website. <br />

Preparing your insurance portfolio<br />

At the same time, one should also remember that the country’s<br />

vaccine rollout is still far from complete, so it is crucial to have<br />

financial plans in place with adequate cover to provide for loved<br />

ones, should the unthinkable happen.<br />

This virus is a threat to all people. While the cost of death<br />

is difficult to quantify, Zamisa says significant expenses arise<br />

when someone dies. “There are funeral expenses, estate duty<br />

The vaccine refusers<br />

could cost us billions.<br />

and executors’ fees that simply have to be paid. Then there are<br />

the regular monthly bills and expenses to cover. The list goes<br />

on and on.”<br />

More specialised options address the estate administration<br />

costs and professional fees associated with a loved one passing<br />

away. If that person was also the breadwinner, specialised life<br />

cover options exist to replace that loss of income.<br />

The financial burden of a pandemic<br />

Rising costs and increasing debt have put South Africans under<br />

immense financial pressure, and the onset of Covid-19 has made<br />

this even more acute. More than half of credit-active consumers in<br />

South Africa are in arrears, and many are trapped in a debt spiral.<br />

Struggling with debt means cutting down on expenses, insurance<br />

and savings, and can impact one’s prospects of creating wealth.<br />

www.bluechipdigital.co.za<br />







In six months’ time, I will have been in the financial<br />

services industry for 30 years. I have lived through all<br />

the change that has happened over that time. I started<br />

my career selling commission-based products as a<br />

23-year-old (with the best intentions). I did not know better<br />

but as I grew in experience, I started to question what I was<br />

doing and how I was or was not adding value to my clients.<br />

Fortunately, I discovered lifestyle financial planning 20<br />

years ago, moved to the assets under management (AUM)<br />

fee model and have continued to learn and question<br />

aspects of what we do, to get better and add more real<br />

value to our clients.<br />

For the past year, I have been thinking about the way<br />

we charge our clients and have been exploring various<br />

remuneration models used by planners around the world. This<br />

has occupied my mind almost daily and consumed a lot of my<br />

headspace – as well as my sleep.<br />

When the model stops making sense<br />

The challenge I see in using the AUM model is that for different<br />

clients, what we earn in relation to the value we add can vary a<br />

lot and, in many ways, does not make sense. Advising a client<br />

with R1-million of investable assets is not necessarily different<br />

to doing the same for a client with R20-million of the same. At<br />

Client Care we have started adopting a sliding scale to the annual<br />

AUM fees we earn.<br />

Portfolio Value<br />

Fee<br />

0- R5 000 000 1%<br />

R5 000 000 - R8 000 000 0.75%<br />

R8 000 000 - R11 000 000 0.50%<br />

R11 000 000+ 0.25%<br />

94 www.bluechipdigital.co.za


We generally work with people and<br />

families who need to plan properly to<br />

ensure they are financially secure. We<br />

do not have many clients who have<br />

excess funds (more than they need)<br />

so overcharging has not really been a<br />

concern until recently. The few clients<br />

we have who have excess assets are all<br />

paying a lot less than they were with<br />

their previous advisors where in most<br />

cases they were getting no value at all,<br />

so they are happy on all fronts.<br />

Charging a flat fee for a particular<br />

offering or service agreement regardless<br />

of investable assets really sounds like the<br />

fairest way to operate. So, I have been<br />

exploring many models to find what can<br />

work for our business. The transparency<br />

this model provides is clear and it seems<br />

simple both for planner and the client.<br />

Working out how much to charge can<br />

be difficult and then how we collect this<br />

fee can also be a challenge. Yet, there<br />

are many planners out there doing<br />

exactly that. So, it can and is being done<br />

successfully.<br />

How to find the balance?<br />

I analysed our existing client base to<br />

see who pays us how much in relation<br />

to the amount of work and complexity<br />

those clients require. This exercise was<br />

very interesting, and the simple result<br />

was that we have very few clients who<br />

potentially overpay us (in my opinion)<br />

and many who probably do not pay us<br />

enough for what we do for them – this was not making my job<br />

any easier. In fact, it raised alarm bells around many clients who<br />

we have done and do plenty for, yet on our existing AUM fee<br />

model do not and probably never will earn equal to the value<br />

I believe we provide them with.<br />

So, the question then arose: what do we do with these<br />

clients? I started putting faces to the numbers and reliving our<br />

journey with these people and families – many of whom we have<br />

worked with for years. Some of our most (financially) successful<br />

clients had nothing when they started their journey with Client<br />

Care and have grown their wealth substantially. Others have had<br />

real challenges, personal tragedies and uncontrollable disaster<br />

(like Covid) that has set them back massively and even caused<br />

them to lose everything. Do we fire these people and families<br />

because they cannot pay us enough any more?<br />

At Client Care, we have always battled with the concept of<br />

segmenting our clients and even when we have tried to do<br />

so, have placed the largest weighting on the relationship we<br />

share and how well and easily we work together with them.<br />

The challenge that a flat-fee model would bring is that many<br />

of these clients would not be able to afford our services. This is<br />

the simple truth and something that really, really conflicts with<br />

how I have worked all these years.<br />

I have always said, if a potential client will go through our<br />

process, implement the advice we give them and participate in<br />

the relationship we want to have with them, then we have an<br />

obligation to help them. This is a terrible business model, I know,<br />

but it has never been only about the money at Client Care (as<br />

our name indicates).<br />

Heart has always been a big part of the Client Care offering.<br />

We really do care for our clients and all who work with me share<br />

this “care” gene. Moving to a flat-fee model would right now be<br />

at conflict with who we are as people, as a business and how<br />

we work. Yes, Client Care is a business, but it is also so much<br />

more than that.<br />

We owe it to the industry do more<br />

So many people have built extraordinary wealth through this<br />

industry, but how many of us give anything back?<br />

I have a personal passion to make a difference in South Africa<br />

through the promotion of proper lifestyle financial planning,<br />

both to the public and to other financial planners. The reality<br />

is that right now there are people and families we can help,<br />

who cannot afford the flat fee we would charge. But I believe<br />

that over time, with our help, they can become clients who are<br />

profitable for our business while living their best lives.<br />

I believe in the “lifetime value of a relationship” which means<br />

that we will, at times, not earn much for great work but at other<br />

times earn well for what may seem a little work. The real value<br />

is in the ongoing relationship, for us and for our clients.<br />

I believe the world operates on<br />

the circle of life. Others have helped<br />

me to get to where I am in life, it<br />

is only natural and essential that<br />

I must do the same for others. Our<br />

clients who work with us, I believe,<br />

understand this concept so the<br />

cross-subsidisation that our current<br />

model creates is good in that it helps<br />

us serves more families.<br />

If we are going to make South<br />

Africa a better place for all, something<br />

we all need is access to great and fair<br />

financial advice. At Client Care, we will<br />

continue to find ways of helping more<br />

people and families be financially<br />

secure and we will continue to find<br />

new and better ways of adding real<br />

value. I believe we can do this while<br />

earning a good honest living.<br />

Dirk Groeneveld, Certified Financial<br />

Planner®, Client Care<br />

www.bluechipdigital.co.za<br />



How shared value<br />

can solve retirement<br />

problems<br />

Making sense of today’s retirement landscape. Part 4<br />

In this series we’ve explored how the global retirement<br />

savings landscape is being transformed in the wake of<br />

two rapidly advancing global phenomena: the Workplace<br />

Revolution and the Ageing Revolution. As these unstoppable<br />

trends intersect with our complex local context and the reality<br />

that we are already faced with a retirement savings crisis, it is<br />

abundantly clear that we are going to need new solutions to<br />

tackle an age-old conundrum.<br />

An age-old conundrum meets the<br />

modern revolutions<br />

South Africa’s retirement savings<br />

industry has failed to solve the<br />

problem that motivates for its<br />

existence. According to the National<br />

Treasury, only 6% of South Africans<br />

have enough savings for retirement.<br />

This suggests that most of our people simply do not have enough<br />

money to live out their lives in retirement without having to rely<br />

on their families, communities, the state or, at worst, extractive<br />

debt for survival.<br />

While modern investment strategies and digital efficiencies have<br />

allowed investment managers to lower their fees, this is nowhere<br />

near what is needed to tackle a problem of this magnitude. We<br />

When people invest<br />

earlier, invest more,<br />

and withdraw wisely in<br />

retirement, they do better.<br />

would, therefore, be naive to think that this situation is simply<br />

going to resolve itself.<br />

This age-old conundrum is now colliding with the twin<br />

metamorphoses of population ageing and workplace insecurity.<br />

As people live longer, they are spending substantially less time<br />

earning an income as compared to their time spent in retirement.<br />

As machines disrupt the workplace, those incomes are becoming<br />

less secure.<br />

We would be incredibly naive to think that these global<br />

phenomena will not exacerbate the<br />

local situation. Clearly, we need to shift<br />

paradigms when it comes to helping<br />

people achieve financial freedom.<br />

Shared value is the solution<br />

Shared value is the idea that when<br />

companies align their purpose and<br />

strategy with societal needs, they can become more profitable<br />

while simultaneously unlocking economic value for everyone.<br />

There are, of course, various complex and fluid structural, societal<br />

and economic dynamics at play that inform retirement savings<br />

in South Africa. Yet, when focusing our efforts to solve for the<br />

problem, the key insight we have found is that, in most cases, the<br />

problem is behavioural.<br />

96 www.bluechipdigital.co.za


As the Discovery model for shared value works by inspiring<br />

positive behavioural change, there is a solution.<br />

Inspiring healthy financial and physical behaviour through<br />

shared value<br />

Historically, in South Africa, people’s savings behaviours<br />

have been poor. In fact, the primary driver behind the dismal<br />

retirement outcomes is mostly driven by poor investment<br />

behaviours, namely: people are starting to save for retirement<br />

too late and retiring too early; when people start saving they<br />

are not saving nearly enough; when South Africans change jobs<br />

they by and large do not preserve their retirement savings and<br />

finally, when in retirement, South Africans are drawing far too<br />

much out of their savings for income than is sustainable.<br />

Yet, when people invest earlier, invest more, and withdraw<br />

wisely in retirement, they do better, thereby solving for the<br />

problem of inadequate retirement savings.<br />

Through powerful behavioural incentives, that are<br />

layered in addition to a best-of-breed investment offering,<br />

we help inspire these behaviours. These incentives include<br />

substantial investment boosts for clients who engage in<br />

these healthy financial behaviours. The quantum of these<br />

boosts is then amplified when our clients additionally adopt<br />

healthy physical behaviours.<br />

This is because when people are healthy, they not only enjoy,<br />

and are rewarded for enjoying, a better quality of life and improved<br />

economic output pre-retirement, but they live longer, healthier<br />

lives in retirement.<br />

It works<br />

In the few years since introducing<br />

the shared-value investment<br />

model in 2015, our retired clients<br />

who have engaged with the<br />

Vitality programme have received<br />

on average 20% to 46% in boosts<br />

to their retirement income.<br />

Withdrawal rates have dropped<br />

markedly, and our clients are far<br />

more likely to remain invested and<br />

on track for their retirement.<br />

For society, this reduces the<br />

financial burden on families and<br />

the state, thus enabling wealth<br />

creation and much-needed<br />

investment into the economy. In<br />

this way, it helps to break the cycle<br />

of the Sandwich Generation.<br />

Kenny Rabson,<br />

CEO of Discovery Invest<br />

www.bluechipdigital.co.za<br />


Metropolitan works towards creating agricultural stability with pilot<br />

launch of the Collective Shapers initiative<br />

Polokwane<br />

South Africa is entering an interesting time in its rich historical roadmap and while we<br />

face harsh difficulties, there is hope where innovation and creative solutions lie. The<br />

Metropolitan Collective Shapers, an initiative aimed at accelerating young people’s<br />

passion and skills to the next level, was launched in Polokwane as part of the first leg<br />

of the programme rollout. The aim of the programme is to uplift communities and hone<br />

in on developing existing skills and passions within the agriculture industry and spread<br />

knowledge among the youth.<br />

Many households in Polokwane – 41 867 to be exact – are already involved in agriculture<br />

and this presents an opportunity to build on this skill. Instead of swooping in and changing<br />

the landscape, so to speak, Metropolitan is using this as an opportunity for fun and<br />

interactive ways of sharing knowledge within the community and taking the people’s<br />

lead, formulating solutions from within so that it is sustainable and suitable for the local<br />

environment to flourish.<br />

Through the Collective Shapers initiative, Metropolitan aims to uplift the youth through<br />

knowledge, skills, and enabling a sustainable future for them to reach their goals. Tapping<br />

into already established local practices and introducing a training programme, the<br />

hope is to instil generational knowledge as well as introducing new ways of agricultural<br />

development, farming, and running an agricultural business. By garnering the already<br />

present passion that people in the area have for agriculture, Polokwane is a prime area to<br />

begin this exciting journey.<br />

The initiative in Polokwane, in conjunction with Agri Enterprises, includes post-course<br />

support for when attendees leave the classroom and begin working. The programme runs<br />

over nine weeks and involves nine modules that will enable young people in Polokwane<br />

to better navigate the agricultural industry and boost both farming and the employment<br />

market. The course includes nine modules on the Introduction to Agri-business and a more<br />

in-depth six-module look at vegetable and avocado production, which is a specialisation<br />

for the area specifically. There is sustainability knowledge being introduced in the form of<br />

permaculture and upcycling resources.<br />

Metropolitan wishes to see these communities flourish and hopes to impact job creation,<br />

and better the lives of people in the area through farming and knowledge that can be<br />

passed down generation to generation. The people of Polokwane are already doing so<br />

much in feeding the nation so our wish for them is to see them become farming leaders. In<br />

this way, Metropolitan has said “together we can” in a much bigger way than ever before.<br />

Youth living in the Capricorn District between the ages of 18 to 34 that are already involved<br />

in agricultural businesses are encouraged to apply at www.metropolitan.co.za.<br />

We believe that together we can build a better future. As a brand that is passionate about<br />

community and youth development. While Metropolitan can influence the person, the<br />

person influences the broader community. Our sponsorship of this initiative will hopefully<br />

enable sustainable development and employment for generations to come.<br />

You can support the initiative by sharing the message far and wide because together we can.<br />

For more information check out www.metropolitan.co.za<br />

or follow the official social media pages:<br />

MetropolitanZA @MetropolitanZA metropolitan_za<br />

Together we can<br />

#<br />

#CollectiveShapers<br />

Metropolitan is part of Momentum Metropolitan Life Limited, a licensed life insurer and<br />

authorised fi nancial services (FSP44673) and registered credit provider (NCRCP173).


Tech revolution: time to take advantage<br />

<strong>Blue</strong> <strong>Chip</strong> sat down with atWORK’s chief technology officer, Werner Koekemoer, to<br />

discuss the biggest IT challenges (and solutions) facing financial planners.<br />

What role will technology play in the future of financial planning?<br />

It’s common to hear people saying that the robots are coming to<br />

take our jobs. But nothing could be further from the truth. The<br />

robots – or rather, technological advancements – are going to<br />

make our jobs easier and more profitable.<br />

The theme of this year’s FPI Professional Convention is “The<br />

Future is Human” and you might ask<br />

yourself how that reconciles with<br />

the predictions that tech is replacing<br />

human connections. The simple<br />

answer is that technology should<br />

be seen as an enabler that gives us<br />

more time with clients and to do the<br />

human things that financial advisors<br />

signed up for, like building trust and<br />

giving great advice. We’ve been saying for years that robo advice<br />

will replace humans, but I think we all know how that has worked<br />

out. Robos have largely cost more and failed to deliver the goods<br />

for most planners.<br />

The beauty of open systems architecture is that one software<br />

system can tap into all of the latest developments in fintech<br />

and bring those developments together in a single, easy-to-use<br />

package. Human relationships are at the core of financial planning,<br />

but tech can greatly accelerate success by saving time and<br />

increasing profits.<br />

Can you give an example of how tech can do this?<br />

There are so many examples. Simply using a modern Customer<br />

Relationship Management (CRM) system will slash the time and<br />

money you spend on administering your practice. But if you<br />

want a specific example, look at the people still doing Financial<br />

Needs Analyses (FNAs) on Microsoft Excel – it’s almost medieval.<br />

atWORK has carefully designed South African-specific planning<br />

solutions that are built into our system, and which can save advisors<br />

loads of time and ensure far more accurate results. Doing an FNA<br />

properly ensures that the client is properly covered. It can also<br />

help the advisor to formulate budgeting and tax strategies that<br />

can result in significant long-term savings.<br />

So, it is all about having the right tool for the job?<br />

Yes, that’s half of it. There is so much software available; advisors<br />

have no excuse not to benefit from the latest innovations from<br />

around the world. But the other half is taking advantage of a<br />

nifty thing called an API, to integrate all of these innovations<br />

on one platform. The latest version of atWORK is built using<br />

open systems architecture, which means that integration can<br />

Human relationships are<br />

at the core of financial<br />

planning, but tech can<br />

greatly accelerate success.<br />

happen in both directions: we can add third-party applications<br />

to our system; or your in-house CRM can quickly and easily<br />

pull any aspect of our software (our LISP data, for example)<br />

into that ecosystem.<br />

Using the API platform, we have already incorporated a risk<br />

profiling tool (Finametrica) and an e-signature application<br />

(QuicklySign), to name a few. And<br />

we have our eye on emerging<br />

services like anti-money laundering<br />

software and ID verifiers.<br />

Would you agree that many advisors<br />

understand the benefits, but resist<br />

new software because they are afraid<br />

of change?<br />

Absolutely, and that’s completely normal. Humans are resistant<br />

to change, but a good software provider who really wants your<br />

business will bend over backwards to make the transition as<br />

seamless as possible. No matter how big or small your business,<br />

atWORK will always offer free training (when signing up and on<br />

an ongoing basis) and we will assist with transferring data to the<br />

new system.<br />

What is the one thing you would say to convince an advisor who<br />

is considering new software?<br />

Simple. It’s time to start thinking of<br />

IT as an investment, not a cost. This<br />

is especially true when you consider<br />

the benefits of future-proofing your<br />

system with open architecture.<br />

Finally, what are your thoughts<br />

on cybersecurity? Is it a core<br />

consideration or a side note?<br />

It’s central to everything we do.<br />

Advisors store so much sensitive<br />

personal information that you<br />

have to take security seriously. It’s<br />

a way of respecting your clients.<br />

In my opinion, POPIA is a fantastic<br />

piece of legislation as it protects<br />

each South African’s privacy. Some<br />

advisors think POPIA means more<br />

work, but atWORK is ISO27001<br />

certified so we already had most<br />

POPIA bases covered. <br />

Werner Koekemoer,<br />

Chief Technology Officer, atWORK<br />

100 www.bluechipdigital.co.za




ENTS<br />


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Visit atwork.co.za or contact 0861 ATWORK (289 675)


The future of<br />

client engagement<br />

We caught up with atWORK’s business development executive, Trevor Stacey,<br />

to find out about Next Practice, the shiny new client engagement hub<br />

they’re about to launch. Spoiler alert: It’ll knock your socks off.<br />

There’s no denying that we are fast moving towards a<br />

virtual world – but the tech revolution is nothing to<br />

worry about. The trick is to harness the many benefits<br />

of operating virtually while still maintaining that vital<br />

human element. To this end, atWORK has developed Next Practice,<br />

an exceedingly clever client engagement hub which gives your<br />

practice a permanent digital presence.<br />

“As more and more engagements take place virtually, all<br />

advisors will need a permanent online presence for client<br />

servicing,” says Stacey.<br />

An advisor in your pocket<br />

In addition to a secure online meeting room where advisors and<br />

clients have a vault to store and access files and documentation,<br />

clients can also view (and download) detailed financial planning<br />

reports, graphs and breakdowns of their investment portfolio<br />

– without their advisor so much as having to click a button,<br />

let alone pick up a calculator. atWORK’s IS27001 certification<br />

means no more fretting about POPIA compliance (no need to<br />

send an encrypted PDF again!) or struggling with cybersecurity<br />

challenges. And because Next Practice is fully integrated with<br />

atWORK, “Everything is always in the right place,” says Stacey,<br />

“so you’ll never lose a document.”<br />

As if that’s not enough, Next Practice also, “acts as a virtual<br />

shopfront that’s open 24/7 and ensures you’ll always have records<br />

of every query and decision,” he adds. The engagement hub<br />

gives clients many ways to interact with their advisors; from chat<br />

messaging through to a built-in virtual meetings platform. The<br />

best part? All chats and meeting recordings are automatically<br />

stored to the client’s profile and can be easily accessed by both<br />

client and advisor.<br />

Virtual first<br />

Next Practice has been built according to atWORK’s philosophy<br />

of Virtual First, says Stacey, who compares the hub to a digital<br />

banking app that allows clients to complete many processes<br />

virtually 24 hours a day, seven days a week. “When last did you<br />

actually go into a bank?” he asks rhetorically.<br />

In a nutshell, Virtual First means that, whenever they want to<br />

get in touch with their advisor, clients’ first port of call could be<br />

their smartphone or computer. Through Next Practice, clients<br />

can easily submit documentation (seamless integration with<br />

QuicklySign e-signature software makes this an especially<br />

painless procedure), access certificates and get an overview<br />

of their investments. This doesn’t just save you and your staff<br />

loads of time responding to small queries, it actually increases<br />

customer satisfaction<br />

But Stacey stresses, “Virtual First is not the same as virtual<br />

only.” To illustrate this point he extends the internet banking<br />

analogy: “If a client wants to transfer funds or pay a traffic fine,<br />

they can do it at 11 o’clock on a Tuesday night.<br />

“But if they want to apply for a<br />

new home loan, they pick up their<br />

phone to speak to their private<br />

banker. The same goes for financial<br />

advice,” he adds.<br />

Not robo advice<br />

Stacey stresses the fact that Next<br />

Practice is the opposite of a robo<br />

advisor. “Our engagement hub makes<br />

it much easier and safer for clients and<br />

advisors to get the boring stuff done<br />

quickly and efficiently,” he explains.<br />

But the moment an important<br />

decision has to be made, the human<br />

element takes over.<br />

“This might sound weird,” he<br />

concludes, “but with Next Practice<br />

on your side you’ll have far more<br />

time to just talk to your clients than<br />

ever before.”<br />

Trevor Stacey, Business<br />

Development Executive, atWORK<br />

102<br />


Women in Finance:<br />

Breaking Barriers<br />

If the financial planning industry is to be sustainable, active steps<br />

need to be taken to recruit, mentor and retain young people,<br />

people of colour and more women. While it is encouraging<br />

to see the exponential growth and change, the industry still<br />

faces many challenges, including the average age and gender of<br />

planners and the lack of diversity with regard to race.<br />

To break some of these barriers, Kim Potgieter, director at<br />

Chartered Wealth Solutions, founded the Women in Finance<br />

Network. The platform aimed to connect women in the financial<br />

planning industry through shared experiences, support,<br />

mentoring, learning and networking. This network was a seed<br />

planted in the hopes of attracting and retaining women within<br />

the industry.<br />

At the FPI 2021 Convention, Kim Potgieter will be in<br />

conversation with Gratitude Mahlangu, Esther Mabunda and<br />

Annelise Mti to discuss the challenges of bringing more women,<br />

people of colour and youngsters into the financial planning<br />

industry. The role that Chartered Wealth Solution’s Articled<br />

Planner Programme and the Women in Finance Network played<br />

in their journeys will also be explored.<br />

The programme was designed to produce fully qualified<br />

planners with confidence, soft skills, technical and administrative<br />

knowledge. Providing learning opportunities and a space to ask<br />

questions is key to the Articled Planner Programme. Esther Mabunda<br />

came to appreciate the saying, “Indlela ibuzwa kwabaphambile”,<br />

meaning that so many colleagues (young and old) gladly stepped<br />

up to lend a hand when she asked for their help. Mabunda firmly<br />

believes that to navigate the financial planning landscape, it is<br />

important to remember to ask for help when you need it, as asking<br />

for help takes nothing away from an individual but instead shows<br />

a willingness to learn and grow.<br />

The programme focuses on creating an environment where<br />

people can merge their book knowledge with practical skills. Mona<br />

Manzambi found this aspect of the programme exceptionally<br />

helpful when preparing for her board exam.<br />

Personal development is another focus area of the Articled<br />

Planner Programme, so people are given the opportunity to<br />

attend Dare to Lead workshops and coaching by Colleen Joy<br />

Page and develop other soft skills that enhance relationships.<br />

For Gratitude Mahlangu, this keeps her in the industry. Building<br />

relationships with clients to create a personalised financial plan<br />

has helped her find purpose, which gets her excited about a lifelong<br />

career in financial planning. For Annelise Mti, her motivation<br />

to stay in the industry is through seeing how intentional efforts<br />

can bring growth within the industry, and she is encouraged to<br />

be part of that growth and pave the way for those who come<br />

after her.<br />

Potgieter firmly believes that we have to find the potential in<br />

others and find ways to grow that potential. For this reason, the<br />

Women in Finance Network will be financing one female student’s<br />

Financial Planning Honours/Post-Graduate Diploma in 2022.<br />

Potgieter believes that we each need to find ways to mentor<br />

and encourage others so that the change can become a reality<br />

for our industry. <br />

Written by the Women in Finance Network<br />

104 www.bluechipdigital.co.za

We specialise in<br />

customised data solutions


Cross-border data<br />

transfers and POPIA<br />

International data protection laws generally agree that anyone processing personal data may<br />

only transfer it to someone outside of their country under certain circumstances.<br />

Given that POPIA is largely based on the European<br />

General Data Protection Regulations (GDPR), and<br />

that POPIA prescribes that processing conditions<br />

should be established “in harmony with international<br />

standards”, some reliance can be placed on those countries<br />

that the European Commission has declared as having such<br />

adequate safeguards.<br />

Section 72 of Chapter 9: POPIA deals with the “transfer personal<br />

information about a data subject to a third party who is in a foreign<br />

country…” while Chapter 5 of the GDPR deals with cross-border<br />

data transfers.<br />

At face value, the POPI Act prohibits cross-border data<br />

transfers, whereas GDPR provides strict requirements for such a<br />

transfer to take place. This makes sense as the EU consists of many<br />

cooperative countries who are bound to have organisations span<br />

international boundaries.<br />

However, the emphasis in Section 72 of POPIA is not on<br />

prohibiting data flowing out of the country, but rather on<br />

the exceptions themselves. The exceptions are designed to<br />

safeguard data when they flow outside of the country. With this<br />

understanding, the differences between the two laws regarding<br />

cross-border transfers are mostly superficial.<br />

Justice is<br />

only<br />

Justice if<br />

it’s<br />

available to<br />

everyone<br />

Ancillary Financial Services (Pty) Ltd, Registration Number: 2019/066660/07<br />

We understand your intention.<br />

www.ancillaryfs.co.za | info@ancillaryfs.co.za | 083 452 0200 | 084 589 6821<br />

To ensure compliance under POPIA, in transferring personal<br />

information outside of South Africa (and particularly to countries<br />

where there is no EU declaration of adequate safeguards and/or<br />

where juristic personal information is processed) it is advisable to:<br />

• Carry out due diligence checks of the data protection laws (if<br />

any) in place in the foreign country that they wish to export the<br />

personal information to:<br />

• Obtain advice on the laws in that foreign country that permit<br />

access to personal information by government agencies; and<br />

• Put in place the appropriate safeguards in<br />

comprehensive data-transfer agreements or<br />

binding corporate rules (which would only<br />

apply to transfers of personal information<br />

within a group of companies). <br />

The emphasis in Section 72<br />

of POPIA is not on prohibiting<br />

data flowing out of the<br />

country, but rather on the<br />

exceptions themselves.<br />

Jo-Anne Bailey, CEO,<br />

Ancillary Financial Services


Consumer education:<br />

our collective responsibility<br />

Many adults are struggling with<br />

financial strain, which has been<br />

compounded by the effects of<br />

Covid in the past year and a bit.<br />

Our business has spent a considerable amount<br />

of time advising individuals adversely affected<br />

by retrenchments and a lack of employment,<br />

which has been a great learning experience. In<br />

the past few months, we have had several clients<br />

sharing that they are struggling with insomnia,<br />

anxiety, relationship difficulties, physical ailments<br />

and unhealthy coping methods. All of these are<br />

symptoms of financial strain.<br />

Financial strain can be largely attributed to<br />

a lack of financial knowledge. A lack of financial<br />

knowledge or low financial literacy rates leads<br />

to high levels of debt, low savings rates and<br />

little to no investments. Financial literacy is<br />

the ability to make sound decisions regarding<br />

how much to save, when to invest and when<br />

(and not) to get into debt. The S&P Global<br />

Financial Literacy Survey had a few findings<br />

worth noting:<br />

• Low levels of financial literacy around<br />

the world<br />

• Numeracy and inflation are the most<br />

understood concepts<br />

• Risk diversification is the least understood<br />

concept<br />

• Women’s financial literacy levels are lower<br />

than men’s<br />

• The young are a vulnerable group and an<br />

important target for financial education<br />

programmes<br />

Many people don’t know the difference<br />

between saving and investing, often<br />

confuse the two terms and frequently use<br />

them interchangeably. Many people do not<br />

understand the effects of interest rate changes<br />

on their savings and debt levels. I have met too many individuals<br />

who often got into debt when there was no need, which led to<br />

many financial difficulties.<br />

The effects of financial strain do not only affect the<br />

individual but very often become societal issues. High<br />

divorce rates, substance abuse and violent behaviour – many<br />

of these issues trace their roots back to financial strain. It is<br />

clear that improving financial knowledge among the general<br />

population will serve to alleviate a lot of issues for the country<br />

and should be prioritised. This then begs the question – whose<br />

responsibility is it to educate the average individual about<br />

matters of personal finance?<br />

In 2013, research from behaviour experts David Whitebread<br />

and Sue Bingham of the University of Cambridge found that our<br />

www.bluechipdigital.co.za<br />



approach to money, much like our personality, is formed by the<br />

time we are seven years old. Concepts such as planning ahead<br />

and delayed gratification are already understood at that age<br />

and should be taught to children as a matter of urgency. These<br />

Times have changed<br />

drastically, and our education<br />

and financial systems<br />

should speak to that.<br />

habits then affect our behaviour with money in adulthood. If<br />

they are negative behaviours, they become detrimental to our,<br />

financial wellbeing, leading to the issues highlighted above. In<br />

practice, it becomes very difficult to then change bad behaviour<br />

making it even more difficult to achieve financial success in the<br />

long term.<br />

We need to be introduced to personal finance concepts from<br />

our first year of school. It is also clear that parents need to be having<br />

constructive conversations with their children about money long<br />

before they even start school as that is where they learn their initial<br />

habits and views regarding money. That means adults need to be<br />

equipped with this information as well.<br />

The lack of financial literacy affects us in different ways, which<br />

means we must combine our efforts to make it accessible to all.<br />

Times have changed drastically, and our education and financial<br />

systems should speak to that. That’s why financial education for<br />

children is so important and must be prioritised throughout the<br />

entire basic education curriculum.<br />

The financial industry also has<br />

a major role to play in creating<br />

financially fit consumers.<br />

Individual financial institutions<br />

will benefit greatly from having<br />

financially astute clients and<br />

should, therefore, increase efforts to<br />

improve financial literacy rates. That<br />

includes advisors, independent<br />

practices, large institutions as well<br />

as professional bodies – we all have<br />

a unique and important role to play<br />

in changing the status quo for all.<br />

It is our individual and collective<br />

responsibility. <br />

Gugu Sidaki, Wealth Creed<br />

108 www.bluechipdigital.co.za

Why the multi-management<br />

model works<br />

Even at the best of times, markets can be unpredictable. Sudden shifts and impact events aside, the<br />

entire market cycle passes through different phases that make it virtually impossible for any single<br />

fund to unfailingly outperform in any single class or sector. No matter the individual manager style.<br />

Therefore, a multi-manager or a fund of funds approach,<br />

continues to be one of the most consistently successful<br />

ways to adjust risk and deliver better return on investment.<br />

These are funds that specifically invest in other funds<br />

rather than individual stocks and bonds. This essentially allows<br />

each fund to assemble a team of highly specialised experts to<br />

develop a portfolio of investments across the spectrum of funds<br />

in the marketplace. The multi-manager model works by combining<br />

multiple performing funds into a single, secure offering.<br />

A well-structured, well-resourced and well-researched<br />

investment philosophy applied to a portfolio of funds does more<br />

than look good on paper, it delivers consistently over time in realword<br />

application.<br />

The benefit of diversification<br />

Multi-management funds enable any investor to obtain instant<br />

diversification across multiple variables: market sectors, asset<br />

classes, geographies and even management styles. This minimises<br />

the dependency on any given variable to deliver returns, mitigating<br />

risk by compounding the overall performance of the combined<br />

portfolio. Investors can look forward to protection from severe<br />

downturns while maintaining a stable rate of return.<br />

The benefit of specialisation<br />

Multi-management funds pool the expertise of multiple<br />

investment experts, with each fund manager devoted specifically<br />

to their unique area of expertise while maintaining awareness<br />

of their individual contribution to the overall fund structure.<br />

This encourages each team member within the fund to operate<br />

optimally in their speciality while simultaneously seeking out ways<br />

to complement one another in a holistic approach to delivering<br />

the best results.<br />

It’s also worth noting that the individual funds themselves,<br />

being specialists, have already conducted their own rigorous<br />

processes in researching, selecting and assembling their own<br />

assets and management style. All of which they actively continue<br />

to optimise independently of the multi-management fund.<br />

The result is multiple layers of active management, endlessly<br />

engaged in producing better returns.<br />

The benefit of active management<br />

Multi-management funds reduce the onus on the investor of<br />

having to find, research and invest in individual funds. It’s more<br />

than just that, though, it’s common sense. There is quite simply, no<br />

way any single investor can ever stack up to the total of expertise<br />

and real-world know-how of an entire team. Nor can they ever<br />

respond as quickly or effectively to sudden market shifts or events<br />

as dedicated specialists can.<br />

Overall, it just places less demand, less stress on the investor,<br />

whether they are new to hedge funds or seasoned veterans. It’s<br />

an effortless way to achieve that crucial balance of appropriate<br />

risk and return.<br />

Cost implications<br />

Multi-management fund fees, on average, are nominally higher<br />

than those of a single manager funds due to the multiple layers<br />

of cost attached to multiple layers of management. However, the<br />

decision to invest in a multi-management fund is a value-formoney<br />

proposition. Sure, it may cost a little more, but there is a<br />

lot more to be gained in terms of peace of mind and predictable<br />

returns over the long term.<br />

One should also consider that a multi-manager funds have<br />

substantial buying power, which allows them to negotiate on<br />

fees and access institutional share classes that would otherwise<br />

remain unavailable to smaller investors. This saving is also<br />

passed onto the end client, making the cost of ownership much<br />

less demanding.<br />

Choosing a multi-management portfolio comes down to your<br />

personal appetite for risk. While the function of funds of funds<br />

is to reduce risk, there nevertheless remain varying levels of<br />

risk attached to various portfolios, depending on how they are<br />

constituted and managed.<br />

Look for the right mix of these four key benefits that best suit you:<br />

• Consistent returns: How well has the fund performed? How<br />

predictable is that return? Can the return be associated with a<br />

clear philosophy and process?<br />

• Risk vs return: What diversification and active portfolio<br />

management is in place? How has the fund responded to both<br />

adverse systemic and non-systemic events?<br />

• Access to opportunities: What products does the fund invest in<br />

which would otherwise be unavailable to you?<br />

• Fee structure: Does the fund, for example, utilise lower-fee<br />

institutional share classes to reduce your costs?<br />

At Novare, we offer multi-managed investment solutions in the form<br />

of South African funds of hedge funds, unit trust funds, an offshore<br />

fund of funds and bespoke solutions. Depending on your unique needs,<br />

objectives and risk appetite, trust us to help you select the right fund for<br />

you. For more information, go to www.novare.com.

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