Blue Chip Issue 84

BLUE 

Issue 84 • Aug/Sept/Oct 2022 

www.bluechipdigital.co.za 

CHIP 

0.5 CONTINUOUS 

PROFESSIONAL DEVELOPMENT 

THE OFFICIAL PUBLICATION OF THE FPI 



01 CONTINUOUS 


01 CONTINUOUS 






02 CONTINUOUS 


02 CONTINUOUS 


The power of balance 

EQUILIBRIUM 

The value proposition 

WHY YOU SHOULD USE A DFM 

Planning for a life 

TO 100 AND BEYOND

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“Multiple” layers of fees and 

the foundations of nonsense 

In most professions, you will find some non-sensical 

ideas that take hold for longer than one might expect. 

Eventually, a bit of logic, scepticism and common sense usually 

gives the Darwinian process a gentle push. For example, just the 

other day I read an article – more literate than numerate – about 

how the bucket approach to investing addresses sequencing 

risk. Yep, I am throwing the bait out there for a different day… 

When ideas are wrong-headed, but through repetition get 

accepted as axiomatic anyway, you either have a paucity of 

understanding or some interest in maintaining the conventional 

(non)wisdom. Pseudo-logic drives a lot of human belief everywhere 

– why should financial services be immune? 

Debunking the “extra layers of fees” myth 

There is seldom discussion around Discretionary Fund Managers 

(DFMs) which in itself is a descriptor laced with contradictions, that 

doesn’t get mired in “extra layer of fees” commentary. Like Donald 

Trump and Covid vaccines, it can be a polarising debate depending 

on whether you see value in DFM services or not. Unfortunately, 

the debate is flawed even as one gets into the real questions like, 

“What are you getting for the money?”, “Is it worth it?” and “Who 

should be paying?” 

That the “extra layer” is accepted as self-evident is where the 

problem starts. The confusion comes from mixing up layers of 

services and the layers of entities that provide them. We are 

so deeply steeped in the legacy of multiple services being 

bundled together by a single provider into a single fee, that we 

sometimes forget that we are paying for multiple services from 

Entity layers: simplistic and nonsensical. 

that provider, performed by different teams and divisions, 

requiring different types of expertise. 

This common practice of counting layers of providers in the 

food chain paints a picture of multiple snouts in the trough 

and displaces important questions, such as, which role-player 

is best suited to providing what service, how much does each 

service cost, and what does it all add up to? It sounds obvious – 

and it should. But there are some who are entirely comfortable 

that one entity implicitly provides five services for 1%, while 

2 www.bluechipdigital.co.za

Investment Management by Design 


something back, like higher returns from investment fees. These 

are a known expense in the uncertain production of income. We 

pay with a nervous smile. In other words, it only makes sense 

to pay an extra basis point if you expect more in return, but it 

would be non-sensical to optimise for the cheapest proposition. 

This requires a clear-headed evaluation of the evidence. 

A common sense view of investment fee layers. 

being outraged that there are four specialist parties to a “food 

chain” whose fees add up to 1%. 

Consider the logic of services offered “for free”. Let’s see. You 

have smart executives employing whole divisions of expensive 

people, who perform key services for no consideration? Think 

about that. The company is either being run by fools or is based 

on the reasonable expectation that people are easily hoodwinked 

– that the same fee is somehow acceptable if it is concealed and 

embedded in a different service, insulting as that is to advisers. 

People don’t perform services for free – it is time to move on from 

these archaic fictions. Why not just associate the correct fee with 

the correct service and let the consumer decide whether it is 

worth paying for? Not doing that simply makes things harder to 

compare, which in certain instances is the whole point. 

What we should be asking 

• What services do I need? 

• Which entities provide the service? 

• Who is earning the fee? 

• Is there value in the service that exceeds the fee? 

• Can specialists provide more value than a generalist in performing 

this service? 

• What do all the fees add up to? 

• Do I have the information to compare propositions? 

Not all fees are made equal 

Some fees we pay begrudgingly. We acknowledge we have to pay them, 

and we pay with a grimace. There are other fees we pay because we 

desire the utility and consider it worthwhile. We pay with a smile. 

There is a third class of fees that one pays in the hope of getting 

Where “extra layers” can be a problem 

The points made above simply show that, all else being equal, the 

number of providers is not the issue, but rather the utility the 

investor receives and the price they pay. However, there are 

several practices that do raise some warning flags (and have been 

scrutinised by the FSCA), particularly where there is a duplication 

or overlap of services or fees, or where there are certain payments 

between Financial Services Providers. This does not automatically 

mean the practice is irregular or unethical, or that no value is 

added – it just requires much higher scrutiny: 

The first questions that should be asked are: 

• Are there any duplications of the services provided by 

different entities? 

• Is more than one party charging for the same/similar services? 

• Is any party charging the investor for a service that is not 

being provided? 

• Is any party earning a fee for a service that another party 

is providing? 

• Is the party skilled, qualified, and appropriately resourced to 

provide that service? 

• Is any entity earning a fee for one service, but actually receiving 

it in consideration for another service (e.g. a fee for transferring 

assets to a product dressed up as a consulting fee)? 

Conclusion 

The move from generalist to specialist 

has been a trend since the agricultural 

revolution, which means multiple 

parties performing services that one 

party used to provide. In this model 

of “horizontal integration” (where a 

composite outcome is provided to 

consumers by independent entities), the 

costs and benefits of discrete services 

are potentially easier to disaggregate 

when it is compared to vertically 

integrated models, which involve crosssubsidisation 

of services. It is time to 

start asking the right questions and 

looking through the noise. 

Brandon Zietsman, CEO and 

CIO, PortfolioMetrix 


3

BLUE 

CHIP 

Kim Potgieter tells us that financial planning is about helping clients realise their 

life dreams with money as the enabler. Dreams and priorities shift, and so financial 

plans must adapt and change. As life becomes less linear and the concept of 

earning until retirement is replaced by lifelong learning and purposeful living, 

financial planners must add value in different ways (page 86). 

Florbela Yates, head of Equilibrium, says financial advisors do not need to spend time 

worrying about which asset classes or funds to invest in or about timing the market; 

they can rather focus on their practice and giving the best advice to their clients. 

Discretionary fund managers (DFMs) are an extension of an advisor’s practice – a team 

of experts focused on knowing the advisor, understanding their needs and delivering 

solutions that help build their business. “Our understanding of both the investment 

management industry and the financial advice process allows us to narrow the gap 

between investments and advice,” Yates attests in The Power of Balance on page 28. 

She adds that DFMs spend time understanding which outcomes they are solving for, 

so that they can make sure that benchmarks are not arbitrary but rather aligned to the 

advice. Portfolios are constructed to ensure the best chance of reaching these outcomes. 

The investment market is complex and there are so many different funds that it 

makes it difficult for advisors to evaluate the benefits of every fund, and this has been 

exacerbated by the constantly evolving legislative pressures, Yates explains on page 24 

in Do DFMs add value? The introduction of the FAIS, FICA, RDR and POPIA legislation as 

well as the compliance burden on financial advisors has increased operational costs. By 

partnering with a DFM, advisors free themselves to spend more time on adding value. 

Leigh Kohler, INN8 Invest, points out that history shows financial markets absorb a great 

deal of negative news and price that information accordingly. He says that partnering 

with a DFM removes the risk of making irrational investment decisions based on emotions 

(page 32). 

On page 30, Glacier Invest’s Rafiq Taylor says intermediaries need to demonstrate 

they have a robust investment solution that stands the test of time throughout market 

cycles. DFMs help distil complexity into something that is digestible for both advisor and 

end investor. They articulate what is happening in the markets and help the advisor’s 

clients stay the course to realising their life dreams. As Rob Macdonald says on page 

76, for better client results, focus on the investor not the investments. He has no doubt 

better client outcomes come from focusing on the person who is your client and not 

going down the rabbit hole of the latest investment hype. 

And while we are on the topic of investment hypes: in his column on page 22, Kobus 

Kleyn asks if Bitcoin as an asset class has no intrinsic value, why is not only the herd 

climbing into Bitcoin but also significant institutions? It is a case of fear of missing 

out, as we often see when it comes to investment opportunities. Could crypto be your 

kryptonite? Find out more in our introduction to cryptocurrency on page 62. 

Enjoy this issue! 

Alexis Knipe, Editor 

EDITOR’S NOTE 

WHY USE A DISCRETIONARY 

FUND MANAGER? 

Blue Chip Journal – The official publication of FPI 

Blue Chip is a quarterly journal for the financial planning industry and is the official publication of the Financial 

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

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

A total of 7 500 copies of the publication are distributed directly to every CERTIFIED FINANCIAL PLANNER® (CFP®) 

in the country, while the monthly Blue Chip Digital e-newsletter reaches the full FPI membership base. FPI members 

are able to earn one non-verifiable Continuous Professional Development (CPD) hour per 

edition of the print journal (four per year) under the category of Professional Reading. 

Special advertising packages in Blue Chip are available to FPI Corporate Partners, 

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blue-chip-journal 

ISSUE 84 | 

AUG/SEPT/OCT 2022 

BLUE 

CHIP 

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CONTENTS 

ISSUE 

84 


02 

“MULTIPLE” LAYERS OF FEES AND 

THE AETIOLOGY OF NONSENSE 

By PortfolioMetrix 

04 

10 

12 

14 

20 

EDITOR’S NOTE 

By Alexis Knipe 

BACK TO SORT-OF NORMAL 

Message from FPI CEO 

STAND OUT FROM THE CROWD 

By UFS School of Financial Planning Law 

ON THE MONEY 

Milestones, news and snippets 

FINDING THE BALANCE 

Column by Florbela Yates, 

Head of Equilibrium 

21 

“NO” IS A WORD 

Column by Rob Macdonald 

22 CRYPTOMANIA 

Column by Kobus Kleyn, 

Kainos Wealth 

23 

THE MOST EXCLUSIVE CLUB IS 

OPEN, BUT WHERE IS THE DOOR? 

By Mike Titley, Business Development Fund 

Manager at Laurium Capital 

24 

DO DFMS ADD VALUE? 

Blue Chip sat down with Florbela Yates 

to understand the true value of DFMs 

28 

THE POWER OF BALANCE 

Momentum Investment Consulting has 

rebranded as Equilibrium 

30 

CAPITAL PRESERVATION 

Blue Chip speaks to Rafiq Taylor, Head of 

Implemented Consulting, Glacier Investments 

32 

ADVISOR INSPIRED 

Blue Chip caught up with 

INN8 to find out about the new addition 

to its brand 

33 

ENABLING GROWTH FOR 

ADVISORS 

INN8 responds to market demands 

34 

WHY USE A DFM? 

Barry O’Mahony, Veritas Wealth, 

tells us why 

36 

CAPITAL GAINS TAX IS NO SMALL 

CHANGE 

Says Peter Foster from Fundhouse 

40 

INVESTOR’S CONFLICT 

By Duncan Lamont, Head of 

Strategic Research, Schroders 

42 

EXTRAORDINARY EXECUTION 

Momentum Investments’ smart beta 

funds deliver exceptional performances 

44 

NOT EVERYTHING THAT COUNTS 

CAN BE COUNTED 

ESG is more of an art than a science, 

says Truffle Asset Management 

46 

A TRIED-AND-TESTED FLEXIBLE 

FIXED INCOME APPROACH 

By Visio Fund Management 


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CONTENTS 


ISSUE 


47 

SA INVESTORS GOING GLOBAL 

Sentio Capital attests that the devil is in 

the detail 

48 

THE RISE OF FAMILY OFFICES 

IN SOUTH AFRICA 

The future of wealth management by 

Private Client Wealth 

50 

TIME FOR SA CONSUMERS 

TO TIGHTEN BELTS AND 

AVOID DEBT 

The short-term discomfort should pay off in 

the long term, says NMG Benefits 

52 

TRADERS WITH A SUNNY 

DISPOSITION MAY CAST A 

SHADOW ON INVESTMENT ADVICE 

By Paul Nixon from Momentum Investments 

54 

56 

58 

WHERE DO WE STAND NOW? 

Asks Hannes Viljoen, Kudala Wealth 

THE POWER OF OIL AND GAS 

By Petroleum Agency South Africa 

HOLISTIC SERVICE: TECHNOLOGY 

AS AN ENABLER, CULTURE AS 

THE CORE 

INN8 Investment Platform’s Georgina Smith 

on customer service technology 

60 CUSTOMER-CENTRIC 

SOFTWARE TO GROW 

YOUR FINANCIAL BUSINESS 

By Iress 

62 

IS CRYPTO YOUR KRYPTONITE? 

An introduction to the cryptocurrency 

and blockchain technology 

66 

GROWTH OF BLOCKCHAIN 

TECHNOLOGY CATAPULTS 

DIGITAL ASSETS INTO THE MAINSTREAM 

As well as the Krugerrands 

68 

PLANNING FOR A LIFE TO 100 

AND BEYOND 

Wynand Gouws discusses life expectancy 

70 

RETIREMENT INCOME 

REIMAGINED 

Momentum Investments introduces its 

lifelong income stream solution 

74 

UNPACKING GOVERNMENT’S 

PROPOSAL OF A TWO-POT 

RETIREMENT SAVING SYSTEM 

By Alisha Corbett, Liberty Corporate 

76 

FOR BETTER CLIENT OUTCOMES, 

FOCUS ON THE INVESTOR NOT 

THE INVESTMENTS 

Sage advice from Rob Macdonald, Fundhouse 

78 

THE RDR JOURNEY 

Carolyn Erasmus and Peter Mann, 

Bravura Solutions, advise on the transition to 

RDR in South Africa 

82 

SUCCESSION PLANS 

REALLY MATTER 

The final part of this series on succession 

plans looks at retirement planning 


UNLEASHING THE FINANCIAL 

POTENTIAL OF TIME SAVED 

By Seed Analytics 

86 

THE BALANCING ACT 

Kim Potgieter and how to guide 

clients through life changes 

88 

HELPING CLIENTS TO RISE 

ABOVE THE CLOUDS 

Andy Hart, HUM, tells us that financial storms 

are never far away 

90 

FINANCIAL PLANNING: 

PROFESSION OR VOCATION? 

By Dirk Groenewald, Client Care 

92 

THE SMART SOLUTION 

FOR FINANCIAL ADVISORS 

BY FINANCIAL ADVISORS 

By Easiworx 

94 

THE FPI VALUE PROPOSITION 

FOR FINANCIAL ADVISORS 

FPI professional membership benefits 


49271 

Live 

for a living. 

Thanks for helping your clients live their best life. 

For over 29 years of investing through many unnerving market events, we’ve 

grown your clients’ savings into real long-term wealth. Thanks to your trust, it 

didn’t require us to sit on the sidelines during crisis times, but enabled us to 

lean into them to take advantage of the opportunities on offer. 

Good things come to those who 

don’t wait to invest with us. 

Coronation is an authorised financial services provider.

BLUE 

CHIP 

FOREWORD 

Lelané Bezuidenhout, CFP® 

CEO, Financial Planning 

Institute of Southern Africa 

BACK TO 

SORT-OF NORMAL 

The world-at-large is back to some form of “normal”. 

People are travelling internationally again and 

attending in-person events, shaking hands and 

rubbing shoulders without fear or masking. As 

we engage with our stakeholders, some are still 

working in a hybrid fashion while most, surprisingly, are 

60% to 100% back in the office. In fact, some returned to 

the office as early as August 2020. 

So, what, if anything, has changed in our world of work? 

While staff were in lockdown, most large insurers took 

the time to revamp and modernise their offices. The new 

workplaces have more meeting rooms for teams to focus 

on engagement and rebuilding company cultures back to 

pre-Covid-19 levels. There is no doubt that some company 

cultures took a knock for the worst during lockdown. 

The return to the office in some fashion is instrumental 

in lifting servicing levels and creating better customer 

outcomes. The revamped offices have more open spaces 

to create and keep social distancing at acceptable levels. 

The dress code is also, quite noticeably, very relaxed – from 

very casual to smart casual. 

With small to medium-sized financial planning and 

advisory practices, the trend is to either be back in the 

office on a 100% basis, or to be on some sort of flexi-time 

arrangement. This allows staff much-needed flexibility in 

both their professional and personal lives – including, for 

example, the ability to combine the roles of being a parent 

and working full time. The dress code in smaller practices 

remains smart casual to professional. Clients are also returning 

to in-person meetings and appreciating the opportunity for 

“human” interaction. That there is still room for online meetings, 

is an attestation to the fact that clients, like employees, prefer 

the hybrid model when it comes to engagement. 

Technology 

Staff performance management systems and customer 

relationship management systems have been enhanced to 

meet the changing needs of the workforce and consumers. 

For me, this is not innovation but rather the enhancement of 

the use of the available technologies to better cater for the 

needs of the different stakeholders. More financial services 

providers (FSPs) are using artificial intelligence (AI) in the 

background so that it can learn and populate standard answers 

to standard problems. There is also a big need for different 

sets of technologies to be cloud-based and able to integrate 

seamlessly with other applications. Where integration is too 

costly or will take time, FSPs are not shying away from moving 

off their current platforms to platforms that are agile and able 

to meet their needs instantly. 

Update from the FPI 

We had a very productive strategy planning session with 

FPI leadership and volunteers in May. The volunteers are all 

professional members of the FPI and assisted us in laying 

down the grounds for our 2023-2025 strategy. The feedback 

received was honest, bold and future-focused. I would like to 


It is an absolute privilege to serve 

you and to work with you in 

serving South Africa better. 

thank each member who blessed us with their time and for 

sharing their insights to move us forward. 

We also had very robust peer-to-peer discussions on 25 

May where we tackled the topic, “How to end a relationship 

with a client” with more than 170 FPI professional members 

online. Our next peer-to-peer session will be in mid-July 

where we will discuss the different remuneration structures 

available and how this relates to service level agreements, 

value propositions and the current regulatory universe. 

Upcoming events 

Don’t miss out on the Retirement Planning Conference 

(online) in partnership with the Actuarial Society of 

Southern Africa (ASSA) and the Institute for Retirement 

Funds Africa (IRFA). During the conference, we will focus 

on the fund members’ experience and journey through 

reforms within the retirement space and receive insights 

from different corners of the financial services sector. 

It’s about understanding the impact of the reforms over 

the last decade – from product development to fund 

management to professional financial planning. 

Date: 27 July 2022 

Bookings online via www.fpi.co.za or contact 

events@fpi.co.za for more information. 

FPI 2022 Professional Convention 

This will be a hybrid event with a wide range of local and 

international speakers on the theme, “The time is now”. 

In-person spots are limited and filling up fast. Book your 

seat today. See www.fpi.co.za for more information. 

Date: 19 and 20 October 2022 

Venue: The Indaba Hotel, Johannesburg or online. 

Professional Competency Examination 

Congratulations to all the candidates who passed the 

Professional Competency Examination (PCE) written in 

March 2022. The pass rate has moved up to almost 50% 

(sitting on 49.6%). This is a remarkable achievement, and 

we look forward to welcoming all the new professional 

members. We also just had the June PCE and are eagerly 

awaiting the results of the exam. If you missed both 

these exams, you can still register for the September PCE. 

Contact certification@fpi.co.za for more information or 

visit our website. 

In closing 

As we wrapped up our AGM on 8 June 2022, I again realised 

how thankful we are for you as members of the FPI. It is an 

absolute privilege to serve you and to work with you in 

serving South Africa better. 

Until next time, 

Lelané Bezuidenhout, CFP® 

CEO, Financial Planning Institute of 

Southern Africa 


11

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BLUE 

CHIP 

BLUE 

CHIP 

On the money 

Making waves this quarter 

Stakes in boutiques to 100 and beyond 

NMG BENEFITS EXTENDS INVESTMENT 

ABILITIES WITH SEQUOIA STAKE 

Johannesburg-based advisory and intermediary firm NMG Benefits has 

acquired a stake in boutique discretionary fund manager Sequoia Capital 

Management as it looks to expand its ability to manage and execute 

client investments. 

The deal will see Sequoia founder and director JB Smith joining the 

NMG executive team to head up asset execution in NMG’s investment 

consulting business. 

TO 100 & BEYOND 

How to make your money last as long as you do 

The number of people living into their late nineties and early hundreds 

is growing by the day. The notion that you must retire at 65 is becoming 

outdated and, more importantly, impractical and even financially hazardous. 

However, the question remains: How do you provide for yourself should you 

live to a ripe old age, as is very likely? 

Irrespective of where you currently are in life – starting out in your career, 

approaching retirement or already retired – living longer fundamentally 

challenges the traditional mindset of a retirement date being a line drawn 

in the sand. 

To 100 & Beyond provides sound, tried-and-tested advice on how to 

approach living a longer, financially secure life, including how to invest 

wisely, generate alternative income streams, handle your tax affairs and 

plan your estate. Practical, real-life examples make this book an easy-tounderstand, 

highly accessible tool that can help you to achieve financial 

Sequoia was founded at the end of 

2018 with an initial focus on retail portfolio 

management and fund management 

services. This partnership also allows the 

business a platform to enter the institutional 

multi-manager space as well. NMG’s South 

African operation, NMG Benefits, focuses 

on employee benefits including healthcare 

consulting, retirement fund consulting and 

retirement fund administration. 

JB Smith, Founder of Sequoia 

freedom so that you, too, can live your best 

life now and into retirement. Wynand Gouws’ 

passion is using his extensive experience in 

investments and retirement planning to coach 

clients through the maze of complexity and 

jargon in the financial-planning industry and 

help them realise their financial aspirations. 

Gouws has more than 30 years’ experience 

in the industry and, in addition to being a 

Certified Financial Planner (CFP®), he also 

holds an MBA and a post-graduate diploma in Future Studies. Wynand 

regularly comments on the financial-services industry and has been invited 

to participate in and write for the print, radio and TV media, as well as a range 

of online publications. 

POWER AND INFLUENCE 

In South Africa, as with most countries, retirement fund assets represent 

the largest source of invested assets in the country by a significant margin. 

This puts them in a singularly strong position to drive the shift to investing 

sustainably and for positive impact. According to the National Treasury, South 

Africa has slightly over 5 000 active retirement funds that preserve the longterm 

assets of more than 16-million contributing members and retirees. 

South African retirement funds account for around 100% of the country’s 

annual GDP. To date, retirement funds have been able to spend an estimated 

R4.4-billion in various sustainability initiatives, such as renewable energy and 

affordable housing projects. Within this context, this year’s Sanlam Benchmark 

Survey – an annual body of research into the state of retirement funds and 

retirees in South Africa – has revealed an increased focus on ESG. 

It is notable that the retirement fund industry manages a significant 

pool of assets and, therefore, has a large role to play in driving ESG 

forward. Darryl Moodley, Head: Tailored Investments at Sanlam Corporate 

says, “As long-term investors, retirement funds are innately exposed to 

ESG risks and should have strategies in place to address it. Wider than 

the direct financial impact on their members, retirement funds are 

custodians of a significant amount of capital, and therefore are influential 

stakeholders in the determination of economic and strategic policy.” 

The stewardship responsibility of retirement funds is huge as they can 

influence policymakers and the companies that they invest in. Funds 

can certainly exclude some companies that they believe are not up to 

standard and send a strong signal to the market.

TBWA\HUNT\LASCARIS 934408 

Your company’s 

biggest asset is 

its people. 

At Liberty Corporate, we are in the business of caring for people. 

That’s why our team of highly skilled business development 

managers and specialist advisers will consult with key people in your 

organisation to ensure that the solution we design for your company 

will benefit the people who work there. Because people are the heart 

of our business and yours. 

Speak to a Liberty Accredited Financial Adviser or 

Employee Benefits 

2018 SUNDAY TIMES TOP BRAND AWARD 2021 PMR AFRICA GOLDEN ARROW AWARD 

Liberty Group Limited (Reg. no. 1957/002788/06) is a licensed Life Insurer and an Authorised Financial Services Provider (FAIS no.2409). Terms and Conditions, risks and limitations 

apply. For more details about benefits, guarantees, fees, tax, limitations, charges, contributions or other conditions and associated risks, please speak to a Liberty Accredited Adviser 

or visit our website.

BLUE 

CHIP 

BLUE 

CHIP 

On the money 


The Collaborative Exchange and foreign exchange 

The 2021 South African Discretionary Fund Manager Survey 

The Collaborative Exchange is delighted to release its 2021 South African Discretionary Fund Manager Survey, 

following our inaugural report in 2019. 

Key findings to note: 

• With global passive investments solution integration growing 

significantly – and environmental, social and governance (ESG) filters 

becoming increasingly important in portfolio construction – coupled 

with the rise of alternative strategies, this complexity is now beyond 

the reach of the average financial advisor. 

• In the South African investment landscape, passive strategies have 

not been implemented as broadly as global markets. Only 18% 

passive/rules-based solutions have been implemented across the 

local investment Discretionary Fund Manager (DFM) market and 25% 

across global DFM solutions. 

• Global themes of asset management fees pressure are now being seen 

locally. A large focus on the end investor’s costing has resulted in a 

downward shift of total investment charges. The ASISA multi-asset 

high equity category average investment charge (TIC) across all DFM 

participants is 1.24% versus a 1.5% average fee across the ASISA multiasset 

high equity category. 

• The large DFM players with scale, extensive research capabilities and 

technology that makes the financial advisor’s life easier to report to 

clients, as well as good distribution, will increasingly dominate. We 

would not be surprised if there were several corporate actions and 

mergers as competition in this sector intensifies. 

For more information visit: www.thecollaborative.co.za 

CEASING TAX RESIDENCY 

The process to cease South African tax residence has become a central point 

of discussion since the National Treasury suggested the amendment of the 

foreign exemption to render foreign earnings taxable. 

The most important aspect of the ceasing of South African tax residence 

is the deemed disposal of worldwide assets in terms of Section 9H of the 

Income Tax Act (the ITA). The primary reason for the option in tax returns 

to notify SARS of a taxpayer’s change of tax residence was to ensure that 

the capital gain from the deemed disposal of the taxpayer’s assets was 

included in the relevant return. 

However, this created confusion regarding the process to cease South 

African tax residence. Many tax professionals advised that simply “ticking 

the box” would be sufficient. SARS changed its approach for the 2022 tax 

year and removed the option to “tick box” to ensure taxpayers notify SARS 

of their non-residence. This enables SARS to conduct a thorough review of 

each taxpayer’s tax status. 

With SARS’s new approach, a taxpayer can open their 2022 tax return 

and see if their “Taxpayer ceased to be a tax resident of the RSA” box 

has an X in it and whether it reflects the date on which they ceased to 

be a resident. If the box is not prepopulated with an X and the date, 

then the taxpayer is not recognised as a non-resident for tax purposes 

on SARS’s systems. It is evident that taxpayers who simply “ticked the 

box” in previous returns and who did not formalise their non-residence 

subject to the strict review by SARS, do not have a prepopulated ceased 

to be a resident box in their 2022 tax return. The box will be greyed out 

and the taxpayer will need to formalise their non-residence through 

the manual route which is commonly referred to as Tax Emigration. It 

is important to note that taxpayers who underwent the process of Tax 

Emigration after the submission of their 2022 tax return will not have 

their ceasing box automatically updated and need to ensure they are 

in possession of their Notice of Non-Resident letter. 

By Reinert van Rensburg, expatriate tax legal specialist, and Jonty Leon, managing partner, attorney and tax practitioner at Leap Group

Linking precision investment 

management to expert 

financial advice. 

Volatility Anxiety 


portfoliometrix.com 

PortfolioMetrix Asset Management SA (Pty) Ltd is authorised and 

regulated financial services provider operating in South Africa, 

regulated under the Financial Advisory and Intermediary 

Services Act 37 of 2002 (FSP No: 42383).

BLUE 

CHIP 

On the money 


Listen up and see the light 

FINANCIAL SERVICES, LISTEN UP! 

Created by Iress, Upfront is the bold new financial services podcast that’s 

taking on the industry’s challenges and helping build financial services 

businesses people truly love. Hosted by comedian Olga Koch across 

10 episodes, Upfront deals with the questions everyone is too afraid to 

ask in a series of bold and frank conversations about what’s right – and 

wrong – with financial services today. In each episode, outspoken experts 

share their upfront views on what the industry needs to do to appeal to a 

broader, more diverse audience and how financial services businesses can 

make themselves more engaging, relevant and memorable. 

Each episode includes bonus content from our guests, plus a free guide 

to building a financial services business that stands out on the Upfront blog: 

www.iress.com/upfront. 

For further details, please contact: 

Imran Majid 

Mobile: +44(0) 7837 647 618 | Email: imran.majid@iress.com 

Upfront is available where you get your podcasts: 

https://lnkd.in/ekjx-q5c 

NATIONAL TREASURY SHEDS LIGHT 

ON RETIREMENT REFORM 

In a recent conference, National Treasury acting director-general, 

Ismail Momoniat, explained the National Treasury’s views on the 

governance of umbrella funds and the CoFI Bill. 

Umbrella funds 

As it is uneconomical for smaller employers to maintain a retirement 

fund for their employees, they often join a multi-employer retirement 

fund or umbrella fund. Momoniat said some of the governance issues 

that have arisen with umbrella funds include employers not paying 

contributions, the inability of employers to switch between umbrella 

funds, costs, over-dependence on service providers for advice and 

the appointment of board members who are also consultants/service 

providers to the same fund. Proposed solutions include requiring that 

board members cannot belong to more than three boards in a year, 

prescribing an ongoing value-for-money evaluation of the umbrella 

fund, and a disclosure-based initiative requiring funds to provide 

information on their cost structures. 

There should also be standardised provision of information to 

enable employers to make comparisons and promote competition 

among umbrella funds. Momoniat said South Africa could implement 

elements of the UK Master Trust Scheme and the Chilean Pension 

auction system to enable stand-alone funds to select and appoint 

default “consolidation” or auto-enrolment funds when they need them. 

These elements would be regulated under the auspices of the Financial 

Sector Conduct Authority (FSCA). 

CoFI Bill 

The Conduct of Financial Institutions (CoFI) Bill will be tabled in Parliament 

later this year. The Financial Sector Regulation Act (FSRA) gives customers 

and financial institutions an indication of what to expect from financial 

sector regulators, while the CoFI Bill outlines what customers and industry 

stakeholders can expect from financial institutions. The Pension Funds 

Act (PFA) is being amended to align with the CoFI Bill and the overall 

framework in terms of the FSRA. The PFA will be renamed the “Retirement 

Funds Act”, to better reflect the types of funds which are provided for and 

regulated by this statute. 

References to “pension fund organisation” and “fund” are being 

amended to refer to “retirement fund”. Umbrella funds and employers 

as supervised entities will be recognised. Momoniat said that all public 

sector retirement funds, including the Government Employees Pension 

Fund (GEPF) will be subject to the same legislative and regulatory 

requirements, to ensure that members of all retirement funds enjoy 

similar protections and rights. 

By Joon Chong, partner, and Raeesah Shaik, candidate attorney from Webber Wentzel

BLUE 

CHIP 

COLUMN 

Finding the balance 

The balance in the workplace, the balance in the family and the balance between the two. 

Florbela Yates, 

Head of Equilibrium 

Florbela Yates is the head of 

Equilibrium in the Momentum 

Metropolitan group. 

Equilibrium is an independent 

discretionary fund manager 

that partners with financial 

advisors to help them enable 

their advice outcomes. 

Equilibrium brings balance to 

an advice practice by delivering 

services and investment 

solutions to help clients achieve 

their defined investment goals. 

Looking back on my career over the past 

25 years, I am amazed by the progress 

made to transform the financial services 

industry into one which recognises 

that our differences often result in better 

outcomes. Long gone are the days where I’d 

walk into a boardroom and be the youngest 

person or the only woman. However, I am 

still shocked whenever I see how few women 

are represented on boards both globally and 

locally. I also know how far we have come. 

Looking at the South African financial 

services industry, I immediately think of Emrie 

Brown, the newly appointed CEO of RMB, 

Delphine Govender, CIO of Perpetua Investment 

Managers and Nerina Visser, director at etfSA 

Portfolio Management, to name just a few. 

Within our own group, we have Jeanette 

Marais, deputy CEO of Momentum Metropolitan 

Holdings and CEO of Momentum Investments, 

Nontokozo Madonsela, group chief marketing 

officer, Sonja Saunderson, CIO of Momentum 

Investments, and Hymne Landman, head of 

Momentum Wealth. These are all exceptional 

women who have worked hard to get to the top. 

I do believe in the power of diverse thinking. 

Of all the businesses that I have been involved 

in, the ones that grew the fastest were the 

most innovative, had both happy staff and 

clients, were made up of strategic leaders 

who surrounded themselves with teams 

of individuals from different backgrounds, 

combined youth with experience and then 

shared their learnings but encouraged debate 

and were willing to explore new ways of doing 

things. Doing what you always did often 

results in you staying where you are, while 

competitors overtake you in the race that is life. 

I often joke with my colleagues that because 

I am female, I can multitask. And while this is 

said in jest, it has some truth to it – women 

are used to balancing multiple balls. Research 

conducted by statista.com showed that in 

South Africa, 42% of households were headed 

up by women and that 38% of all households 

rely on the income of females. Yet, on average, 

women earn 35% less than men for doing the 

same job. That hardly seems fair, especially if 

you add to that the responsibility that many 

South African women often play in supporting 

extended families. And the support isn’t only 

financial, it’s emotional as well. 

But our family isn’t complete without the 

male role models. My husband’s perspective is 

insightful and valuable and he has the ability 

to see things through an entirely different lens, 

which brings calmness and clarity to so many 

situations. This is no different in the workplace – 

I am blessed to be surrounded by younger men 

and women, who teach me every day how to 

do things differently and often more efficiently. 

Every person has a 

contribution to make and 

we are only as strong 

as our weakest link. 

I am grateful to every person who takes the 

time to share a little bit of their wisdom with 

me, so that I can improve. They point out my 

blind spots and show me new points of view. 

Every person has a contribution to make and 

we are only as strong as our weakest link. So, 

it stands to reason that we need to appreciate 

and care for each other. 

As the mother of two gorgeous girls, Julia 

(19) and Megan (17), I believe that as women, 

we need to be role models to younger women 

and show them that their opinions count, 

their learnings matter, that they can balance 

a family and a career and that like those 

before us, we have a duty to mentor the next 

generation. Just as it takes a village to raise 

a child, so it takes an entire (diverse) team to 

generate value. 

Equilibrium Investment Management (Pty) Ltd (Equilibrium) (Reg. No. 2007/018275/07) is an authorised financial services provider (FSP32726) and part of Momentum Metropolitan Holdings Limited, rated B-BBEE level 1.

COLUMN 

BLUE 

CHIP 

“No” is a word 

And one that’s worth its weight in gold. 

Rob Macdonald, Head of 

Strategic Advisory Services, 

Fundhouse 

Rob Macdonald has held 

several senior positions in 

the investment industry. 

At Fundhouse, he acts as 

a consultant and coach 

to financial advisors and 

develops and facilitates 

training programmes in 

behavioural coaching and 

practice management. Before 

joining the financial services 

industry, Macdonald was 

MBA director at the UCT 

Graduate School of Business. 

He is co-author of the book 

Rethinking Leadership and has 

consulted, written and spoken 

widely on a range of topics. 

Macdonald has a Master’s 

degree in Management 

Studies from Oxford University 

and is a CFP® Professional. 

I 

recently took a road trip with my family 

through the Karoo and spent a night in 

Prince Albert. We had dinner with friends on 

the stoep of a restaurant watching Karoo life 

meander along the road. Very peaceful – apart 

from a loud patron sitting on his own who 

clearly had drunk too much and was shouting 

animatedly into his cellphone. Fortunately, 

this gentleman left before our irritation levels 

rose too much. 

As we finished our meal, we had some 

unexpected excitement with a police car racing 

up the normally quiet road followed closely 

by another big civilian bakkie. It seems the 

loudmouthed patron had left without paying 

his R800 drinks bill and the local police, with 

the help of the restaurant’s security manager, 

weren’t letting him get away with it. In a small 

town, there are not many places to hide and 

before we had paid our bill, the gentleman was 

back at the restaurant under police escort to 

do the same. 

It turns out that he had drunk 31 tots of 

whisky. No mean feat and no surprise that he 

forgot to pay his bill. All the onlookers to this bit 

of comedy drama commented on what an idiot 

this guy was. I have to say my family and friends 

had the same view. But on further reflection, 

I wondered who the idiot really was… the 

patron, or the premises? 

To serve 31 tots of whisky to one person is 

beyond idiotic. In fact, it’s incredibly dangerous. 

Thank goodness this guy had a strong 

constitution, so the worst consequence of his 

activity was some memory loss. Not only did he 

forget to pay his bill, but he also left his cellphone 

on the table when leaving. Not the sign of 

someone intent on doing a runner from their bill. 

Now I’m sure you’re wondering what this 

story has to do with financial planning. Well, 

I’m yet to meet a financial planner who hasn’t 

had at least one client who wants too much of 

a bad thing. 

They want to spend too much money; or 

drawdown too much from their investments 

or switch their investments too often. The list 

goes on. When I ask financial planners about 

what they do with clients who want too much 

of a bad thing, the answer is invariably: “It’s their 

money, it’s their life, so as long as they sign a 

disclaimer pointing out the risks and that this 

is not my advice, then that’s fine.” 

This is a bit like the waiter coming over to 

the patron after his 10th whisky and instead 

of saying, “I am sorry you can’t have any more,” 

rather gets him to sign a disclaimer that if he 

drinks anymore whisky, it’s his responsibility. 

Outrageous and dangerous, I am sure 

you’ll agree. But is it any more outrageous 

when a client signs a disclaimer because a 

financial planner doesn’t think what they are 

doing is sensible? 

I’m yet to meet a 

financial planner who 

hasn’t had at least one 

client who wants too 

much of a bad thing. 

Another approach a financial planner can 

take is one that I learned from a parenting 

coach when my children were small. She 

pointed out that many parents forget that 

“No” is a word. So, when you next have a client 

who wants too much of a bad thing, don’t be 

afraid to say, “No.” 

If your client doesn't want to listen to you, 

then they probably are not a client you want 

anyway. At least your client will be taking 

full responsibility for their decisions, without 

the need of a disclaimer that may or may 

not be worth the paper it’s written on. The 

disclaimer is the path of least resistance. But 

professional financial planners ideally know 

that “No” is a word, and one that is worth its 

weight in gold. 


21

BLUE 

CHIP 

COLUMN 

CryptoMania 

There may even be a future for Bitcoin as an asset. 

Kobus Kleyn, CFP®, Tax 

and Fiduciary Practitioner, 

Kainos Wealth 

Kobus Kleyn has published 

over 200 articles and authored 

three books. He is a multiple 

award-winning professional 

and holds eight memberships 

with professional associations. 

His most recent awards were 

lifetime achievements awards 

from the FPI (Harry Brews), The 

Million Dollar Round Table (Top 

of the Table Life Membership) 

and Liberty Group (Life 

Membership) in 2021/22. 

In my second column, I will focus on one of the most 

topical issues for financial professionals, namely 

crypto. People widely refer to cryptocurrency, 

but crypto assets seems to be the term more 

frequently used today. I have combined these two 

terms into what I call CryptoMania, as per the title of 

my book on the subject matter. 

I launched CryptoMania on 1 April 2018 (April Fool’s 

Day) as the only independent book on Amazon about 

crypto, with a view on both sides of the coin, and I 

believe it is still the case today. Although I will refer in 

my column to Bitcoin only, it would have relevance to 

all altcoins (alternative coins), as Bitcoin is the mother 

coin. I am not going into the history of Bitcoin and will 

instead focus on the principles and future of Bitcoin 

and crypto as I observe it. 

The whitepaper on Bitcoin always designed it as 

a cryptocurrency with a restricted supply of Bitcoin 

of 21-million. Why is Bitcoin being used as a crypto 

asset with no intrinsic value and not primarily as a 

cryptocurrency? This is where I believe a severe fault 

line is developing within the crypto industry. When 

something designed for one use is being abused for 

another purpose, questions must be asked. 

When Bitcoin is not used as a currency by most 

holders but as a speculative asset, we should not 

be surprised by its volatility and regular crashes. 

Over the last ten years since it launched, we have 

seen 15 significant hits above 30%, with four at 

50% plus and three above 80% plus. We are busy 

with number 16 as I write this column. Over the 

last 10 years, it has only not crashed in three years. 

We all know a currency requires stability, which is 

not the case with Bitcoin, but also not with any 

of the 19 000 plus alternative coins, including the 

so-called Stable Coin, which was supposed to peg 

against the dollar. 

If Bitcoin as an asset class has no intrinsic 

value, why is not only the herd climbing into 

Bitcoin but also significant institutions? It is a 

case of fear of missing out (FOMO), as we often 

see when it comes to investment opportunities. 

It brings me to the greater fool theory that 

argues that prices go up because people can sell 

overpriced assets to a “greater fool”, whether or 

not they are overvalued. That is, of course, until 

there are no greater fools left, which is not the 

case yet with Bitcoin, but we see it happening 

with many alternative coins regularly. 

According to the greater fool theory, investing 

means ignoring due diligence on valuations and 

other relevant data. It means people subscribing to 

the greater fool theory could be left holding the bag 

after a correction, as we are currently observing again. 

I launched my book on April Fool’s Day for a reason, 

to make a point. 

I, for one, believe there is a considerable future 

for crypto if used as a currency. It may just be the 

Internet of 25 years ago. There may even be a future 

for Bitcoin as an asset, but then someone or the 

investment industry must find a value for it to be 

used as an asset class. I believe blockchain has a 

much bigger future. Remember that blockchain 

does not need Bitcoin, but Bitcoin needs blockchain 

to prevent double transactions. However, the 

blockchain technology brand is used to manipulate 

the herd to buy crypto. 

If Bitcoin as an asset class has no 

intrinsic value, why is not only 

the herd climbing into Bitcoin 

but also significant institutions? 

As financial professionals, we must be aware 

that we are not allowed to advise on unregulated 

products, and I believe the reason the Financial 

Sector Conduct Authority (FSCA), as well as many 

global regulatory bodies and governments, are 

looking at regulations for crypto. As Bitcoin has 

been designed to be decentralised and operate 

unregulated, interference by regulators will 

cause another crypto fault line in the future with 

disastrous consequences for the crypto herd, 

which the crypto whales are manipulating. My 

complimentary book with all the detail you, as an 

advisor, requires to have conversations with clients 

and investors can be downloaded from Blue Chip 

Digital at www.bluechipdigital.co.za. 


HEDGE FUNDS 

BLUE 

CHIP 

The MOST 

exclusive club is 

open, but where 

is the door? 

By Mike Titley, Business Development Fund Manager 

For many years, hedge funds in South Africa were unregulated 

and available to only the wealthiest via complicated 

structures. This changed with the introduction of the hedge 

fund regulation under CISCA in 2015, essentially opening 

the door to retail investors. With South African hedge funds being 

some of the most regulated and transparent in the world, the black 

box risky label that has been internationally attached to the asset 

class is unwarranted. Fortunately, hedge fund managers in South 

Africa have proven themselves to be more conservative than their 

international counterparts – there are several experienced South 

African hedge managers in the country, including Laurium Capital, 

that have 10- to 20-year consistent track records to prove it. 

Hedge funds are obviously not without risk, and it is very 

important how this risk is managed. Risks like liquidity, leverage 

limitations and net positioning are all regulated and integrated 

into the portfolio risk management daily. The relatively small size 

of the hedge fund industry (R73-billion according to the 2020 

HedgeNewsAfrica report) versus the long only R3-trillion makes 

it highly flexible when taking positions. As hedge funds always 

carry a sizeable cash position, the fund does not need to sell a 

position to take advantage of a new opportunity. This magnifies 

the nimbleness to exploit the full breadth of the liquid market and 

its broad investable mandate. 

Reporting has significantly improved with the regulation 

of hedge funds. Governed by CISCA, hedge funds are required 

to report fact sheets, total expense ratios and positioning. A 

concerted shift has been made by the South African hedge fund 

industry to meet investors requests for more information. 

The combination of the improved regulation, successful 

performance and improved understanding of hedge funds is 

driving increased demand in South Africa currently. In our recent 

webinar poll on hedge funds, 78% of the audience voted that 

hedge funds should receive a weighting of between 5% and 20%. 

The question asked by these interested parties now is: how does 

one access hedge funds? Where is the door? 

Given the current wording of Board Notice 90, unit trusts cannot 

make an investment into a hedge fund. The industry remains 

hopeful that this will be amended in the much-anticipated revamp 

of Board Notice 90. In the interim, the inclusion of hedge funds 

for financial advisors can either be done directly into the fund or 

via a model or wrap fund. Going direct can be quite onerous for 

retail investors given the minimum investment requirements and 

the choice of funds. A better solution would be gaining access 

to a pre-approved select list of funds via the LISP platforms. This 

would provide comfort to allocators that the hedge funds have 

passed due diligence processes and carry the LISP’s approval. They 

can then make a choice of the hedge fund strategy they require 

and split their allocation across a few funds. Although unlimited 

for discretionary investors, Regulation 28 limits single manager 

hedge funds allocations to 2.5% and fund of funds to 5%. With the 

overall hedge limit being capped at 10%, an allocator could splitfund 

their allocation to hedge across four different funds equally. 

This has not been possible up until now as no-one could find 

the door to a LISP with a selection of approved hedge funds 

available. This is changing as several LISPs are seeing the demand 

for hedge funds, allocating the research time, and adding their 

preferred funds to their platforms. If you are interested in adding 

a great diversifier to your portfolios, offering equity-like net returns 

at lower volatility or elevated returns at market-like volatility, then 

please contact your preferred LISP consultants to motivate for 

hedge funds to be added to their platforms.

BLUE 

CHIP 

DFM 

Do DFMs 

add value? 

Blue Chip sat down with Florbela Yates, 

head of Equilibrium, to understand the 

true value proposition that discretionary 

fund managers offer financial advisors. 

Florbela Yates, Head of Equilibrium 

Florbela, what is the difference between advisory and 

discretionary investing? 

Advisory refers to someone that gives advice. It usually 

relates to financial advisors who have a Category I licence. 

They can recommend funds that they think are suitable 

based on risk profiling their clients but don’t manage the 

investments themselves. 

Discretionary investing refers to someone in 

possession of a Category II licence – as the name 

suggests, discretionary fund managers (DFMs) have full 

discretion to manage portfolios within the parameters of 

an investment mandate. The investor signs an investment 

mandate upfront that governs the parameters within 

which the DFM needs to apply their skill. For example, 

the mandate might dictate the portfolio’s investment 

outcome (or benchmark), set a predetermined risk 

budget as well as stipulate the investment time horizon 

and targeted level of drawdowns. 

The DFM will then need to make investment decisions 

to make sure that they optimise the investment portfolio 

to increase their probability of achieving the portfolio 

outcomes. This includes determining which asset 

classes to be invested in, what investment styles they 

need exposure to as well as selecting the appropriate 

underlying funds. Managing the portfolio and everything 

that comes with it (eg asset allocation calls, portfolio 

construction and any changes to these) are made by the 

DFM. Within the ambits of the mandate, the DFM makes 

decisions without having to confer with the client. 

The DFM decides which investment managers have 

skill in different asset classes and whether to execute 

passively, actively, utilising smart-beta strategies or 

through a combination of these. At Equilibrium, we 

don’t believe that there is only one way to execute our 

portfolio construction process. And so, we prefer to use a 


DFM 

BLUE 

CHIP 

combination of styles and strategies that we believe are best in 

each asset class, to build truly diversified portfolios for our clients. 

Why should a financial planner use a DFM? What are the benefits? 

Firstly, the investment market is very complex and there are so 

many different funds that it makes it difficult for advisors to be 

able to really evaluate the benefits of every fund, and this has 

been exacerbated by the constantly evolving legislative pressures. 

The introduction of the FAIS, FICA, RDR and POPIA legislation as 

well as the compliance burden on advisors has resulted in an 

increase in the costs of running their practices and personal time. 

By partnering with a DFM, the advisor frees themselves up to 

spending more time on giving clients advice. 

When Equilibrium partners with a financial advisor, we try to 

understand what their challenges are and how they give advice. 

We pride ourselves in building portfolios that are closely aligned 

to the advisor’s value proposition 

There are also benefits that a Category II licence offers that 

a Category I licence cannot. The Category II licence allows 

us to implement changes across all investors in a particular 

portfolio simultaneously. Whereas an advisor needs to get 

signed switch forms from each client, we literally make the 

changes at the touch of a button. Another advantage comes 

from the consolidated reports that we produce for advisors 

which look through to the underlying holdings with each 

investment manager. This negates the need for advisors to rely 

on often out-of-date information provided in factsheets to try 

to calculate the total combined asset class exposure and the 

performance of their clients’ overall portfolio. 

It’s often said that there is no such thing as a free lunch, 

but in investments, diversification is the only free lunch. At 

Equilibrium, we believe in building truly diversified portfolios, 

but we also believe in ensuring that we are not chasing 

investment performance at all costs. Our process allows us to 

make deliberate decisions around the level of drawdowns that 

we would be comfortable with over shorter time periods. For 

example, in our conservative portfolios, we are conscious that 

investors often can’t tolerate big capital losses. Although we want 

to outperform inflation and make sure that we are building real 

wealth for our clients, in these portfolios we allocate the risk 

budget to make sure that clients don’t lose more than 2% over 

any rolling 12-month period. This affects the amount of offshore 

and growth assets that we would be comfortable including in 

the portfolio. In these portfolios, we typically take less offshore 

exposure because the rand is volatile. 

I believe this is probably one of the reasons why we haven’t 

seen our investors down-risking between portfolios during the 

past few years. And it’s also the reason that our clients have had 

a higher hit-rate than the average South African retail investor. 

In other words, their ability to achieve their personal investment 

goals has been better. 

Lastly, there is often a fee benefit to partnering with a DFM. 

Investors should always look at the Total Investment Cost (TIC) 

they pay for any portfolio. If they are using a DFM, this would 

be calculated by combining the TIC of each of the funds they 

are invested in with the DFM or portfolio manager fee that the 

DFM charges for their services. Most of the larger DFMs have 

been quite successful at negotiating preferential pricing with the 

underlying investment managers, so that the total TIC is often 

very competitive with that of balanced funds. 

At Equilibrium, our clients have reaped the benefit of a 

reduction in fees over the past few years. As our total assets under 

management have grown, so has our ability to negotiate better fees 

because many investment managers offer sliding fees or better fee 

classes for larger assets. Where we can negotiate preferential fees, 

we pass those directly and fully onto underlying clients. While each 

individual advisor can only negotiate fees based on their book size, 

we have the advantage of combining the assets of all the advisors 

for whom we manage assets, thereby giving us better scale. 

Regulation in South Africa has forced advisors to revisit what 

they do. Please expand. 

The Retail Distribution Review (RDR) was introduced to 

professionalise both the financial advisory and investment 

management industries. It is a great piece of legislation that has 

forced advisors to rethink their value proposition. 

There are a portion of advisors who have chosen to focus 

on investment management as part of their value proposition, 

but they are not licensed to manage assets. Selecting funds and 

managing portfolios require completely different skills. What 

we have seen in the industry is an evolution of advice. There are 

advisors who have evolved from being generalists (ie advising 

on risk, funeral, health, tax and investments) to focusing on their 

investment book as well as investment advisors evolving into 

wealth businesses offering more holistic advice to high-net-worth 

clients and often extending this to inter-generational solutions. 

And there are others who have identified an opportunity to 

diversify their earnings stream and have obtained a Category 

II licence allowing them to be advisors as well as investment 

managers. Many other advisors realised that they didn’t have 

the time or expertise to manage assets and decided to focus on 

what they do well (give advice) and rather partnered with a DFM 

to manage their clients’ assets. If that partnership is right, it brings 

a lot of value to the advisor. 

The partnership allows the advisor to outsource the investment 

side to an investment manager. An investment manager who 

has a discretionary mandate, like Equilibrium, actively manages 

a portfolio on a day-to-day basis. It is up to us to decide what 

the appropriate asset classes and time frames are and to select 

underlying funds or investments appropriate to that mandate. 

For example, a conservative portfolio has a shorter time 

horizon, so we invest in more conventional asset classes and 


25

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DFM 

mandate some of the fund managers to have a capital protection 

or preservation mindset. In aggressive portfolios, we take more 

risk because we have the time and the investors in these portfolios 

don’t mind a bit of volatility as their focus might be more on capital 

growth than on capital protection. 

All investors in a portfolio get the benefit of decisions on the 

same day under a Category II licence. From a Treating Customers 

Fairly perspective, clients are all treated the same at the same time, 

which is a big advantage of partnering with a DFM. 

The complexity of legislation and the fact that FAIS has 

professionalised the industry has led advisors to partner with 

DFMs who manage assets on behalf of the clients. It is up to the DFM 

to understand what is happening in the market and how different 

asset classes are performing. 

What is the potential growth of the DFM sector? 

We have seen huge growth in the DFM industry both locally and 

internationally as advisors grapple with the increased demands 

on their time. The legislation requires Category II licence holders 

to have the necessary expertise to operate as such. This requires 

specific skill and training but also necessitates the required 

resourcing within a DFM to offer all the services. 

Although the market has grown, not all DFMs are equal. Some 

manage only in-house funds, some specialise in limited areas 

and others offer the full spectrum of Category II services from 

strategic and tactical asset allocation, manager research, strategy 

optimisation, quantitative tools, full attribution reporting and 

portfolio construction to MANCO services. 

There are Category II licences out there that aren’t fully 

resourced. In these instances, they often appoint a sub-investment 

advisor (or DFM) to help them in the areas where they may not 

have the necessary skill. For example, they might have asset 

allocation skills but lack portfolio construction skills or they 

might be good at identifying equity managers but are not 

skilled in the fixed income or hedge fund market. I think there 

is going to be consolidation. 

Another factor is how many of those are not necessarily 

true DFMs in that they do not manage third-party assets. In 

South Africa, there are maybe 12 true independent DFMs who 

manage on behalf of independent financial advisors and six 

of them are large. There are a lot of what I call in-house DFMs, 

who manage for their own network group type assets, that’s a 

little bit different. 

Do you think that there should be more consolidation? 

There is no doubt that the discretionary fund market is 

growing so if the percentage of assets that are managed by 

DFMs is increasing and advisors are starting to outsource more 

to DFMs, I think there will be opportunity for new entrants. 

But running an investment management business isn’t easy. 

Professional skills and tools are expensive and attracting 

assets is critical. One of the best tools to secure assets is a proven 

track record. 

I guess the challenge for new entrants will be in their 

differentiators. We need to remember that adding new model 

portfolios to platforms is costly and often leads to operational 

inefficiencies. Platforms are becoming increasingly hesitant to 

keep adding funds that don’t attract assets. This puts pressure 

on all investment managers and DFMs to make sure that they 

are bringing in the assets. 

For advisors and investors, more choice makes it even more 

difficult to evaluate the best option. In South Africa, we are 

spoilt for choice. We have phenomenal investment managers. 

The challenge is in identifying what each investment manager 


DFM 

BLUE 

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is good at and then determining whether their fund’s benchmark is 

aligned to the outcome that an investor is looking for. 

We have started to see consolidation across investment 

managers reaching an all-time high over the past few years, and 

the same is true of platforms. I believe there will be a point at 

which the industry will become too saturated and we will start 

to see consolidation. There is an opportunity for certain new 

entrants, but size is very important. DFMs with large investment 

teams but small assets are often not profitable. Investment teams 

cost money to run. They need sizeable assets, and I would argue 

that if they’re trying to compete with the larger DFMs, unless 

they are niche, you may find consolidation in that space. So, the 

small houses trying to compete with the larger independent 

DFMs are probably under pressure. 

Is the DFM’s service to the advisor worth the cost? Do DFMs 

generate investment alpha? 

If they are providing the benefits that the advisor is looking for 

then I would argue yes, but they should provide the service at 

an appropriate fee. There are a range of fees that DFMs charge 

and it is important to understand what you are getting for that 

fee. Just like you would evaluate an investment manager on their 

performance, you should evaluate whether your DFM’s portfolios 

are performing. Traditional investment managers and DFMs add 

value after fees so it is essential to look at the after-fee experience 

rather than before fees. 

An advisor needs to evaluate the level of benefits they receive. 

Are you getting strategic and tactical asset allocation, manager 

research, portfolio construction or is your DFM only giving you a 

couple of these? 

The DFM fee cannot be looked at in isolation, you need to 

combine the DFM and the underlying portfolio manager fees 

and compare the total to what you would pay if you bought 

the funds directly. The DFM market has grown so the ability 

to negotiate preferential fees with underlying investment 

managers has improved. If you compare the DFMs’ total 

investment charges to the charges that retail investors could 

get going directly to underlying funds, you will find that you 

are getting very good value for money. A DFM does charge a 

fee for this professional investment service, but it is not that 

fee in isolation – it is the total investment charge that needs 

to be compared and then the performance after all those fees. 

You need to look at how your DFM is performing. Are 

they generating alpha? You should compare this to how 

a traditional manager generates alpha. It is important to 

understand what you’re getting. Whether using a DFM or 

a fund, is the benchmark aligned to your objective as an 

investor? If you are looking to out-perform inflation, you 

need to ask yourself is that DFM, single manager or multimanager 

portfolio giving you what you are looking for or is 

the benchmark completely misaligned? 

Certainly, professional DFMs add value. It is difficult to 

compare them because not all of them have funds and fund 

of funds. Many execute through model portfolios and there 

isn’t really a formal benchmark survey for that. The DFM 

survey produced by The Collaborative Exchange is a start 

but certainly not enough. Not all DFMs participate and some 

participants do not include their full range of portfolios. I 

would love to see a more formal industry survey with strict 

minimum criteria similar to the institutional surveys produced 

by some of the asset consulting firms. Just like there are good 

investment managers and some not so good investment 

managers, I believe the same is true of the DFM industry, not 

only in South Africa but globally. 

Equilibrium Investment Management (Pty) Ltd (Equilibrium) (Reg. No. 2007/018275/07) is an authorised financial services provider (FSP32726) and part of Momentum 

Metropolitan Holdings Limited, rated B-BBEE level 1.

BLUE 

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DFM 

THE POWER 

OF BALANCE 

Momentum Investment Consulting has rebranded 

with a new look and a brand-new name: Equilibrium. 

Blue Chip speaks to Florbela Yates, Head of Equilibrium, 

about the evolution of the discretionary fund manager. 

Florbela, why are you rebranding? And why the name Equilibrium? 

The definition of equilibrium is “a state in which two opposing 

forces or influences come together to achieve a state of balance”. 

Equilibrium is all about balance, two sides of the equation, and we 

feel that this encompasses what we stand for as a business. 

Our business has always been about balance: 

• Balancing the ability to scale our business by getting assets 

into our standard portfolios with the advisors requiring more 

bespoke portfolios aligned to their advice process. 

• The balance between creating efficiencies in advice 

practices and producing simplified investment reports, 

while providing sufficient detail that our reports meet our 

internal governance standards. 

• Balance between understanding which areas of our investment 

process we can adapt to be more client-centric and which 

absolutely need to be standardised. 

As the business has evolved, our ability to balance the 

different elements has improved. Our business has grown 

significantly over the past five years and particularly the 

last two. We have built a sizeable and credible business 

and it seemed an appropriate time to rebrand to a name 

that better reflects our independence as a market-leading 

discretionary fund manager (DFM), while giving advisors the 

comfort that we’re owned by one of the top five financial 

services companies. 

At Equilibrium, we remain committed to supporting the 

financial advisor, so that they can do what really matters: 

building their business and spending more time with their 

clients. Our unique advice-led model portfolios are designed 

to be efficient and optimised through market cycles, so clients 

can stay invested and achieve their investment goals. 

And importantly, finding the balance between building our 

own business while realising that we are only successful if the 

financial advisors build theirs. 

As a business, Momentum has always believed in the value of 

partnerships. How does this translate to financial advisors? 

Human collaboration. Equilibrium has a different human approach 

to collaboration and the establishing of long-term reciprocal 

relationships. The success of our business rests on the success of 

the financial advisor. Our model portfolios don’t need to work for 

us – they need to work for advisors and their clients. 

Efficiencies. Without exception, advisors tell us how much 

more time they are spending on reporting and compliance. 

The volume of new legislation and complexity in reporting 

and disclosures mean they have less time with clients, and this 

has only been exacerbated by the volatility and uncertainty in 

investment markets. We align various administrative processes 

that lead to operational efficiencies, thereby saving advisors time 

and money. The use of our Category II licence also unlocks other 

administrative efficiencies such as the ability to do “bulk-switches” 

across all investors in a particular portfolio simultaneously, doing 

away with the need for advisors to get each client to sign a switch 

form. This saves them a tremendous amount of time. 

Investment management. We are an extension of a financial 

advisor’s practice. A team of experts focused on knowing the 

advisor, understanding their needs and delivering solutions that 

help build their business. 

Our understanding of both the investment management 

industry and the financial advice process allows us to narrow the 

gap between investments and advice. When an advisor partners 

with Equilibrium, we spend time understanding their process 

and which outcomes they are solving for. We can then make sure 

that the benchmarks are not arbitrary but rather that they align 

to the advice process and the outcomes that the advisor is trying 

to solve for. 

How are these outcomes reached? Portfolios are constructed 

to ensure the best chance of reaching these outcomes. A 

financial advisor doesn’t need to spend time worrying about 

which asset classes or funds to invest in, about timing the 

market or the continuously changing regulatory environment, 

but they can rather focus on their practice and giving the best 

advice to their clients.

DFM 

How are your portfolios constructed? Our portfolios are constructed 

and managed using a three-tier approach: we determine the 

acceptable time horizon and acceptable level of risk, and then use 

these to deduce a reasonable return target. 

Our portfolio construction process attains equilibrium using 

three main steps: 

Firstly, we determine the optimal strategic asset allocation – 

blending the right asset classes for the optimal risk management 

process. Then, we use the optimal combination of investment 

styles, using the most appropriate investment strategies to 

ensure consistent returns in dynamic market conditions and 

enhance our probability of achieving the benchmark or outcome. 

Our final step is to identify the optimal blend of managers or 

mandates to execute on the above. 

And we look at the result at the total portfolio level. 

Understanding what each mandate brings to the whole 

portfolio makes it easier to ensure true diversification and avoids 

concentration in certain areas. It also allows us the flexibility 

to offer clients who need it a more bespoke solution without 

compromising the first two steps in the process. 

How do you ensure that clients stay invested? By setting the 

acceptable levels of risk or acceptable levels of drawdowns, together 

with advisors, we build portfolios that make it easier for clients to 

stay invested through the cycle. And we don’t stop engaging once 

we’ve constructed the portfolios. We engage with advisors regularly 

to ensure that our clients understand the drivers of historical returns 

but also have reasonable expectations of future returns. 

We believe this is one of the key reasons that clients have 

remained invested even during periods of increased volatility and 

market drawdowns, and why clients in the Equilibrium portfolios 

have had a lower behaviour tax impact. 

What about risks and returns? At Equilibrium, we set the acceptable 

levels of risk, or the acceptable negative returns, together with 

financial advisors to reduce the impact of any behaviour tax on 

clients’ investments. 

We also engage regularly with the advisors using our portfolios 

in their advice process so that everyone is up to date with the 

drivers of historic returns, and we ensure that their expectations 

of forward returns are reasonable. 

How did Covid-19 affect business? We recently did an in-depth 

analysis of investor behaviour across clients invested on the 

Momentum Wealth Platform. Not surprisingly, 2021 was a year 

of record engagement between investors and their savings. The 

analysis revealed: 

• A total of 27 994 switches with an average switch amount of 

R169 316. 

• The range of under/outperformance was particularly wide 

(between -10% per year and 210% per year). 

We then went even deeper to try to understand the impact 

of these 27 994 switches on actual client outcomes. The reality 

is that clients investing to meet a R1-million liability (or goal) in 

five years could have missed the goal by R390 000 purely due to 

continuously chasing returns and switching between investments. 

But those that remained invested in a CPI+5% outcome portfolio, 

reduced the range of returns to between -3% to 6%. So even in a 

particular difficult year for clients, they would have still done better 

and only missed the goal by R145 000. Managing the downside risk 

and drawdowns, instead of focusing only on chasing performance, 

can reduce this behaviour tax even further. 

Please speak to us about split-funding. Most advisors believe 

that by split-funding, they are building diversified portfolios. But 

if the assets are being split-funded across managers with similar 

philosophies, size and other biases, one could actually be increasing 

the concentration risk in a portfolio. 

While split-funding on its own can lead to more concentrated 

portfolios, diversification at portfolio level requires a full lookthrough 

analysis into: 

• Asset classes 

• Investment styles per asset class 

• Investment manager execution and an understanding of 

multiple factors, including: 

• Cap biases 

• Segment biases 

• Portfolio turnover 

• Style factors and how these change through time 

• Any existing overlaps between the managers 

What about fees? The truth is that fees detract from returns. The 

higher the fee you pay, the lower the real return you receive after 

fees. That’s why at Equilibrium we 

follow two basic principles: 

The first is that we adhere to the 

treat customers fairly (TCF) principles. 

We construct from an investment 

perspective – not a marketing angle. 

Our DFM fee is applied equally 

across similar types of portfolios on 

a cost-plus basis. This means that we 

never compromise on an investment 

decision based on fees. The second 

is that we continuously review the 

fees to make sure that we remain 

competitive and that where we can 

negotiate preferential fees, we pass 

these entirely on to clients. 

The result is that clients benefit 

does from our relationships with 

managers, and we are aligned. As 

our assets grow, so does our ability 

to access better fees. All clients 

benefit, irrespective of how much 

they invest. 

Florbela Yates, Head of Equilibrium 

For more information visit, eqinvest.co.za. 

Equilibrium Investment Management (Pty) Ltd (Equilibrium) (Reg. No. 2007/018275/07) is an authorised financial services provider (FSP32726) and part of Momentum 

Metropolitan Holdings Limited, rated B-BBEE level 1.

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DFM 

CAPITAL PRESERVATION 

Glacier Invest embeds a capital preservation mindset through its risk budgeting process 

and utilises a sophisticated portfolio construction technique that allows the DFM to better 

understand and monitor the risk and reward of a portfolio. Blue Chip speaks to Rafiq Taylor. 

Discretionary fund management has become a pressing need for 

intermediaries in recent times. What has given rise to this need? 

Complexity in markets and the asset management industry has increased 

quite significantly. Intermediaries need to demonstrate that they have 

a robust investment process and solution that stand the test of time 

throughout market cycles. Discretionary fund managers (DFMs) help 

distil complexity into something that is digestible for both advisor and 

end investor – they articulate what is happening in markets and help the 

advisor’s clients stay the course. 

The DFM takes the investment burden away from the advisor. 

Regulation is stricter about advisors’ conduct. The pending retail 

distribution legislation says that advisors need to professionalise their 

advice and investment solutions attached to that advice. Ultimately, this 

has ignited the rise of DFMs. 

What makes your offering unique? We build portfolios by determining 

the value of advice, the advisor’s client base and the investment lifecycle 

those clients are in, in a more specific way. Our view is that a client in postretirement 

and a client saving for retirement shouldn’t have the same 

portfolio. That is potentially very different to how other DFMs might think. 

The typical way to build portfolios is to ascertain what the appropriate 

mix of specific asset classes is for long-term returns. This strategic asset 

allocation is a major feature of most DFMs’ portfolio management 

capability. We coin our consultative process and ourselves as solutions 

architects because we carve out an appropriate solution based on 

requirements both from an investment outcome perspective as well as 

the client’s needs. 

What is your value proposition? Define skill, scale and simplicity. 

Our investment pedigree has been there for some time. Our team 

has 20 investment specialists spanning 280 years of experience, and 

we leverage off our global multi-manager in London. This balance 

between experience and various skill sets allows us to deliver an 

investment capability that encompasses different perspectives. We 

work closely with Glacier Research, so when it comes to investment 

capability, we are one of the best in South Africa. Because we are one 

of the largest multi-managers in the country, we can leverage the 

scale allocated to the asset management industry on the institutional 

side and bring fee benefits to retail clients. Over the past four years 

we’ve managed to deliver more discounted pricing than the market 

has done on average. What we allocate to asset managers is sizeable 

and it affords us the ability to pass on fee discounts to end clients. So, 

from a scale perspective I think that’s where we come in. 

The simplicity part comes in two parts. What we do is not simple, 

but it is somewhat complex. The simplicity part is how we take complex 

concepts and deliver them in simple, digestible formats for advisors. The 

simplicity part also comes in the fact that we deliver a seamless solution 

to the client as opposed to a simple solution. 

One of the solutions that Glacier Invest has launched looks to 

address risk linked to retirement income planning. What does this 

mean and what is asymmetry? When you start drawing income from 

your retirement savings you face two risks. Longevity risk is when your 

capital doesn’t last the full retirement span. Retirees also face sequence 

of returns risk, being that the monthly return of their investment could 

affect their capital adversely while drawing income and not keeping up 

with inflation or worse, eat into their capital. If your return is consistent, 

it is easier to draw your income whereas in volatile markets you eat 

into your capital base. This is detrimental to the longevity of retirement 

savings. Glacier Invest Real Income Solutions cater for inflation, income 

withdrawals and the fees associated with a solution. We deliver this 

through asymmetry. Asymmetry is mitigating as much downside as 

possible while trying to capture the upside that markets deliver. 

Asymmetry is the crux of what we deliver to living annuity investors 

investing in our Real Income Solutions. How we do that is unique. By 

using a portfolio construction technique called Conditional Value at 

Risk (CVAR), this enhances the asymmetry giving the retiree a much 

better chance of their capital lasting their full retirement. 

What makes your solutions ideal for those drawing an income in 

retirement? Glacier Invest focuses on managing the sequence of the 

monthly returns investors receive in their portfolio through our absolute 

investment philosophy. This approach aims to manage and where 

possible reduce the volatility of the returns by combining different 

investment strategies that have low correlation to one another and 

provide diversified sources of return. 

What does the inclusion of alternatives mean for investors and 

how does this benefit them? The inclusion of alternatives serves as 

a source of return enhancement, given that these investments usually 

produce returns superior to traditional listed instruments such as 

equities or bonds issued by governments or corporations. Because 

these assets do not trade on an exchange but are valued periodically 

(usually by an independent valuation process) 

the prices of these assets tend to be more 

stable in nature and also exhibit low volatility 

in price performance. These kinds of assets 

include (but are not limited to) unlisted credit, 

mezzanine debt, infrastructure and private 

equity. The extra returns received through 

these assets come at the cost of liquidity as 

these projects usually entail being invested for 

more than five years. The other risk assumed is 

the risk that these unlisted companies being 

invested in default, hence why diversification 

and partnering with experienced investment 

managers in this space is essential. 

Rafiq Taylor, Head of 

Implemented Consulting, 

Glacier Invest

Glacier 

Invest Real 

Income 

Solutions 

A new way to ensure retirement income lasts 

Have peace of mind that retirement savings invested in living annuities will last as long as you need it to, 

with the Glacier Invest Real Income Solutions. 

Contemporary investment tools and a unique approach to portfolio construction protect and grow your 

capital, while also mitigating the risks posed by market volatility and increasing life expectancy. 

Speak to your financial adviser today about securing your future with the Glacier Invest Real Income 

Solutions. 

Glacier Financial Solutions (Pty) Ltd is a licensed discretionary financial services provider, trading as 

Glacier Invest FSP 770. 

Sanlam Multi Manager International (Pty) Ltd FSP 845 is a licensed discretionary financial services 

provider, acting as Juristic Representative under Glacier Invest. 

As Juristic Representative of Glacier Invest, Sanlam Multi Manager International (Pty) Ltd manages the 

retail investment solutions.

BLUE 

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DFM 

ADVISOR INSPIRED 

INN8 is an independent wealth management brand changing 

the way investments are done in South Africa. Launched in 2017, 

the company builds investment solutions inspired by consistent 

collaboration with independent wealth managers. Blue Chip caught 

up with them to find out more about a new addition to their brand. 

OUR MODEL PORTFOLIOS 

A complete range of solutions across the risk/return spectrum. 

OUR LOCAL 

MODEL PORTFOLIOS 

OUR GLOBAL 

MODEL PORTFOLIOS 

Flexible Income 

(2 years) 

CPI + 1 to 2% 

BENCHMARK: 

ASISA South African MA 

Income - Average 

Global Cautious 

(3 years) 

BENCHMARK: 

Morningstar EAA Fund 

USD Cautious Allocation - 

Average 

Stable Growth 

(3 years) 

CPI + 2 to 3% 

BENCHMARK: 


Low Equity - Average 

Global Balanced 

(5 years) 

BENCHMARK: 

Morningstar EAA Fund USD 

Moderate Allocation - 

Average 

Moderate Growth 

(5 years) 

CPI + 3 to 4% 

BENCHMARK: 


Med Equity - Average 

Global Equity 

(7+ years) 

US CPI + 1 to 2% US CPI + 2 to 3% US CPI + 5-6% 

BENCHMARK: 

Morningstar EAA Fund 

Global Large-Cap Blend 

Equity - Average 

High Growth 

(7 years) 

CPI + 4 to 5% 

BENCHMARK: 


High Equity - Average 

Flexible Growth 

(7+ years) 

CPI + 5 to 6% 

BENCHMARK: 

ASISA Worldwide MA 

Flexible - Average 

What is INN8 Invest and why has it been added to the INN8 brand? 

This new discretionary fund manager (DFM) proposition was 

developed in response to the needs of South African financial 

advisors who have been experiencing growing pressure and 

demands because of the changing legislative and regulatory 

environment. Advisors require both a world-class investment 

execution as well as industry-leading investment solutions. The 

addition of INN8 Invest to the brand now gives financial advisors 

access to an independent DFM, backed by the team, expertise, 

experience and track record of a significant player in the industry. 

What value does an independent DFM have in an advisory firm? 

The latest NMG survey conducted on the independent advisor 

market in South Africa suggests that 83% of wealth managers 

have now partnered with a DFM by implementing a centralised 

investment proposition into their practice. The main drivers for this 

remarkable change were driven by the need to reduce advice risk 

and the regulator’s view that there should be a clear separation 

between advice and investment management. 

Many planners have realised that their value can no longer be 

defined in picking funds and building portfolios, but rather on 

giving specialist planning advice. The job of the DFM is simple – but 

difficult – and that is to create value by achieving the performance 

objectives of clients and create practice efficiencies for advisors. 

What are INN8 Invest’s attributes? 

Pedigree. You gain access to best-in-class discretionary fund 

management expertise, successfully managing peer-relative and 

outcomes-based solutions for more than two decades. 

Power. We offer you the comfort and security of a large balance 

sheet, ensuring longevity and business sustainability, while 

empowering us to remain future-focused. We bring you breadth 

and depth of manager research capability both locally and globally. 

Performance. Consistency – less likely to be last or first – performance 

consistency is key to the DFM value proposition. A better and more 

consistent outcome for your client promotes longer relationships and 

contributes to performing in line with client expectations. 

Please provide detail on the team that makes up INN8 Invest. 

The INN8 Invest team has been providing DFM solutions since 

2011 and currently manages R35-billion in DFM strategies 

and has consistently achieved top-two-quartile investment 

performance over the past 10 years. As we deliver institutional 

quality, independent and superior DFM solutions to IFA clients, 

the scale of INN8 Invest dedicated investment and support 

teams offers significant value in supporting advisors beyond just 

investment performance, but also in helping deliver practice 

efficiencies by leveraging technology and enhanced practice 

development solutions. 

How does INN8 Invest offer investment independence? 

As an investment-led business, our primary measure of success 

is our ability to achieve contractual/mandate obligations for 

our clients. Advisors and their clients need to know that the 

investment professionals they hire operate with their clients’ 

best interests in mind. That is only possible when you are 

completely independent. 

How do you support the wealth manager of the future, especially 

in terms of navigating through the geopolitics of investing? 

It is never a good idea to panic and make significant portfolio 

changes in response to a crisis. History shows that financial 

markets can absorb a great deal of negative news and pricing in 

that information accordingly. Partnering with a DFM removes the 

risk of making irrational investment decisions based on emotions. 

What is the DFM multiplier effect? 

The multiplier is the key that unlocks the potential in an advisor’s 

practice. The DFM multiplier effect combines the power of 

partnership with the power of the relationship 

to add real value to all parties, ie investment 

alpha + practice alpha + advisor alpha. 

Please detail the enhanced diversification 

that INN8 offers to both local and global 

model portfolios. 

Diversification goes beyond asset classes 

and strategies. Additional diversification is 

provided through a multi-managed blend 

of managers as clients are not fully exposed 

to a single manager that is going through 

a period of underperformance. This assists 

your clients in reducing investment risk and 

delivers more consistent outcomes. 

Leigh Kohler, Head: DFM, 

INN8 Invest 


DFM 

BLUE 

CHIP 

Enabling growth 

for advisors 

INN8 responds to market demands by introducing a discretionary 

fund manager team under independent brand INN8 Invest. 

INN8 announces the launch of their latest advisor-inspired 

proposition INN8 Invest, an independent retail discretionary 

fund manager (DFM). The new DFM proposition was developed 

in response to the needs of South African independent 

financial advisors (IFAs) who have been experiencing growing 

pressure and demands because of the changing legislative and 

regulatory environment. 

In addition, client needs are evolving with significant 

demand for investment performance in a highly complex 

and volatile global market. These changes have resulted in 

significant growth in the DFM market over the past five years. 

“As a Group, we recognise the needs of IFAs in an increasingly 

complex environment. To support 

advisors and preserve the power of 

independent advice, we launched 

INN8 in 2017. INN8 is an independent 

advisorinspired brand focused on 

the wealth manager of the future, 

with the vision of changing the 

way investments are done in South 

Africa,” says Michael Summerton, head of marketing at INN8. 

The addition of INN8 Invest to the INN8 brand now gives 

financial advisors access to an independent DFM, backed by the 

team, expertise, experience and track record of a significant player 

in the industry. The core investment team behind INN8 Invest has 

been providing multi-manager solutions to the institutional and 

retail markets for the last 20 years (and DFM solutions since 2011). 

The team currently manages R35-billion in DFM strategies and has 

consistently achieved top-two-quartile investment performance 

for the last 10 years. The team’s consistency and credibility were 

recently recognised with a Raging Bull award nomination for 2021 

South African Manager of the Year. 

Being truly advisor inspired, INN8 

Invest can provide customised 

solutions to any South African or 

international investment platform. 

Moreover, to track record and experience, INN8 Invest offers 

complete investment independence, which is a critical cornerstone 

to the success of any DFM. While fully independent, INN8 Invest 

also offers the additional benefit of the security and support of the 

larger Liberty Group to add to investor confidence. 

“Investors are looking to financial advisors for independent 

investment guidance, especially in the uncertain global context 

of a lingering pandemic and increasing geopolitical tensions. 

The INN8 Invest proposition provides this through a unique 

combination of pedigree, power and performance attributes, 

along with its advisorcentric partnership approach,” says Leigh 

Kohler, head of DFM solutions at INN8. 

Being truly advisor inspired, INN8 

Invest can provide customised solutions 

to any South African or international 

investment platform. 

“We combine the partnership 

between ourselves and the advisor 

with the power of the relationship 

between the advisor and their clients 

to deliver additional value to all. We make the advisors part of 

the journey because they are critical as the custodians of their 

relationship with their client,” adds Kohler. 

The scale of INN8 Invest’s investment and operational 

teams offer significant value in supporting advisors beyond 

investment performance and helping deliver practice 

efficiencies by leveraging technology and enhanced practice 

development solutions. 

“We are looking forward to our evolving journey with advisors 

at INN8 Invest and will remain focused on our goals to inspire 

advisor confidence, grow client portfolios and facilitate business 

growth for advisors,” says Kohler. 


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DFM 

Why use a 

DFM? 

Veritas Wealth probably took longer than most firms to 

consider using a discretionary fund manager (DFM). We 

had not made any major errors on behalf of clients, so 

fear did not play a major part in our decision. What led 

to the implementation was a change in circumstances. 

Our business had suddenly grown from three to five CFP® 

professionals, and we asked one financial planning colleague 

to take control of fund selection. However, after a few months it 

became apparent that the person allocated to the role – although 

competent and experienced enough to undertake the task – did 

not feel comfortable taking on a responsibility of that magnitude. 

Simultaneously, regulations in South Africa were changing, 

allowing us to select from a substantial pool of international 

managers. Fellow CFPs who favoured offshore over locally 

domiciled funds told us informally that there were better offshore 

fund managers available than the existing registered shortlist in 

South Africa. We decided to investigate for ourselves, given that 

we expected to increase offshore exposure within client portfolios 

in the long term – especially for wealthier clients who had surplus 

discretionary savings. If the right partner could improve our 

selection of offshore assets, we were happy to review our model. 

Financial planning 

Since the business was founded in 2004, we have not positioned 

ourselves as investment advisors, although within the Veritas team 

we have plenty of experience in investing client assets and it was 

something we could have brought inhouse. Instead, we have 

always positioned ourselves as Certified Financial Planners, using a 

powerful but simple philosophy called lifestyle financial planning. 

When evaluating client needs, we stay in the planning role as 

long as possible. This is where we believe we can add most value. 

However, at a certain point, a plan needs to be implemented. 

Where the rubber meets the road 

We have always used multi-asset, multi-managed funds and 

balanced/managed fund mandates and as an independent firm, 


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Going this route gave us 

research scale in our business 

that would have cost us 

millions of rands to replicate. 

management industry because of their scale and, in time, to drive 

down asset management fees in South Africa. Relative to offshore 

options, South Africa still has quite a road to travel to become 

competitive. Using a DFM also gives us better access to local 

and global asset managers at a better price than we could have 

achieved on our own. 

Some financial planners are currently attracted to share 

portfolios due to the low fees. In the next few years, we think 

planners and clients will realise how clunky and inefficient 

running individual share portfolios is. Our expectation is that 

the multi-managed fund will again be the preferred solution. 

They are tidier, more tax-efficient and less time-consuming than 

dealing with a DFM. 

The tipping point will likely be when multi-managed 

funds realise they cannot charge double or triple what a DFM 

is charging. When this happens, they will re-emerge in the 

industry. What we would like to see is for multi-managed funds 

to list and report on underlying funds via their platform, rather 

than reflecting one line item. Planners and clients will appreciate 

greater detail and complexity in reporting. 

we were agnostic in terms of active versus passive. Somewhere 

along the line, we began using balanced funds directly on 

platforms locally and offshore. That may have been spurred by 

a particular corporate action or poor performance for a two-year 

period or simply the need for more options. 

Are we happy using a DFM? 

We are very comfortable with the DFM we chose. Going this 

route gave us research scale in our business that would have 

cost us millions of rands to replicate. As an independent firm, 

the nagging question for us has always been whether we could 

do it better ourselves. Ultimately, believing that bringing the 

investment function inhouse may compromise our independent 

views, we opted for the DFM route. 

Is DFM the answer to everything? 

No, it is not a panacea, but we believe it makes our planning 

process stronger. DFMs showed potential to shift the local asset 

Facing the client, outsourcing the rest 

A CFP® professional makes money by being in front of existing 

or new clients. This means any business functions that can be 

outsourced should be handed off to service providers to free you 

up. We are enjoying our relationship with 

our DFM, which adds enormous value to 

us and feels like a partner in the business. 

Our client presentations and plans feel 

more robust as a result. 

As a team, we have an in-depth quarterly 

meeting with our DFM and can interact 

with them. This is a change from going to 

an asset manager presentation, where you 

feel like you are merely an informationtaker 

rather than a partner. Having said 

that, as an independent firm we continue 

to monitor the landscape for any ways in 

which we can improve implementation of 

client financial plans. 

Barry O’ Mahony, Founder, 

Veritas Wealth 


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INVESTMENT 

Capital Gains Tax is 

no small change 

Many of us are resistant to change and, in many 

cases, look for ways to avoid it. In investments, this 

aversion is complicated by the fact that near-term 

costs – such as capital gains tax (CGT) – are offset 

with future gains which are uncertain in terms of both timing and 

magnitude. In addition to this uncertainty, the expected future 

gain as a result of making a change may not even materialise. 

However, for well-considered investment decisions, we believe 

there are material long-term benefits in making changes to an 

investment portfolio, but where capital gains tax needs to be 

paid upfront. In this article, we step through the typical thought 

process to understand the implications of making portfolio 

changes, and importantly the implications of avoiding changes. 

Why make a change to a well-considered portfolio? 

In a perfect world, we would invest in a portfolio on day one 

and leave it alone for a decade or two, with no tinkering. 

For this to happen we would need to assume a few things 

to take place: 

1. All of the underlying instruments, such as funds or shares, 

retain their investment merit and integrity over the longterm 

investment horizon which often spans multiple 

decades. This would mean that funds retain capable and 

competent management, and that the fund management 

businesses responsible continue to thrive (and survive). 

Individual shares (companies) are also required to stay in 

business, innovate and ward off competition all the while 

surviving financial crises and any manner of adversity. 

2. There are no changes to the underlying assumptions 

governing asset allocation between equities, bonds and 

cash, or local relative to offshore prospects. This is outside 

of any changes to regulations – such as those allowing 

more investments offshore in your personal capacity. 

3. There are no issues holding onto the winners that 

increasingly dominate a portfolio over time. By way of 

illustration, over the past 30 years, a simple balanced 

portfolio which started life at 60% invested in shares in 

1990, would today be 83% in shares when left untinkered 

– a significantly higher risk profile than what was originally 

set out, and likely at a time when the investor is requiring 

less risk, not more. 

Realistically, these assumptions may endure for some time, but 

history tells us that we need to be more flexible in our expectations 

to maximise wealth over time and this requires the appetite to 

make portfolio changes. 

There are a few mitigations which can reduce the need for 

making portfolio adjustments. For instance, forward-looking fund 

due diligence can help to identify problems before they occur 

and avoid allocating money to funds which will likely need to be 

sold later. Establishing a broadly diversified strategy also helps to 

balance the risk and return profile, enabling a smoother investment 


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journey and less urgency to make many smaller adjustments on a 

daily, weekly or monthly basis. 

Also bear in mind that the bulk of trading in a portfolio consisting 

of individual unit trust funds happens within each separate fund 

and shields the investor from numerous and frequent tax payments. 

Despite these mitigations, there are cases where adjusting a 

portfolio makes sense. Below we step through the two main categories 

to assess how we can factor this into our decision-making. 

Investment-linked reasons 

Firstly, changes are likely required when there has been a 

material change to the outlook of an asset class. We identify 

these opportunities to rebalance through our internal investment 

and fund research process, fund insights and internal valuation 

models. There are several examples; below 

Investment portfolios are 

living, breathing things 

which require constant 

care and attention. 

are two of the most common. 

• Selling high, buying low 

Essentially, you are selling the winners 

and buying the losers. Doing so has two 

main benefits; firstly, you maximise the 

portfolio’s return by taking your profits 

and reallocating them to a cheaper/ 

better opportunity. Secondly, by selling 

an expensive part of your portfolio, you minimise the portfolio’s 

risk. For example, taking profits on high-growth style equities 

which benefitted from the Covid-19 lockdown in 2020 and 

recycling into cheaper value style equities which were severely 

punished, was a profitable change to a portfolio. 

• Selling low, buying low 

Sometimes, there are cases where it makes sense to sell a part 

of the portfolio which is lagging and replace it with another 

opportunity which has similarly underperformed but has 

better prospects. (Selling a loser for a better loser.) This sell-low 

approach also affords the opportunity to make changes when 

capital gains costs are minimised. 

These opportunities to rebalance come and go, and mostly are “use 

it or lose it” scenarios. We have experienced numerous investors 

wanting to hold onto their past winners, and who in extreme cases 

have remained substantially undiversified and have suffered the 

consequences when these positions take a turn. The most common 

example is Naspers, often held as the largest position in domestic 

share portfolios over the past decade, and which is now 55% off its 

highs in 2021. This could be an opportune time to buy into a broadly 

diversified emerging markets fund for example – performance 

similarly weak, but many opportunities to recover given the range 

of underlying holdings, whereas Naspers is a single instrument 

underpinning a recovery of investor capital. 

This is an underutilised “escape route” from problem legacy 

holdings in our view. 

Risk or governance-linked reasons 

The second broad reason we would look to rebalance a 

portfolio is when there has been a material negative change 

and a reduction in our confidence levels in a particular fund 

manager. While we aim to mitigate these instances through 

our fund research, such changes can and do happen. In this 

instance, we are aiming to preserve the future return potential 

of the portfolio by retaining only fund managers in which we 

have a high level of conviction. Examples of issues we would 

have natural concerns with include a corporate buyout, 

significant business change or any team changes that involve 

key people in the fund or business. 

Generally, consequences come quickly or slowly. Firstly, 

in cases where the problem is evident and happens quickly, 

such as a critical member of the team 

leaving, you could see significant shortterm 

performance issues, potentially 

leading to liquidity challenges and forced 

selling within the fund which can lead 

to permanent capital loss for investors. 

Secondly, you get cases where the 

change is not significant enough to affect 

performance immediately. Instead, the 

concerns play through more slowly; in this case, you can see 

a longer-term performance drag on a portfolio which often 

struggles to correct its course. 

In both of these cases, the solution requires a fund replacement. 

These scenarios each have varying degrees of comfort for 

investors. Selling a “winner” often seems like a bad idea, particularly 

when there is a tax bill. Making a fund replacement, often on terms 

which can be opaque, or after a fund has underperformed, may lead 

investors to take their chances and sit it out. 

To make sense of these potential decisions we first need to 

evaluate whether the trade-off is sensible. 

Evaluating the cost-benefit 

Once there is a proposed change to assess, it is important to 

test whether it is sensible by comparing the costs and benefits. 

Firstly, the cost or tax to be paid. A helpful way to think about 

this is to convert it into a percentage of the total portfolio. For 

example, a portfolio with a value of R1 000 000 and, due to a 

planned rebalance, a CGT liability of R20 000. This is a known 

upfront cost of 2% of the portfolio’s assets, a material amount. 

Secondly, you need to establish the potential payoff. This is 

where it becomes tricky, as these payoffs are in the future and 

will differ depending on why you are restructuring the portfolio. 

Some payoffs are easier to establish than others. For example, the 

impact of a significant change to an underlying fund manager 

or considerable market dislocation is likely to benefit a portfolio 

in the short to medium term. However, payoffs expected over 


37

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INVESTMENT 

the longer term, such as the benefit from increased exposure to a particular investment 

style, are harder to establish. 

Ultimately, the expected future gains need to outweigh the near-term costs, and in our 

example above we would need to achieve a total return benefit greater than the R20 000 outlaid. 

In the example below, we compare two scenarios to illustrate the points above over 

a five-year horizon. Firstly, where a change is considered but rejected due to the CGT 

implications. Then secondly, where the change is agreed and implemented. 

1. A starting point where we have budgeted on an annual return of 10% after fees 

over five years. 

2. An identified issue with the current portfolio which we wish to counteract, and 

which is expected to cost 1% per year in returns if we don’t. 

3. We have also identified a return opportunity where we can hope to add value in 

future, at 1% per year benefit above the original return. 

To implement both the mitigation to the current issue identified (2 above) as well as take 

advantage of the return opportunity (3 above), it will cost 2% of the asset value of the 

portfolio today paid in taxes: 

Option 1: No change 

Option 2: Changes made 

Starting investment value R1 000 000 R1 000 000 

Original expected return per year 10% 10% 

Capital gains tax paid (2% of 

starting investment) 

- -R20 000 

Return issue identified [2] 

Original return less 

1% pa 

No impact/mitigated 

New return opportunity [3] No change +1% pa 

Final investment amount (year 5) R1.54-million R1.65-million 

Table 1: Cost vs benefit 

This simple example illustrates how incurring material upfront tax costs can be overcome 

relatively easily by making both corrective and opportunistic changes. In Option 2, the 

investor is over 7% wealthier after five years, despite paying away 2% of their portfolio 

at the outset to the tax man. Also, the investor manages to achieve a higher return 

when compared with the original portfolio, assuming no issues took place over the 

five-year period. 

The second hurdle is that paying CGT today requires cashflow that many investors do 

not want to solve at the time. How do they fund it? From the investment itself or from 

other sources, and at what cost? If the portfolio is global, do you bring more assets back 

to South Africa to fund it, or do you use local assets? These are often tricky decisions to 

make, despite being in the investors best interest. There are alternatives here such as 

endowment products which assist in shielding against ongoing tax payments. 

Investment portfolios are living, breathing things which require constant care and 

attention. In most cases, changes are required to make sure that the portfolio stays 

on track with what was originally planned. This does come with a level of ongoing tax 

cost; however, when you factor in the potential to enhance returns, mitigate risks and 

continuously reposition for the future, it is likely to make the cost worth it. 

Peter Foster, Chief Investment 

Officer, Fundhouse 


BLUE 

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INVESTMENT 

INVESTOR’S CONFLICT 

The data which can help you keep a cool investing head in a crisis 

We first published this research in the days following 

Russia’s invasion of Ukraine earlier this year. Since 

then, markets have continued to fall as investors 

focus on the longer-term outcomes of the conflict 

and how these play into other concerns including sharply higher 

inflation, rising interest rates and a potential recession. In this 

updated version of the original article, we suggest our core 

arguments continue to hold true. 

1. Stock market investing is very risky in the short run but less so 

in the long run – unlike cash 

Using almost 100 years of data on the US stock market, we found 

that, if you invested for a month, you would have lost money 40% 

Percentage of time where investors would have lost money in inflation-adjusted terms 

of the time in inflation-adjusted terms ie in 460 of the 1 153 months 

in our analysis. 

However, if you had invested for longer, the odds would shift 

dramatically in your favour. On a 12-month basis, you would have 

lost money slightly less than 30% of the time. More importantly, 

12 months is still the short run when it comes to the stock market. 

You’ve got to be in it for longer. 

On a five-year horizon, that figure falls to 23%. At 10 years it 

is 14%. And there have been no 20-year periods in our analysis 

when stocks lost money in inflation-adjusted terms. Losing 

money over the long run can never be ruled out entirely and 

would clearly be very painful if it happened to you. However, it 

is also a very rare occurrence. 

In contrast, while cash may seem safer, the chances of its value 

being eroded by inflation are much higher. And, as all 

cash savers know, recent experience has been even more 

painful. The last time cash beat inflation in any five-year 

period was February 2006 to February 2011, a distant 

memory. Nor is that something that’s expected to change 

any time soon. 

Past performance is not a guide to the future and may not be repeated. US Large-Cap Stocks, stocks and 

cash represented by Ibbotson® SBBI® US (30-day) treasury bills. Data January 1926 to January 2022. 

Source: Morningstar Direct 

2. Falls of 10%+ happen in more years than they don’t 

– but long-term returns have been strong 

By late May, US equities had fallen by approximately 19% 

in 2022. In the US, 10% falls happened in 28 of the 50 

years prior to 2022. In the past decade, this includes 2012, 

2015, 2016, 2018 and 2020. More substantial falls of 20% 

occurred in eight of the 50 years (that's roughly once every 

40 

www.bluechipdigital.co.za

INVESTMENT 

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The message is overwhelmingly clear: a rejection of the stock 

market in favour of cash in response to a big market fall would have 

been very bad for wealth over the long run. 

Past performance is not a guide to the future and may not be repeated. Data to 18th May 

for MSCI USA index. Chart shows 2022 data to 18 May. 605092. Source: Refinitiv and Schroders. 

4. Periods of heightened fear have been better for stock market 

investing than might have been expected 

A combination of the war between Russia and Ukraine, soaring 

inflation and tightening monetary policy have sent the stock 

market’s “fear gauge”, the VIX index, higher. The VIX is a measure 

of the amount of volatility traders expect for the US’ S&P 500 index 

during the next 30 days. It reached a level of 31 on 19 May, well 

six years – but if it happens this year, that will be twice in the past 

three, in 2020 and 2022). Despite these regular bumps along the 

way, the US market has returned 11% a year over this 50-year period 

overall. The risk of near-term loss is the price of the entry ticket for 

the long-term gains that stock market investing can deliver. 

3. Bailing out after big falls could cost you your retirement 

While the market hasn’t fallen too much so far, further volatility and 

risk of declines cannot be ruled out. If that happens, it can become 

much harder to avoid being influenced by our emotions – and be 

tempted to ditch stocks and dash for cash. 

Past performance is not a guide to the future and may not be repeated. Monthly cash return 

1934-2020 based on a three-month treasury bill, secondary market rate: 1920-1934 based on yields on 

short-term US securities; 1871-1920 based on one-year interest rate. This data only available annually so 

a constant return on cash has been assumed for all months during this period. Other data is monthly. All 

analysis is based on nominal amounts. Source: Federal Reserve Bank of St Louis. Robert Shiller. Schroders. 

However, our research shows that, historically, that would have 

been the worst financial decision an investor could have made. 

It pretty much guarantees that it would take a very long time to 

recoup losses. 

For example, investors who shifted to cash in 1929, after 

the first 25% fall of the Great Depression, would have had to 

wait until 1963 to get back to breakeven. This compares with 

breakeven in early 1945 if they had remained invested in the 

stock market. And remember, the stock market ultimately fell 

over 80% during this crash. So, shifting to cash might have 

avoided the worst of those losses during the crash, but still 

came out as by far the worst long-term strategy. Similarly, 

an investor who shifted to cash in 2001, after the first 25% 

of losses in the dotcom crash, would find their portfolio still 

underwater today. 

Past performance is not a guide to the future performance. Note: Levels in excess of 

33.5 represent the top 5% of experience for the Vix. Portfolio is rebalanced on a daily basis 

despending on the level of the Vix at the previous close. Data to 18th May 2022. Figures do not 

take account of any costs, including transaction cost. Source Schroders, Refinitiv. 605092 

above its average since 1990 of 20, and steeply higher than its 

start-of-year level of 17. 

However, historically, it would have been a bad idea for 

investors to sell out during periods of heightened fear. 

We looked at a switching strategy, which sold out of stocks 

(S&P 500) and went into cash daily whenever the VIX was above 

30, then shifted back into stocks whenever it dipped back below. 

This approach would have 

underperformed a strategy which 

remained continually invested in 

stocks by 2.9% a year since 1991 

(6.7% a year vs 9.6% a year, ignoring 

any costs). A $100 investment in 

the continually invested portfolio 

in January 1990 would have grown 

to be worth nearly 2.5 times as 

much as $100 invested in the 

switching portfolio. 

As with all investment, the past 

is not necessarily a guide to the 

future, but history suggests that 

periods of heightened fear, as we are 

experiencing at present, have been 

better for stock market investing 

than might have been expected. 

Duncan Lamont, CFA, Head of 

Strategic Research, Schroders 


41

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INVESTMENT 

EXTRAORDINARY 

EXECUTION 

Momentum Investments’ smart beta funds 

deliver exceptional performance 

Smart beta investing is not as complex as it may sound. At its 

core, it is an investment approach that combines passive and 

active investing. Compared to their traditional colleagues, 

smart beta fund managers consider the same input 

parameters, but their approach to the investment process differs. 

The main distinction between the managers of traditional funds 

and smart beta funds is that smart beta managers prefer objective 

numbers rather than subjective opinions. They base their investment 

decisions on quantifiable financial data rather than, for example, 

on an upbeat view expressed by management. And while their 

traditional peers may prefer certain styles, smart beta investors 

explicitly exploit investment styles such as momentum, value and 

quality. As they follow systematic processes, clients do not run the 

risk of their portfolios drifting away from their chosen styles just 

because a particular style temporarily goes out of fashion. 

Keeping things simple 

At Momentum Investments, we like to keep things simple. Simplicity 

allows for focus, and focus is key for delivering performance excellence. 

In April this year two of our funds, the R2.3-billion Momentum 

Trending Equity Fund and the R1.2-billion Momentum Value Equity 

Fund, celebrated their fifth birthday and they have both performed 

exceptionally well since inception. The Momentum Trending Equity 

Fund delivered a return of 11.8% per year, which is 5.3 percentage 

points ahead of its benchmark and 4.7 percentage points ahead of 

the average peer in the general equity category. It was ranked ninth 

out of 122 peers over this period. The Momentum Value Equity Fund 

delivered 11.5% per year, which is 5 percentage points ahead of its 

benchmark and 4.4 percentage points ahead of the average peer. It 

was ranked 13th out of 122 peers over this period. 

Annualised five-year performance to April 2022 

Source: Morningstar, IRESS, Momentum Investments 

Date: 30 April 2022 

It is important to remember that investment styles can be 

popular the one day but can fall out of fashion the next, only 

to gain traction later again. The chart below illustrates rolling 

12-month outperformance relative to the FTSE/JSE Capped Swix 

benchmark index. From the chart, it is evident that while the 

Momentum Trending Equity Fund’s strategy worked exceptionally 

well since inception until early 2021, it lagged towards the end of 

the five-year period as turbulent markets since the outbreak of 

Covid were not conducive to a trending strategy. The Momentum 

Value Equity Fund performed well until the end of 2019, then 

underperformed over most of 2020 and then suddenly started 

to outperform again from early 2021. 

While investors in both these funds can look back to stellar 

five-year performance figures, the ride was by no means 

smooth. However, investors who would have invested 50% into 

each of these two funds would have enjoyed a much smoother 

return stream. While the average performance experienced 

would still be exceptionally high, the rolling 12-month return 

figures of such a blend would almost never have dropped 

below the benchmark. 

Rolling one-year outperformance to April 2022 

Source: Morningstar, IRESS, Momentum Investments 

Date: 30 April 2022 

Paying lower fees 

Another factor to keep in mind 

when considering investing in 

smart beta funds is that because 

these funds follow predominantly 

quantitative processes, they do not 

require expensive research teams. 

The cost of running our smart beta 

business is much lower than that 

typically associated with traditional 

fund managers. This enables us to 

charge competitive fees, putting 

our clients in a materially better 

position to achieve their long-term 

financial goals. Because with us, 

investing is personal. 

Loftie Botha, Portfolio 

Manager, Momentum 

Investments 

Momentum Collective Investments (RF) (Pty) Ltd (the “Manager”), registration number 1987/004287/07, is authorised in terms of the Collective Investment Schemes Control Act, No 45 of 2002 to administer Collective 

Investment Schemes (CIS) in Securities. The Manager is the manager of the Momentum Collective Investments Scheme. Standard Bank of South Africa Limited, registration number 1962/000738/06, is the trustee of the 

scheme. CISs are generally medium to long-term investments. The value of participatory interests may go down as well as up and past performance is not necessarily a guide to the future. The terms and conditions, a 

schedule of fees, charges and maximum commissions, and additional risks are available on the minimum disclosure document (MDD) and quarterly investor report (QIR) for each portfolio which is available on www. 

momentuminv.co.za. All performance figures are net of fees and represents the A class in each portfolio.

Reimagine 

retirement 

When your clients retire, they can now enjoy certainty and flexibility in one retirement 

income solution. The Momentum Retirement Income Option (RIO) gives your clients the 

best of both worlds. By including a life annuity in the form of our Guaranteed Annuity Portfolio 

as an investment component in our living annuity (RIO), you can offer your clients the 

certainty of a guaranteed income, as well as flexibility and potential market upside. 

At Momentum Investments, we are dedicated to giving you every possible advantage to help 

your clients on their investment journey to success. Because with us, investing is personal. 

Speak to your Momentum Consultant or visit momentum.co.za 

Momentum Investment s @MomentumINV_ZA Momentum Investments 

Momentum Wealth (Pty) Ltd (FSP 657) is an authorised financial services provider. Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit 

provider (FSP 6406). The Retirement Income Option and the Guaranteed Annuity Portfolio are life insurance products, underwritten by Momentum Metropolitan Life Limited, a licensed life insurer under the 

Insurance Act and administered by Momentum Wealth (Pty) Ltd. The information in this advertisement is for general information purposes and not intended to be an invitation to invest, professional advice or 

financial services under the Financial Advisory and Intermediary Services Act, 2002. Momentum Investments does not make any express or implied warranty about the accuracy of the information herein. 

BRAVE/8133/MOM/E

BLUE 

CHIP 

BOUTIQUES 

Not everything that counts can be counted 

ESG integration is more of an art than science 

everything that counts can be counted and 

not everything that can be counted counts,” was 

once said by William Bruce Cameron in reference 

“Not 

to measuring human behaviour. Given how much 

of investing centres on human behaviour, this pearl of wisdom 

seems to have good application to the field. While one should still 

try to measure what can’t be counted, it is good to remember that 

the factors with the largest impact might be those that are difficult 

to distil down to a single number. 

This is especially relevant when evaluating Environmental, 

Social and Governance (ESG) data and incorporating it into an 

investment process. As asset managers, we spend a great deal 

of time determining the value of a 

There are over 600 ESG 

disclosure standards, which 

makes comparability and even 

accountability extremely difficult. 

company and assessing the risk of 

investing in that company. ESG is an 

important part of this. However, not 

all companies disclose decisionuseful 

information despite a 

notable increase in sustainability 

reporting globally. 

A KPMG survey1 found that in 2020, 80% of companies globally 

report on sustainability. Blackrock noted2 in their 2020 survey of 

clients that 53% of respondents cited poor-quality ESG data as 

a barrier for them to adopt sustainable investing: a classic case 

of just because something is counted, doesn’t mean it counts. 

What’s more, Ernst and Young estimates3 that there are over 

600 ESG disclosure standards, which makes comparability and 

even accountability extremely difficult. Thankfully, there has at 

least been increasing regulation on what needs to be disclosed. 

This can be seen in the proposed JSE Disclosure Guidelines, 

the Security and Exchange Commission’s Climate Disclosure 

requirements and the International Sustainability Standards Board 

coming out with global sustainability disclosure requirements. 

This is incredibly useful and a great first step towards getting 

companies to think more holistically about how they create value. 

However, it still leaves us with unquantifiable risks. For instance, the 

amount a company spends on their community does not necessarily 

tell us about the impact of the spend on that community or whether 

there are underlying issues brewing. What it does tell us is that a 

company is keeping track of that metric. This is at least a good start, 

but more in-depth measurement and reporting is required. 

Some metrics that can be measured are dependent on human 

behaviour. Take the carbon tax for example. As per Climate Action 

Tracker4, a carbon tax of at least $135 per ton of CO2 equivalent by 

2030 on the majority of GHG emissions is required to limit global 

warming to 1.5 degrees. Given the increasingly divergent views on 

balancing climate action with energy security, it’s unclear what level 

carbon prices will get to. What we can say with certainty is that South 

Africa’s carbon tax will need to increase 

from current levels of around $9 per ton 

of CO2 equivalent. This is still far below the 

levels required to limit global warming 

to 1.5 degrees. The point being that we 

must ensure that what we can count, is 

made to count! 

The fact that what can’t be counted 

counts means that integrating ESG into an investment process 

can sometimes fall more into 

the art than the science part of 

investing. That doesn’t make it any 

less important than the other, more 

quantifiable parts. 

1 KPMG, The Time Has Come: The KPMG Survey 

of Sustainability Reporting 2020 

2 BlackRock, Sustainability goes mainstream: 

2020 Global Sustainable Investing Survey 

3 Ernst & Young, What to watch as global ESG 

reporting standards take shape 

4 Climate Action Tracker, State of Climate Action 

2021: Systems Transformations Required to 

Limit Global Warming to 1.5°C 

Vuyolwethu Nzube, ESG Analyst, 

Truffle Asset Management 

C 

M 

Y 

CM 

MY 

CY 

CMY 

K 


NOT EVERYTHING THAT 

COUNTS CAN BE COUNTED. 

At Truffle, ESG analysis is important in our focus 

on downside protection through highlighting both 

opportunities and risks. Mitigating risks due to 

exposure to suboptimal ESG outcomes plays a 

critical role in the pursuit of producing superior 

long-term sustainable returns for our clients. 

www.truffle.co.za 

The value of experience. 

Truffle Asset Management (Pty) Ltd is an authorised Category I financial services provider (FSP No. 36584). Morningstar Awards 2022 (c). Morningstar, 

Inc. All Rights Reserved. Awarded to Truffle Asset Management for Best Fund House: Smaller Fund Range and Best Bond Fund, South Africa. Full details and 

basis of the awards are available from the Manager.

BLUE 

CHIP 

BOUTIQUES 

A TRIED-AND-TESTED FLEXIBLE 

FIXED INCOME APPROACH 

Multi-asset income has grown to become the largest of 

the unit trust fixed income categories. The category 

is also the most diverse, allowing a very broad range 

of instruments with varying interest rate risks. One of 

the catalysts to this growth was the development of the local credit 

market which took off in the early 2000s as government issuance 

declined and companies began to see the benefits of diversifying 

their sources of capital by adding debt to their funding mix. This saw 

the domestic corporate bond market grow rapidly, following the 

global trend and providing the ideal asset for income type funds 

as most of the issuance was high quality (investment grade) and 

paid a floating rate coupon, which comes with little interest rate risk. 

The growth in the credit market was part of a significant 

change in the local bond market which included inflation-linked 

bonds and longer dated government bonds. However, the 

different type of instruments remained siloed in their “specialised” 

portfolios like money market, income (mainly credit), inflationlinked 

and nominal bonds. What it meant was that if you wanted 

to be exposed to the full set of opportunities in the fixed income 

space, you had to invest in several funds – an offering that we 

provided to our clients. 

Increasingly, clients were asking us to manage a “blended” 

portfolio which included more than one of these offerings with 

different benchmarks (eg 70% ALBI, 20% CILI and 10% Stefi). 

Over time, this developed into our “Unconstrained Fixed Interest” 

offering, first in the institutional (2012) space and later as the 

“Visio BCI Unconstrained Fixed Interest” unit trust (2016) where 

we decided on the split between the assets with an objective of 

The unconstrained fund philosophy, 

strategy and objectives have not 

changed since its inception in 2012. 

performing in line with the All-bond Index, but with less than half 

the volatility, and materially lower downside capture. 

When launched as a unit trust, the unconstrained fund was 

unique in the category as it was not a credit fund (although it does 

invest in corporate bonds when they are deemed to offer value) 

and has the flexibility which does not limit the holding to type or 

term. Over the last two years or so, with a (relatively) shrinking credit 

market, more traditional income funds have migrated to rely on 

other sources of performance which, in 

many cases, come with higher interest 

rate risk. 

The unconstrained fund philosophy, 

strategy and objectives have not 

changed since its inception in 2012, 

suggesting that the performance 

signature is likely to remain similar 

going forward (better returns than the 

category and similar returns to the ALBI 

with much less volatility). Many other 

funds in the category, however, have 

changed from traditional income funds 

to an unconstrained lookalike suggesting 

a different (and somewhat experimental) 

performance signature to their past. 

Jonathan Myerson, Head of Fixed 

Income, Visio Fund Management 


BOUTIQUES 

BLUE 

CHIP 

SA investors 

going global 

THE DEVIL IS IN THE DETAIL 

Mohamed Mayet, CEO, 

Sentio Capital 

It’s not so simple 

The announcement that Regulation 28 will be reformed to allow 

an increase in the foreign allocation to 45% in total (the 10% 

separate allocation for Africa has fallen away) has made waves 

in the investment industry in South Africa. For years, investors 

have been waiting for the opportunity to “go max” in global to 

offset the risk of the ZAR. But is it a case of be careful what you 

wish for? As it might just happen. 

In a nutshell, more global equity in a domestic-heavy equity 

fund widens the opportunity set and provides diversification 

due to the geographic and sector diversification that the globe 

provides. It also provides exposure to global franchises which 

provide the Quality and Growth style exposure that a South 

African-only portfolio cannot provide, given South Africa’s 

concentration to cyclicality and value. But, it’s not all roses; 

higher global exposure does come with additional risks with 

the probability of higher drawdowns and additional currency 

risk that needs to be effectively managed. 

It’s all in the detail 

Our detailed data analysis and back tests have shown that while we 

all fear the volatility of the ZAR, increasing the global proportion 

in portfolios ironically increases volatility in performance and the 

actual drawdowns increase. At Sentio, we believe the inclusion of 

global in higher proportions is more about diversification and a 

wider frontier of views. This has implications for how the overall 

portfolio is managed, especially the portfolio construction and 

global factor exposure. These cannot just be managed “by default” 

and in our view, proactive management of sector, factor and asset 

allocation become paramount to managing the larger drawdowns 

and ensuring that the diversification we seek is realised. 

“Benign neglect” is not an effective global strategy 

An aggressive asset allocation strategy combined with a high conviction 

stock selection on their own will not be optimal for investors. This is 

because it relies on correlation structures being stable and ignores the 

increased reflexivity and dynamic structure of markets. We believe that 

managers need to have defined and deliberate asset, sector and factor 

allocation strategies to prevent the dilution of returns through poor 

factor and sector allocation. At Sentio, our use of machine learning and 

artificial intelligence (AI) in risk management, portfolio construction 

and stock selection means that we take deliberate risks using a scientific 

and globally competitive process. 

Established global managers or South African fund managers? 

The default position for many asset owners is to hand the assets 

over to large global houses. However, we argue that this misses 

some important interplays that affect portfolio stability and 

volatility. A portfolio that is scientifically managed by a South 

African manager to take account of the cross-section of higher 

order risks will result in better outcomes. It also adds nimbleness 

to the decision-making, which is essential in volatile environments. 

However, there are caveats. 

The South African manager needs to have a credible and 

defined global process that is differentiated on alpha generation. 

The big question is: how are you able to generate alpha ideas and 

does that rubber hit the road in the final portfolio construction? 

We believe our investment team can compete with the large 

global players using our process and technology on two fronts: 

finding alpha in a targeted approach and constructing riskappropriate 

portfolios for South African clients. Our global process 

has been tested and honed over the last 15 years and the use of 

technology allows us to effectively tailor portfolios. 

www.bluechipdigital.co.za 47

BLUE 

CHIP 

WEALTH MANAGEMENT 

The rise of family offices 

in South Africa 

South Africa’s wealthy families and individuals face 

unique challenges when it comes to managing their 

wealth given the country’s prevailing socio-political and 

economic pressures. Many high-net-worth individuals 

(HNWIs) have family-owned businesses, global assets and multijurisdiction 

fiduciary demands, which requires implementing 

a more complex structure to manage 

Family offices have distinct 

advantages for families 

who are looking to grow 

and preserve their wealth. 

their wealth. Given this complexity, 

special tax regime (STR) HNWIs are 

increasingly looking to the family office 

model to protect and manage their 

wealth in a more cohesive manner. 

The family office service has become 

a fast-growing wealth management 

segment in South Africa and Africa, 

which is hardly surprising given that the AfrAsia Bank Africa 

Wealth Report 2021 predicts that total private wealth in Africa 

will rise by 30% over the next eight years, reaching $2.6-trillion 

by 2030. Research by Knight Frank found that just less than 

4 400 individuals will join the league of ultra-high-net-worth 

individuals (UHNWIs) in Africa between now and 2026, a growth 

rate of 33%, the fastest in the world after Asia. 

The family office model offers HNWIs several unique benefits. 

Families benefit from a highly qualified, multi-disciplinary team 

of advisors who are experts in different fields of finance, both 

domestically and offshore, such as asset management and global 

tax structuring, estate planning as well as cash 

and risk management. They work together 

to make key financial recommendations 

and create financial solutions to suit the 

needs, expectations and goals of their client 

families. A family office acts as a firm of trusted 

advisors and looks at the big picture to devise 

a strategy for managing a family’s wealth in a 

comprehensive and integrated way. This also 

affords families the convenience of having their affairs integrated 

under one roof and managed with the family’s future in mind. 

Private Client Holdings is a multi-family office based in Cape 

Town that has been managing HNWIs’ wealth for the last 30 

years. It provides a hands-on and personalised approach where 


WEALTH MANAGEMENT 

BLUE 

CHIP 

clients have full access to specialist advice for all aspects of their 

wealth management. Grant Alexander, a director at Private Client 

Holdings, believes that the model not only saves their clients time, 

but also money as their investments can be structured to be taxand 

cost-efficient. 

“Family offices have distinct advantages for families who are 

looking to grow and preserve their wealth and to do so during 

uncertain times,” says Alexander.According to Campden Wealth and 

RBC, many family offices took advantage of Covid’s global market 

upheaval to implement growth-focused strategies to help UHNWIs 

grow their wealth. A total of 86% UHNW families in North America 

and 79% globally saw their wealth increase over the past 24 months. 

Succession planning is another key area where Alexander 

believes family offices have a role to play. “Should a wealth 

creator die, our team is able to provide 

support and guidance to ensure the 

family’s wealth grows and is seamlessly 

transferred to the next generation,” 

says Alexander. 

In South Africa, while some retail 

banks cater for HNW clients there are 

only a handful of companies that offer 

a bespoke multi-family office service, 

which positions this sector for substantial 

growth over the next decade. 

For more information, feel free to contact 

Grant Alexander on grant@privateclient. 

co.za or visit www.privateclient.co.za. 

Grant Alexander, Director, 

Private Client Holdings 

PRIVATE CLIENT HOLDINGS IS AN AUTHORISED FINANCIAL SERVICES PROVIDER (LICENSE #613) 

Private Client Holdings has taken care to ensure that all the information provided herein is true and accurate. Private Client Holdings will therefore not be held responsible 

for any inaccuracies in the information herein. The above press release does not constitute advice and the reader should contact the author for any related concerns. 

Private Client Holdings shall not be responsible and disclaims all loss, liability or expense of any nature whatsoever which may be attributable (directly, indirectly or 

consequentially) to the use of the information provided. 

Since 1990, Private Client Holdings has been assisting individuals and families to define 

and implement strategies for managing their wealth. We take on the tasks associated 

with a traditional Family Office including investment and portfolio management, tax and 

accounting services, consolidated reporting, cash management and fiduciary services 

including estate planning - ensuring wealth grows from generation to generation. 

PRIVATE CLIENT HOLDINGS IS AN AUTHORISED FINANCIAL SERVICES PROVIDER (LICENSE #613) 

VISIT WWW.PRIVATECLIENT.CO.ZA/DISCLAIMER TO VIEW FULL DISCLAIMER.

BLUE 

CHIP 

ECONOMY 


Time for SA consumers to 

tighten belts and avoid debt 

ECONOMY 

BLUE 

CHIP 

The recent increase in the repo rate, combined with steep 

increases in fuel and energy prices, points to a torrid time 

ahead for South African consumers battling to make ends 

meet – but the short-term discomfort should pay off in the 

long term, says employee benefits advisory firm NMG Benefits. 

It sounds counter-intuitive to ordinary consumers struggling to 

balance their budgets, but the recent series of increases in the repo 

rate are designed to keep inflation at bay in the broader economy, 

says NMG’s head of investments, Raazia Ganie. While consumers will 

be constrained for now, the longer-term effect is that they end up 

spending less. In theory, this means demand for goods goes down 

and prices are brought back in line, in response to supply and demand 

principles. Now, however, external factors like the Russia/Ukraine war 

mean the normal tools that the central bank uses to manage inflation 

– in the form of monetary policies – may 

not be as effective. 

One of the immediate effects of 

the cycle of increasing interest rates 

is that households who have debt will 

now have higher debt repayments to 

make. This raises the risk that highly 

indebted consumers will start defaulting on their debts. The flip 

side is that those who have excess funds will save more, as they 

will earn more interest on their savings. 

“Right now, our advice to all consumers is that they should 

aim to pay off their debts as quickly as possible – and where 

they are in difficulty, they should seek help and debt counselling 

immediately. They should also avoid taking on new debt, or even 

worse, taking on additional debt to pay off debt, as this will lead 

to a slippery slope which will be hard to recover from,” says Ganie. 

The current economic climate is particularly worrying for those 

nearing retirement. The five years before and after retirement are 

often referred to as the “fragile decade”, as any economic setbacks 

could have a significant impact on a consumer’s retirement 

funds and their ability to make up for any market losses in 

their portfolios. If they have already started drawing on their 

retirement funds, the withdrawals and the tough market could 

deplete their funds account faster than planned. 

“If you are approaching or are already in retirement, this may 

be a good time to reach out to your financial advisor to revisit 

and reassess your retirement plan,” says Ganie. “Those who are 

five years or more from retirement should remain invested but 

consult their advisors to get a holistic view of their commitments 

and assets and work out the best strategy for their circumstances. 

This is not the time for hasty decisions: knee-jerk reactions during 

times of market turmoil usually lead to sub-optimal outcomes.” 

Right now, the world is 

essentially being held to 

ransom for food and energy. 

One bright spot in the turmoil is that retirement funds 

are now compelled to allow members to leave their assets in 

the fund after they retire or resign. This offers members who 

have the means to do so the opportunity to benefit from the 

lower institutional fees offered by retirement funds while their 

investments recover from the current volatility. 

The increased interest rates will also hit local businesses 

hard, as they could find it harder to obtain or service loans, 

which could limit their growth. As is the case with consumers, 

though, businesses with excess cash will benefit from putting 

their money in higher-yielding investments. For investors, 

the effects of the interest rate hikes vary. Most investors will 

have diversified holdings of instruments across multiple asset 

classes such as equities, bonds, cash and property – all of 

which would react differently to 

the interest rate changes. 

“Markets are volatile now, with 

the Ukraine conflict, global interest 

rate hikes and higher inflation 

causing uncertainty. During times 

of market turbulence, it’s best to 

stay the course and not make any impulsive changes due to 

market movements. Your professional portfolio managers will 

continue to evaluate the opportunities on your behalf and make 

changes as these become available,” says Ganie. 

Banks are generally among the businesses which benefit the 

most from higher interest rates, while companies investing in luxury 

goods may struggle as consumers cut 

back on discretionary spending. Goods 

with inelastic demand, usually staples, 

will continue to see regular demand 

levels, says Ganie. 

“However, this is under normal 

circumstances. Right now, the world 

is essentially being held to ransom for 

food and energy. Essential inputs into 

many staple foods have seen significant 

price increases, which are being passed 

on to consumers. This becomes a 

vicious cycle as consumers are already 

highly indebted and struggling to 

keep their heads above water,” says 

Ganie. “Hopefully, as the situation in 

Ukraine normalises, we will see relief 

for consumers, but when this may occur 

remains highly uncertain.” 

Raazia Ganie, Head of 

Investments, NMG Benefits 


51

BLUE 

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INVESTMENT 

Traders with a sunny 

disposition may 

cast a shadow on 

investment advice 

It was Benjamin Franklin who suggested that one’s happiness 

depends more on your inward disposition of mind than 

outward circumstances. The term “disposition” itself can be used 

to describe someone’s inherent qualities of mind (a tendency to 

have a pleasant outlook) as well as the way something is arranged 

in relation to other things (relative to a point of reference) that 

creates perspective. 

Both descriptions help us to understand one of the most widely 

documented behavioural biases, the 

One’s happiness depends 

more on your inward 

disposition of mind that 

outward circumstances. 

disposition effect (DE). The term was 

coined by economist Hersh Shefrin, and 

behavioural economist Meir Statman in 

1985. The DE refers to the general inclination 

to sell off winning assets too hastily and hold 

onto losing ones for too long. This is rooted 

in two distinct states of mind, namely: 

i. The aversion to losses. Trading turns a paper loss into a 

real one and loss aversion will mean the trader becomes more 

reluctant to realise this loss. The result is holding onto “losers” for 

too long in the hope they turn into winners. 

ii. The aversion to regrets. Trading turns a paper gain into a 

real one that makes the trader feel good. Sometimes waiting, 

however, means a winning position turns into a losing one. This 

encourages a tendency to sell winners too quickly as the trader 

fears the regret of the winning position reversing. 

The second part of the original DE definition provided 

regarding the “reference point” is also significant. A few years 

earlier in 1979, Daniel Kahneman and Amos Tversky published 

a seminal paper (that would later earn 

Kahneman the coveted Nobel Prize) on 

what they called “Prospect Theory”. 

They transformed the prevailing 

model of preferences, being Expected 

Utility Theory (EUT), from a utility 

function to a psychological value 

function. Said differently they asserted 

that a more descriptive model of preferences requires 

knowledge of whether the chooser is evaluating a prospect 

from the perspective of winning or losing. This asymmetry is 

captured in the DE. 


INVESTMENT 

BLUE 

CHIP 

A more descriptive model of 

preferences requires knowledge 

of whether the chooser is 

evaluating a prospect from the 

perspective of winning or losing. 

selling (trading) a stock reflects a change in preferences occasionally 

stemming from a cognitive or emotional bias (such as loss aversion), 

an investment switch from one fund to another represents a similar 

change in preferences often from the same biases. The investment 

switch behaviour of over 20 000 clients in discretionary unit trusts 

and living annuities were analysed with the following highlights 

focusing on their level of engagement: 

i. The number of “active” investors or those performing at 

least one investment switch increases by over 80% during the 

pandemic. 

ii. The number of switches at a platform level exceeded record 

levels during 2020 and 2021 (increasing by over 50%). 

Momentum Investments set out to study the extent of the DE in a 

South African context earlier in 2022. When analysing the behaviour of 

nearly 10 000 execution-only traders (self-advised) on the Momentum 

Securities platform trading slightly more than R9-billion from 2016 until 

2021, a clear DE effect is evident. Traders were 1.39x more likely to sell 

stocks in a gain position over a loss position during this time period 

which fits snugly with results in literature that vary between 1.3x and 

1.5x in general. Where this gets particularly interesting, however, is 

when the periods are dissected into “pre-Covid” and “Covid” and further 

into age groupings. The highlights of these findings are: 

i. During the Covid pandemic (2020 and 2021) in South Africa the DE 

increases rapidly to 1.9x. Said differently, traders become 1.9x more 

likely to trade winning positions over losing positions. 

ii. Gen Xers (ages 39 to 53) during 2020 were 3.92x (392%) more 

likely to trade winning positions over losing ones. They account for 

a healthy quarter of the total population (comfortably the largest 

segment) and maintain the highest DE over the total period of 1.92x. 

During the same period of analysis (2020 and 2021) another two large 

groups of investors were studied to quantify their risk behaviour. Just as 

The difference in investment behaviour over the same period that 

likely stems from the same bias (loss aversion sitting at the core of 

the DE) when the two groups are juxtaposed may cast a shadow on 

investment advice. The nearly 10 000 unadvised traders that clearly 

suffered from a high disposition effect during the Covid pandemic 

were significantly less likely to trade 

and realise these losses. 

Yet, more than 20 000 advised 

clients in the discretionary unit 

trusts and living annuities were 

transacting at record levels incurring 

a behaviour tax (lower investment 

return) of over 6% in 2020 and nearly 

4% in 2021 on average. 

Loss aversion is clearly playing 

out different and opposing ways 

with the notable difference being 

investment advice. While this is 

cause for further investigation, it is 

very clear that the disposition of the 

advisor has a major role to play in 

creating (or destroying) investment 

value for clients. 

Paul Nixon, Head of Behavioural 

Finance, Momentum Investments 


53

BLUE 

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INVESTMENT 

Where do we stand now? 

“Everything feels unprecedented when you have not engaged with history.” – Kelly Hayes 

World stock markets have had their worst start to 

a year since 1939. Try to take your mind back to 

some crises that have taken place from then until 

now. With the war in Ukraine currently underway, 

let’s just look at a few wars: 

• 1939 - 1945 World War II 

• 1950 - 1953 Korean War 

• 1955 - 1975 Vietnam War 

• 1990 - 1991 Gulf War 

• 2003 - 2011 Iraq War 

And these are just the relatively well-known ones. 

Then there have been quite a few financial “wars” as well. 

Take your mind back to some recent events such as the Enron 

scandal, European Debt Crisis, the Great Financial Crisis, 

BREXIT, Donald Trump, Zuma and two finance ministers in so 

many days, Covid-19… 

Things that have never happened before are happening all 

the time. 

There are three aspects of investing and investment strategy 

that advisors and their clients should have clarity on to make it 

through these times: 1. Arbitrary market periods, 2. Appropriate 

asset allocation, and 3. The psychology of the market. 

“The only relevance of a one-year time period is that it is the 

time it takes earth to go around the sun.” 

The headlines that hit the hardest get the most attention. To 

substantiate, as at the beginning of the piece, that stock markets 

have had their worst start to a year since 1939, hurts. It causes 

anxiety. But this is not uncommon. Returns are discussed by 

referring to stock market returns “Year to Date”, or what happened 

in the last quarter, the first half of the year or the reference to a 

specific year. 

The question is whether a specific period really matters? The 

answer is yes, but the period of application differs for everyone. 

If clients want to achieve a goal with their finances and 

investments, there is usually a period attached. For example, 

clients want enough funds to send their child to a prestigious 

university. A client wants to save enough to take three years off 

from work or have enough to be financially independent. And 

then probably the most common, to save for retirement. 

Given assumptions and inputs, clients need a certain return 

to reach their goal at a set time. So, what happens during any 

arbitrary time of a year or six months has very little to do with 

that specific goal. 

Context is so incredibly important. If a client has 25 years left 

before retirement, the year-to-date returns of 2022 are of very 

little importance. If the client wanted to tour around the world 

in 2023, and they did not have enough funds to do so and took 

a chance on putting all their money into the stock market in 

2022, then it does matter. The holiday will have to be put on ice 

for a while. 

Be aware of what your client is investing for. Be sceptical of 

the media trying to influence them by what is happening in the 

short term. 

But also, be aware of what they are invested in, point two. 

If clients draw income from their investments, this portion of 

their investments is not supposed to be heavily exposed to “the 

worst stock market start to the year since 1939”. The portion of 


PORTFOLIO INVESTMENT CONSTRUCTION 

their investments should be much more stable than what goes a Goldilocks moment where everything is just right, where 

on in stock markets. 

the pendulum stands still in the middle, and markets reflect 

“Never let a good crisis go to waste.” – Winston Churchill the future 100% correctly right. We are either too positive, 

The past few months have been a golden opportunity to reflecting high prices in the market, or too negative, pushing 

determine the sustainability of a portfolio from which income is prices down to low valuations. 

drawn. If the portfolio is sharply down, there is quite possibly too Covid-19 was just such a case. Within a few months, world 

much exposure to stock markets and the asset allocation needs to markets were down by a third, the market reflected that there 

be reviewed. If the portfolio is a little off, or even possibly a little was a major recession or even depression in our future. Great 

up during such a volatile period, the allocation is quite possibly pessimism! As time went on, we better understood the virus, and 

in line with what is required of such a period. 

there were rumours of a vaccination, our pessimism turned in 

This is also a good time to revisit the exposure of your longterm 

growth portfolio. 

and as soon as we get through, things will go very well again, for 

the fastest time in history to optimism. We will get through this, 

If a portfolio is positive during the period, you should ask a very long time! Prices went up. There is nothing that can stop 

what was the exposure that led to a good return? Since the us now. Billions were poured into technology companies making 

beginning of the year, most stock markets around the world losses. But this is not a problem, somewhere in the future they 

have been down. These include the JSE, Eurostoxx50, Dow Jones, will make a profit, so no price is too high. Great optimism! 

NASDAQ, S&P500 and many more. There were one or two areas We did forget, in the background, that debt incurred to keep 

of the market that performed well. 

the economy going during the pandemic is not free. We forgot 

In South Africa, financial stocks were up, as were resources. The that when you borrow money, you borrow from the future. You 

FTSE in London delivered a small positive return. And commodities bring consumption in the future to today, but you must pay for 

like oil, gold and palladium. 

it. The price for that is interest rates. And when interest rates go 

The purpose of the exercise should not necessarily be whether up, like now, then the price of your historical consumption rises 

an allocation was “right” or “wrong” 

and your ability to consume in the 

over such a short period of time. The Most prices on world 

future diminishes. 

exercise should So, rather will expose the US still to an be the largest economy over the next few I believe the answer And is then yes. came the war, which 

investor whether decades? they Will know China what take their crown? stock Will Europe exchanges or Japan wake up are still A unit trust portfolio was not has the the main obligation reason to for provide recent liquidity to un 

their allocation again? is and And whether will their respective they markets follow? No-one knows, even holders whenever events, required. but If which I want to set withdraw the snowball my funds, I put in 

determined by people. 

are comfortable though with many it. has an opinion. Either way, buy a low-cost index that redemption request in motion. and have There access are to usually my funds a variety a few days later (i 

If a client’s references portfolio the is down major stock 15%, markets but they and are economies comfortable of the world. of things An that most cause cases). a situation. Hence, management of these funds needs to be don 

with the international example, the equity Vanguard exposure Total they World have, Index with the a fee belief of only 0.08% The per question in such is, a where way that is the liquidity pendulum is readily now? available. Are we only An individual at on th 

that there will annum. be growth Buy and over hold the for as long long term, as possible. then there is no the beginning other of hand the pessimistic has, with the swing right and financial things coach, are going the ability to to take o 

problem with the The allocation. overall asset If the portfolio allocation is and up by in 25%, particular and they 

allocation get “much worse” illiquid from positions. here? Is this just the beginning? 

are not comfortable to bonds with is a the bit 50% trickier. allocation The average to oil in US the 10-year portfolio, bond yield I hope in not, but Structured I do not notes know. that Nobody are designed knows. to provide a high probabilit 

the portfolio 1980 allocation was 11.43%, should be versus revisited. the average yield in 2020 of 0.89%. What I do of know coupon is that payments humanity is (quarterly, a species that semi-annual will continue or annual) an 

Use fewer Remember good times if yields like these decrease, to make bond sure prices clients increase, are so to this grow, was continue provide to some improve, downside continue protection to innovate… can be and a great when alternative t 

comfortable a with phenomenal their asset bond allocation. bull market. Also remember Could rates to go do lower the still? economy traditional starts to bonds. grow well Individuals again, when have the the option clouds to lift, take it advantage o 

the exercise when Possibly. it is Are going rates very going well. to And go that consistently brings us lower to the for the will next reflect in the the illiquidity stock market. premium Prices that are most going retail up portfolio again. managers canno 

psychology of few the decades? market. Probably not. 

I do believe Constructing 

a diversified equity the 

Howard Marks, The one allocation of the to most bonds famous and bond investors alternatives of our versus portfolio equity is core the best of any place strategy to be for is 

time, compares depend market on two psychology aspects that to are a pendulum intertwined. that Firstly, swings your investment long-term wealth literally growth. the centre And here of I 

from great optimism period and to secondly, great pessimism. your ability Think to stomach of it this volatility. way. The am longer not alone. the The investment trick is to convince process. 

During our childhood your time there horizon, was the a triangular lower your box allocation that was to bonds used should your be clients The to next sit on steps their are hands the 

to indicate pace and when the lower you your play volatility the piano. absorption The pendulum threshold, swung the higher when your others satellites throw in that the can towel. provide 

from one side allocation to the other to bonds and should tapped-tapped be. A quality to financial the desired advisor should We be are exposure going to to have some another totally 

pace. When the able weight to assist on here the with pendulum ease. was shifted to the top, period where unique the party assets. will Think get so 

the pace was longer There and are alternatives slower. Once to traditional the weight sovereign was moved bonds out in highyield 

pace corporate accelerated bonds. and the Although pendulum the probability swung faster of default become is too economy, high again innovation that it is and not 

of hand infrastructure, and that prices the green will 

downward, the 

from left to right. higher than their sovereign counterparts, so too is the expected sustainable. disruption This the and nature health of and the 

This is how return. the psychology If, however, of offshore the market bonds works. are not Most expected prices to pendulum provide wellness and our to species. name a few. But if 

on world stock an inflation-beating exchanges are return still determined the medium by to people. perhaps even you, the and your With clients, the can right keep advice, their 

Humans are long emotional term, are beings. there other We are tools not a computers. private investor We can head access when you others can are build losing something theirs, Hannes Viljoen, CFA, CFP®, 

interpret what that the provide world some looks sort like of today, downside what protection we expect with in a the higher music is truly going special to be blissful and unique in the Hannes CEO and Viljoen, Head of CFA, Investments, CFP®, CEO and 

the future, and probability this infers than our bonds emotions. to deliver And there inflation-beating is very rarely returns? long run. to your personality. Head Kudala of Wealth Investments, Kudala Wealth 

www.bluechipdigital.co.za www.bluechipdigital.co.za 55 35

Huge finds could change 

South Africa’s economy 

Explorations for oil and gas off the western and southern coast are making significant 

finds which could alter the country’s energy trajectory and create thousands of jobs. 

Instead of spending upwards of R12-billion on decommissioning 

the existing gas-to-liquid plant at Mossel Bay, the South African 

government might be in a position to again start earning 

revenue from Mossgas. Operating the Mossgas plant would 

generate R22-billion in taxes and royalties and save SA R26.5- 

billion through not having to import oil and refined products. 

Recent gas finds off South Africa’s southern coast really could 

be a game-changing event for the oil and gas sector and the 

country’s economy as a whole. 

The currently mothballed facility could become the recipient 

of gas feedstock as a result of huge finds off the southern coast 

by TotalEnergies. The two fields are called Luiperd (2.1-trillion 

feet of contingent gas resources, enough to power a city the 

size of East London for five years) and Brulpadda (1.3 Tef), 

which are part of Block 11B/12B. 

Petroleum Agency South Africa (PASA) estimates that the gas 

found in these blocks could produce 560-million cubic feet per 

day of gas for more than 15 years. TotalEnergies’ expenditure on 

stream phase one could amount to $3-billion in 2027 and create 

1 500 direct jobs, 5 000 indirect jobs and increase the country’s 

gross domestic production by R22-billion. The plan is to run the gas 

via a pipeline to a new fixed steel platform, and from there to use the 

existing pipeline to get the gas to Mossgas. Up to 18 0000 barrels 

per day of condensate and 210-million cubic feet per day (MMcfd) 

are expected to be pumped to the facility. Gas condensate is a 

hydrocarbon liquid stream separated from natural gas and is used 

for making petrol, diesel and heating oil. 

West coast finds 

More exciting news in the exploration field came out of Namibia early 

in 2022. South Africa shares a geological sedimentary basin with its 

western neighbour so the announcement by Shell that it had made 

significant oil and gas discoveries in the southernmost sector of its 

Orange Basin offshore Namibia, was welcome news indeed. The 

discoveries were made at the Graff-1 well. 

Scientifically, the big takeaway from Shell’s discovery is related 

to where the finds were made. Previously, it was believed that 

only gas would be found in one layer of the shelf, known as the 

Cretaceous sector: Shell found a working petroleum system with 

oil as a component in the Cretaceous section. The geological 

56 

www.bluechipdigital.co.za

OIL & GAS 

sedimentary basin extends to offshore Cape Town and out to 

sea, stretching over 160 000km². The rights to the South African 

southern section of the basin are held by Shell and its partners 

TotalEnergies and PetroSA. 

TotalEnergies have themselves had promising early signs of 

possible oil and gas finds near the Shell find off Namibia, and in 

the block adjacent to the South 

African maritime border. This 

is the Venus-1. The deepwater 

sector of the South African 

Orange Basin is unexplored, 

but similar geology extends 

south of Namibia into the 

South African sector. 

Geological features similar 

to the Namibian reservoirs have 

been identified on seismic data 

in the South African part of the 

basin, also in the Cretaceous, 

but these remain to be tested 

through drilling. New seismic 

data acquired by the survey 

planned by the company, 

Searcher, will assist in reducing 

exploration risk and help in identifying and quantifying possible oil 

and gas deposits off South Africa’s west coast. 

Recent seismic activities 

Two separate court cases were heard at the Grahamstown High Court 

of South Africa in November and December 2021. In both cases, 

the applicants sought an order interdicting Shell and Impact Africa 

Limited from proceeding with their 3-D seismic survey off the east 

coast of South Africa. In the first case, brought by Border Deep Sea 

Angling Association and others, the application was dismissed on 

the basis that the applicants lacked supporting evidence that seismic 

surveys would cause irreparable harm to marine life. 

In the second case, brought by Sustaining the Wild Coast and 

others, an interdict was granted against Shell and Impact Africa 

Limited on the basis that the evidence presented showed that 

Pathways to a green future 

Gas could be the transition fuel that gets South Africa to a 

cleaner energy future. 

The International Energy Association (IEA) has published 

a report, ‘Africa Energy Outlook 2022’, which tackles the 

supposed conflict between Africa’s developmental needs and 

the urgent imperative to move away from fossil fuels. 

Both can be achieved, according to the report. A key factor 

in allowing Africa to continue to industrialise will be an uptick 

in the discovery and use of gas. If all the gas so far discovered 

in and off Africa was used, the continent’s share of global 

emissions would rise by 0.5% to 3.5%. 

Petroleum Agency South Africa has welcomed the report. 

PASA has consistently argued that South Africa’s road to 

net zero emissions will be via gas. As PASA CEO, Dr Phindile 

Masangane, noted in the context of major discoveries of oil 

condensate off the southern coast, “The development of these 

discoveries has the potential to replace more than 2 300MW 

of diesel-fired electricity generation in Gourikwa, Dedisa and 

Ankerlig, thereby reducing the carbon emissions from these 

plants by more than 50% while eliminating sulphur oxide 

and nitrogen oxide emissions, which are also harmful to the 

environment. Gas is therefore an obvious bridge to a lowercarbon 

future in South Africa.” 

the consultation process was significantly flawed. Shell applied 

for leave to appeal, which was dismissed on the basis that a 

ruling on the matter would have no material effect, since Shell 

would only resume the seismic survey around December 2022. 

In terms of the court, by this date the actual matter – that is, 

whether the exploration right to Shell and partners was granted 

in compliance with regulatory requirements – would have been 

ruled upon. Furthermore, in February 2022, an interim interdict 

lodged by Adams and Others was granted by the Western Cape 

High Court against Searcher Geodata, temporarily suspending 

a 2-D multiclient seismic acquisition off the west coast of South 

Africa pending the hearing of an application interdicting the 

seismic survey. 

Petroleum Agency SA: promoting and regulating exploration and production 

Petroleum Agency SA evaluates, promotes and regulates oil and gas exploration and production activities in South Africa 

and archives all relevant geotechnical data. The Agency acts as an advisor to the government and carries out special 

projects at the request of the Minister of Mineral Resources and Energy. 

South Africa’s energy mix is changing to include more gas through importing liquefied natural gas (LNG), using shale 

gas if reserves prove commercial and developing infrastructure for the import of LNG. Petroleum Agency SA plays an 

important role in developing South Africa’s gas market by attracting qualified and competent companies to explore for gas. 

Another major focus is increasing the inclusion of historically disadvantaged South African-owned entities in the upstream industry. 

Currently, natural gas supplies just 3% of South Africa’s primary energy. A significant challenge facing the development of a major gas market 

is the dominance of coal. Opportunities for gas lie in the realisation of South Africa’s National Development Plan (NDP) and the Integrated 

Resource Plan (IRP). As custodian, Petroleum Agency SA ensures that companies applying for gas rights are vetted to make sure they are 

financially qualified and technically capable, as well having a good environmental track record. Oil and gas exploration requires enormous capital 

outlay and can represent a risk to workers, communities and the environment. Applicants are therefore required to prove their capabilities and 

safety record and must carry insurance for environmental rehabilitation. 

petroleumagencysa.com Petroleum Agency SA @sa_petroleum Petroleum Agency of South Africa @petroleumagency

BLUE 

CHIP 

TECHNOLOGY 

Holistic service: 

technology as an 

enabler, culture 

as the core 

Georgina Smith, Head of Distribution 

and Sales, INN8 Investment Platform 

Fewer than 20 years ago, I was keeping appointments 

in a paper diary and calling clients from a Rolodex 

(Millennials and Gen Zs, look it up; the spinning 

nature of it doubled as a desktop stress reliever or 

the original fidget toy). The appointment book (which 

served several employees) was about 70cm wide, with 

much eraser debris scattered across it where pencil 

hieroglyphics had been altered many times. 

I remember the sinking feeling when a client called 

asking when their appointment was. “I’ll just have to scan 

through the book and come back to you,” would mean the 

start of a 30-minute exercise that would be interrupted 

several times before completion. 

The lack of technology-backed and -based service 

delivery hampered the service experienced by the end 

client. Not being able to search, track and trace client 

data with the click of a button or a touch to a screen 

feels alien and antiquated today, but it was a reality still 

in this millennium. 

Thankfully, not having the data or the systems to 

analyse it is no longer a problem. Fast forward a few years 

and we have an overload of analytics available to us in 

every sphere of life. 

Let’s use a topical example, considering the current 

Wales rugby tour to South Africa. 

In a specific rugby game, you would see the following 

statistics displayed on-screen: 

• Kicks from hand: Red 36, Green 37 

• Number of passes: Red 115, Green 67 

• Number of runs: Red 114, Green 71 

• Possession: Red 61%, Green 39% 

• Territory: Red 62%, Green 38% 

• Clean breaks: Red 7, Green 5 

• Tackle count: Red 74, Green 147 

• Lineouts won: Red 14/15, Green 5/6 


TECHNOLOGY 

BLUE 

CHIP 

At INN8 we promise to provide wealth managers 

with what they need when they need it. 

• Scrums won: Red 4/4, Green 8/8 

• Penalty count: Red 8, Green 9 

Red is dominating in a few of those comparisons, but who is 

winning the game? 

Rugby World Cup 2019: Wales 16, South Africa 19 

The Springboks emerged victorious, even though you wouldn’t 

think that looking at the stats. Territory, possession, passes and 

runs are all in Wales’ favour. Scrums and lineouts look even, and 

penalties are well-matched 

And that’s the point. 

Stats are only information. They can point you in the direction 

of where your attention should be focused, but stats have nothing 

on human creativity, behaviour and culture. 

Client-centric means human-centric 

I asked my team at INN8 for three words that enable them to deliver 

the exceptional service that our advisors have told us they enjoy. The 

following word cloud highlights what they listed. 

Taking the lead with quite a margin was knowledge. At INN8 we 

promise to provide wealth managers with what they need when 

they need it to fulfil the promises they’ve made to their clients. 

The team feels that the only way to deliver on that promise is to 

be equipped with the required knowledge about our platform 

and services and how our advisors operate. Yes, technology and 

carefully analysed data can help unlock this knowledge, but it only 

comes to life if you look at the second and third most prominent 

words: relationship and attitude. 

We use an exceptional high-tech contact management system 

(the same system Amazon uses) to track our advisors’ interactions 

with us. Our service dashboards are projected on TV screens to 

show, transparently, how we are doing. However, metrics are only 

25% of the story. The remaining 75% is enabling a culture that 

allows people to excel at what they feel passionate about. 

In its simplest form, client-centric means understanding the 

needs of your clients, solving for those needs to drive business 

growth (in our case for us and our advisors) and fostering good 

relationships in the process. 

At the heart of it all: culture 

Yes, customer service technology and all the emerging tools to 

deliver optimal client service are indispensable if you want to 

stay ahead of the pack into the future. But, your client cannot 

have a relationship with tech or AI – no matter how great your 

omnichannel support approach is. Relationships remain humanto-human, 

and these human interactions form the core of a 

culture that will deliver success. 

In his podcast series, Cautionary Tales, economist Tim Harford 

describes corporate culture as something pervasive, enduring, 

shared and implicit. He unpacks these four characteristics as 

taken from the 2018 Harvard Business Review to show how 

culture can drive behaviour and action, sometimes even above 

reason and common sense. 

In its most recent survey on global marketing trends, Deloitte 

states in the findings report that 360-degree engagement 

across people, data and experiences is paramount to success. 

The report highlights that these three sections are not mutually 

exclusive endeavours, but an interdependent system that "when 

integrated, forms the basis of dynamic customer experiences”. I 

absolutely agree that people (and culture) always and without 

fail, should be put first. 

INN8 is a registered trademark of STANLIB Wealth Management (Pty) Limited, an 

authorised Financial Services Provider, with licence number 590 and registered 

office residing at 17 Melrose Boulevard, Melrose Arch, Johannesburg, 2196, South 

Africa; and a registered business name of STANLIB Fund Managers Jersey Limited, 

regulated by the Jersey Financial Services Commission, with registration number 

30487 and registered office residing at Standard Bank House, 47-49 La Motte Street, 

St Helier, Jersey JE2 4SZ 


59

BLUE 

CHIP 

TECHNOLOGY 

Customer-centric 

software to grow 

your financial 

business 

Business life policies, such as a keyman 

policy or a contingent liability policy, are an 

important aspect of ensuring the long-term 

survival and continuity of a business. 

It’s not easy running a financial advice business. Every day 

there are more demands on your time and money. More 

data. More information. More compliance. More reporting. 

More competition. The evolution of software means 

clients expect “always on” access to data to make informed 

decisions about their finances. But as an advisor, where’s your 

competitive advantage when technology already enables 

easy access to information? 

Today’s tech-savvy clients require delightful, intuitive and 

convenient solutions that fit into their everyday life. To meet 

these needs, financial advisors need customer-centric software 

that enables them to provide a premium advice experience for 

their clients, says Noah Greenhill, commercial director for Iress, 

South Africa. Greenhilll highlights four ways to enhance client 

centricity in your business practice: 

Prioritise personalisation 

Instead of a one-size-fits-all approach, create unique client 

experiences that go beyond putting your client’s name into a 

mass email. New technologies like Xplan Prime, coming soon to 

South Africa, simplify the process of delivering advice experience 

at scale using a goals-based recommendation. 

Seeing is believing 

In a visual age, PDFs and Excel spreadsheets are becoming 

nostalgic. Move on to more memorable methods of engaging with 

clients by bringing your recommendations to life with rich media 

content. Digital statements of advice use cutting-edge graphics 

and animations while features like Cashflow 

Visualise in Xplan, helps advisors more easily 

demonstrate cashflow modelling. 

Today’s tech-savvy clients require 

delightful, intuitive and convenient 

solutions that fit into their everyday life. 

Make time to meet 

With demanding client schedules, it can be challenging to find 

a gap in their day, but make sure that you’re still meeting your 

clients beyond the mandatory annual review. Xplan users can 

create, schedule and launch instant Zoom video meetings with 

clients from anywhere in Xplan – saving time and minimising 

context switching. 

Make information accessible and secure 

with self-service 

Available through Xplan, Client Portal offers 

a better way to connect and communicate 

securely with your clients. Clients have secure 

access to information about their finances at 

a click of a button on their desktop, laptop, 

mobile or tablet. 

Work smart by providing an accurate 

picture of your clients’ financial future in a 

personalised, easy-to-understand way. 

Visit www.iress.com to put your clients’ 

needs first. 

Noah Greenhill, Commercial 

Director, Iress 


Advice 

software. 

Built for better 

performance. 

iress.com/financial-advice

BLUE 

CHIP 

TECHNOLOGY 

IS CRYPTO YOUR 

KRYPTONITE? 

An introduction to cryptocurrency and blockchain technology.

TECHNOLOGY 

BLUE 

CHIP 

A 

couple of decades ago, finance was conducted on 

paper ledgers with all transactions written by hand. 

We developed as we moved into the digital-age banks. 

Central banks and other financial institutions started 

using digital ledgers, but those ledgers are still centralised. 

Blockchain, which is a method of sharing and verifying 

information, allows us to decentralise digital ledgers. Because 

a blockchain network is freely accessible to anyone with an 

Internet connection, the lines become blurred between what a 

user can and is allowed to do and what the regulator does. In a 

blockchain, these two roles are the same. 

Any node (user) can join a blockchain network and essentially 

programme their computer to run a specific protocol (set of rules) 

that regulates the network. The node participates on the network 

as a user, and at the same time, watches and verifies every other 

transaction that goes through the network. This gives rise to a 

certain set of characteristics on a blockchain network. Foremost 

is decentralised governance – there is no longer one single entity 

that dictates to the network what the rules should be regarding 

the monetary supply of that network. Unless every single user or 

node on that network agrees to a rule change, those rules will 

stay fixed rendering blockchains as 

very robust. Terms such as censorship 

resistance, immutable, anti-fragile are 

used because it is practically impossible 

for anyone to change a rule once a 

network is established. 

In a blockchain network, once a 

transaction has been verified and committed to the ledger (or 

confirmed in a block, as the jargon goes) it, again, is impossible 

to reverse or change that transaction. This is different from what 

we are used to in a traditional centralised banking service, 

where we can contact the bank and reverse transactions. This 

is a very specific difference when transacting on a blockchain 

versus in the traditional banking sector. 

Each user on a network speaks to the other, and all of them 

verify every single transaction that goes through that network. 

In the 10 years or so that we have seen the emergence of 

blockchains, these networks have typically grown to hundreds 

of thousands if not millions of geographically separated nodes. 

If an individual, corporation or government wanted to try 

to shut down these networks, it would be impossible to do so 

because they would need to go to every single one of those 

nodes and destroy the copies that they maintain of these ledgers. 

As the blockchain grows and more nodes join the network, it 

becomes anti-fragile, more robust and users can trust in the 

network progressively as it grows. 

This contrasts to what we are used to in the traditional system, 

which is generally a producer-user interaction. Using our banking 

system as an example, we have a centralised system where the 

South African Reserve Bank (SARB) takes monetary policy and 

interest rates to the entire market. They decree the policy to 

commercial banks who then offer services to retail and corporate 

clients. We do not have a say in what that policy should be or 

how the rates should change. We are dictated to as users of the 

system. The benefits of this system are that there is insurance in 

cases of fraud, you can reverse transactions and you can speak 

to someone at the bank, if necessary. 

There are also pitfalls to this type of system. As an example, 

in the great financial crisis of 2008 there was a lot of leverage 

built into the banking system and investment banks took a lot 

of risks. As users, we had no power to mitigate ourselves from 

those risks and as the markets collapsed, ultimately the users 

and depositors suffered because of the banks’ recklessness. 

We rely on the regulations that these institutions instil so 

that the economy runs well. But in history, we have seen that 

there are times when the system becomes stressed, and the 

protocols don’t work. Another major difference is that central 

banks are inflationary with monetary policy. If you, as a holder 

of the rand or foreign currency, save in that currency, central 

banks can arbitrarily dilute the value of your savings by inflating 

the supply of that currency. Blockchains offer an alternative to 

the centralised system, in that the 

With good comes bad; the risks 

associated with open networks 

need to be understood. 

monetary policy is regulated by 

the network. If I save in Bitcoin as 

opposed to the US dollar, I know 

that the monetary policy in Bitcoin 

is not going to change, and my 

savings cannot be diluted although 

I am still exposed to market fluctuations in the Bitcoin price. 

A blockchain simply verifies and records transactions 

that flow within a network. There are thousands of different 

cryptocurrencies on the market, so it is useful to have a 

framework to evaluate each of them and determine their 

value. Since the advent of Bitcoin, and over the last decade 

or so, we have seen the emergence of three main categories 

of cryptocurrency. The three main services/types of crypto 

(tokens) being built off the backbone of blockchain technology 

are money, gas and utility. Because these networks follow their 

own protocol, which is determined by the nodes, the token in 

these blockchains becomes valuable and carries a monetary 

premium. Money tokens are private or non-sovereign money 

and monetary networks compete directly with national 

currencies. The best example is Bitcoin, the oldest, largest and 

the most established network. 

Secondly, we have gas tokens or infrastructure blockchains. 

Ethereum, one of the most well-known blockchains, is home 

to digital money, payments and applications. This blockchain 

sends and receives value internationally using its native 

cryptocurrency, Ether (second only to Bitcoin in market 

capitalisation). The platform emerged because developers 

were frustrated with the ability to code or to create complex 


63

BLUE 

CHIP 

TECHNOLOGY 

The cryptography in 

blockchains is initially complex 

and difficult to grasp. 

transactions (referred to as smart 

contracts) on top of the Bitcoin 

blockchain. Ethereum and a range 

of other blockchains that allow for 

this capability were developed. 

They allow for a richer development 

environment where smart contracts are created and developers 

build apps on top of blockchains. There is currently a lot of 

innovation in this space. A native token is required to transact 

on this blockchain to create contracts and applications – and this 

native token is referred to as gas. 

The last type is a utility token, or a layer-two token (they 

do not have their own blockchain). Utility tokens offer a more 

specialised service. An example is Arvie, which has no protocol 

for its own blockchain and exists on top of layer-one blockchains. 

Arvie specifically is a type of lending contract where a lender and 

borrower reach an agreement. The unit of account for this contract 

is essentially the Arvie token and because it runs on top of a layer 

one, it requires the layer-one token as gas to execute the contract. 

RESULTING RISKS 

With good comes bad; the risks associated with open networks need 

to be understood. The cryptography in blockchains is initially complex 

and difficult to grasp; transacting for the first time is difficult to do, 

knowing how to store these tokens securely, how to pass them on, etc. 

Handling risk. If you enter an incorrect digit or send a Bitcoin 

over the wrong network, that value will be lost forever. There are 

many examples of users making simple mistakes, losing a lot of 

value and not being able to recover that value. 

Counter-party risk. With crypto being an early market, people 

have sought intermediaries to assist them with investments. 

Due to the unregulated market, there is a gap for fraudsters and 

scamsters; exchanges have collapsed, and brokers have run away 

with millions in investors’ money. Unless investors interact with 

these networks themselves and understand how to use them, they 

must accept that they are taking on counter-party risk. 

Market risk. Market risk is inherent in any investment, but that 

risk is further heightened with cryptocurrencies because there is 

a large amount of volatility in this market. 

TRACKING TRENDS 

The overarching trend is digitisation. We have been through 

the computer age, the Internet age, in the late 20th century 

many services became digitised and now most of the valuable 

companies worldwide are digital (Google, Amazon and social 

networks, for instance). More and more of our time is spent 

online and on digital platforms. Cryptocurrency is the final 

piece of the puzzle. 

Positive regulatory acceptance. The attitude has shifted 

towards acceptance and the treatment thereof varies in different 

parts of the world. Certain nations legalise cryptocurrency and, in 

some cases, Bitcoin is legal tender. In other cases, regulators treat 

crypto as assets, sometimes as capital assets or foreign currencies. 

Adoption. Demand from consumers 

drives the price and the valuation 

of the crypto. The trend is towards 

increasing demand because crypto is 

becoming easier to use. Decentralised 

networks are gaining popularity as 

demonstrated by increased demand and usage metrics, whether 

it be to store value for the long term, for payments and micropayments 

or for more complicated smart contracts. 

REGULATION AND TAX 

Although cryptocurrency is not defined under South African law, it 

does not mean it is unregulated. This is a misconception. In 2014, 

SARB provided guidance stating that cryptocurrencies are not 

legal tender and as this status is reserved for the rand, any further 

regulation falls outside of SARB’s mandate. We are unlikely to see 

any more explicit direction from SARB about how investments 

in cryptocurrency should be treated but they were clear in that 

blockchain networks cannot be used to circumvent exchange 

controls. In 2018, SARS said that cryptocurrencies should be 

regarded as assets of intangible nature and as such normal tax rules 

apply. So, it depends on the usage of the assets and on the type of 

investments. For example, if you are a trader using cryptocurrency 

to day-trade on a regular basis and extract gains from that trading, 

then your returns will be seen as part of your income account and 

taxed. If these assets are used for long-term investment, they will 

be treated as capital assets and taxed as capital gains. 

The Inter-Governmental Fintech Working Group (IFWG) is 

a policy think-tank on how fintech should be regulated and 

cryptocurrencies falls under its mandate. As the market develops, 

we should expect to see more guidance from the IFWG that will 

eventually be written into law and regulate cryptocurrency as an 

independent asset class with its own licensing category. Once 

that happens it will fall under the purview of the FSCA and will 

become a fully regulated asset class. 

THE IDEAL INVESTOR 

The archetype blockchain investor has risk appetite, can handle 

volatility and doesn’t get skittish at the first sign of weakness. A time 

horizon of a minimum of three years is 

recommended for two reasons: historically 

any investment held for a period of three 

years will realise a gain. Within those 

three years, there will be volatility and 

large drawdowns. The second reason is 

from a tax perspective; any gain realised 

from an investment held for three years 

or longer falls into the category of capital 

gains. A tax benefit is realised with this 

time horizon as well. 

And then, lastly, one underappreciated 

reason for investors to allocate to this 

asset class is to diversify away. 

Andoni Nicolau, Head of 

Digital Asset Operations, 

Jaltech Digital Investments 

*Taken from FPI’s CPD accredited webinar entitled An Introduction to Cryptocurrency in partnership with JalTech Digital Investments.

We’ll 

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handle that 

long tail. 

Focus on 

the big 

relationships. 

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OUTvest is an authorised FSP. Ts and Cs apply. OV22/0359/E

BLUE 

CHIP 

DFM COLLECTABLES 

Growth of blockchain 

technology catapults digital 

assets into the mainstream 

Though non-fungible tokens (NFTs) have been around since 2014, 2021 was the year this novel 

technology broke through conventions, disrupting the world of collecting. Over the past 

12 months, the NFT scene has evolved rapidly. And now there is a real, audited, insured NFT. 

The South African Gold Coin Exchange (SAGCE) & The 

Scoin Shop has over 45 years of experience bringing 

gold coins and collectables to South Africa. We have 

forged exclusive relationships with the world’s most 

prestigious mints, established traditional retail shops, developed 

an e-commerce site, introduced a cryptocurrency payment 

option, and recognised the value of Troygold. SAGCE & The Scoin 

Shop is always chasing innovation. We continue to reshape the 

industry by listening to our clients, anticipating their needs, 

redefining opportunities and ensuring that gold is for everyone. 

We have always embraced the future and are responding to 

the next frontier: NFT assets. This ZAR coin collection NFT is unique 

because it is backed by one of the most highly graded, sought-after 

coin sets South Africa has ever produced. This is not a picture of a rock 

or a mutant ape; this is real, audited and insured. 

Our pioneering partnership with Momint demonstrates how the 

blockchain is revolutionising asset ownership. Once only the domain 

of the wealthiest numismatists (coin specialists), this tokenisation will 

enable fractionalised ownership of this priceless collection, lowering 

the entry point for enthusiastic collectors to a price as low as $200. 

Momint, a South African Web 3.0 tech firm, has tokenised an 

exclusive complete denomination coin proof set of the old Zuid- 

Afrikaansche Republiek (ZAR) coinage for the digital era. Collectively 

known as the original Krugerrands, the coins occupy a unique place 

in South African history and have only grown in legend and value. 

Now a new generation of collectors can get their hands on a piece of 

this iconic collectable set. 

To ensure the accessibility of the collection, the Momint 

marketplace supports the purchase of NFTs using a credit card and 

generates a crypto wallet for each user. No prior crypto or blockchain 

experience is required to purchase a Scoin token. 

Since the ZAR-era coins were first minted in 1874, beginning with 

the Burgersponde, they have proven to be an outstanding store of 

value over their nearly 150-year history. Worth a face value of 1 ZAR 

in 1893, the “Een Pond” coin alone is worth more than R240 000 today. 

The complete set being tokenised includes the 10 denominations 

of ZAR coins that were minted before the South African War (also 

referred to as the Second Anglo-Boer War) of 1899 and is worth an 

estimated R18-million. 

The holders of the tokens will gain part ownership in the actual 

physical collection. This initiative comes at an ideal time with the 

global economy poised for recession and gold widely accepted as 

the safest alternative asset class in times of economic uncertainty. 

Numismatics (coins) made of precious metals have been around 

since the fifth century and have been a medium of exchange and 

representation of money ever since. Buyers of physical precious 

metals are motivated by the fact that gold and silver provide a safe 

store of value, are a currency hedge, combat inflationary concerns 

and can be moved around. 

The ZAR coins were minted through the Berlin Mint of Germany in 

1874. When Paul Kruger became president, he commissioned what is 

considered the first true ZAR circulation coins made of gold, silver and 

bronze. The coins were remarkably well preserved due to non-use 

during the subsequent war and are therefore in excellent condition 

and graded highly by the foremost grading 

company, Professional Coin Grading 

Service. The collection also includes the 

near-mythical 1892 “Red-Brown” Proof 

Penny, so-called for the unique colour 

produced by an incorrect mixture of copper 

when production was moved to Pretoria. 

Our collaboration with Momint 

introduces an opportunity for a new 

wave of savvy digital natives to participate 

in fractional ownership of a priceless 

collectable numismatic treasure. Your 

grandparents might have scoured 

auctions for rare collectables, but now 

revolutionary technology is changing the 

souvenirs market. 

Rael Demby, CEO, The South 

African Gold Coin Exchange & 

The Scoin Shop 


COMPREHENSIVE ASSISTANCE WITH 

ALL KRUGERRANDS AND GOLD COINS 

We buy, sell, store and appraise. 

Our team of experts will assist with the insurance and logistics 

of collections and deceased estates. 

Trust the market leaders with 50 years of experience. 

CALL 011 784 8551 OR EMAIL CEO@SAGOLDCOIN.COM

BLUE 

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RETIREMENT 

Planning for a life to 

100 and beyond 

One of the key variables used in retirement planning 

is life expectancy of our clients and their spouses 

or partners. Financial planners may use their own 

estimates or use available data from the insurance 

industry. Life expectancy is probably one of the, if not the most 

important variable in the retirement planning process, ie if you 

are constructing a retirement plan with a life expectancy in the 

mid-80s, your retirement plan could be fundamentally flawed as 

the plan could underestimate life expectancy by 10 years or more. 

This can leave clients destitute in retirement. 

Life expectancy, 1770 to 2019 

Source: Our World in Data 

Even though no-one can plan exactly how long they will live, 

as many things in our lives are outside our control, people are 

generally living longer today than before. This fact can be attributed 

to continued advancements in technology and innovations in the 

field of medical treatment. 

Over the past century, global life expectancy has increased by 

more than 25 years and continues to increase. The dramatic increase 

in life expectancy can best be illustrated through the graph below 

left, illustrating the continued increase in life expectancy across the 

world. The trajectory and continued increase in life expectancy is 

clearly evident. 

The continued increase in life expectancy is captured in 

two recent statements. The first from the Stanford Centre on 

Longevity, “By the middle of this century, living to the age of 100 

will become commonplace, continuing a remarkable trend that 

saw human life expectancies double between 1900 and 2000, 

increasing more in a single century than across all prior millennia 

of human evolution combined,” and the second from Aubrey de 

Grey, Biomedical Gerontologist, “The first person to live to 150 

has already been born”. Even though these citations are from 

developed markets, this is a reality for the South African insured 

population, ie our clients. 

Before we delve into the South African numbers, let’s first reflect 

on clients’ expectations. From consultations and discussions with 

clients, I am sure you have also experienced that most clients 


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From the available South African mortality statistics, it is important 

to develop retirement plans for living into the 90s and 100s. The 

following are the facts; a couple aged 65 has a high probability of 

living into the mid-90s and beyond, 35% of men are expected to live 

Source: Just Retirement Life (South Africa) 

completely underestimate their life expectancy, ie they do not 

expect to live to 80, 90 or 100. 

This is evidenced in research conducted by Just Retirement 

Life (South Africa) where clients before retirement underestimate 

their life expectancy by a staggering 10 years! The chart below 

shows what age people expect to live to, based on current age. 

What is clear from the graph is that younger clients significantly 

underestimate their life expectancy. As clients grow older, they 

start realigning their expectations as they realise they may 

live significantly longer than they expected. Not appropriately 

accounting for these additional 10 years and longer could mean 

the difference between a long and comfortable retirement and 

retirees outliving their money. 

Source: Just Retirement Life (South Africa) 

Wynand Gouws, CFP®, Wealth Manager, 

Gradidge Mahura Investments, author 

of Life to 100 and Beyond 

to 89 and beyond and 35% of woman are expected to live to 94 and 

beyond. This continued increase in life expectancy is profound and 

has or should have – a significant impact on how we think about life 

and retirement planning. It also challenges the conventional wisdom 

of developing a retirement plan for age 60 or 65. 

We need to fundamentally rethink the traditional definition 

of retirement being a “line in the sand” and a retirement plan 

starting at 60 or 65. Increased life expectancy requires a reframing 

of the retirement conversation to a lifetime framework and 

understanding our clients’ multiple chapters after the traditional 

and outdated “normal retirement age”. It becomes increasingly 

important to change the conversation with clients to ensure we 

have a deep understanding of their lifetime plan, after 60. 

A lifetime plan could include multiple chapters after 60. This 

could include continuing in full-time employment, part-time 

work or consulting, travelling and exploring, slowing down, 

medical care and/or frail care. Understanding clients’ multiple life 

chapters after 60 allows developing a lifetime financial plan with 

multiple chapters to 100 and beyond. This can be very different to 

developing a traditional retirement plan for a client “retiring” at 65. 

The United Nations describes population ageing and increased 

longevity as a “human success story that gives us a reason to 

celebrate public health, medical advancements, economic and 

social development over diseases, injuries and early deaths that 

limited human life spans throughout history. Population ageing has 

been recognised as one of the four global demographic megatrends, 

next to population growth, international migration, 

and urbanisation, which will all have a lasting 

impact on sustainable development”. Financial 

planners need to have a deep understanding of 

not only life expectancy but also the significant 

advances we have seen and are likely to continue 

seeing in life expectancy. 

If the reality has not hit home yet, you and 

your clients may live a lot longer than you and 

they planned for! Financial security starts with 

your Client’s Life to 100 plan and should then be 

supported by a sound financial plan. 


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RETIREMENT 

Retirement income reimagined 

Momentum Investments has recently introduced enhancements that can help clients 

to maximise their chances of receiving a reasonable income stream, for as long as they 

live. Blue Chip unpacks these developments with Martin Riekert and Fareeya Adam. 

Martin Riekert, Executive Head: Retail Investments, 

Momentum Investments 

Fareeya Adam, Head: Product Solutions, 


Over the last few years, advisors faced some very difficult 

circumstances for retired clients in living annuities. 

Many clients experienced market volatility or lower 

than expected investment returns, which can impact 

the future sustainability of their retirement income. 

What options are currently available for clients who are retiring? 

Fareeya: People who accumulate money in a pre-retirement 

savings vehicle must, according to law, use some of this money 

to purchase an approved income product. The available 

options, the choice between a living annuity and a life annuity, 

have been static for quite some time. These products can be 

well suited for meeting income needs but they come with their 

respective advantages and disadvantages. 

A living annuity is a market-linked investment that gives 

pensioners a regular retirement income, while at the same time 

giving them an opportunity to grow their retirement savings. 

Living annuities offer flexibility of income and the freedom 

to choose investment components to suit specific investment 

strategies. But a client essentially takes on all the investment and 

longevity risk. So, if markets don’t perform as expected or if a 

client lives longer than expected, the client is at risk of running 

out of money to pay for even the bare necessities. A life annuity, 

on the other hand, pays a regular guaranteed income for life to 

the pensioner and could include their dependants. The client 

does not take on any risk of investment markets or living longer 

than expected. But there is also no upside potential from market 

growth and no remaining capital when the client passes on. 

What has the trend been between these two types of products? 

Martin: Five years ago, the split between living annuities and life 

annuities was roughly 90:10. Recently it has been closer to 70:30. 

This shows that retired clients and their advisors are starting to see 

the value of the guaranteed nature of a life annuity, especially in the 

context of the pandemic which ushered in a period of high volatility. 

At Momentum Investments we saw many retired clients invested 

in a living annuity experience reduced investment values and then 

switching out of their investments, thereby locking in capital losses. 

Over R3-billion was switched on our Retirement Income Option over 

the last two calendar years, resulting in an average behaviour tax of 5%. 

What, in your opinion, is the true need in retirement? 

Fareeya: What clients really need from retirement income is to 

match their expenses during retirement. However, not all expenses 

are the same, and we think about life expenses and living expenses 

differently. Basic life expenses would include things like having 

a place to live, medical aid, groceries and other regular essential 

spending. These are generally quite predictable. Ideally, a client 

should be certain about being able to meet this minimum level of 

expense matching. Living expenses include things like paying for a 

holiday, starting a small venture and paying for a special life event. 

These expenses tend to be more variable in nature, and while they 


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are also important in a person’s life, they can be considered after 

the life expenses are taken care of. 

Why is it so difficult to make the right choice? 

Martin: The key decision that is being made is about the sharing 

of risk. In a living annuity the client takes on all the reward but also 

all the risk. On the other side of the spectrum, in a life annuity the 

client outsources all risk to the insurer. In most cases, this decision 

is made at a single point in time – a once-off decision that affects 

the income that a client should receive for the rest of their life. 

What is Momentum’s reimagined retirement income solution? 

Fareeya: We have reimagined our living annuity product to become a 

“hybrid annuity”. The client and advisor can use some of the retirement 

savings to purchase a Guaranteed Annuity Portfolio inside our living 

annuity. The Guaranteed Annuity Portfolio will pay a guaranteed 

income into the living annuity for as the long as the client lives, thereby 

allowing clients to protect a portion of the future income they receive. 

Clients can then invest the rest of the money in various investment 

components to potentially increase the capital value and offer 

more flexibility of income. The more it grows, the more optionality 

a client has both for drawing income and for leaving a legacy. The 

growth portion has the same functionality as it currently does on the 

Retirement Income Option and the advisor can choose from any of 

the underlying investment components available. 

The Retirement Income Option provides the option of 

protection and potential for growth 

This sounds like one solution with both sets of benefits. Is 

that correct? 

Martin: That’s right, one contract includes all these benefits. 

The protected portion of the Retirement Income Option can be 

a very good match for a client’s life expenses. At the same time, 

the balance can cater for a client’s living expenses and inheritance 

needs through investing in growth assets. The balance between 

growth and protection becomes customisable for each client. 

Advisors can follow the normal processes for the living annuity, 

even when they choose to use both types of components. We 

have incorporated the Guaranteed Annuity Portfolio into our 

Retirement Income Option, so the proposal and application forms 

are all integrated. The client will have one contract, will receive 

one statement, the same review process, making it much easier to 

manage their income during retirement. The Guaranteed Annuity 

Portfolio is effectively an investment component that is available 

on our platform specifically for the living annuity. 

Please outline the fees. 

Fareeya: There are generally three types of fees associated with 

living annuities. Firstly, there are investment management fees 

charged by the fund manager for managing the assets. These 

typically average between 1.25% and 1.5% every year. The 

Guaranteed Annuity Portfolio component already has all fees 

priced into it, so on this part of the living annuity, there are no 

explicit investment management fees charged. 

The next category is administration fees. At Momentum Wealth, 

the administration fee is a calculated according to a tiered structure, 

so the higher the investment, the lower the percentage fee applied. 

The maximum fee charged is 0.3% every year for Momentummanaged 

investment components and 0.5% every year for 

investment components managed by other investment managers. 

Again, because the Guaranteed Annuity Portfolio component 

already has all fees priced into it, there will be no administration 

fees charged on this part of the living annuity. 

The third category is advice fees which are negotiated between 

the advisor and the client. It includes an upfront advisor fee and an 

ongoing fee payable on an annual basis. There are product limits 

in place, but the levels depend on the agreement between the 

client and advisor. There could be fees associated with bespoke 

components like offshore, personal share portfolios and model 

portfolios where these are selected. The effect of fees on a particular 

contract is shown and explained in detail in the proposal document. 

What are the key benefits of including the Guaranteed Annuity 

Portfolio in the living annuity? 

Martin: Our view is that this hybrid structure will introduce three 

important benefits. Firstly, enhanced advice opportunities for 

financial advisors. 

Then, given that it is effectively introducing a new asset class 

into the retirement profile, there are diversification opportunities 

for the remaining part of the market-linked assets to consider. And 

thirdly, including a Guaranteed Annuity Portfolio directly affects the 

sustainability of the client’s retirement income profile. 

In what way does this enhance advice opportunities? 

Martin: If one considers traditional solutions, in many cases the 

relationship between the advisor and client reaches the end phase 

once the client purchases a life annuity. There is a single point in time 

where advice is required. 

Contrast this with a world where client needs can be better met 

with a blend of a living annuity and a life annuity. In this structure, 

the life annuity becomes one of many components within a 

living annuity. An advisor can therefore continue to be involved 

in advising clients during their retirement years, for example, 

about how to manage expenses in the context of returns, when 

to protect income, and how much income to protect. These all 

require ongoing advice. 


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RETIREMENT 

The new structure of the living annuity provides the flexibility for 

a client and advisor to decide when to share risk and how much risk 

to share. And at the same time, the client can retain some exposure 

and some possibility of upside potential on investment growth. 

Because the Guaranteed Annuity Portfolio is a new component 

and not a new product, it means that advisors can make these 

decisions, not only for new clients but also for existing living 

annuity clients. It is simply a switch instruction. 

We have also aligned advisor fees to be relevant for this ongoing 

advice opportunity and the continued value that can be added. 

What are the returns that a client can expect from a Guaranteed 

Annuity Portfolio? 

Fareeya: The Guaranteed Annuity Portfolio, as part of a living 

annuity, introduces a very different type of asset class with a very 

different type of return profile. It is an insurance contract, so the 

underlying return is a function of both the guaranteed return and 

how long the client lives and not only the investment return that 

we are familiar with for other asset classes. 

For example, let’s consider a 65-year-old client in a guaranteed 

income product where the income increases at 5% every year. This 

client will receive the investment amount back after 10 years or by 

age 75. Thereafter, the client will receive the investment amount 

back again every two to three years. Someone who lives until 95 

will have received income more than five times the amount that 

they initially invested. This translates to an internal rate of return of 

more than 12%. 

A client who lives less than 10 years would not receive his capital 

back in income. Is there a way to mitigate this? 

Martin: That is also true, which is why life annuity products have the 

guaranteed term feature. Basically, a guaranteed term is the minimum 

period for which the income is paid, regardless of how long the client 

lives. So, for example, if the same client chose a guaranteed term of 

20 years, the minimum return would be around 2.5 times the initial 

investment amount, which translates into an internal rate of return of 

around 9.3%. Of course, the client and advisor will need to consider 

this in the context of the decrease in income that a guaranteed term 

introduces, which depends on the client’s age. 

You mentioned diversification as a benefit. How does an allocation 

to the Guaranteed Annuity Portfolio achieve this? 

Fareeya: A life annuity should be viewed as a separate asset class 

with unique risk and return characteristics. By including a Guaranteed 

Annuity Portfolio in a client’s portfolio, financial advisors can formulate 

a different view on the risk capacity on the balance of the assets. The 

best way to explain the potential impact is by using an example. 

Let’s assume that the suitable asset strategy for the client is a 

medium equity investment. This typically has 56% invested into 

equities and property, with the balance invested in bonds and cash. 

Let’s further say that the advisor and client decide to protect 

some of the income by using 35% of the capital to purchase a 

Guaranteed Annuity Portfolio within the living annuity. The balance 

of 65% is invested into a medium equity investment. 

If one recalculates the exposure, seeing the Guaranteed Annuity 

Portfolio as a different asset class, the overall allocation to growth 

assets in the living annuity drops from 56% to 36%. This is likely 

to be overly conservative for this client. 

If the advisor combines a higher equity investment portfolio 

with the 35% investment into the Guaranteed Annuity Portfolio, the 

exposure to growth assets becomes roughly similar, at 52%, to the 

medium equity scenario. So, by introducing protection on a portion of 

the income, the advisor can now choose to pursue a more aggressive 

asset strategy on the market-linked assets, with a view to potentially 

achieving higher growth rates on that part of the investment. 

We have discussed advice and diversification. You mentioned 

a third benefit being the sustainability of retirement income. Is 

sustainability the definition of success in retirement? 

Martin: Investing is personal and success in retirement is different 

for each client. For very high net-worth clients, the aim is likely to 

increase the capital value and draw the minimum income so that 

they can leave a legacy. But for most clients, successful retirement 

means being able to receive an income for as long as they live and 

ideally have the income increase with inflation. The reality is that 

many clients have not saved enough for retirement. Combine that 

with a low-return environment and it becomes very difficult to be 

confident of a successful retirement. 

A protected income means that a client will never run out 

of money. On at least a portion of the income, the client can be 

certain of the outcome. Including a Guaranteed Annuity Portfolio in 

a strategy introduces a floor below which a client’s income will not 

be at risk. And the results of our analysis show this quite strongly. The 

Momentum Investments’ analysis shows that including a guaranteed 


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portion can increase the sustainability of a client’s income by as 

much as 10 years. 

That is quite powerful. Tell us more about these results. 

Fareeya: We used an average case study where the client is 65-year-old 

with R2-million to invest in a living annuity. We assume that the 

client needs an income of 7% (or R140 000) in year one and that 

the income has to increase by 5% every year. Let’s also assume 

that half of his expenses are fixed life expenses, and that the client 

invests in a medium equity strategy. 

Our marketing actuary, Martiens Barnard, ran 2 000 return 

simulations that showed that in 40% of cases, the best-case 

scenario would be that the client’s required income can be met 

until age 83. Thereafter, the income starts to drop. 

From age 89 onwards, this client’s income will have dropped 

to less than half of what is required. This means that from age 89, 

the client will not be able to cover even the basic life expenses 

that they have. 

He then assumed that 35% of the capital was used to purchase 

a Guaranteed Annuity Portfolio inside the living annuity and re-ran 

the results. 

There are two important effects to observe after the Guaranteed 

Annuity Portfolio was added. Firstly, instead of starting to reduce at 

age 84, the income only started to reduce at age 94. So, there were 

10 more years that this client could receive the full income required. 

Secondly, there is no red line in the graph. This means that even 

though the income reduced at these older ages, it was always 

more than 50% of what was required. The consequence of this is 

that the client was always able to meet the essential life expenses. 

So, based on our earlier definition, the chances of a successful 

retirement increased. 

Does the inclusion of a Guaranteed Annuity Portfolio mean that 

a client will always have a successful retirement? 

Martin: Including a Guaranteed Annuity Portfolio in a living 

annuity does not mean that a client will always receive the 

income that he requires. There will still be situations where a 

client has not saved enough for retirement and the income that 

he can expect to receive will reduce. 

The outcomes map shows the result of the 2 000 simulations 

in a medium equity portfolio. The green shaded area is the safe 

area where the client can meet all the income needs. The yellow 

shaded area is the part where the client’s income is between 50% 

and 100% of what was required, and the red area is where the 

income is less than 50% of what was required. The first picture 

illustrates the effect of 100% invested into a medium equity 

portfolio. The second picture assumes 65% in a medium equity 

portfolio and 35% in a Guaranteed Annuity Portfolio. 

Depending on the scenario, the inclusion of the Guaranteed 

Annuity Portfolio can have two effects: firstly, it can extend the time 

before the income starts to reduce, and secondly, even when it does 

fall, the extent of the fall will be limited. This is illustrated in the graph 

by the green area becoming bigger and the red area shrinking. 

What do you think will be the key differentiator on this solution? 

Martin: Overall, we believe that our living annuity product with 

the inclusion of a Guaranteed Annuity Portfolio, offers advisors 

the best possible solution for growth and protection over a client’s 

lifetime. It is one unique structure and not two separate solutions. 

So, an advisor can provide holistic advice about balancing risk and 

enhancing diversification. The structure also allows for appropriate 

advisor remuneration. 

We have taken away the pressure of making this decision once 

off. Advisors can choose to protect some of the client’s income at 

the time when it makes most sense for that client’s circumstances. 

It’s another way that we at Momentum Investments are making 

retirement income choices very personal. 

Momentum Wealth (Pty) Ltd (FSP 657) is an authorised financial services provider. Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial 

services and registered credit provider (FSP 6406). The Retirement Income Option and the Guaranteed Annuity Portfolio are life insurance products, underwritten by Momentum 

Metropolitan Life Limited, a licensed life insurer under the Insurance Act and administered by Momentum Wealth (Pty) Ltd. The information in this interview is for general 

information purposes and not intended to be an invitation to invest, professional advice or financial services under the Financial Advisory and Intermediary Services Act, 2002. 

Momentum Investments does not make any express or implied warranty about the accuracy of the information herein.

BLUE 

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RETIREMENT 

Unpacking government’s 

proposal of a two-pot 

retirement saving system 

The COVID-19 pandemic and resulting lockdowns saw 

many South Africans accessing their retirement savings 

as a cash withdrawal on leaving their employer due 

to resignation, dismissal or retrenchment, rather than 

preserving their accumulated retirement savings (keeping one’s 

retirement savings invested) as a result of the financial strain on 

their household finances. 

In South Africa, the savings rate remains low. Our total 

household savings averages at just above 2% of GDP per 

annum, with the majority of this being allocated to contractual 

retirement fund savings.1 Furthermore, 34% of the Old Mutual 

Savings and Investment Monitor 2021 survey respondents 

indicated that they do not have enough savings to last more than 

one month if they lose their income.2 But even contributions to 

retirement funding is low and in the majority of cases this is the 

only source of saving. 

This low level of savings is exacerbated by low levels of 

preservation when moving jobs before retirement. Data from the 

South African Revenue Service (SARS) indicates that over 700 000 

individuals cashed out a “withdrawal lump sum” before retirement 

for each of the last three years, resulting in an annual average of 

R78-billion being taken out of the retirement system through 

withdrawals made before retirement.3 

Low savings coupled with low levels of preservation results in a 

significant portion of the South African population not being able 

to retire with adequate retirement funding. This is worsened in 

times of financial hardship, as seen with the COVID-19 pandemic, 

where individuals with little to no sources of other savings turn to 

their retirement savings as a source of emergency funding when 

moving between jobs. 

There may be a need for a formal regulated system of preretirement 

withdrawals that is different to what currently exists – 

one that enables individuals to access a portion of their retirement 

savings before retirement if needed, but to also ensure some 

prescribed level of preservation, affording one the ability to still 

retire comfortably without unduly eroding accumulated retirements 

savings before retirement. 

Addressing the conflicting priorities of saving for an income 

in retirement (and enforcing preservation) but allowing (some) 

access to retirement savings during financial hardship in working 


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ages has historically been extremely topical and ever more so 

considering the impacts of the COVID-19 pandemic. National 

Treasury released a paper in December 2021 proposing a two-pot 

system for retirement savings, followed by discussions and debates 

which are currently ongoing between the National Economic 

Development and Labour Council (NEDLAC), key stakeholders, 

trade unions and regulators. The proposed retirement reform 

would result in the restructuring of future retirement savings 

contributions – allowing for limited pre-retirement withdrawals 

from one’s retirement fund to help alleviate financial pressures, 

while addressing compulsory preservation. 

Overview of the proposed two-pot system 

In short, National Treasury’s proposal involves a two-pot system. 

The first pot, known as the “Retirement Pot”, is made up of twothirds 

of all future retirement fund contributions (ie contributions 

made after the implementation date of the two-pot system) plus 

investment returns earned on these contributions. This pot must 

be preserved (remain invested) until retirement and cannot be 

accessed before retirement. 

The second pot, known as the “Access Pot”, would enable 

access to accumulated retirement savings prior to retirement 

and made up of the remaining one-third of all future retirement 

fund contributions plus investment returns earned on these 

contributions. It is recommended that withdrawals from the 

Access Pot should be permitted (provisionally) once per year 

only, subject to a minimum amount of R2 000. If members 

access only a portion of their retirement savings in the Access 

Pot, the remaining amount from the previous year plus further 

accumulated amounts become accessible again in the following 

year and so on. 

The cost of the withdrawal(s) will be covered by the member 

withdrawing. The amount withdrawn from the Access Pot will also 

be subject to tax at the relevant withdrawal tax rates. 

Members will be required to undergo benefit counselling and/ 

or obtain financial advice before a withdrawal is made. This aims 

to help ensure that individuals accessing their retirement savings 

early understand the long-term consequences these withdrawals 

may have on their future retirement goals. 

Some considerations regarding the proposal 

The implementation date for the two-pot system is proposed to 

be on 1 March 2023. However, the proposal is highly complex 

and requires numerous changes to processes, reporting, 

systems, communication, legislation and training to members, 

employers, trustees and intermediaries. Given the above and 

seeing that no final proposal has been submitted by National 

Treasury, the 1 March 2023 implementation date may be 

somewhat optimistic. 

Some of the issues still under consideration include: 

• It is recommended that withdrawals from the Access Pot should 

be permitted (provisionally) once per year only. The definition 

of a “year” (ie a tax year or a rolling 12-month period from the 

commencement date of a member’s contributions) requires 

clarification to ensure consistent treatment for all funds and ease 

of administration. 

• Whether members should be able to immediately access 10% 

of their share of retirement fund savings, up to R25 000, at 

implementation of the legislation. 

The retirement industry has indicated several concerns on the 

large sudden outflows from retirement funds should a large 

number of individuals decide to make use of the immediate access 

to their retirement savings all at once upon implementation date. 

The result may place significant pressure on capital markets, 

administrators, funds and SARS with respect to the payment of 

these withdrawal benefits. 

Liberty Group’s view on the proposal 

As Liberty, we are in support of the proposal by National Treasury in 

the view that if correctly structured and implemented, it may help 

improve retirement funding in the longer term and retirement 

outcomes for South Africans. However, it is both complex and a 

material change to the current retirement system; we therefore 

caution that the proposed timeline may extend beyond the targeted 

implementation date. 

A balance needs to be achieved between 

ensuring that the size of the Retirement Pot 

is large enough to provide for a comfortable 

retirement and the achievement of longterm 

retirement goals and ensuring that 

the Access Pot is sufficiently sized to 

adequately allow for continued access prior 

to retirement. 

We believe that the proposed two-pot 

system can achieve a constructive outcome 

by supporting those in our society who 

are suffering financial hardships, while 

simultaneously boosting long-term financial 

savings to benefit many. 

Alisha Corbett, Head: 

Umbrella, Liberty Corporate 

Sources: 

1 National Treasury, Encouraging South African households to save more for retirement. Reference to SARS data. 2021121401 Two-pot system retirement proposal and auto 

enrolment.pdf (treasury.gov.za) 

2Old Mutual Savings and Investment Monitor 2021 survey. Old Mutual Savings & Investment Monitor 2021 | Old Mutual 

3National Treasury, Encouraging South African households to save more for retirement. 2021121401 Two-pot system retirement proposal and auto enrolment.pdf (treasury.gov.za) 


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INVESTMENT 

For better client outcomes, 

focus on the investor 

not the investments 

In 2020, Warren Buffett said on CNBC, “I don’t own any Bitcoin, 

I don’t own any cryptocurrency, I never will. It’s probably rat 

poison squared.” Buffett was similarly sceptical of the technology 

bubble in the late 1990s, when investors believed that “dot com” 

behind the name of any listed business guaranteed riches beyond 

any other type of business. Bill Gates, in June this year, said at a 

tech conference that the phenomenon of crypto is “100% based on 

greater fool theory”, which suggests that overvalued assets will go 

up in price when there are enough investors who are willing to pay 

more for them. “I’m not involved in that,” Gates said. “I’m not long 

or short any of those things.” He said that he is more used to “asset 

classes… like a farm where they have output, or like a company 

where they make products”. 

I have no doubt every financial planner on the planet has had 

clients asking them about cryptocurrency, “What do you think of 

it as an investment?” What the client is really saying is, “Wow, that 

looks exciting. I want a piece of the action.” Much data and research 

show that over the long term, the most liquid, highest returning 

regulated investments (listed equities) deliver average annual real 

returns around 6% (international) and 7% (local) above inflation. 

Yet, whenever there seems to be an opportunity for higher 

returns, clients want it. In dealing with these wants from clients, 

we usually get caught up in discussing the merits (or not) of the 

investment. A different approach would be to consider that it’s 

not about the investment, it’s about the investor, which means 

we need to focus on the person, not their money. 

With this in mind, much work has been done and continues 

to be done on the impact that cognitive and emotional biases 

have on our financial decision-making. Despite the insights that 

research into behavioural finance have generated in this area, 

client decision-making, especially in the area of investments, 

remains a challenge. The stampede for the exit from risk assets 

when Covid-19 hit is a case in point. As was the stampede for the 

entrance when crypto coins promised riches that other supposedly 

more boring investments like listed equities could not match. The 

rise and fall of crypto has once again demonstrated the power of 

the herd. It is social pressure that enables so many people to fall 

foul of the “greater fool theory”. Inevitably when a client asks you 


Macdonald will be speaking at the Humans Under Management (HUM) conference on 13 October 

2022 in Cape Town. HUM is for financial planners who are interested in improving client outcomes 

by focusing on the human side of their advice. 

Get your tickets at https://www.humansundermanagement.com/southafrica2022. 

about an investment, they know somebody else who has made 

that investment. But these factors do not adequately explain why 

clients keep falling foul of poor investment decision-making. 

In his book, The Psychology of Money, Morgan Housel makes 

the point that “building wealth has little to do with your income 

or investment returns, and lots to do with your savings rate”. Again, 

it’s not about the investment, but about your client’s savings 

habit, which begs the question, what influences a client’s ability 

to save? One is a simple nudge like an automated contribution to 

a retirement annuity (RA) or unit trust investment. But even such 

a nudge is not foolproof. Clients find ways around them. I believe 

we need to understand the person more deeply in two ways. 

Firstly, a client’s personality will influence their inherent 

ability to save or not. And when I mean personality, I don’t mean 

risk profile. Possibly the greatest damage to helping clients get 

the investment outcomes they need has been the concept of a 

person’s risk profile. A client may be risk averse by nature, but 

their investments may need as much risk as possible to counter 

a late start to saving. 

Personality is more complex than a risk profile. It is not only 

about how someone shows up in the world, but what drives 

their behaviour, and is built on a multiplicity of factors, both 

genetic and contextual. Understanding your client’s personality 

is important. Analytical clients may need your help to make 

decisions. Enthusiastic extraverts may need you to slow them 

down and not rush into decisions. This is important work, 

especially when it comes to investing. 

The second key influence on a client’s ability to save is their 

relationship with money. 

Whether we have money or not, we have a relationship with 

it. In fact, our relationship with money is probably the longest 

relationship we have with anything. Our relationship with 

money starts when we are in the womb, which means it is being 

formulated even before we get into the womb. 

Warren Buffett famously said that he won the Ovarian 

Lottery. He was born into a middle-class American family which 

he acknowledges laid the foundation for his fascination with, 

and pursuit of, making money. He lived in a neighbourhood 

where people read newspapers. This meant he could start 

earning money as an 11-year-old by delivering newspapers. As 

he points out, if he had been born in a rural village in Africa, 

his opportunities in life would have been very different. And he 

would have had a very different relationship with money. 

So, our relationship with money starts in ways unique to us. 

I was born into a family where as the youngest of five children, 

I no doubt introduced an additional financial burden to an 

already financially stretched situation. Or that is the story I tell 

myself. As David Krueger, author of Your New Money Story, says, 

“Money relies on the meaning we assign to it.” My money story is 

one of scarcity rather than abundance. To compound this, both 

my parents had lived through the hardship of the Second World 

War, and all the frugality that this entailed. My mother’s father 

lost all his savings on the stock market, after his retirement. My 

father lost his mother at the age of 14. He and his three brothers 

knew frugality long before the war years. So my money story 

starts in the womb as one of scarcity and my relationship with 

money has been challenging ever since. Often a source of stress 

rather than pleasure. 

Now this money relationship is a complex thing. To a lesser 

or greater extent, my four siblings received the same messaging, 

but interpreted it differently from me. We each process the world 

according to our own perspective. As Anais Nin says, “We see the 

world as we are”, which is why having an understanding of each 

client’s unique personality is so important. The real challenge with 

our relationship with money is that it is difficult to walk away from. 

We can’t get divorced from money unless we live in isolation on 

a desert island. The emotional relationship we have with money 

is deeply embedded. And it unknowingly will influence our 

decisions, not just about money but about life, for the two are 

so inextricably linked. So, in a sense we have a hidden guide to 

our financial decision-making which may impede, or in some 

instances improve our financial outcomes. 

Unless we make our money story conscious, understand the 

nature of our relationship with money fully, and if need be, change 

our money story, we run the risk of not living fully and making suboptimal 

choices about money and life. Our brains are storytelling 

machines. We tell stories about ourselves, and as David Kreuger says, 

“These stories both describe and determine what we do.” Without 

knowing a client’s money story, and 

understanding their relationship with 

money, I believe it is very difficult to 

give optimal advice. More importantly, 

if a client does not understand their 

money story they will not be conscious 

of the dynamics in their relationship with 

money and may struggle to take and 

implement appropriate advice. 

I have no doubt better client outcomes 

come from focusing on the person who 

is your client and not going down the 

rabbit hole of the latest investment hype. 

Especially if, as the greatest investor of our 

time says, at the bottom of that rabbit hole 

is “rat poison squared”. 

Rob Macdonald, Head of 

Strategic Advisory Services, 

Fundhouse 


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TECHNOLOGY 

THE RDR JOURNEY 

“Platforms transitioning to the new RDR landscape in South Africa need a technology 

provider that understands the challenges and can work collaboratively with them 

on their business strategy as well as implementing the right technology”, says 

Carolyn Erasmus, Country Head for South Africa, at Bravura Solutions. 

The Retail Distribution Review (RDR) journey, being 

undertaken in the South African financial advice 

market, brings with it numerous challenges for 

advice firms and the platforms which serve them. The 

inherent changes to rules and regulations will affect, not just 

how financial advisors work, but also will impact how platforms 

operate and how they deliver services to advisor firms. 

The UK market transitioned to RDR 10 years ago, and there 

is much which can be learned from it in how to approach these 

changes. It is important for South African platforms that they 

understand, explore and investigate the transition to see how 

it will impact their business. 

Bravura’s Interim Chief Executive Officer and Chairperson for 

EMEA, Peter Mann, has first-hand experience of this transitional 

pathway in the UK market and how this can be applied to the 

South African industry. He says: “RDR is changing how advisors 

charge, their need to obtain qualifications and the relationship 

and conversations they will now be having with clients and their 

providers. Platforms need to adapt to that change by ensuring 

their operations and services enable their advisors’ clients to 

remain compliant with the new regulations. They will need to 

respond to pricing pressures and slimmer margins in the market, 

and they will need to innovate to remain competitive.” 

The good news from the UK experience is that alongside 

the challenges come opportunities. Notably, platforms 

moved from a role as “fund supermarkets” to take a far more 

central position in the way advice firms deliver their client 

propositions. But to be part of that change process, platforms 

need to have the right technology architecture in place, creating 

efficiencies and delivering the service advisors will both want 

and need to run successful businesses in the new landscape. 

Carolyn Erasmus, Country Head for South Africa, 

Bravura Solutions 


TECHNOLOGY 

BLUE 

CHIP 

What is the RDR? 

The Retail Distribution Review (RDR) is an initiative that 

aims to provide greater clarity about the various financial 

services that are available. Its objective is to improve 

transparency around the costs and fees associated with 

financial advice. 

“In moving forward, platforms need to 

understand their role in the value chain 

and how this affects their service.” 

According to the UK’s financial regulatory body, the 

Financial Conduct Authority (FCA): RDR is about 

establishing a “resilient, effective and attractive retail 

investment market that consumers can have confidence in 

and trust at a time when they need more help and advice 

than ever with their retirement and investment planning”. 

RDR aims to ensure that each client of a financial advisor 

is offered a transparent fee structure, able to understand 

the services the advisor provides and knows they are 

being advised by a respected professional. 

From our conversations with companies in South Africa, platforms 

are considering two main technology pathways. One is to re-platform, 

rationalising their legacy systems and moving them to a whole new 

back-end technology. The other is to make use of what they have in 

place and bring in microservices technology – the strategic addition 

of componentised technology – to build on their current offering and 

deliver what the market needs now and in the future. 

Mann says: “To undertake re-platforming, the benefits of 

technology change must be significant and very quickly realisable 

to assuage the upfront cost and the inevitable pain of an enterprisewide 

change. The experience in the UK has been that the money 

spent, time consumed and benefits gained were not necessarily 

matched, which is why we are seeing a more gradual approach 

from executives and shareholders in South African businesses.” 

The best way forward 

In moving forward, platforms need to understand their role in the 

value chain and how this affects their service. It is important to 

look at where their strengths lie and how the technology they have 

supports their distribution channels. These aspects differ between 

platform, which is why it is important to assess their position in the 

market now and with a future mindset, to ensure the underlying 

technology they choose is flexible enough to adjust to change as 

and when it is required. 

Peter Mann, Interim Chief Executive Officer and Chairperson 

(for Europe, Middle East and Africa), Bravura Solutions 

As a global technology partner to financial services providers, 

Bravura has helped UK businesses prepare for and adapt to 

the rapidly changing regulatory environment, with that future 

mindset. We have a very clear and successful way of working with 

any client. This is a collaborative process, built on our years of 


79

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TECHNOLOGY 

experience working with companies around the globe. Before 

we have any talk around technology, we work together with the 

company to understand their problem statements that they as 

an organisation are trying to solve. 

From these conversations, we can ascertain how we can best 

solve their challenges. Only at that point do we talk technology 

and how to deliver a solution that will provide the most optimal 

business value. As Mann puts it: “It’s software implementation 

but a business relationship.” 

For example, we are drawing on the intel we have gained 

through working in the UK market to help South African 

platforms avoid the same problems and mistakes. We have 

produced two white papers to help platforms better understand 

the potential effects of RDR on the South African market. They 

talk to the changes from a regulatory perspective, how to 

support and manage scale, transparency of service and speed 

to market, and how to keep ahead of the competition. 

HELPING PLATFORMS THROUGH RESEARCH 

Bravura Solutions has published two white papers to help 

platforms understand the challenges and the solutions that 

can help in the transition to the new RDR environment. Both 

can be downloaded from https://www.bravurasolutions.com/ 

sa-fintech/. They are called: 

• Platform evolution through the RDR and beyond: lessons from 

the UK experience 

• Supporting South Africa’s journey to a client-focused and 

transparent financial market 

These papers were researched in collaboration with Next 

Wealth and The Collaborative Exchange. 

Platforms we are talking to that are ahead of the game are not 

only making decisions around whether to re-platform or focus 

on the pain points by incorporating modular software, they are 

looking at what’s coming down the line and which technology 

will enable them to quickly and cost-effectively deliver what 

the market wants. This more often puts microservices top of 

mind, as they can rapidly help solve technology challenges and 

take advantage of opportunities in a smart and cost-effective 

way – and without the need to upgrade the underlying system 

or build in substantial downtime for testing. 

Platforms who are looking at their strategy going forward 

should be looking for technology that supports speed-tomarket 

and delivers functionality on a regular cadence without 

interrupting the platforms’ business-as-usual operations. This 

is critical for a company, not only to progress but also to stay 

ahead of its competitors. 

ABOUT CAROLYN ERASMUS 

Country Head for South Africa, Bravura Solutions 

Carolyn Erasmus is the Country Head for South Africa at Bravura 

Solutions, a leading global software provider to financial 

institutions. She is a high-performing professional who is energised 

through the creation and shaping of a business as it grows into a 

fully flourished operation that generates growth and revenue in a 

proficient manner. 

Erasmus’ 17 years years of experience in the financial services industry 

has spanned across multiple areas of expertise, from managing 

a FinOps team, delivery of technology solutions, commercial 

development to executive stakeholder management. She has 

in-depth knowledge in wealth management, life and short-term 

insurance as well as financial advisory. 

80 


ABOUT PETER MANN 

Interim Chief Executive Officer and Chairperson (for Europe, 

Middle East and Africa), Bravura Solutions 

Based in London, Peter Mann was previously vice chairman at Old 

Mutual Group, where he played an integral role in the delivery the 

Group's growth strategy. Prior to that, Mann held several senior 

roles including Chief Executive Officer of Skandia, one of the 

United Kingdom’s largest retail platforms, which was acquired by 

Old Mutual in 2006. Mann has also been the CEO of Bankhall, an 

independent financial advisor network. 

In his role at Skandia, Mann laid the foundations for expanding 

the retail platform into the leader it is today. At Bankhall, Mann 

supported significant revenue growth and steered the company 

to profit, implementing several new services for existing members 

across various business lines.

EXPERTS. PIONEERS. INNOVATORS. 

THE FUTURE 

OF FINANCIAL SERVICES 

IS OUR PRESENT. 

We can help you achieve 

your business goals.

BLUE 

CHIP 

RETIREMENT PLANNING 

SUCCESSION PLANS REALLY MATTER 

A retirement plan is different to a business continuity plan. 

A series on succession planning, business continuity and retirement planning. Part 3 

Parts 1 and 2 of our series showed that people mean two 

different things when they talk about succession plans: 

business continuity and retirement planning. In the final 

part of our series, we look at retirement planning. 

Your retirement plan is how you plan to exit your business. This 

sounds straightforward, except that retirement means different things 

to different people. It is about realising the equity in your practice. You 

need to choose between selling the business completely or leaving a 

legacy where the clients continue to feel your DNA long after you’ve 

left. There is no right or wrong choice here. You are the only person 

who can decide what is right for you. 

While there are several possible scenarios, I’m going to limit this 

article to three options to help you decide what is right for you. 

Option A: selling your practice 

This option is appealing to people who don’t have time to transition 

their practice to their successor. It is popular with advisors who 

want to start something new, as well as those who suffer from ill 

health. There is no magic in determining the value of your practice. 

Regardless of the specific valuation methodology, it always comes 

down to your recurring income. Many advisors are disappointed when 

they discover that their life-long clients have no value to a successor 

because there is no ongoing revenue. 

To maximise your selling price, you need to increase your ongoing 

revenue by stopping upfront commission or fees and moving 

to an as-and-when commission or ongoing fees and increasing 

the longevity of your clients by focusing on their product holding 

(compulsory vs discretionary investments) and their relationships with 

you and your staff. You will need to actively manage this in the years 

leading up to your retirement. 

In this scenario, it is typical to earn a multiple of around twice your 

annual recurring revenue. Where someone offers you more than this, 

it is likely that they are going to churn the clients to their in-house 

products. You need to consider whether this will be in your clients’ 

best interests. 

Option B: transitioning your practice to a successor 

The key difference between this option and selling your practice 

is that the successor joins you for a few years so that client 

relationships can be transferred effectively. The result is that 

the clients are stickier and that means that you should expect 

your practice to be valued on a multiple of around three times 

annual recurring revenue. Once again, you need to ask questions 

if someone is offering you substantially more than this amount. 

Option C: leaving a legacy 

As a financial planner, your clients are buying a customer experience 

that is based on your skill and the sense of comfort that they 

provide. If you want your legacy to continue, you need to bring the 

successor into your business long before you leave so that they can 

be absorbed into the culture you’ve created. 

Practically, there are several ways for you to exit while leaving 

a legacy and the best option is often dictated by circumstance. 

I suggest that you consider a timeline that looks something 

like this: 

• While you are still working at full capacity, you identify a 

successor and bring them into your business. 

• They spend a few years learning about your customer experience, 

advice philosophy and solution preferences, and building 

relationships with your clients and staff. 

• As you approach retirement you inform both your clients and 

staff that your successor will start taking over the business, but 

that you will still be around for some time (you may want to start 

handing over some of your clients at this stage). 

• Your successor takes over the day-to-day management of the 

business, while you take on the role of figurehead. 

• For several years, you remain in the practice but you reduce your 

hours as you hand over your remaining clients. 

• At some point, you step away from the business entirely. 

In terms of realising equity, you have the option of selling the 

practice, although you would expect a valuation multiple of at least 

three times annual recurring revenue because your clients are much 

more likely to remain in the practice. However, a better option for both 

you and your successor is that you do not do 

a valuation and instead earn a percentage of 

all future revenue as an annuity. Two popular 

models are 30% for the remainder of your life 

or 25% for the remainder of your life plus six 

years thereafter to your spouse. 

Your retirement plan is your plan to realise 

one of your biggest assets. Remember that 

you can change your preference as your life 

changes. A solid strategy is to meet with a 

practice manager and/or valuer every five 

years from age 40 to value your practice and 

discuss what you should be doing to enhance 

the value. And then spend the next five years 

making those changes. 

Guy Holwill, Chief Executive 

Officer, Fairbairn Consult 

82 www.bluechipdigital.co.za 

Disclaimer: Fairbairn Consult is a firm of Registered Financial Advisers. We are a licensed FSP and 

a member of the Old Mutual Group.

FAIRBAIRN CONSULT 

FINANCIAL PLANNING 

ARE YOU CONSIDERING LEAVING THE INDUSTRY, 

BUT UNSURE ABOUT YOUR OPTIONS? 

Fairbairn Consult Financial Planning is a growing firm of 

unbiased, salaried, Certified Financial Planners (CFP®). 

We are actively looking to purchase client bases from 

financial planners wanting to exit the industry. 

We will work with you to structure an exit strategy that 

is right for you and your clients’ needs. 

To find out more, scan my QR code or visit 

www.fairbairnconsult.co.za 

ombds 03.2022 C5488 

Fairbairn Consult Financial Planning is a Fairbairn Consult franchise. 

Fairbairn Consult is a licensed FSP and a member of the Old Mutual Group.

BLUE 

CHIP 

CLIENT SERVICE 

Unleashing the financial 

potential of time saved 

The power of a comprehensive view of a client’s portfolio 

is vital now more than ever. For the past two years, many 

South Africans have buckled down and now tossing 

their masks away is giving them a moment to come up 

for financial air. It is time for many portfolios to be re-evaluated. 

But, with a myriad of financial products in the market, coupled 

with a deluge of online investment opportunities, the role of 

financial advisors is critical in ensuring that the correct investment 

decisions are made. While there is uncertainty as to which financial 

products and/or funds the investor needs, there is no doubt in their 

mind that procrastination brings loss. 

For financial advisors to effectively be able to support and advise 

their clients’ investment decisions, they need a comprehensive view 

of their clients’ current financial interests. 

Clients often have multiple investment accounts at different 

platforms. While this might be a result of good, independent advice 

at the planning stage of the relationship from their financial advisor, 

it can be admin-intensive to manage these diverse investment 

portfolios on an ongoing basis. It is important to use technology to 

your advantage so you can deliver a service that keeps your client’s 

best interests in mind. 

Financial advisors need to consider the most efficient and 

cost-effective way to collect data from various financial service 

providers and consolidate the information under their brand 

banner. This will allow the financial advisor to proactively add value 

to their clients, move away from a reactive position and to have a 

comprehensive view of their client’s portfolio to ascertain what the 

asset allocations are for the various funds, the risk exposure for the 

clients and the client’s product exposure. With knowledge of the 

client’s financial needs, the financial advisor can then evaluate their 

existing portfolio and ensure that their investments and policies 

hold the correct balance of risk diversity across the required 

financial products. 

Applying the financial advisor’s branding to the consolidated 

investment statement increases the total trust the client has in the 

financial advisor. The advisor remains top-of-mind with the regular 

reporting communicated to the clients. 

The format of this data is critical in the management of a 

financial services firm. Collecting and analysing data can be used 

as a management tool for business insight to manage its advisors 

and business more accurately, as well as to assist with marketing 

to a client base. Using an aggregated set of investment data will 

not just allow a financial services provider to identify and address 

the correct clients who require services, but also save the business 

time and money by having this information readily available, with 

minimum manual intervention. 

Accurate data is a critical ingredient to form a foundation for 

good reporting, and it also prevents an increase in financial costs, 

productivity losses, missed opportunities, reputation damage and 

ineffectual business strategies. 

Financial advisors who communicate regularly with their clients 

and keep them informed, ensuring that they are always fully aware 

of their financial position, will secure long-term clients. And loyalty 

has more positive consequences for a brand that is actively investing 

in its clients’ financial wellbeing. With regular client engagement, a 

person’s portfolio can be adjusted to suit the changes in their financial 

position. All significant life changes require a review of the client’s 

portfolio, which, in turn, creates better customer relationships and 

increases the value for both the client and advisor. 

Using Seed Analytics makes 

a significant positive impact on 

the ability for financial advisors to 

service their clients and doesn’t 

just save time, at least a week 

per month on reporting alone, 

but removes human error from 

manual inputs. 

Ensuring that a client’s financial 

standing is well taken care of and 

that they understand the value of 

their financial advisor and their 

impact on their financial future. 

This is how businesses in the 

financial advisory and wealth 

management sector will be able 

to build a lasting institution and a 

sustainable long-term brokerage 

or advisory service. 

Andries de Jongh, Key Account 

Manager, Seed Analytics 

84 www.bluechipdigital.co.za

THE 2021 SOUTH AFRICAN 

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+27 82 054 4521

BLUE 

CHIP 

COACHING 

THE BALANCING ACT 

Guiding your clients through significant life changes. 

We have all seen and experienced a shift in our clients’ 

priorities as many people are undergoing – or 

considering – substantial life changes. This is a time 

of change, a time for reflection and learning, and 

most certainly a time to rethink and edit how we can add value to 

our clients going through life transitions. 

The Covid-19 pandemic certainly spurred on the changes 

we are seeing today. Apart from the Great Resignation, people 

are changing what they value, who they spend time with, 

what they do with their money and are overall looking for a 

greater purpose. I have seen a definite shift towards valuing 

relationships, health, purpose, give-back, experiences and 

learning above owning things. Many of my clients are ready 

to pause, reflect on their lives and rethink their way forward. 

With rearranged priorities and life goals, planners are tasked 

with coaching clients through transitions to help them achieve 

a return on life as well as a return on their investments. 

Coaching is perhaps the most 

crucial role in progressive 

financial planning. 

In my opinion, financial planners need to add value by 

applying three skills when life change is on the table: objectivity, 

an open mind and coaching. 

A lot of the work I’m doing right now is helping my clients 

make informed decisions by bringing an objective view to 

discussions. Life transitions are significant, and most people 

experience a certain amount of anxiousness and stress in these 

situations – often leading to poor or ill-considered decisions. 

When clients are emotional, it is up to the planner to be the 

objective sounding board and give insight into the financial 

impact of life changes in their later years. But it is also about 

balancing the return on investment (ROI) with a return on life. 

I recently met with a client in her late 50s who is excelling 

in her career with extremely positive future earnings and job 

prospects. She wanted to shift priorities and lead a fuller, more 

passionate life – now instead of waiting another eight years as 

planned. Looking at her financial plan and objectively talking her 

through the real impact of earning less but living more, helped 

clarify her decision. She felt empowered after the exercise as she 

clearly understood the effect on her financial plan, putting her 

firmly in the driving seat to make an objective decision. 

Our work does not stop after the financial plan discussion. In 

these situations, planners must keep an open mind and coach 

clients beyond the ROI. In my client’s case, she could weigh 

the pros and cons and decide if moving to a small town in the 

Karoo and living her dream life was worth the financial sacrifice 

of leaving her job. We discussed many options of how she could 

bridge the gap to make sure she stays on track financially. Her 

first stop after our meeting was to discuss remote working 

options with her current employer. 

These meetings do require planners to be open-minded. It is 

far easier to simply point out to a client that the numbers don’t 

add up when you’re confronted with life-changing choices. But 

it takes listening with empathy and the ability to consider other 

perspectives when dealing with these situations. 

Coaching is perhaps the most crucial role in progressive 

financial planning. More and more of my clients want fulfilment 

and dream to live with purpose. We coach them through 

this transition from where they are now to where they want 

to be. It really is an edit of time, money and lifestyle and a 

recalibration to start a new journey. The process requires a lot 

of introspection and often the unlearning of habits that do not 

support the clients’ lives going forward. 

Financial planning is all about helping clients realise the 

dreams they have for their lives with money as their enabler. 

Dreams and priorities do shift with the result that financial 

plans must adapt and change. As life becomes less linear and 

the concept of earning until retiring is replaced by lifelong 

learning, purposeful living and adding value, we as planners 

must adapt and add value in 

different ways. Whether clients 

are getting divorced, moving 

cities or countries, giving up 

jobs to pursue significance and 

purpose or simply want to get 

off the treadmill and enjoy a 

quieter, simpler lifestyle, our 

role should include supporting 

them through the transition. I 

encourage planners to remain 

objective and unbiased during 

these discussions as we deal with 

situations and decisions that don’t 

always fit into the traditional 

mould of financial planning. It’s 

about editing the plan, offering 

creative suggestions to fill the 

money gaps and ensuring that 

their money works for them in 

support of their goals. 

Kim Potgieter CFP®, Director, 

Chartered Wealth Solutions, 

ICF Professional Certified Coach, 

New Money Story® Mentor Coach, 

Certified Dare to Lead Facilitator 


Humans Under Management 

South Africa 2022 

Thursday 13th October 2022 - 9:00-17:00 

Allan Gray Auditorium, V&A Waterfront, Cape Town 

Our Speakers 

Andy Hart 

HUM Founder 

Kim Potgieter 

Chartered Wealth Solutions 

Nick Lincoln 

Values to Vision 

Rob Macdonald 

Fundhouse 

Sarah Newcomb 

Morningstar 

Paul Nixon 


Prince Sarpong 

University of Free State 

Rob Geraghty 

Presenting Virtually 

Jean Archary 

Money Messages 

Felicity Guest 

Social Innovator 

Louis van der Merwe 

WealthUp 

Jason Butler 

Financial Wellbeing Expert 

Tickets: 

Early-bird In-Person: R1495, Standard In-Person: R1695, Virtual: R995 

www.humansundermanagement.com/southafrica2022

BLUE 

CHIP 

BEHAVIOURAL FINANCE 

Helping clients to rise 

above the clouds 

The well-known TV show “Mad Men” has a scene in which 

the protagonist, Don Draper, is being flown to a business 

meeting on a rough winter’s day. The amateur pilot, 

Draper’s colleague, remains focused while the plane climbs 

slowly through dreary rain and gusting wind. Draper’s face screams 

terror as he slowly becomes more and more concerned about his 

friend’s ability to safely navigate the blizzard. 

The pilot keeps repeating, “Just a couple more minutes.” Just 

as Draper starts giving up on survival, the plane suddenly breaks 

through the clouds and instantly the plane calms. The noise 

stops and the rain disappears. Through the windows, it looks 

like a perfect summer’s day. 

Experienced pilots know that whatever the weather holds 

below the clouds, once you’re above the clouds there will be 

blissful sunshine. The trick is to stay calm until you break clear. 

Financial storms: they’re never far away 

Successful long-term investors also need to breach the “clouds” 

in order to be successful and beat the odds. We know that 

most investors underperform the markets, as well as the actual 

investment funds they are invested in. 

Financial storms come in many forms, and the next one is 

never too far away. We find ourselves in one of these storms right 

now. A combination of rising inflation, a stock market decline and 

recession fears means it may even be the “perfect storm”. What are 

you doing to help your clients rise above the proverbial clouds? 

Three ideas 

The field of behavioural financial advice (in essence the study 

of how to help clients achieve better outcomes) is only a few 

decades young, with much advancement still to come. While good 

investment behaviour is “easier said than done”, I have found the 

following three techniques helpful in helping clients to manage 

the storms that cross their paths. 

Historical perspective. Flying blind is not likely to end well, 

for a pilot or an investor. Helping clients understand how markets 

have performed before, how cycles come and go, and what price 

they need to pay for inflation-beating long-term returns is crucial. 


BEHAVIOURAL FINANCE 

BLUE 

CHIP 

Financial storms come in 

many forms, and the next 

one is never too far away. 

If you’re interested in developing the human side of your advice 

and want to mingle with others on the same journey, join us in 

Cape Town on 13 October 2022 for the fourth Humans Under 

Management South Africa Conference. I hope to see you there! 

Get your tickets at www.humansundermanagement.com/ 

southafrica2022 

This will help to set realistic expectations, prepare them for what is 

to come, and give them some reassurance that what they are going 

through has been seen before. 

You want them to know the language of investing, and so much of 

this comes down to understanding the rhythms of market cycles. 

As we know, this time is not different. 

Ask better questions. For those of us who are technically 

minded, most of our time would be better spent if we focused on 

getting clients to ask themselves better questions. So often they 

are caught up in detailed tactical considerations when what they 

need is to focus on longer-term strategic challenges. Asking a good 

question helps them to slow down, zoom out and gain perspective. 

They are likely to know the answer better than you do, but by asking 

the question you get the credit and gain more of their trust. Everyone 

values a wise and caring thinking partner. 

There are endless lists of insightful questions that financial 

advisers can ask. Work through these, but more importantly listen 

carefully with curiosity. If you do this, the next question to ask is 

likely to come naturally. 

Emotional encouragement. In its simplest form, this is 

nothing more than being a caring voice saying, “You can 

do this”. Like the trainer at the gym or a loved one next 

to the race track, remind them that they are on the right 

track and have what it takes to make the handful of difficult 

decisions it takes to have a decades-long retirement filled 

with meaning and independence. A few words of assurance 

may be all they need. 

This is why we’re here 

It is easy to wish away the difficult 

market seasons, but that is after all 

why our services are valued. This is 

our real job and my challenge to you 

is to embrace it. Let’s not be found 

wanting when it matters most. 

Continue to give your clients 

the unvarnished truth about the 

investment markets, nothing more 

and nothing less. Our battle cry 

remains: “Stick to the plan!” Financial 

plans and financial futures are 

destroyed below the clouds. How 

many more client families can you 

get to live their financial lives above 

the clouds? 

Andy Hart, Founder, Humans 

Under Management 


89

BLUE 

CHIP 


Financial planning: 

profession or vocation? 

As lifestyle financial planners (LFP), we keep talking 

about striving to be professional and to run professional 

businesses. We compare what we do to the occupations 

of lawyers and accountants who we view as being true 

professionals. But is there more or even something deeper which 

speaks to the work we should be doing with our clients? 

How do you know if your friends’ children are studying to be 

lawyers or accountants? Because their parents will tell you. Nothing 

wrong with this. All parents want to be, and should be, proud of 

their offspring’s achievements. It seems wrong to me, however, 

that these professions seem to hold the monopoly around implied 

future success. The man in the street views a successful accountant as 

someone who can help you pay as little tax as possible and even avoid 

it where possible by using (sometimes aggressive) tax structures; as 

well as keeping your business running smoothly. 

A successful lawyer would similarly be seen as someone who gets 

you out of trouble by drawing up a watertight contract, being great 

at litigation or getting you a good divorce settlement regardless 

of which side you are on. This means they must have an in-depth 

understanding of contracts and trusts and have excellent skills in 

arguing your case. All these things take hard work and dedication. 

Both these professionals’ client relationships are in the main 

transactional and the more successful the professional is or is 

deemed to be, the more you the client will pay for their services. 

There is mostly no need for them to care for their client or worry 

about the correctness or morals of the cases they argue, in fact if 

they did that it may be seen as unprofessional. These professionals 

will also deal with thousands of different clients throughout their 

career, many on a once-off or case-by-case basis. 

I know many brilliant lawyers and accountants who do topclass 

work and do care for their clients, but it does not seem to be a 

prerequisite to be seen as a professional. 

Not all advisors are LFPs. Many see and call themselves 

investment experts or estate planners. Again, there is nothing 



BLUE 

CHIP 

The human side of what we do is 

becoming more important as our 

clients’ lives become more stressful. 

wrong with this but being an expert at a particular aspect of what 

we do could mean that that person is seen as being transactional, 

just like the two occupations mentioned before. 

To be a good LFP, we know that we first need to know our 

stuff around things such as investments, cashflow planning, tax, 

estate planning, etc. The list goes on and touches on many aspects 

of what accountants and lawyers specialise in. These skills allow 

us to give advice around the money, yet we also know that we 

need to go further if we are to deliver our most valuable work 

which is around the person and their life. As a great client-focused 

LFP, we go further than just the transactional points mentioned 

above. We take time to get to know our clients by finding out who 

they are, how they got to where they are, where they want to go 

and who they want to take with them on that road. We need to 

know what is important to them and why. We also know that we 

cannot have more than around 100 clients if we are to have the 

relationships we need, to add true value. 

Building the kind of relationships we should have with our clients 

takes time and involves a lot more than “knowing our stuff”. In fact, 

if we do not get to know our clients properly, should we be advising 

them on what they should do with their hard-earned money? I would 

suggest that the answer is “no”. 

My view is that aiming to be professional is important but also 

not enough. I would say that to be good as an LFP, one needs to be 

“vocational” in our approach to our work. The word vocation speaks 

to a “calling” or a “life of purpose”, rather than having specific skills to 

perform a certain job. 

This implies that making money should not be our main 

motivator if we really care about our clients. Yes, money is 

important, but it is a result of the great work we do and it cannot 

be more important than the lives we work with. We should steer 

away from transactional relationships as 

it is very difficult to run a business which 

does both – the lines get blurred. 

Much (even most) of what advisors 

see as their value proposition is being 

taken over by some form of robo-advice 

or a new app. These are things like 

fund picking, asset allocation, cashflow 

planning, budgeting, etc. However, the 

human side of what we do is becoming 

more important as our clients’ lives 

become more stressful. I believe we can 

only make our clients feel cared for if we 

do really care. This cannot be faked; it 

must be real. It is felt. So, should we be 

striving to be professional or vocational? 

You know my view. 

By Dirk Groeneveld, 

Lifestyle Financial Planner, 

Client Care 


91

BLUE 

CHIP 

TECHNOLOGY 

The smart solution 

for financial 

advisors by 

financial advisors 

A 

Customer Relations Management (CRM) 

system built by financial advisors and software 

engineers, specifically for financial advisors? 

This innovative idea was somehow inspired by 

the Wright brothers in 1903 whose determination and 

foresight resonated with my aspiration, in 2011, to reach 

the milestone of Financial Planner of the Year. 

With a background in analytical chemistry, a Bachelor 

of Computing qualification and as a Certified Financial 

Planner, my practice at Mojaff gradually envisaged an 

alternative to unwieldy CRM systems. Reliance on Excel 

spreadsheets by the financial planning industry is a 

generally accepted practice for doing clients’ financial 

needs analyses, monitoring their investment portfolios 

and doing their investment projections. 

However, we increasingly found that conventional 

spreadsheets and CRM systems are simply inadequate for 

our purposes as financial advisors. I had been using my 

third CRM system as a financial planning tool. Apart from 

their complexity, they added little value to our clients and 

technical support was prohibitively expensive. 

In 2012, with the help of a talented software engineer 

partner, we commenced our journey on developing 

Easiworx, an innovative CRM system for financial advisors, 

by financial advisors. Revolutionary developments 

in technology and the proliferation of cloud services 

have enabled SMMEs to access technology that has for 

too long been the preserve of big corporations. Small 

and medium businesses can now build economies of 

scale buoyed by technology to lead innovation in the 

independent financial advisory practice. 

By the end of 2015, our entire practice was operating 

with Easiworx, including client interaction, workflow, 

compliance and staff productivity management. 

While undertaking the prestigious one-year Practice 

Management Course by Fundhouse, I was asked to do 

a presentation on Easiworx. Thereafter, industry peers 

implored me to share its value and to make it accessible 

to the broader industry. 


TECHNOLOGY 

BLUE 

CHIP 

Taking to market 

After eight years of engaging with key stakeholders it was apparent 

that the growth of my practice could not be divorced from any 

contribution we make for the benefit of the broader industry. There 

is a compelling ethical logic underlying the idea of sharing intellectual 

property that benefits the industry, and that offers my practice a 

pioneering edge. In November 2020, after consulting with a close 

friend and successful businessman, Liakat Sonday, and the developer, 

we decided to take Easiworx to market. Twenty beta test candidates 

used the system freely. Their feedback was overwhelmingly positive 

due to the exceptional user experience. And our compliance officer 

was delighted with integrations particularly in respect of client 

interaction and record-keeping. 

The Easiworx value proposition 

In addition to its development by financial advisors, the Easiworx 

value proposition is its integrated set of features to meet the 

needs of most practices and as well as its modular component 

architecture enabling customisation when required. 

The basic set of features include the following: 

1. A fully capable CRM system that stores and manages 

clients’ data in a secure cloud database. 

2. Efficient and easy modelling tools to assist advisors and 

clients in making sound decisions when planning for 

retirement, investments, education and risk cover needs. 

3. Ability to generate live FAIS/POPIA compliant documents. 

4. Integrated workflow offering back-office staff a clear 

record of advisor-client engagement. There is no manual 

intervention, and allocated tasks via the workflow 

dashboards can easily be tracked and implemented. 

5. Integration with the established programming language 

LISP enables secure and seamless import of clients’ data 

into Easiworx. 

Additional features include: 

1. Estate planning 

2. Risk analysis and planning 

3. Post retirement 

4. Medical aid 

5. Short-term insurance 

6. Weekly training and development support 

Our future strategic plans include: 

1. Providing advisors with a rich set of reporting and business 

information tools to evaluate and gauge the performance 

of their practice. 

2. Improving communication with clients via automated SMS 

(eg birthday, condolence, new business, etc), WhatsApp 

messaging and chat bots. 

3. Providing clients with access to their portfolios via the web. 

4. An open-source portal for free access to content of public 

interest and engagement on financial advice. 

The intellectual capital at Easiworx 

has grown from a single member 

to two financial advisors and two 

software engineers, plus two 

support members of staff. 

Financial needs analysis and calculator 

In the above illustration, the colour-coding of the client’s retirement goal is 

reflected as a function of their current portfolio. The what-if scenario provides 

a clear and comprehensive report on the client’s financial position and it 

recommends interventions to address possible gaps in the client’s portfolio. 

The team 

The intellectual capital at Easiworx has grown from a single member 

to two financial advisors and two software engineers, plus two 

support members of staff. The advisors understand the needs of the 

industry and the engineers successfully align business strategy with 

technology. With their combined expertise, they have produced a 

solution fit for market. 

We generally prioritised investment value, customer service 

and measurable progress to ensure simplicity, integration and 

adherence to industry regulations and standards. Simplicity 

foregrounds ease of use for advisors, staff 

and clients. Integration offers a system 

with seamless functionality for financial 

needs analysis, financial plan, built-in 

workflow and processes and records of 

advice to clients. Compliance with the 

industry’s legislative and regulatory 

environment is ensured with a live plug-in 

built into the system. The vision of the 

Easiworx CRM system is to raise the level 

of financial advice, aid the industry with 

respect to compliance and productivity, 

and ultimately enhance profitability. 

Mohamed Jaffer, Director and 

Co-founder, Easiworx 


93

The FPI value 

proposition for 

financial advisors 

The FINANCIAL SERVICES ADVISOR (FSA) and the REGISTERED 

FINANCIAL PLANNER (RFP) professional designations are 

offered by the Financial Planning Institute of Southern Africa 

(FPI) to financial advisors who wish to differentiate themselves. 

FPI designated members adhere to the FPI Code of Ethics and Practice 

Standards, have the necessary experience and provide trusted expert 

advice to consumers. 

These designations, both South African Qualifications Authority 

(SAQA) registered professional designations, represent another level 

of professionalism in the financial services industry. To be accepted 

as an FSA or RFP professional the applicant needs to meet the 

following requirements: 

Education 

Experience 

Examination 

FSA 

Completed a level NQF6 (old) 

or NQF7 (new) qualification 

Two or more years of relevant 

financial services experience 

Pass the Professional 

Competency Exam (PCE)** 

RFP 

Completed a level NQF5 (old) 

or NQF6 (new) qualification 

One or more year(s) of relevant 

financial services experience 

Pass the Professional 

Competency Exam (PCE)** 

Ethics Abide by the FPI Code of Ethics Abide by the FPI Code of Ethics 

**PCE exemption for FSA and RFP professional designations: for approved NQF5, 6, 7 and 8 qualifications 

in financial planning, wealth management and finance qualifications obtained with FPI approved education 

partners, Milpark Education, Sanlam Academy, Moonstone and the following universities: Academia, Free State, 

Johannesburg, KZN, NNMU and Stellenbosch. 

The FPI membership value proposition 

1. Entitlement to use the FPI professional designations as 

financial advisors. 

2. FPI sets the professional standard for professional planning and 

advice for all to ensure that your skills as a professional member 

of FPI remain relevant. 

3. Through robust stakeholder engagement, FPI represents the 

collective views of its members through its advocacy and 

public policy division at institutions such as the Financial Sector 

Conduct Authority, Council for Medical Schemes, National 

Treasury, South African Revenue Service, Reserve Bank, South 

African Qualifications Authority and the Insurance Sector 

Education and Training Authority. 

4. Demonstrate a higher standard through interaction with the 

competency committees who constantly shape the ongoing 

requirements of the industry. Through volunteer competency 

committees, FPI is constantly reviewing what is needed 

to practice as a financial planner or advisor and develops 

templates and resources such as the Transition to Fee-Based 

Guide to assist members in implementing best practice. 

5. The FPI Code of Ethics and Practices Standard is another 

way for members to set themselves apart. FPI guidance 

and member resources help you best utilise this benefit. 

The adherence to the Code of Ethics demonstrates a higher 

standard and accountability. 

6. FPI offers interaction through an online FPI community platform, 

FPI networking events, as well as online and face-to-face 

Continuous Professional Development (CPD) events. 


7. FPI has negotiated member discounts with various industry 

institutions, such as the Astute Financial Services Exchange. 

FPI constantly reviews this programme to add more discounts 

that are important in enabling members to conduct their 

business. Members also receive complimentary copies of Blue 

Chip and Pensions Africa magazines. 

8. The CPD programme and activities are aligned to both the 

financial advisor and financial planner curriculum, competency 

profiles and FPI Code of Ethics and Practice Standards to enable 

you to obtain CPD verifiable hours across technical, general as 

well as ethics and practice standard categories. 

9. FPI is an affiliate of the Financial Planning Standards Board 

(FPSB) and the only licensed holder of the CFP® mark in 

Southern Africa. FPI is a recognised controlling body of SARS, 

which means FPI professional members can apply to FPI to 

become a Tax Practitioner at no additional cost. 

10. As an FPI professional member, you can become a mentor to 

upcoming professionals and earn CPD points in the process. 

11. As an FPI professional member, you can be part of 

the FPIMyMoney123 programme and initiatives. 

FPIMyMoney123 is the consumer education division of the 

FPI. As a facilitator for FPIMyMoney123, you can earn probono 

CPD hours and build your profile. 

The FPI’s professional 

and high standards will ensure 

that your knowledge and skills are 

always up to date through our free 

CPD programme and events. 

The FSA and RFP professional designations can be of great 

benefit to professionals in the advisory market. In addition to being 

entitled to use your FPI professional designation, membership will 

boost your professional image with your clients and employers 

alike. The FPI’s professional and high standards will ensure that 

your knowledge and skills are always up to date through our free 

CPD programme and events. 

Through our community networking structures, you will also 

be able to benefit from the interaction and exchange of ideas 

with other fellow FPI professionals. 

For more information on how you can join, please contact: 

Email: businessdevelopment@fpi.co.za | Tel: +27 11 470 6000 


95

Become a 

FINANCIAL 

SERVICES 

ADVISOR 

professional 

Who should apply? 

For Financial Advisors who have two (2) years or 

more relevant financial services experience. FPI 

offers the FINANCIAL SERVICES ADVISOR TM 

Designation so that you can differentiate yourself 

through the FPI Code of Ethics and Professional 

Standards. 

The Criteria 

This membership type is for a person who 

has: 

Completed a level NQF6 (old) or NQF7 (new) 

qualification; 

Has two or more years financial services 

experience; 

Has completed the professional competency 

examination (written or exempt*); and 

Has agreed to abide by the FPI Code of 

Ethics and Professional Standards. 

Exemption* :Honours/ Post Graduate Diploma In Financial Planning ;BCom in Financial Planning; BCom Finance; Certificates in 

Exemption* :Honours/ Post Graduate Diploma In Financial Planning ;BCom in Financial Planning; BCom Finance; Certificates in 

financial financial planning planning & Wealth & Wealth Management obtained obtained from from Milpark Education; Moonstone (MBSE); SANLAM Connect Connect Academy; Academy; 

Universities- Universities- Academia, Academia, Free State, Free State, Johannesburg, Kwa-Zulu Natal, Stellenbosch, Johannesburg, NNMU. 

businessdevelopment@fpi.co.za | +27 11 470 6000 | www.fpi.co.za

WE LOOK 

FORWARD, 

SO YOU KNOW 

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Your capital is at risk with investing. 

Marketing material for investment professionals and advisers only. Issued by 

Schroder Investment Management Ltd, an authorised financial services provider 

FSP No: 48998, registration number 01893220. (Incorporated in England and Wales).

Blue Chip Issue 84

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