Issue 85 • Oct/Nov/Dec 2022
THE OFFICIAL PUBLICATION OF THE FPI
THE VALUE OF A
Lelané Bezuidenhout, CFP®, CEO of FPI
Hendrik Spies, CFP® Palesa Dube, CFP® Tom Brukman, CFP®
FINANCIAL PLANNER OF THE YEAR: THE TOP THREE FINALISTS
The value of a
Lelané Bezuidenhout, CFP®, CEO of the Financial Planning Institute of Southern
Africa (FPI), tells us that the value of a financial planner is crystalised in how
a CFP® professional assists clients in developing strategies to help them
manage their finances and to meet their life goals (page 20).
The role of a financial planner is so much more than writing a prescription for
investments or any other financial product. It is about helping clients achieve
holistic financial health. The two most important professions of the 21st century
are, undoubtedly, the medical profession and the financial planning profession, Rob
Macdonald tells us on page 66. People are going to live longer and they are going
to need their money to last longer. Nobody would entrust their physical health to a
distributor of pharmaceutical products rather than a doctor. Nor should they entrust
their financial health to a distributor of financial products, but to a professional
financial planner who prescribes products rather than sells them.
It can be daunting for a graduate to step into their first workplace and be
expected to learn the ropes of a professional business in a short time span. The
successful learnership programmes focusing on developing talent in our industry
take a minimum of three to four years for candidates who have already completed
a post-graduate qualification. The FPI offers a structured mentorship programme,
designed to run over a minimum period of 12 months to assist in training a new
industry entrant in all aspects required to become a fully-fledged financial planner.
Read more on page 30.
On 19 October 2022, FPI will be hosting the prestigious awards ceremony where
excellence in the financial planning profession is recognised. This event endeavours
to acknowledge extraordinary CFPs® from across Southern Africa that demonstrate
innovation, professionalism and commitment to both their clients and the financial
planning profession. Meet the finalists of the Financial Planner of the Year Award 2022
on page 26. We wish you all the best.
South Africa has one of the most regulated investment industries, which means
advisors are spending more time on compliance and less on doing what matters
most – giving advice and spending time with their clients. By recognising that their
value rests in evaluating clients’ personal circumstances and determining their unique
needs, advisors are increasingly partnering with investment experts to ensure that their
clients’ investment needs are consistently met. The partnership with a DFM not only
saves the advisor an enormous amount of time, but also ensures that all investment
considerations are met. Read more in Choosing a Discretionary Fund Manager (and
platform) by Florbela Yates on page 40.
Enjoy this issue!
Alexis Knipe, Editor
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,
FPI Recognised Education Providers and FPI Approved Professional Practices.
ISSUE 85 |
Publisher: Chris Whales
Editor: Alexis Knipe
Online editor: Christoff Scholtz
Digital Manager: Charl Daniels
Designer: Tyra Martin
Production: Yonella Ngaba
Gavin van der Merwe
Managing director: Clive During
Administration & accounts:
Distribution and circulation manager:
Printing: FA Print
Global Africa Network Media (Pty) Ltd
Company Registration No:
Directors: Clive During, Chris Whales
Physical address: 28 Main Road,
Postal address: PO Box 292,
Tel: +27 21 657 6200
No portion of this book may be reproduced without written consent
of the copyright owner. The opinions expressed are not necessarily
those of Blue Chip, nor the publisher, none of whom accept liability
of any nature arising out of, or in connection with, the contents of
this book. The publishers would like to express thanks to those who
support this publication by their submission of articles and with their
advertising. All rights reserved.
By Alexis Knipe
SPRING IS IN THE AIR
Message from FPI CEO
ON THE MONEY
Milestones, news and snippets
HOW FLEXIBLE ARE YOU?
Column by Rob Macdonald, Head
of Strategic Advisory Services, Fundhouse
PASSION FOR OUR
Column by Kobus Kleyn, Tax and Fiduciary
Planner, Kainos Wealth
THE VALUE OF A FINANCIAL
Blue Chip interviews Lelané Bezuidenhout, CFP®,
CEO of FPI
WINNERS ALWAYS WIN
Meet the top three finalists of the
Financial Planner of the Year Award 2022
THE SMART SOLUTION FOR
FINANCIAL ADVISORS BY
By Warren Ingram, winner of the
Financial Planner of the Year Award 2011
Peter Foster, Chief Investment Officer,
Fundhouse, speaks about investment risk
CHOOSING A DISCRETIONARY
FUND MANAGER (AND
Florbela Yates, Head of Equilibrium, tells us why
financial advisors partner with DFMs
IMAGINE THE FUTURE
Matrix Fund Managers says that it is the
sequence of returns that is important
GOOD NEWS FOR SA’S ECONOMY
Kickstarting investment and growth, by
Petroleum Agency South Africa
THE UNLOVED OF THE UNLOVED
By Ben Arnold, Investment Director,
IS THERE STILL A PLACE
FOR HEDGE FUNDS?
Bateleur Capital tells you why
financial planners should be interested
FOR THOSE WHO BELIEVE,
For those who do not, none will suffice, says
Protea Capital Management
Mike Adsetts, Deputy Chief Investment
Officer, Momentum Investments, says that
the investment industry is one that we can
be proud of
By Fränzo Friedrich, Head of Marketing,
DO YOU HAVE THE WILL
TO SECURE YOUR CLIENT’S
By Kobus Wentzel, Head of Distribution, 1Life
A PARTNERSHIP WORTH ITS
WEIGHT IN GOLD
By SA Gold Coin Shop
Michelle Noth tells you why
FORGET SOFT LANDINGS
How much of a recession is needed to
WILL FINANCIAL PLANNERS EVER
By Rob Macdonald, Head of Strategic Advisory
CX CHANGES EVERYTHING
Fairbairn Consult says that customer
experience is of utmost importance
IN NEED OF A CRISIS
Why do we wait for a crisis before we
act? By Hannes Viljoen
FIVE STEPS TO A
By Dieter Schmikl, Financial Advisor, NMG
THE PANDEMIC’S INFLUENCE ON
Cancer is one of the leading deaths globally, by
JEAN MINNAAR – MANAGING DIRECTOR –
OLD MUTUAL WEALTH TRUST COMPANY
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THE DIVORCE ACT
What the recent judgement means
for you. By Bianca Maritz, Wills and Estates
Sentinel International Advisory Services
NAVIGATE YOUR CLIENT’S
COMPLEX WEALTH SOLUTIONS
By Andrew Ratcliffe, CFP®, Director, Private
HOW TO BUILD A
Jen McKay tells us its by design
2C OR NOT 2C
The University of Free State
explains when to apply Section 2C
of the Wills Act 7 of 1953
THE IMPORTANCE OF
By Adv. Beverly Jubane, Specialist
Customer Service, Liberty Consultants
SHIFTING THE WAY PEOPLE THINK,
FEEL AND BEHAVE WITH MONEY
By Jean Archery
Warren Ingram, CFP®, Co-founder,
Peter Foster, Chief Investment
Jean-Pierre Matthews, Head of
Product, Matrix Fund Managers
Jen McKay, Director,
We look forward to seeing you at the
2023 Financial Planning Institute
of Southern Africa, Professional's
SPRING IS IN THE AIR
The CEO of the Financial Planning Institute
shares the FPI’s latest news.
Lelané Bezuidenhout, CFP®
CEO, Financial Planning
Institute of Southern Africa
Spring is in the air and so is a lot of excitement
around what is happening at the Financial
Planning Institute of Southern Africa (FPI) and the
financial service industry at large. Some reflection
on what has taken place before we jump into what is
coming for the rest of the year:
CPD hours: 5.5 (4 technical and 1.5 ethics)
The FPI hosted a successful Retirement Conference in
partnership with the Actuarial Society of South Africa
(ASSA) and the Institute of Retirement Funds Africa
(IRFA). The conference reflected on over a decade of
regulatory changes due to the retirement reforms
that started back in +-2012. Members and speakers
from the FPI, ASSA and IRFA also reflected on what to
expect from the Financial Sector Conduct Authority’s
(FSCA) harmonisation project (harmonising all sectorial
laws into the Conduct of Financial Institutions (COFI)
environment), especially in the retirement space.
Key Individual Workshop
CPD hours: 4 (ethics and practice standards)
For some time, the FPI has recognised that the world of
the Key Individual (KI) has evolved drastically since FAIS
came into effect. Under the COFI matrix a KI’s role and
responsibilities will expand even further as they are a
key person as defined in the Financial Sector Regulation
Act 9 of 2017 (FSR Act). The KI Workshop took place in
partnership with the Compliance Institute Southern
Africa (CISA) and the Institute of Risk Management
South Africa (IRMSA). Both speakers, Hildegard Lombard
and Christopher Palm, left some great insights for the KIs
that joined us online for the workshop.
If you missed the Retirement Conference and/or the Key
Individual Workshop, you can still register for the events via
FPI networking sessions
During August and September, the FPI hosted a series of
in-person member networking sessions that focused on
the 2023-2025 strategy planning and a general update
from the Institute. A massive thank you to the professional
members who attended the sessions – Team FPI gained a
lot of insights into what members need in the profession
over the next three years.
Professional Competency Examinations
Well done to all the candidates who passed the March, June
and September Professional Competency Examinations
(PCE). It is a massive achievement and great recognition of
years of hard work. For those who missed the PCE this year,
the first PCE sitting for 2023 will be in March.
Membership renewal 2023
Membership renewal is opening on 1 November 2022.
Be sure to renew your membership before 31 December
2022 to qualify for the early bird discount. You need to
complete your CPD upload by 31 May 2023 – all you need
to do between 1 November and 31 March 2023 is to renew
your membership (ie complete your declaration and pay
the required membership fee).
A massive thank you to all our attendees,
sponsors, speakers and the FPI
team for making this year’s convention
yet another roaring success.
Annual refresher 2023
Good news! The annual refresher will be in-person in
February 2023. It is time for FPI professional members
to enjoy the benefit of peer-to-peer collaboration over a
cup of coffee and catch up on the latest technical content
when it comes to professional financial planning. The
in-person events will be followed by an online event for
those members who could not make it across the country.
Registrations will open in November 2022.
Financial Planning Week and WFPD
A big thank you to all who celebrated the sixth annual
World Financial Planning Day (WFPD) on 5 October
with us! The theme this year was Live your Today – Plan
The FPI celebrated Financial Planning Week in
South Africa (3-7 October) that focused on topics such
as children and money; managing risk in your life;
managing your finances in tough times and the benefits
of working with a financial professional. Thank you to all
who contributed to making WFPD and Financial Planning
Week a success.
The theme for this year’s Professional Convention is The
Time is Now. Thank you to all our local and international
speakers for sharing relevant content with our professional
community. Topics covered at this year’s convention include,
but are not limited to:
• Understanding the psychology of money
• Helping clients through transitions
• FPSB global update
• The need for regulators to understand the value of CFP®
professionals and title protection
• The fight for talent
• Global standards update
• Client engagement via the use of video and other client
• Resilience and reinvention
• Leadership, mentorship and coaching
• Electronic wills and digital assets
• Ethical investment and the climate emergency
• Investing for impact
• The new world of work and the impact on client engagement
• Start giving back (consumer education)
• FSCA regulatory update
• Motivational talks
A massive thank you to all our attendees, sponsors, speakers
and the FPI team for making this year’s convention yet another
2022 flew by and so will the last quarter of the year. All the best for
the rest of 2022 and may 2023 be a fantastic year where we all reach
new heights and discover more innovative ways of serving the
profession as well as the communities that the profession serves.
Until next time,
Lelané Bezuidenhout, CFP®
CEO, Financial Planning Institute of Southern Africa
On the money
Making waves this quarter
Retirement, reporting tools and US government bonds
ARE YOU COVERED FOR MEDICAL AID IN YOUR RETIREMENT YEARS?
NMG Benefits has launched SmartAid, a retirement annuity dedicated
to help retirees save towards medical costs during retirement.
SmartAid offers the following unique benefits:
• Assesses each member’s circumstance in determining if members are
on track to meet their specific retirement financial needs.
• Focus is on the member’s need based on their unique circumstances
rather than on the investment return.
• Members who are not on track to meeting
their needs are guided on actions to take
using the projection tool. This is a simple, easyto-use
calculator that translates a member’s
personalised information into a member
NEW REPORTING TOOL
ProfileData has launched Share Stats and Insights (SSI), an easy-to-use
add-on reporting tool, which provides real-time information for listed
users. “Knowledge of who owns your share, who is buying and who is
selling is strategic to managing value for one’s shareholders,” says Ernie
Alexander, chairman of the Profile Group.
SSI is modelled on the share statistic information requirements of
formal financial reports, including those typically included in board
information packs. It offers tables and charts on two databases:
• Share price movements, market values, liquidity, trade statistics, price/
earnings ratios and dividend yields.
• Institutional holdings, sales and purchases as represented by portfolio
reports from collective investment schemes.
Key features of SSI include:
• User-defined date controls, making it possible to instantly obtain share
statistic data for any calendar range.
• Customisable peer comparisons, making it possible to instantly
compare a company’s share statistics with up to four peers.
• Downloadable bar charts suitable for inclusion in board information
packs or other reports.
• Exportable data tables.
• Detailed quarterly views on asset manager activities.
• Quarterly analysis by fund on share movement and holdings, both for
previous institutional shareholders and new buyers.
• Aggregated analysis across funds by asset manager.
• Institutional trading pattern comparisons with up to four peers.
Analysis of investor classification, location and share allocation as
well as shareholder buying and selling trends, is easily analysed and
condensed into a reporting tool customised to the issuer’s investor
relations needs, saving both time and costs.
ProfileData is a subsidiary of information publisher, Profile Group,
the leading South African supplier of data feeds and customised data
solutions for financial markets clients.
ETF FOR US GOVERNMENT BONDS
Shares in the 1nvest ICE US Treasury Short Bond Index Feeder ETF have
begun trading on the JSE, giving South African investors exposure
to liquid, short-term US government bonds. According to 1nvest, a
specialist index fund manager, the ETFUSD tracks the performance of
the ICE US Treasury Short Bond Index which measures the performance
of US dollar-denominated short-term government bonds issued by
the US Treasury.
The index is market value-weighted and is designed to include US
dollar-denominated, fixed-rate securities with a minimum term to
maturity greater than one month and less than or equal to one year.
Through this ETF (JSE code ETFUSD), South African investors can
invest with rands in the US dollar-based product as an alternative
to USD-denominated money market funds, without affecting their
exchange control limit or going through an externalisation process.
The listing of ETFUSD brings the number of ETF listings on the JSE
to 93 with a total ETF market capitalisation of R114-billion.
Connect with a Momentum
Financial Adviser Today!
On the money
Making waves this quarter
Leaders with a clean slate
The Financial Planning Institute of Southern Africa (FPI) was proud
to be among 300 of the country’s top thought leaders at Leaderex
2022, South Africa’s premier business event which took place in
September at the Sandton Convention Centre in Gauteng.
Designed to provide attendees with insights into industry trends,
Leaderex included 20 conferences and over 100 masterclasses. The
programme was highly relevant to leaders in today’s fractured and
complex socio-political world. The current uncertainty dominating
South Africa across loadshedding, politics and corruption formed part
of the discussions, allowing leaders to connect on real issues.
The event had an impressive list of sponsors that included the
JSE as the primary sponsor, the South African Institute of Chartered
Accountants (SAICA), the Institute of Directors South Africa (IoDSA) and
“At the JSE, educating South Africans about financial markets is a
key focus for us as this creates ownership of one’s financial journey.
The JSE working with platforms such as Leaderex opens doors for
us to educate more South Africans about investing on the stock
exchange and taking the first steps in your investment journey,” says
Vuyo Lee, director of marketing and corporate affairs at the JSE.
Financial planning was an aligned theme. As David Kop, CFP®, HOD:
Policy and Engagement at FPI, says, “FPI has been part of Leaderex since
2016. It is a fantastic platform for us to engage with industry leaders
and for us to showcase what financial planning is. The attendees are
engaging and appreciative of both the talks and the complimentary
financial planning sessions on offer.”
STARTING WITH A CLEAN SLATE
We have recently come across “Slate”, an exciting new Wealth Tech
platform in the advice software market in South Africa. Slate expertly
addresses the concern that planners have been falling short of delivery
expectations in exactly the areas of the advice value chain that clients
have explicitly prioritised as the most important areas to them.
Slate provides a way for the planner to reinvent the first meeting that
a planner has with a client, to accurately capture the information about
the client’s hopes and dreams.
It kicks off with the planner and client playing the digital equivalent
of a board game where each card in the deck is a different potential
Cards that are important and relevant to the client are force-ranked
by placing them in areas of the board based on relative importance and
timing. Using the intel provided by the Slate system, it is easy for the
planner and client to then transform each priority into a very visual and
understandable SMART financial goal.
Slate plugs seamlessly into the first part of any planner’s advice
process and can be integrated into existing CRM, compliance and
planning systems. Slate also plays a very strong role in strengthening
the value provided by planners in the ongoing post-sale servicing of
clients. The monitoring module of Slate, powered by Yodlee, allows
planner and client to keep abreast of performance against financial
goals and to act where it is necessary.
The co-creation methodology provided by Slate, underpinned by
its goals-based philosophy and its total focus on customer centricity
and “doing things right”, is what sets it apart from other technology.
After 18 months of testing, Slate launched in Q2 2022 for use by a
limited set of money mentors and is now ready for adoption by the
wider market. Planners should visit www.slateadvisor.com to read
more about Slate, see a short video and register interest for a demo.
Alternatively planners should contact the founder, Andrew Broadley,
Built for better
On the money
Making waves this quarter
Discover the lite side
THE LITE SIDE OF RUNNING AN IFA
Managing revenue and remuneration is an essential part of every
financial advisory practice. Iress understands this and is releasing
CommPay Lite, the latest offering in the Xplan product suite.
Based on the same technology as its enterprise counterpart
CommPay, CommPay Lite is designed for independent financial advice
businesses to streamline revenue reconciliation and reporting.
CommPay Lite provides advisor-specific reports, policy and transaction
searches, revenue tracking and forecasting, allowing financial advisors
to spend more time with their clients.
Iress Head of Commercial and Client Solutions Shaun Nicholson says,
“CommPay Lite is both versatile and functional. The integration with
Xplan allows for comprehensive client revenue and business reporting
for independent financial advisors and their back-office teams.
“It is challenging running a financial services business. Every day, there
are more demands on time and money – more data, additional compliance
and extra reporting. CommPay Lite is designed to
help smaller practices get the most out of their
day and their existing Iress software, Xplan,
to maximise their business.”
CommPay Lite enables advisors to
wrap up commission payments
quickly and manage revenue
easily, buying time to do
the things that matter most.
For further details, please contact
the Iress team:
Telephone: +27 10 492 1110
SA’S FIRST GLOBAL DFM
LAUNCHED BY DISCOVERY
Discovery Group recently announced the launch of Cogence, a
discretionary fund manager (DFM) seeking to significantly enhance
the business of wealth creation in South Africa. Cogence will bring
asset allocation views from BlackRock, one of the world’s leading asset
managers, together with personalised insights from Vitality to provide
investment solutions including model portfolios. This new investment
solutions offering will be enhanced by Aladdin Wealth technology,
an industry-leading platform from BlackRock which provides portfolio
analytics and risk analysis.
Adrian Gore, Discovery Group Chief Executive, says the impetus
behind entering the DFM space is based on two distinct areas
that have been disrupted: “Firstly, investment markets are more
sophisticated and complex than ever. At the same time, we’re seeing
local investors increasingly looking to invest more globally. For
South Africans it’s been hard to do so but with the recent regulatory
changes, pension funds and mutual funds are now able to invest up
to 45% in offshore assets. This means we can invest nearly half of our
retirement savings in offshore assets – that’s powerful. Research and
understanding of risks and the opportunities that global markets
present is crucial.
“Secondly, more than 90% of people in South Africa can’t afford
retirement, relying on their family or state and often the elasticity
of savings behaviours is more important than investment returns.
Cogence is built upon BlackRock’s asset allocation views and has been
designed to pair Aladdin Wealth technology with Vitality’s data and
analytics to incorporate personalised health and longevity metrics,
which essentially maps out every aspect of a financial plan.”
Cogence combines Discovery’s investment expertise with
BlackRock’s deep knowledge of asset management to help financial
advisors try to realise improved investment outcomes for their
clients. Through Cogence, financial advisors will also have access to
proprietary Aladdin Wealth technology.
Gore concludes, “Our combined behavioural science and global
investment expertise will support local financial advisors to deliver
more timely information, deeper insights and superior service to
clients that can ultimately result in an optimal retirement outcome.
With lifespans extending, clients need the financial means to retire
comfortably and drawdown at a sustainable income level; and most
importantly, also the good health to ensure they can enjoy it.”
Equilibrium is a discretionary fund
manager that brings balance into
your financial advice practice.
We enable you to do what really
matters - spending more time with
your clients and building your business.
Equilibrium Investment Management (Pty) Ltd (Equilibrium) (Reg. No. 2007/018275/07) is an authorised
financial services provider (FSP 32726) and part of Momentum Metropolitan Holdings Limited, rated B-BBEE level 1.
How flexible are you?
And going forward, will you remain flexible?
Rob Macdonald, Head of
Strategic Advisory Services,
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.
In a recent LinkedIn post, Martin Lindstrom,
a global leader on organisational and brand
transformation, poses the following conundrum
about two hypothetical companies:
One company says, “Everyone is back in
the office all the time – five days a week. I
expect you to show up at 8am and stay for
the day.” Another company says, “You know
what? We’re going to provide flexibility to
our workforce. There might be certain days
when we decide that we’re all going to come
together because we want to collaborate in
person, but other days, you can work from
wherever you want. You can work from home.
If you want to come into the office, you can,
but you’re not required to. You’re going to
have flexibility.” Now, which company do you
think is a more attractive place to work? My
guess is that the answer is fairly obvious.
Think of your financial planning business.
Which company are you? How much flexibility
do you offer your employees? And very
importantly, how much flexibility do your
employees want? Since the start of the
pandemic, different companies globally
have had different approaches to workplace
flexibility, and of course the nature of the
business has an influence on how much
flexibility is possible.
In the technology sector, Twitter and
Facebook implemented policies at the start of
the pandemic that allowed employees to opt
to work from home permanently. Apple, in
contrast, has been pushing for a return to the
workplace for all employees. Its initial return
to office policy for employees was that they
all had to be back in the office on Mondays,
Tuesdays and Thursdays. Now Apple has
softened this position, requiring employees
to be at the office on Tuesdays and Thursdays
and giving them the flexibility to choose their
third day back in the office.
Apple’s softened stance on flexibility
was still not enough for many employees.
In an open letter, 1 400 of Apple’s 165 000
workers objected to the policy, saying,
“Stop treating us like school kids who need
to be told when to be where, and what
homework to do.” One employee who felt
this way was Director of Machine Learning,
Ian Goodfellow, who resigned in protest at
the return-to-work policy, stating: “I believe
strongly that more flexibility would have
been the best policy for my team.” (Quoted
by Zoe Schiffler on Twitter.)
Goodfellow was no ordinary employee.
He previously worked for Google where
he developed a system enabling Google
Maps to automatically transcribe addresses
from photos taken by street view cars. His
work in artificial neural networks and deep
learning have won him many accolades. In
2017, he was one of MIT Technology Review’s
35 Innovators under 35 and in 2019 he was
included in Foreign Policy publication’s list
of 100 Global Thinkers. After only two years
at Apple, it’s no surprise that he has joined
a company that offers greater flexibility, his
former employer, Google.
And this is not an isolated incident. The
recent 2022 PWC Global Workplace Hopes
and Fears Survey indicates that the Big
Resignation is a reality. In the next 12 months,
PWC predicts that one in five employees will
switch to a new employer and that almost
50% of employees want to be able to choose
where they work.
During the Covid pandemic, professional
financial planning businesses successfully
delivered their services to clients despite
at times extreme lockdowns. Employees
worked remotely, flexibly and most
importantly productively. While there may
be a yearning for more in-person interaction
from many clients and employees, a desire
for greater workplace flexibility is also real.
The dilemma going forward is whether to
remain flexible or not. The answer may lie
with the employees you don’t want to lose,
as Apple found out.
We are a profession and not a so-called industry.
Kobus Kleyn, CFP®, Tax
and Fiduciary Practitioner,
Kobus Kleyn has published
over 200 articles and authored
three books. He is a multiple
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.
With October month bringing to life
our Financial Planning Institute
conference and associated
professional awards for 2022, it
would be apt for me to touch on my passion
for our profession and drive awareness of our
professionalism. It would be appropriate to start
with a better understanding of an industry and
profession. I hope that at the end of this article,
my fellow financial professionals and all financial
stakeholders will increasingly refer to us as a
profession and not a so-called industry. Let’s review
the definitions of both.
“An industry is an economic activity concerned
with the processing of raw materials and the
manufacture of goods in factories.”
If we consider the creation and selling of financial
products without advice, we may see ourselves as
“A profession is a vocation founded upon
specialised educational training, the purpose of
which is to supply objective counsel and service
to others, for direct and definite compensation,
wholly apart from expectation of another
business gain. A profession arises when any trade
or occupation transforms itself through the
development of formal qualifications based upon
education, apprenticeship and examinations,
the emergence of regulatory bodies with powers
to admit and discipline members according to a
code of conduct and ethics.”
As financial professionals in South Africa,
under the FSCA and FAIS Act regulations, we all
must meet minimum requirements after a twoyear
supervision period. We have a professional
body in the Financial Planning Institute of
Southern Africa, that endorses professionals who
want to go well above the minimum standards
and be certified as fully-fledged professionals.
Unfortunately, we do not have as many FPI
members at this time as we should. Still, I am sure
over time, with awareness with publications like
Blue Chip and the FPI, as well as organisations
like the Financial Intermediaries Association
and Insurance Institute of South Africa, we are
transforming into a fully-fledged profession like
the medical profession.
I attend many webinars, seminars, conferences
and financial events, and I have to admit it feels
like a stab in the back when many still refer to
us as an industry. If you, in your mind, believe
we are an industry, how would we uplift the
status and respect we deserve for changing
people’s lives daily, as we have observed even
more so over the once-in-a-lifetime pandemic?
If anything, the pandemic has confirmed our
status as a noble profession.
Perceptions always tend to become a reality,
and what we do as financial professionals
will define our destiny as a profession and
professionals. Maybe there are sections of our
financial services that would always stay an
industry, but financial planning is not one, and
we need to raise the bar across the board to meet
the requirements set out above in the definition
of a profession.
Sometimes it is all in words,
and words do matter.
As financial professionals, no matter the
advisor category you operate under, it should
always start with financial advice and guidance
long before products. A consequence of
solid advice may lead to selling products or
investments. We need to create an advice
experience for the public and our clients with
the appreciation that we are in a vocation, not
a job. We must make clients’ dreams come true
by considering their long-term needs and advice
with due ethics and conduct.
Sometimes it is all in words, and words do
matter. Allow your passion to become your
purpose, and it will one day become your
profession. Next time you use the word “industry”,
think about it, and update your vocabulary to
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THE VALUE OF A
Lelané Bezuidenhout, CFP®, has been the chief executive officer of Financial Planning
Institute of Southern Africa for three-and-a-half years. Blue Chip, the official
publication of the Institute, speaks to her about the financial planning profession.
Lelané Bezuidenhout, CFP®, CEO of FPI.
Lelané Bezuidenhout has a passion for developing people,
processes and systems. She is a strong believer in turning
stumbling blocks into stepping stones and finds a silver
lining in every situation. Lelané has a positive mindset
and is focused on reaching her goals through careful planning
and aligning with strategic goals and commitments. She
values the standards and principles implemented by bodies
like Financial Planning Institute of Southern Africa (FPI) as
well as the FPI Code of Ethics and Practice Standards as they
guide her in treating customers fairly. She is a proud CERTIFIED
FINANCIAL PLANNER® (CFP®) professional member of FPI.
Lelané, please talk to us about the importance of consumer
education in South Africa.
Consumer education is extremely important as it enables
consumers to make informed decisions around their finances.
Consumer education focuses on financial management (like
budgeting), investing and borrowing, risk
management (insurance and medical aid)
as well as addressing South Africa’s poor
savings culture. There is a massive need for
financial literacy training in South Africa.
Reflecting on the findings of the
Financial Sector Conduct Authority’s
(FSCA) Financial Literacy Baseline Survey,
especially the financial literacy index,
the overall current state of financial literacy in South Africa is
lower than what was found in 2015 – young people seem to have
been negatively affected. We need to introduce more financial
literacy programmes for the youth of South Africa.
As a community of financial institutions, non-profit and
business process outsourcing companies as well as associations,
we need to do more in a collective manner to increase the
overall financial literacy levels in South Africa via robust
consumer education programmes. We already have a few good
• FSCA’s Money Smart Week South Africa
• FSCA’s consumer education website
• FPIMyMoney123 (www.fpimymoney123.co.za)
• Financial Planning Standards Board (FPSB) World Financial
• FPI’s Financial Planning Week
• Association for Savings and Investments South Africa (ASISA)
Consumer Financial Education Practitioner Sprints
There are quite a few financial institutions that, in terms of their
Prudential Authority and Financial Sector Code compliance
requirements, are running consumer education programmes too.
Please speak to us about the value of and need to use the services
of a financial planner.
We need to understand the services of a financial planner first. A
CFP® professional financial planner works in the areas of:
• Financial management (like budgeting, ratio analysis, etc)
• Investment planning
• Retirement planning
• Tax planning
• Risk planning (short-term, long-term, medical and business risk
• Estate planning
The value and need of a financial planner are crystallised by
how a CFP® professional assists clients in developing strategies
to help them manage their finances and to meet their life goals.
CFP® professionals do all the above within the framework and
ambit of a professional Code of Ethics and Financial Planning
A financial planner is a professional that guides you over a
period of years to realise your financial goals and is there when
life happens (birth, death, marriage, divorce).
The financial services industry
must focus on the value of
professional financial advice
and not on selling policies.
One of the big issues facing financial advisors is clients
focusing on their fees and advisors
having to justify their value to
clients. What is FPI doing to support
advisors to transition to a fee-based
model for advice?
This is a real issue and comes from the
stigma that financial advisors are policy
peddlers that just chase commission.
To change this perception, the financial
services industry must focus on the value of professional financial
advice and not on selling policies.
We have seen quite a few Retail Distribution Review (RDR)
proposals implemented via the General Code of Conduct,
specifically the June 2020 amendments. These amendments,
focusing just on fees, changed Section 3A (financial interest and
conflict of interest management policy) quite significantly. It
clarifies that either commission or fees can be charged, and that
the provider/representative cannot be remunerated more than
once for performing a similar service.
Some professionals have moved to a fee-based-only model
for professional advice (ie they do not take any commissions but
only charge fees). FPI has designed a tool that assists members
in charging a fee and taking into consideration the nature of the
service and the resources, skills and competencies reasonably
required to perform the service/s1. This tool is available in the
membership community under member resources (practice
management). Non-members cannot access this tool.
FPI hosts peer collaboration sessions where professional
members of FPI can participate in best practice sharing sessions.
Transformation of the profession is an imperative of FPI. What
does FPI mean when it refers to “transformation” and what is
FPI doing to support its mission of “facilitating transformation
within the profession”?
One of FPI’s business objectives is to participate in the creation
and revision of programmes in support of transformation in
the industry. If the industry lacks diversity and inclusion, so will
1. 3A (d) (i) BN 80 of 2003 as amended in June 2020
FPI as our members are mainly from the financial services
industry. Transformation at FPI refers to the inclusion of a
diverse group of people – including but not limited to people
from various demographic backgrounds, identities, race, age,
beliefs, values, skills and different ways of thinking. This group
of people participates in and forms part of our governance
and committee structures as well as
our staff and membership base.
FPI supports and works with
other associations, networks and
bodies such as the Women in Finance
Network, LeanIn Circle, Association
of Black Securities and Investment
Professionals – ABSIP (MOU in draft
stage) as well as the Insurance Sector
Education and Training Authority
(INSETA) to support individuals with either mentorship or
funding to become members of FPI. Via these programmes,
we aim to transform the profession to a more diverse one.
One challenge the financial planning profession faces
relative to other professions is an inconsistency in the
professional qualification required to give advice. FPI is
the “guardian” of the CFP® professional qualification, and
yet most financial advisors operating in South Africa do not
have this qualification. What is FPI doing to change this?
This question confuses the profession and the industry. There is
consistency with regards to qualifications obtained to become
a professional member of FPI. Our qualifications are aligned
to clear learning outcomes codified in defined curriculums
that are updated every three to five years depending on
the results of the job analysis surveys conducted locally and
internationally. It is rather a CFP® designation2. To become a
CFP® professional, candidates must meet all four points below:
1. An underlying South African Qualifications Authority (SAQA)
registered qualification (eg a Postgraduate Diploma in
Financial Planning — NQF 8)
2. Three years of relevant financial planning experience or a
one-year mentorship programme completed
3. All candidates must write the professional competency
examination (PCE) commonly known as a “board exam” in
4. Meet the Code of Ethics and Practice Standards on an
Once a CFP® professional, your membership needs to
be renewed on an annual basis by completing an ethics
declaration, paying the required membership fee and
completing 35 Continuous Professional Development (CPD)
hours per annum (20 technical, 10 general as well as five ethics
and practice standards CPD hours).
To give financial advice as defined in the Financial
Advisory and Intermediary Services (FAIS) Act, BN 194 of 2017
(fit and proper requirements), financial services providers
FPI has a fully developed
Mentoring the Professional
of Tomorrow, that is free
for anyone to use.
(FSPs), Key Individuals and representatives must have a
relevant underlying qualification. The onus is on the FSP to
ensure that the qualification is relevant.
FPI commented in the Retail Distribution Review (RDR)
Advisor Categorisation Paper3 and confirmed that regulatory
protection of the title, Financial Planner, is desperately needed
as currently anyone can call themselves
a financial planner. This creates massive
When it comes to the qualifications
required to be licensed under the FAIS
Act (BN 194) we are working with the
FSCA and INSETA to ensure that, like
other professions, we have qualifications
that are fit for purpose. We acknowledge
that this is not a quick fix, and we should
not forget the history that got us to the point that we are at now.
Given the history of the country and the industry, it seems
that black financial advisors face three key challenges: access
to markets, access to funding and access to skills. It seems
that many industry players focus much energy and resources
on skills training, but the other two challenges seem to
receive less attention. What role can FPI play in helping shift
this dynamic when it comes to access to markets and access
to funding for black financial advisors?
This is a great question. FPI works closely with INSETA to
obtain funding that assists black (as defined in the B-BBEE
Act) financial advisors to gain access to the market, but also
funding needed to pay for their studies and a stipend while
completing a learnership and/or mentorship programme at an
FSP or financial planning practice.
FPI has a fully developed mentorship programme,
Mentoring the Professional of Tomorrow, that is free for anyone
to use. It is important that the mentee finds a mentor that
matches themselves as they must have a good working
relationship that is beneficial to both parties.
We are currently registering an education and training trust.
Delays at the Johannesburg Master’s Office have hampered
the process. The sooner we get the trust off the ground, the
sooner we can help more upcoming, young, unemployed
people to become qualified financial advisors and planners.
FPI states that its mission is “to advance and promote the
pre-eminence and status of financial planning professionals”.
What do you believe still needs to happen in the financial
planning profession for it to achieve the same level of
recognition and respect as other professions such as law,
medicine, accountancy, engineering, etc?
Financial planning is a relatively young profession in
comparison to law and medicine. The profession was only
born in 1969 at an airport in San Francisco when a group
of talented, like-minded people recognised the need to
professionalise financial planning.
2The FPSB owns the CFP® mark outside of the US. CFP® is also a SAQA registered designation.
3Referring to specifically Proposal T.
Other professions like law, medicine and engineering
are all statutory professions (established by an act
of parliament) or enjoy some form of regulatory title
protection (like in the accountancy profession). We do not
have this for financial planning yet – well, in South Africa at
least. Regulatory protection of the title Financial Planner is
in draft stage currently and we can only hope, for the sake of
consumer protection, that regulatory title protection comes
in sooner rather than later.
What are the biggest challenges that FPI faces in delivering
its vision of “professional financial planning for all”?
Reflecting on our top two challenges:
• Our biggest difficulty remains growing our numbers
sufficiently across all demographics to provide professional
financial planning and advice for all. We need a more
diverse membership base to serve all South Africans better.
Some of the issues have already been highlighted in this
interview (awareness of the profession, recognition of our
professional members by employers, funding for students
to study and join the profession, to name but a few).
• In most professions, completing the required CPD hours to
remain competent and in good standing within a profession
seems to be problematic. This is because it is seen as a
compliance burden rather than a strategic advantage.
Mindsets around CPD must change: it should not be a
tick-box approach, but an opportunity to set yourself apart
from the rest by ensuring that your personal development
plan speaks to the areas that you need to grow in. CPD should
be strategically aligned to what your financial institution or
practice is trying to achieve.
In achieving its mission, FPI has identified six actions that
it seeks to undertake. We have questions specific to each of
1. Improving the quality and accessibility of professional
financial planning for all in Southern Africa. How do you
see people who can’t afford to pay for financial planning
getting access to professional advice for free rather than
becoming victims of “financial advisors” who are just
salespeople wanting to sell products to them?
Financial inclusion and access to quality advice is a global
problem. What we must appreciate is that there will
always be some form of fee that a client will have to pay
to access financial services (products, advice, etc). These
fees present themselves in many shapes and forms – from
regulated commissions to fees for advice to fees for assets
under management (AUM). As per the discussion above, the
regulatory environment has been enhanced to make it clear
what a provider or representative may charge for advice and
We must look at national models where access to
advice and paying an advice fee could be an allowable tax
deduction, for instance. Another way is to allocate more
B-BBEE points to consumer education via the Financial Sector
Charter and relevant B-BBEE scorecards.
FPI members provide pro bono advice from time
to time, especially during Financial Planning week (in
October) and on World Financial Planning Day. FPI was at
Leaderex 2022 where a few of our professional members
assisted the public with pro bono financial advice. These
volunteers are all licenced to provide financial advice as
per prevailing FSCA regulations.
Consumers can visit www.letsplan.co.za for financial
education and literacy to assist them with basic financial
decisions – from budgeting to understanding what saving
and retirement planning are about.
Consumers can also locate FPI professional members here
and also verify FPI memberships.
2. Acting as advocate for professional financial planning,
building a recognition of the importance and need for
such planning by the public. What are your key initiatives
in this regard?
FPI has a set advocacy and public policy strategy where
we actively take part in relevant regulatory discussions to
create awareness of the importance of financial planning and
professional financial advice to the public.
We add well-considered public comment into draft
regulations, with the active support from our highly
competent members, especially our various competency
committees and Advocacy Committee.
In terms of the public recognising the importance of
financial planning and professional financial advice, we offer
our FPIMyMoney123 programme.
The FPI network, which consists of FPI volunteers and
ambassadors, undertakes quite a few media interventions
and writes in a number of publications to assist with financial
planning awareness. We provide a quarterly newsletter that
updates consumers on relevant financial matters.
These are a few of the key initiatives in this space.
3. Providing a framework within which members can achieve
qualifications and maintain competence to create greater
value for their clients, practices and employers. Will
financial planning ever be on the same footing as other
professions if there is no single professional qualification
standard required of anyone giving financial advice?
The above FPI mission statement is with specific reference to
the profession and not the industry at large. The framework
that is referred to here is for anyone that wants to become
a professional member of FPI. The framework consists
of proper qualifications from NQF5 to NQF8 at FPI and
recognised educational providers based on our published
financial planner and financial advisor curriculums. Visit
We should not confuse what a financial
planner does with what someone who is not a
member of FPI does. This is the precise reason
FPI is seeking regulatory protection of the
term Financial Planner. Not everyone can call
themselves a financial planner, especially if they
do not meet the stringent global certification
standards that are based on the Financial
Planning Standard Board (FPSB).
It is also important to note Proposal T in the
RDR as well as FSCA’s Advisor Categorisation
paper (Section 5). A financial advisor who is not
a professional member of FPI must be licensed
with FSCA in terms of the FAIS Act. There are
clear competency requirements for someone
who is licenced with the FSCA via BN 194 of
2017. I feel that the regulator has done a lot in
this space, from the days when a mere “30/60
FAIS credits” were needed to currently where
a full relevant qualification is required. We
also need to appreciate the direction that the
Conduct of Financial Institutions (COFI) under
the twin peaks model is moving to. It is about
moving to a more principle-based environment
as COFI is built on the eight Treating Customers
Fairly (TCF) principles.
A financial planner is a
professional that guides you
over a period of years to realise
your financial goals and is
there when life happens.
We are sitting with a legacy problem where there was no
firm framework to ensure that financial advisors obtained
qualifications that were relevant to what a financial advisor
does. The FSCA is revising the competency framework
as part of their harmonisation project that is currently
underway. An interesting study to read is the one FPI did
with SAQA in 2016 around the need for FPI’s financial advice
designations. Since then, FPI has set specific codified
education standards for financial advisors that want to
become members of FPI via our REGISTERED FINANCIAL
PRACTIONER (RFP) or FINANCIAL SERVICES ADVISOR
(FSA) SAQA registered designations.
The second part of the above mission statement refers
to CPD. FPI provides more than 35 hours of complimentary
CPD webinars to FPI professional members to enable them to
remain technically strong in the various fields of financial
planning. We also provide online courses, conferences
and technical workshops to ensure that robust peer
collaboration also takes place.
4. Ensuring that members maintain the highest ethical
standards in the pursuance of their profession –
education is often seen as the way to ensure ethical
standards but the reality is that product providers often
provide incentives (intentional or otherwise) which can
compromise the ethics of financial advisors. What is FPI
doing about this?
I will first focus on a broader industry response, then
an FPI-specific one: Here we need to take note of the
regulatory journey that started with the publication
of 55 RDR proposals that came out in November 2014.
In keeping to the point, Section 3A of the General
Code of Conduct (BN 80 of 2003) was updated quite
significantly in June 2020 to address this behaviour
within the financial service industry.
FPI can only address the behaviour of our professional
members via the FPI Code of Ethics and Practice Standards
as well as our published disciplinary regulations.
Professional members of FPI have a specific duty to ensure
that they always act in the best interest of their client and
do not serve any other ulterior motives such as a cheap
boat cruise to the Bahamas or a free plane ticket.
FPI sits on the market conduct committee at the FSCA
and a few other relevant regulatory committees where
we actively participate in discussions that move the
financial services sector forward and address risks that
face the financial advice sector.
5. Providing a leadership role within financial services by
providing balanced, credible input and commentary to
government and the public. How do you achieve this?
FPI has a specific public policy strategy as well as
advocacy goals that we are driving. We provide wellconsidered
public comment into regulations published
by National Treasury, FSCA, Financial Intelligence Centre
and Council for Medical Schemes, to mention a few. We
do this with the exceptional support of our competency
and advocacy committees.
6. Facilitating transformation within the profession. We have
already asked a question on this. Do you have anything
FPI facilitates diversity and inclusion in the profession via
the mechanisms mentioned above. It is important that
we focus not just on race, but on male vs female, various
mindsets and different competencies and skills that people
bring to the table for the greater good of all.
FINANCIAL PLANNER OF THE YEAR
WINNERS ALWAYS WIN
The Financial Planner of the Year Award was launched in 2000 and is the most
prestigious award in the industry. It recognises the country’s top CERTIFIED
FINANCIAL PLANNER® – a stellar professional who exhibits revolutionary ideas,
consummate skill and unimpeachable ethics when dealing with clients.
On 19 October 2022, the Financial Planning
Institute of Southern Africa (FPI) will be hosting
the prestigious awards ceremony where excellence
in the financial planning profession is recognised.
This event endeavours to acknowledge extraordinary CFPs®
from across Southern Africa that demonstrate innovation,
professionalism and commitment to both their clients and
the financial planning profession.
Meet the finalists of the Financial Planner of the Year
PALESA DUBE, CFP®
Director and Wealth Manager, Wealth Creed
How has the process of applying for the Financial Planner
of the Year Award benefitted your business? Have you
made any significant changes to your business during the
The application process was a wonderful opportunity
to assess our financial planning approach as well as our
internal processes. It was also a great affirmation that we
are certainly on the right track and that our client centricity
It did, however, also highlight the extent to which our
industry remains fragmented, resulting in clients typically
having to consult several professionals to address all aspects
of their financial and risk management. To tackle this, our
approach is to collaborate with other professionals in aspects
we are not licensed to give advice on or if another skill set
is required. This is an area we will be
focusing on so that clients receive a
more seamless value proposition.
Do you believe that the FPI can improve
the selection process in any way?
For practicing financial planners, it is
always a challenge to strike a balance
between the information that the
regulations require us to disclose to
clients in the advice proposal document
versus what clients can meaningfully
grasp. A key take-away for me was to
find a good balance between the two
and importantly still use a format and
language that clients can understand.
Palesa Dube, CFP®, Director
and Wealth Manager,
FINANCIAL PLANNER OF THE YEAR
it was to use my expertise for the benefit of the community from
which I emanate. With this mission, our goal is to continue to grow
our practice and ultimately have a presence nationally.
I also believe that one of the most important contributions we
can make as professionals is to place people in a position to make
informed financial decisions for themselves. It’s vital therefore
that we contribute our time and efforts to financial literacy and
inclusion initiates, which is an area our practice and I, personally,
are passionate about.
One of the most important contributions
we can make as professionals is to place
people in a position to make informed
financial decisions for themselves.
What are the changes you would like to see in the financial
I think we need to take pride in the strides we have made in the
industry over the years. When I started my career 18 years ago, the
conversation was around moving from a product-led to a clientcentric
industry with professionals that adhere to high ethical
standards and use their technical skills to positively impact the
lives of the clients we serve. The CFP® designation as well as the
more recent RFP TM and FSA TM designations are a clear indication
of our commitment to further professionalising the industry. The
ball is now in our court as practising members to increase the
prominence of these designations by proudly associating with
them and living up to the high standards required of us by our
peers and importantly the broader community we serve.
What are your long-term objectives – including those on
diversity and inclusion?
One of the pivotal reasons for us starting an independent wealth
management firm was so that we would be able to provide holistic
financial planning services of a high standard to a broader base of
the community, where our eye would remain solely on improving
the lives of our clients. More importantly, for me as a black female,
TOM BRUKMAN, CFP®
Retiremeant Specialist and Director, Chartered Wealth
How has the process of applying for the Financial Planner of the Year
Award benefitted your business? Have you made any significant
changes to your business during the application process?
The process of applying for the Financial Planner of the Year Award
has benefitted my business immensely. It has really allowed me
to see “the wood from the trees” in that you start to view every
aspect of your business with a different lens.
One of the most significant changes I have made in my business,
during the application stage, has been to really define what
my succession planning strategy entails. Not only has this been
important to detail in writing but it is important to communicate it
(once defined) to staff and clients. The clarity on continuation and the
growth of the business, for both staff and clients, has been hugely
Do you believe that the FPI can
improve the selection process in
I do think there are benefits to holding
panel interviews in person. I know
this comes with a cost, but I think
a deeper understanding of who the
candidate is and what they stand for
can come across more authentically
in person. The FPI could potentially
work on turnaround times to help
the candidates plan ahead if they do
make it further into the competition.
Tom Brukman, CFP®,
Retiremeant Specialist and
Director, Chartered Wealth
What are the changes you would
like to see in the financial planning industry?
I would like to see a more legal definition for a financial
planner that incorporates the CFP® designation. This will
FINANCIAL PLANNER OF THE YEAR
help the consumer-at-large understand the difference in
professionalism and quality that is available to them in the
advice space. I also think that the role of a financial planner
is extremely diverse, and it is important that this gets more
defined for both financial planners and clients. Financial
planners and clients need to know where to draw the line
from an advice perspective.
What are your long-term objectives – including those on
diversity and inclusion?
My long-term objectives are to continue building a financial
planning practice that always puts the client first. To do
this, I am driven to build an inclusive and diverse team of
passionate colleagues who learn that the role we hold in
someone’s life is so valuable and important.
I believe that I need to set our business clear and
achievable diversity and inclusive goals from a staff,
provider and client perspective, if we want to see this
business grow and flourish in the long term. Upskilling,
mentoring and sponsoring will always be a cornerstone of
how we manage all staff that join my business.
I am driven to build an inclusive
and diverse team of passionate
colleagues who learn that the
role we hold in someone’s life is
so valuable and important.
HENDRIK SPIES, CFP®
Chartered Accountant (SA), Principal of Spies & Associates,
Old Mutual PFA
How has the process of applying for the Financial Planner
of the Year Award benefitted your business? Have you
made any significant changes to your business during the
Applying for the award has given me an opportunity to
step back and reflect on how far I have come as a CFP®
professional. At the same time, it has also given me an
opportunity to envision an even brighter future for my
practice. The application process has once again made
me appreciate the importance of the CFP® professional
credentials. It has also inspired my three partners to enrol
for the qualification next year.
Do you believe that the FPI can improve the selection process
in any way?
I believe that all CFP® professionals should automatically be
included in the selection process. I am convinced that there
are many more amazing CFP® professionals out there with
strong practices from whom we can learn a great deal. If the
FPI can visit some of these practices in person and spend time
with them, I believe it would further enhance the prestige
Ours is not simply an industry; it is a
profession which can and should be
ranked amongst the best of professions.
that is already connected to this fantastic award. It will be my
absolute privilege to be part of such a process in future.
What are the changes you would like to see in the financial
For me, it all comes down to education. One obviously
needs an education to become a CERTIFIED FINANCIAL
PLANNER®, but I believe education is much more than that.
As CFP® professionals, we have a duty to educate the public
on why it is so important to use a CERTIFIED FINANCIAL
PLANNER®. We also have a duty to show the wider financial
planning industry that ours is not simply an industry; it is a
profession which can and should be ranked among the best
of professions. In 2018, I joined two clients to start a school in
my area. Today our school educates more than 150 learners.
My dream is to see CFP® professionals rise from the ranks of
these learners in 20 years from now.
What are your long-term objectives – including those on
diversity and inclusion?
My team and I are on a drive to grow our practice over the next
two years by employing young planners and assisting them on
their journey to qualify as CERTIFIED FINANCIAL PLANNERS®. I
know there are many young planners out there who, with the
right guidance, can become successful
CERTIFIED FINANCIAL PLANNERS®, and
my team and I see it as our responsibility
to assist this next generation of CFP®
professionals. Our goal is to help these
young planners build their own practices
– an initiative which obviously benefits the
younger planners, but more than that: it
also paves the way to a future where more
clients can be reached and given access to
quality financial advice.
This is especially important in a country
like South Africa where we have a very
diverse population, both economically and Hendrik Spies, CFP®,
socially. To ensure that every South African Chartered Accountant
has access to quality financial advice, it is (SA), Principal of Spies &
our responsibility to help create a diverse Associates, Old Mutual PFA
group of CERTIFIED FINANCIAL PLANNERS®.
At the end of the day, this is what financial planning is
all about – changing people’s lives. How fortunate are we
to be in a position where we can make a real difference. My
dream is for more people to understand this and make it
their daily goal.
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What does the future of financial planning look like? If you ignore all the noise, the changes,
the regulations and the economic environment, one thing becomes very clear: the upcoming
generation of financial planners is passionate about the industry, clients and the profession.
By Nici Macdonald, CFP®, HOD: Certifications and Standards, Financial Planning Institute of Southern Africa
We are, however, finding that not enough
young planners are entering the industry
and some of those who do come through
the pipeline get lost to other industries.
This means that diversity, in terms of age and race, of the
financial planning community is suffering. If you consider
that only 30% of professional FPI members are under 40
years old, and only 6% of those are younger than 30, this
fact is clearly illustrated.
I was told a story the other day of a bright young
financial planning student at one of our local universities
who graduated with honours and started his career with
enthusiasm. His lecturers had high hopes that he would
be wildly successful and make a big impact in the industry.
A year later, his lecturer bumped into him at a club where he
was a DJ.
It turned out that his first job in financial advice was a
horrible experience. He was given very little training, high
targets and no support. This student, now completely
disillusioned, will never practice financial planning again.
What a loss for our industry.
Two of the main reasons why these young planners do
not stay in the industry is lack of support and opportunity.
To successfully start a financial planning or financial advisor
practice, you need to either have a solid client base or
a network to build one from. Alternatively, you need the
capital to buy into an existing practice or succeed a retiring
financial planner. In many cases, these young planners
There are very few things more rewarding
than seeing someone grow and
knowing that you had a part in it.
are first-generation graduates without
many of the resources needed to build a
business in this manner.
Support for a young financial planner
should not just be financial, but also
professional and emotional. It can be
quite daunting for a graduate to step into
their first workplace and be expected to
learn the ropes of a professional business
in a very short time span. The successful
learnership programmes focusing on
developing talent in our industry take
a minimum of three to four years for
candidates who have already completed
a post-graduate qualification. This is a
How can the FPI assist in addressing this
We are passionate about mentorship. We
need to use the existing skills, knowledge
and abilities in the industry to help build
the next generation of financial planners,
via knowledge transfer.
The FPI has a fully developed and
structured mentorship programme,
designed to run over a minimum period
of 12 months to assist in training a new
industry entrant in all aspects required to become a fullyfledged
financial planner. This programme is based on the
FPI Practice Standards (the six steps of financial planning),
combined with the six areas of financial planning (financial
management as well as estate, tax, retirement, investment and
The programme is available to our CERTIFIED FINANCIAL
PLANNER® (CFP) professionals free of charge. The FPI assists
in implementing the programme into your practice and
guides you on the process to be followed. Completing
the mentorship programme can be instrumental in
ensuring that a young entrant in your practice attains all
the knowledge, skills and abilities needed to become a
successful financial planner.
Another benefit of this programme is that a young entrant
who does not yet qualify to apply for the CFP® professional
designation due to not meeting the experience requirement
(three years) can overcome this by formally completing the
mentorship process. This is attained through structured
feedback to the FPI at regular intervals and submitting a
portfolio of evidence to be assessed by the FPI (at a fixed cost)
on completion of the programme. Should this assessment
show that the candidate is competent in the tasks assigned in
the programme, he or she will be deemed to have attained the
experience needed to become a CFP® professional.
What is expected from a mentor?
The process takes time and commitment from both the mentor
and mentee. The words “deliberate mentorship” come to mind. A
plan must be put in place, goals need to be set and progress has
to be tracked.
In your practice, the mentorship can form part of the office
structure. Leverage the knowledge your assistants, practice
manager or other financial planners have. Harness the time of
your product provider consultants and specialist consultants.
Use Continuous Professional Development (CPD) opportunities
to instill learning. Spend time with your mentee to teach them
the soft skills that you have learnt over the years.
Why do I do this?
There are very few things more rewarding than seeing
someone grow and knowing that you had a part in it. Not
only will you be transferring the knowledge, skills and abilities
you have acquired, but you will also strengthen your own
skills and maybe learn some new ones through the process.
Should you mentor a new entrant into your practice, you
will obtain a valuable resource to help your own business
grow and have more efficient and productive employees. The
mentees can also continue the mentorship process, which will
exponentially increase the benefit to the industry and to the
clients we serve.
I want to encourage everyone to start today to make
this industry better by practicing deliberate mentorship.
Ask yourself what you can share, put a plan together and
set the time aside to make sure it happens. By doing this,
we will consciously and intentionally grow the financial
Contact us today at email@example.com or 011 470 6000
to find out how you can get involved.
For more information call us on +27 (11) 470-6000 or email: firstname.lastname@example.org
FINANCIAL PLANNER OF THE YEAR
A reflection on winning the FPI Financial Planner of the Year Award.
Winning the FPI’s Financial Planner of the Year in 2011
was one of the best experiences I have ever had.
The award profoundly changed my personal and
professional life. It remains a mystery to me that we
don’t see many more CFPs® entering the competition every year
– my experience is that if you put in the work, you stand an equal
chance of winning. Even if you don’t succeed in your first year, you
learn so much about yourself, your practice and your professional
abilities that the effort is worthwhile.
OUTSIDERS CAN WIN
In the years before I entered, most of the winners had come
from large practices or had links to a particular product provider
that greatly assisted them in preparing for the competition. The
cynic in me made me feel that the competition was a bit of a
closed shop to financial planners who were not part of the “club”.
In addition, our business was relatively small, quite new and we
were not heavily involved in the financial planning community –
we were outsiders in every sense.
John Campbell of Chartered Wealth, who won the competition
before me, told me I was being silly not to enter because I stood
a good chance of winning if I prepared adequately, so I finally
took the leap in 2011. This gave me the push I needed and I was
thrilled to win on my first attempt. The format of the competition
has changed over the years, but one fundamental principle has not
changed: anyone can win if they do the work.
PREPARATION IS KEY
I realised that our financial planning practice would be a significant
component of the competition once I started investigating what
was required of me to enter the contest. Every aspect of our
business needed to be competition-ready as the judges were not
solely focused on me but also our practice. It took a lot of hard work
to prepare our practice to be battle-ready.
I had many doubts because we were not a big business and I was
not sure we would be able to compete with the more prominent
players in the industry. However, I had great faith in my colleagues,
our clients and the high-quality financial planning processes we
had built since we started the business. Fortunately, the judges
were extremely fair, and our size was no disadvantage.
There were some surprising benefits to winning. Our existing
clients seemed to delight in the award because they felt party to
the success. The increased confidence instilled in my colleagues
was also surprising; they realised we could compete with the “big
boys” on an equal footing. Media houses started calling to ask for
interviews and I was even profiled in You magazine. This turned out
to be vital because it impressed my mother-in-law’s friends, winning
me many brownie points at home. Our business flourished; a more
prominent media profile and greater self-confidence in our planners
was a dream combination. We were able to convince many new
clients to partner with us on their financial journeys.
We must be proud of our profession and Financial Planner of
the Year shines a spotlight on the best professionals in our
country. I firmly believe we compete with the best financial
planners in the world. While awards are not a destination, they
are a valuable way of benchmarking yourself and your practice.
Knowing if you run a great business without opening yourself
up to external scrutiny is impossible. I can think of no better
benchmark than Financial Planner of the Year. I encourage anyone
who aspires to be a high-quality professional to enter. There are
so many benefits and so few downsides that the time spent on
preparation is rewarded many times over. It is essential to know
that this competition is a group effort; you cannot win without a
brilliant team to support you.
ONLY ONE DISAPPOINTMENT
People ask if there are downsides to being the Financial Planner
of the Year. I cannot think of any. You need to budget some extra
time for public talks to raise the public profile of our profession.
This helps you, our profession
and the public to know more
about us. In the years since I
won, my only disappointment
is watching some winners use
the award to find themselves a
better job or build their business
without taking the time to give
back. If you win this, please
allocate some time to talk to
other financial planners about
our profession and encourage
more people to become CFPs®
so we can continue building our
Warren Ingram CFP®, Co-founder,
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Shopping for a new car, iPhone or laptop is a relatively
straightforward affair. You generally know what you are
looking for, you have a budget in mind, and you can set
off on your search and narrow down the options quite
quickly. Upon selecting the desired product of choice, you would
have clear expectations around performance and function, which
are captured in a product warranty.
Should any feature of your recent purchase fail to meet
expectations there is a clear path to evaluate where your
product has failed to deliver. In this case, the provider
should hopefully back up their product with a remedy or a
replacement. It’s not always as simple a process as this, but
for the most part, consumers are empowered to make choices,
to evaluate performance and have recourse should things not
turn out as expected.
The investment industry does not work like this. The
key distinction is that while the industry offers “investment
products” such as unit trusts, retirement funds and the like, it
is in fact a service and not a product which investors receive.
The main implication which we are focusing on here is that the
investor assumes the risk of success, rather than the product
provider. There is no recourse should a particular fund or
product fail to meet expectations over time.
This highlights the topic of “investment risk”. Where the
investor is taking on the burden of putting their own capital at risk
to meet their objectives, guided and serviced by the industry,
the concept of risk can be a vague and mis-used term which can
serve to undermine good investment outcomes. In the absence
of a sound understanding of risk, it is likely that investors will
be more conservatively invested than they otherwise should
be. In the short term, it may seem like this is a small trade-off;
however, it is only over extended horizons that this cost can be
To help ground this concept of risk, it is helpful to start by
clearing up the use of the term “risk”. For different participants,
risk can mean:
• The potential to lose money permanently. An example here would
be through insolvency (African Bank) or even fraud (Steinhoff or
Ponzi schemes such as Sharemax). This is contrasted with losing
money temporarily – a very normal occurrence in investing
where share prices move up and down on a continuous basis.
• A length of time, where “low risk” is often linked to short time
periods such as 12 months and “high risk” is linked to long time
periods such as five years.
• The variability of returns. How much portfolio values change each
day, month or year. Shares on the JSE for example fluctuate wildly
compared with the return earned on a bank deposit.
The term “risk” is often used as a catchall. Yet, the three
examples above have materially different interpretations and
understanding the implications for each is critical to maintaining
a proper investment plan.
CAPITAL AT RISK
When we consider portfolio construction, we are assessing the
potential to lose capital permanently. In a perfect world, capital
loss would be avoided in its entirety, yet this is probably an
unrealistic expectation. With thousands of listed companies,
debt instruments, property REITs and the like, there is always
the potential for a company to face severe financial pressures
that can result in capital loss. So how can we mitigate this? There
are several ways, the most effective of which is diversification.
Spreading your capital over an extended range of assets, so that
if any individual breaks rank it does not have an oversized impact
on the total portfolio.
The second way we can mitigate this is by using strong
investment managers who have robust research and due diligence
processes to mitigate or avoid any of these financial failures. With
a properly diversified portfolio, the potential for small capital
losses can be tolerated and offset with a much broader set of
instruments which add value. And this is the key point: you
need to be able to stomach some permanent losses to be able
to access the types of investments which ultimately do the job
of building wealth. Over a 10-, 20- or 30-year investment horizon
it is likely you will experience some permanent capital loss. It is
worth pointing out though, that by far the biggest “loss” would
be an approach to investing which tries to avoid any form or loss
whatsoever, and where the investor is underinvested in higher
return assets such as shares for long periods of time.
TIME IS YOUR FRIEND
Extended investment time horizons are the primary fallback for any
investment portfolio. The ability to let investment returns average
out over long periods of time means that you increase your odds
of success just by remaining invested, as any short-term anomalies
(eg Russia/Ukraine conflict, Nenegate, rising inflation) are overrun
in time by the return generators underpinning a portfolio: earnings,
dividends and income yield.
As an industry though we don’t do ourselves any favours here.
“Long term” is often perceived as five years, for instance. This is not
a long period of time: five years ago, we were uncovering the Gupta
leaks, Jacob Zuma was still president and Steinhoff was about to
make the headlines. Tested properly, “long term” should rather be
defined as 30 years. This is a period which allows the short- and
medium-term dynamics which shift portfolio values to average
out to a more “reliable” outcome – something closer to what a
product provider offers with their warranty system. The trouble
is most investors are not aligned to this period in holding their
financial service provider accountable.
When we consider portfolio
construction, we are assessing the
potential to lose capital permanently.
More often it is short-term, recent events which raise questions
around performance. This can induce investment decisions
without fully considering the real long-term implications.
It is easy to agree that longer-term horizons are safer or
lower risk, than shorter-term horizons, particularly when
considering investments such as shares. The difficult part is
acknowledging as such, and factoring this in when evaluating
For instruments such as bank deposits or money market
funds, there is relative certainty in terms of investment outcome
over short horizons such as six or twelve months, which is
distinct from the capital risk within (these assets are tied to just
a handful of banks for example – a poorly diversified portfolio
structure which would be higher risk in that sense).
WHAT GOES UP DOES COME DOWN, AND THEN GOES UP AGAIN
A particularly cryptic investment term is that of “volatility”. Risk
is often equated with this term to demonstrate how unreliable
returns are. This is not really an accurate way to define risk either.
Given two options, which is the higher risk portfolio?
1. A portfolio consisting exclusively of rand-based loans
to Eskom which only require paying back in a decade’s
2. A portfolio consisting of 2 000 global shares ranging
from Microsoft to Apple to Alibaba?
Eskom bonds run at around half of the volatility of the global
equity portfolio. Does this mean they are half as risky? No, it
doesn’t. The diversification of a wide range of equities, held
across different geographies and industries provides substantial
risk management benefits, provided you have the longer-term
perspective to recognise as such. Relying on a single issuer, such
as Eskom, can spell disaster for an investment portfolio.
There are numerous other examples here as well: investors
looking for low risk often end up invested in local income funds,
where the return profile is consistent and appears to provide
stability; ultimately the underlying assets rely on South Africa
trading as a going concern, the rand maintaining a decent level
of value, and the economy continuing at a sufficient pace to
Upside without the
downside is the perfect
sales pitch for any
investor, but rarely
does this ring true.
allow debt issuers to repay their loans. This is quite a narrow set
of major events which all need to remain intact, unlike the global
equity portfolio which can weather many a storm and still retain
value for investors.
It is not the short- or medium-term variability of portfolio
values which characterises risk, but rather the likelihood that
you, as an investor, get to earn the return you seek. The higher
that likelihood, the lower the risk.
BEWARE THE FREE LUNCH
Unfortunately, while the industry does not offer warrantees
as standard fare on its investment services, it does tend to
create attractive products which rely on the risk aversion/
wealth-seeking investor desires. Upside without the downside
is the perfect sales pitch for any investor, but rarely does this
ring true. Products such as hedge funds and many structured
products can sound attractive at first, by promising positive
returns without the downside. If this were the case, wouldn’t
all investor assets have migrated there by now? Most often
the risks are just a little opaquer, and the costs higher, often
offsetting what benefit there may be.
LIVING WITH RISK
Back to our service versus product conundrum. The investment
industry offers a long-term service, best measured over three
decades to provide a warranty-level of comfort to investors.
Investors are hoping for shorter-term certainty and are often
poorly communicated to by the industry. This conflict is the
source of enormous amounts of industry effort to help align
expectations, but “never the twain” shall meet.
As service providers to investors, we can start by
communicating better and the topic of “risk” is one such
example of a potentially damaging concept which, when used
without due regard for its impact, can cause harm to portfolios.
As a financial planner, asking yourself and your client simple
questions can help mitigate the real risk in investing:
• Is your client’s portfolio adequately
• Do you and your client recognise
the potential cost of being too
• Are you and your client being
objective about your client’s
portfolio when markets are behaving
• Does your client fully understand the
implications of changes they or you
wish to make to their portfolio?
Better awareness of, and co-existence
with, investment risk will result in better
investment outcomes. Guaranteed.
Peter Foster, Chief Investment
biggest asset is
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That’s why our team of highly skilled business development
managers and specialist advisers will consult with key people in your
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will benefit the people who work there. Because people are the heart
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Speak to a Liberty Accredited Financial Adviser or
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or visit our website.
Florbela Yates, Head of Equilibrium
Advisors are continuously partnering
with discretionary fund managers
(DFMs) for a variety of reasons. The
main reason cited by advisors being
the lack of time. South Africa has one of the
most regulated investment industries, which
means advisors are spending more time on
compliance and less on doing what matters
most – giving advice and spending time
with their clients. By recognising that their
value rests in evaluating clients’ personal
circumstances and determining their unique
needs, advisors are increasingly partnering
with investment experts to ensure that their
clients’ investment needs are consistently
met. The partnership with a DFM not only
saves the advisor an enormous amount of
time, but also ensures that all the investment
considerations are met.
At Equilibrium, our range of services
includes strategic and tactical asset allocation,
strategy optimisation, risk management,
manager research, fund and mandate design,
portfolio optimisation, as well as consolidated
reporting. We take care of everything to do with
investments for our advisor partners. By using
our consolidated monthly fact sheets and quarterly investment
reports advisors can speak with conviction about the performance
and expected returns from the various portfolios. Essentially, we
become an extension of their advice practice.
Advisors often cite the fact that we save them time as one
of the key advantages of using a DFM. This is because we
essentially become their personal investment team – taking
on all the investment functions, from constructing portfolios,
getting them loaded on their preferred platforms, managing
both the rebalancing and compliance, as well as running the
investment committees. The industry has a huge shortage of
key individuals (KIs), and this is one of the biggest challenges
that the regulator is facing with the proposed licensing
requirements under the Retail Distribution Review (RDR). To
have full oversight, KIs cannot be “rented” out. They need to
have sufficient time to ensure that they really can provide
oversight. Therefore, the days of a KI on multiple licences will
soon be over. At Equilibrium, we are delighted to be able to
contribute to the industry as a whole by offering supervision
for other Category II businesses who want to get their own
licences. Does this mean we are growing
competitors? Yes, it does. But in our
experience, these Category II advisors
do not always have the full set of
capabilities necessary to cater for their
client needs. They benefit from being
able to use their own Category II licence
to create certain efficiencies (for example moving from model
portfolios to funds, or fund of funds, to specifically address their
CGT issues) and other investment needs.
One of the most pleasing trends that we have seen, is how our
clients have remained invested and have not de-risked despite
the volatility in markets. But still a concern is that advisors in
general are using too many LISP platforms. Partnering with a
DFM may simplify their practices to a certain extent, but unless
they consolidate the number of platforms on which they load
their solutions, they will battle to harness the benefits that come
from partnerships. The two key issues being advisors’ ability to
access better platform pricing and to ensure that the platforms
they use deliver on their clients’ objectives.
As an independent DFM, we are available on nine platforms
– Glacier, Allan Gray, Momentum Wealth, Ninety One, Stanlib,
INN8, Old Mutual, PPS and AIMS. There are others on our watch
list, and we would consider adding them provided they meet
two main criteria: the first is our ability to execute effectively and
the second is the demand for that platform from independent
The open architecture platforms (like Glacier, Stanlib and
Momentum Wealth) give us access to a larger range of funds,
We take care of everything
to do with investments
for our advisor partners.
making it easier to add additional funds that we want to use,
which is essential to our function as a DFM. Being part of a
larger group allows us to approach Momentum Collective
Investments (the group MANCO) to package solutions for us
that are not available to the average retail investor. Having
said this, we have great relationships with some of the more
closed platforms, like Allan Gray and Ninety One, who load our
But from an advisor perspective, it makes sense to partner
with one or two platforms. Advisors are then in a position to
negotiate better fees and limit the complexity that comes with
different constructs and fee classes across platforms. We have
recently seen another bout of consolidation across the advisor
industry both locally and globally, especially in the UK. Advisors
who use fewer platforms are getting higher multiples on the sale
of their practices. I believe that using more than three platforms
is a disadvantage. For advisors with smaller assets, it makes
sense to limit to one or a maximum of two platforms.
It is also important to ensure that the platform strategy
aligns with the advisor’s strategy. Succession planning is
important not only for the advisor’s
practice but for future generations of
investors. How is your chosen platform
positioned for the future, and to be
future-proof? Is their technology built
in-house or have they partnered with
external technology experts, and can
the technology cater for your needs and future scalability?
Ninety One and Allan Gray are examples of platforms
building technology themselves, whereas Momentum Wealth
have partnered with a leading global wealth management
I recently asked Hymne Landman, head of Momentum
Wealth and Momentum Wealth International, why they
chose to partner with FNZ. The main reason is to leave the
commoditised functions of a platform to the experts like FNZ,
and rather focus on the additional value that Momentum
Wealth can add to the lives of our advisors and DFMs, now
and in the future. This allows us to focus on understanding
and meeting the ever-changing needs of advisors and their
practices, and doing this exceptionally well, says Landman.
Combine this with international best practice and you have a
Regardless of which platform or DFM you choose, as an
advisor it is important that you truly buy into the partnership
and that it is going to be sustainable. Make sure that your
partners have the tools available to help you keep your clients
invested, offer competitive pricing and the level of reporting
that meets your needs.
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.
Imagine the future
Albert Einstein famously once said, “Imagination is
more important than knowledge.” He emphasised
the fact that great physicists often had to draw on
their imagination, in addition to knowledge, to help
make sense of the world.
This holds true in the world of investing as well. We live in
a world where an over-abundance of knowledge is available
at our fingertips. We spend an inordinate amount of effort
analysing past and current market information to make
sense of what is going on in the world around us. But it is the
application of our knowledge to manage risk and return in an
uncertain future that really matters most.
It’s the future which is key to everything concerning our
investments. How that future plays out will determine whether
we will have adequate savings when we retire… or not. Moreover,
the future path of investment returns will also determine the
longer-term income prospects of many retirees such as owners
of Investment Linked Living Annuities (ILLAs).
We might not be able to foretell the future, but we can
imagine it. In doing so, we need to build retiree portfolios that
aim to protect their hard-earned savings as far as possible and
provide investment returns that beat inflation over the short to
medium term. Consistent real returns (above inflation) at lower
levels of volatility are important for most retirees, especially in
the early years of retirement.
Not all investors have the luxury of taking a long-term view
We all agree that, over time, one would expect more volatile asset
classes (such as equities) to provide higher real returns than less
volatile asset classes (such as bonds or money market deposits).
When we are young and in the early stages of our retirementsaving
careers, market volatility can mean buying assets such
as shares at lower prices whenever the market takes a dip, so
early-stage savers can afford a long-term view to help accumulate
However, things change as we approach or enter retirement
and become net sellers of assets. During a market downturn,
many ILLA owners may need to sell some of their investments
at lower-than-expected prices to maintain a desired level of
income. Selling more assets than expected leaves one with less
capital to fund future income. Even if markets rebound, you
may still experience a lasting negative impact on the ability to
maintain your planned levels of income.
It is the sequence of returns that is important. By this, we
mean that the order of up markets and downturns matters when
you are in the early stages of retirement.
Let’s look at the example of two hypothetical ILLAs that are
invested in two investment portfolios with the same average
performance and standard deviation over a 15-year period, but
with a different sequence of returns.
In both examples we assume an initial 100 lump-sum
investment, with the following additional assumptions:
• Investment portfolios. 5% per annum inflation (CPI), 9% per
annum return (ie CPI+4% per annum), 9% per annum standard
• ILLAs. 7% income draw in year one, increasing by CPI+1% every
Chart 1: Portfolio A
Chart 1: Porolio A
Portfolio A has better returns in the early years followed
by a patch of mediocre returns. This means that the income
drawdowns in the ILLA are initially able to be funded by selling
Portfolio A assets at higher prices, resulting in a higher-thanexpected
ILLA balance after 15 years.
Chart 2: 2: Porolio Portfolio B B
By contrast, in spite of the same risk and return over the
15-year period, Portfolio B has weak returns in the early years
followed by more robust returns. In this instance, the ILLA
income was generated by selling Portfolio B assets at lower
prices in the early years, resulting in a much lower-thanexpected
ILLA balance after 15 years. Once again, please note
that these are two hypothetical examples to help illustrate
the potential impact of sequence risk. To manage this
sequence risk, the underlying investment portfolio should
aim to achieve consistent inflation-beating returns. One way
CPI+4 : Portfolio
CPI+4 : ILLA
B : Portfolio
B : ILLA
CPI+4 : Portfolio
CPI+4 : ILLA
B : Portfolio
B : ILLA
to achieve this is through a lower-risk multi-asset portfolio
with active asset allocation. When we have an inflation-plus
targeted return over a shorter term, such as three years, we
need to look beyond strategic asset allocation models that
are typically based on long-term return expectations. With
active asset allocation we adopt a dynamic, shorter-term
and forward-looking process. Ranges of expected asset class
returns are considered, based on current market knowledge
and projections into the foreseeable future. Asset class
exposure is then composed in such a way that we believe
we have the best likelihood of meeting our near-term real
return targets, while best avoiding potential downside risks.
Expected asset class return ranges and asset allocation are
consistently reassessed and adjusted as our knowledge of
the markets change.
How to imagine the future
Unfortunately, we are not clairvoyant and, on top of that, we are
all prone to the usual human behavioural biases that tend to
push us all towards herd mentality. When considering the future,
it therefore becomes highly important to follow a rigorous and
unbiased process. Scenario analysis is a great way to imagine
When implementing a scenario analysis framework for asset
allocation, you would typically start off by identifying the
primary drivers of return for any particular asset class. Based
on your knowledge of these drivers, you can then formulate a
positive, negative and base case scenario for changes in these
drivers and asset classes over the foreseeable future.
It is important to keep your scenarios within the realm
of reasonability and to consider both positive and negative
outcomes. Scenario analysis is a robust and elegant way to
formulate and stress test your
expectations of the future.
It is difficult to make your money
grow under all market circumstances,
but we believe that the ability to
understand sequencing risk combined
with regular stress testing of asset
allocation can assist in producing
consistent real returns over time.
Matrix manages a range of
multi-asset funds with real return
targets. Please consult your
financial advisor to evaluate their
suitability for your portfolio.
Jean-Pierre Matthews, Head of
Product, Matrix Fund Managers
Our comments are of a general nature and cannot consider your specific risk profile or your legal, tax or investment requirements.
OIL AND GAS
Petroleum Agency South
Africa is enabling oil and
gas discoveries to kickstart
investment and growth.
Massive new gas finds off the coast of South Africa
and the positive interest shown by international
investors in the oil and gas sector have brought
good news for country’s citizens.
In the shadow of loadshedding and global energy price
spikes brought on by domestic state capture and Russia’s war
on Ukraine respectively, South Africans can be pleased that
new resources are being found nearby and there is a plan to
use them effectively.
The economic effect of the most recent finds off the coast
of Mossel Bay alone will be significant if they are marshalled
in a coordinated manner (see box).
New certainty in the regulatory environment and hard work
by Petroleum Agency South Africa (PASA), the agency which
evaluates, promotes and regulates oil and gas production
in the country, has seen increased interest in South Africa’s
potential as a destination for investment dollars.
The fact that TotalEnergies was willing to bring an expensive
oil exploration rig all the way to Mossel Bay from Norway more
than once is an indicator of the seriousness with which this
oil major is treating the South African project. TotalEnergies
is a 45% shareholder alongside Qatar Petroleum (25%),
CNR international (20%) and Main Street, a South African
Actually drilling the gas and delivering it via a pipeline to
PetroSA (the national oil company which runs Mossgas) and
Eskom (the national utility) will cost a lot more money, and
that is where several subsectors within the national economy
will benefit the most. In effect, the decision to go ahead and
commercialise the gas find will create a new market for gas in
The massive resources of natural gas that Renergen has been
working on for the last few years reached commercial production
in October 2022 in the northern Free State. Renergen, through
its subsidiary Tetra4, is the only holder of an onshore petroleum
production licence issued by the Department of Mineral Resources
and Energy through the PASA. The production rights area covers
187 000 hectares around the towns of Welkom, Virginia and
Liquid natural gas for the domestic market and helium
for export from this project will create an entirely
new stream of energy options.
Most offshore exploration interest tends to
come from foreign investors because of the high
costs but within South Africa, there is a growing
number of local participants.
A women- and black-owned company,
Imbokodo, is making a name for itself as a
participant as a shareholder in a number
of licensing rounds.
“I wish that as South Africans we can have a
holistic debate around our energy mix,” says Dr
Phindile Masangane, CEO of Petroleum Agency
OIL AND GAS
n and right and environmental authorisation
in Mossel Bay to full production and
t jobs. applications when the exploration
n and right and environmental authorisation profitability, saving about 1 200 direct jobs.
ment right expires, or earlier. The agency
t jobs. applications when the exploration A complete shutdown and abandonment
ad to expects the licensee to use worldclass
technologies and standards to
ment right expires, or earlier. The agency of this refinery would not only lead to
ad to expects the licensee to use worldclass
technologies and standards would to reverberate throughout the town of
job losses at the refinery, but the effects
wn of minimise the effects of the gas and
egion, gas condensate production on the
wn of minimise the effects of the gas Mossel and Bay and the Southern Cape region,
ut R2- environment, while maximising the incountry
benefit or local content from
egion, gas condensate production on since the the refinery contributes about R2-
ut R2- environment, while maximising the billion incountry
benefit or local content economy, from and 6% to the Southern Cape
a year, or 26% of the Mossel Bay
Cape this development to support South
acity. Africa’s economic recovery.
Cape this development to support South economy when producing at full capacity.
Africa These discoveries could indeed support
acity. Africa’s economic recovery. The Petroleum Agency South Africa
gas both the country’s economic recovery and
Africa These discoveries could indeed support awaits the licensee of these gas
ction its transition to a clean energy future.
gas both the country’s economic recovery discoveries and submitting its production
ction its transition to a clean energy future.
OIL AND GAS
right and environmental authorisation
applications when the exploration
right expires, or earlier. The agency
expects the licensee to use worldclass
technologies and standards to
minimise the effects of the gas and
gas condensate production on the
environment, while maximising the incountry
benefit or local content from
this development to support South
Africa’s economic recovery.
These discoveries could indeed support
both the country’s economic recovery and
its transition to a clean energy future.
INTERNATIONAL BRANDS SHOWING AN INTEREST IN SOUTH AFRICAN OIL AND GAS
South Africa, of the heated debate about sources of energy
OIL AND GAS
supply. “We do need to OIL diversify AND GAS our energy mix.”
A binary choice is often presented between renewable
energy technologies and fossil fuels. A recent report published
by the International Energy Association (IEA) argues against
framing the debate in that way.
Both can and should be used, according to Africa Energy
Outlook 2022. 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%.
“We should not be brought into a false narrative and a
false choice,” says Dr Masangane, in agreeing with the report’s
conclusions. “It can be both and that is what this report is
in Mossel Bay to
and right and environmental authorisation
profitability, saving about
direct jobs. applications
Mossel Bay to full with production South and Africa’s excellent
A complete shutdown and abandonment right expires, or earlier. The agency
profitability, saving about 1 200 direct jobs.
of this refinery would solar not resources only lead to expects it makes the licensee sense to use localise worldclass
technologies and standards to
the solar value chain
A complete shutdown and abandonment
job losses at the refinery, but the effects
to boost manufacturing, of this refinery but would the not country only lead to
would reverberate throughout the town of minimise the effects of the gas and
should not ignore
job losses at the refinery, but the effects
Mossel Bay and the Southern what Cape it has. region, “At gas the condensate same time, production we on know the
would reverberate throughout the town that of the gas value
since the refinery contributes about R2- environment, while maximising the incountry
benefit in or local country, content from so let’s also capitalise
Mossel Bay and the Southern Cape region,
billion a year, or 26% chain of the is Mossel well Bay established
since the refinery contributes about R2-
economy, and 6% to the Southern Cape this development to support South
billion a year, or 26% of the Mossel Bay
economy when producing at full capacity. Africa’s economic recovery.
economy, and 6% to the Southern Cape
The Petroleum Agency The South multiple Africa uses These discoveries of gas could indeed play support
economy when producing at full a capacity. major role in helping
awaits the licensee of these gas both the country’s economic recovery and
The Petroleum Agency South Africa
discoveries submitting South its production Africa its transition to a away clean energy from future. fossil fuels while at the
awaits the licensee of these gas
same time boosting discoveries economic submitting growth. its production “We need gas not
just in electricity and transport,” noted Dr Masangane, “but
importantly for South Africa, which is in desperate need
of an economic turnaround, is for us to use this gas for our
right and environmental authorisation
applications when the exploration
right expires, or earlier. The agency
expects the licensee to use worldclass
technologies and standards to
minimise the effects of the gas and
gas condensate production on the
environment, while maximising the incountry
benefit or local content from
this development to support South
Africa’s economic recovery.
These discoveries could indeed support
both the country’s economic recovery and
its transition to a clean energy future.
HOW GAS DISCOVERIES CAN BOOST SOUTH AFRICA’S ECONOMY
The gas discoveries that have been made off the coast of South Africa (near Mossel Bay), when linked with the massive finds off
the coast of Mozambique and the enormous potential that exists in fields off the Namibian coast, amount to what could become
a seachange in the regional economy. TotalEnergies and its partners have deployed the Deepsea Stavanger offshore drilling rig,
pictured passing Table Mountain on its way to work off the coast of Mossel Bay, and they have achieved significant successes. The
two fields where finds have been made are called Luiperd (where 2.1-trillion feet of contingent gas resources has been found,
enough to power a medium-sized city for five years) and Brulpadda (1.3 Tef), which are part of Block 11B/12B.
If this gas were to be piped to the existing gas-to-liquid plant at Mossel Bay, Mossgas, then instead of spending about
R12-billion on decommissioning the plant, the facility could instead start generating R22-billion in taxes and royalties and
save South African taxpayers R26.5-billion through not having to import oil and refined products.
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 18 000 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.
Credit: Anton Swanepoel
petroleumagencysa.com Petroleum Agency SA @sa_petroleum Petroleum Agency of South Africa @petroleumagency
Why bargain hunters should be
shopping in Europe, not the US.
Value stocks in Europe are the “unloved of the unloved”,
but they have offered more growth than growth
stocks. Here, three charts tell the story.
The value investor has become something of an
endangered species over the last decade, pushed to the sidelines
of a market fixated on seeking never-ending growth in areas
such as technology.
The underperformance of the value investment style has been
much discussed, and – barring a relatively short rally this year –
mostly painful for deep value investors such as us on the value
investment team at Schroders.
The result is a wide chasm in the valuations of the cheapest
shares and the most expensive. This has not gone unnoticed.
Indeed, one of our favourite columnists in the FT recently,
Robert Armstrong, said, “Value stocks look like a heck of a value
right now!” He pointed out that the ratio of the price/earnings
(P/E) multiples of growth and value stocks in the US was now
at a 20-year low. This is true and compelling. But there is a place
where the differential is even more pronounced: Europe. And
what’s most surprising of all, is that – counterintuitively – Europe’s
cheapest companies have been delivering higher profit growth
than Europe’s most expensive companies.
Three charts that tell the story
The first chart looks at the valuation dispersion between growth
and value in Europe, using data from Morgan Stanley that combines
three valuation measures: price/earnings, price/book (P/BV) and price/
While the similar value spread in the US is undoubtedly cheap,
the data in Europe is eye-wateringly so. Europe has gone lower
than the dotcom nadir around the turn of the century and the
recent bounce still leaves a very long way to go.
Valuations of value vs growth are still near all-time lows
The two points above show that there are similar broad
themes in the US and Europe, but that they’re more extreme in
the latter. However, the chart below is what makes the first two
points seem completely crazy. It shows the earnings-per-share
growth of Eurostoxx value and growth indices.
Value shares have outgrown growth
Source: Morgan Stanley. 21 June 2022.
While this makes the relative case for value in Europe, let’s not
forget the absolute one. Taking the MSCI Europe indices as a blunt
proxy for European value and growth, we see that the broad MSCI
Europe index is trading on 12-month forward P/E ratio of 15.4,
MSCI Europe Growth is on 20.1 and MSCI Europe Value is on just
10.8 (according to data from Bloomberg).
A forward P/E ratio is a company’s share price divided by its
expected earnings per share over the next 12 months. Using
slightly different data from Eurostoxx, we see value shares in
Europe are currently trading on lower PEs than they were five years
ago (see below).
It has been a brutal few years for cheap stocks in Europe.
There are very few, if any, parts of developed market equities
that the market is so pessimistic about that they’ve de-rated
over the last five years – whether in absolute or relative terms.
(A derating is when the P/E ratio of a stock contracts due to a
bleak or uncertain outlook.)
Just to really put the boot in, the US’s Russell 1 000 value index
is on a 12-month forward P/E of 16.5, while the equivalent in
Europe is on around 11. This enormous differential shows that
a cheap stock in the US is held in much higher regard than a
cheap stock in Europe; value stocks in Europe are the unloved
of the unloved.
Source: Bloomberg. Schroders as at 13 January 2022.
Over the last five years, Europe’s cheapest companies have
delivered more profit growth than their growth counterparts.
This is a distinctly European phenomenon and isn’t what you
see in other developed markets such as the US, where you have
some premium profit growth from growth stocks.
Cynics could say that this is down to the effect of starting from
a low base, as the chart starts in 2017 just as the mining cycle
turned positive. But we’ve ran this over multiple time periods,
and you get the same result.
It is also worth noting that the favourable earnings profile
for value was in place before the Covid-19 pandemic.
It’s not all driven by the profit rebound, commodity inflation
and interest rate benefits that have boosted value following
So over that five-year period the real growth stocks in Europe, in
terms of fundamentals at least,
have been the value stocks.
Bring this all together and
there’s a compelling reason
to believe value in Europe
is looking attractive, almost
through absolute valuations,
record levels of relative
valuation discount to growth
and positive relative earnings
momentum. This isn’t really a
widely shared view, however.
Indeed, looking at investor
flows and allocations, Europe
is one of the most overlooked
equity markets in the world.
Perhaps not for long.
Ben Arnold, Investment Director,
For professional investors and advisors only. The material is not suitable for retail clients. We define “professional investors” as those who have the appropriate expertise and knowledge eg asset managers, distributors and
financial intermediaries. Any reference to sectors/countries/stocks/securities are for illustrative purposes only and not a recommendation to buy or sell any financial instrument/securities or adopt any investment strategy.
Reliance should not be placed on any views or information in the material when taking individual investment and/or strategic decisions. Past performance is not a guide to future performance and may not be repeated. The
value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of investments to fall as well as rise.
The views and opinions contained herein are those of the individuals to whom they are attributed and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds.
in England and Wales) which is authorised and regulated in the UK by the Financial Conduct Authority and an authorised financial services provider in South Africa FSP No: 48998
Is there still a
place for Hedge
why should FPs
Bateleur Capital1 was founded 18 years ago
in 2004 as a fund management company. In
January 2005 we launched our first hedge
fund with R11-million in invested capital.
The reason we opted for a hedge fund as our initial
investment offering was twofold – firstly, the
overriding objective was to protect investor capital
and the hedge fund structure was the most suitable
vehicle to achieve this; and secondly, the flexibility afforded by
a hedge fund meant we were largely unconstrained in terms
of our investment opportunity set.
Since inception in January 2005, the Bateleur Long Short
Fund2 has exceeded its investment objectives. The fund has
compounded at 14.6%3 per annum net of all fees, well ahead
of the JSE All Share Index total return of 13.3% before fees. To
put this into context, R1-million invested in the Bateleur Long
Short Fund in 2005 is worth R11.1-million today.
Importantly, these returns were generated at significantly
lower levels of volatility than the overall equity market. The
Bateleur Long Short Fund‘s volatility has averaged 7.8%4 since
inception compared to 17.7% for the JSE All Share Index. The
fund’s worst single calendar year was during the financial crisis
in 2008 when it declined 4.8%. In the same year, the JSE All
Share Index fell 23.2%. Although Bateleur Capital has over time
expanded its product offering beyond hedge funds and now
directly manages more than R9-billion of assets across flexible,
long only and global mandates, the attractiveness of hedge
funds as an investment vehicle is more relevant and compelling
today than back in 2005. Some of these reasons include:
If managed according to their strict definition, hedge funds
are designed to protect capital. This can be achieved in many
ways, but the most common approach for equity hedge funds
is through managing the net equity exposure so that the
hedge fund’s returns are not overly correlated to the equity
market. The net exposure is managed via the use of shorting
individual equities, shorting indices or by using a wide range
of derivative structures. Shorting individual equities is not
readily available to most conventional long only equity funds
and is a key competitive advantage for hedge funds. Our
experience is that capital preservation in periods of market
stress leads to outperformance over the long term.
Depending on their approved mandates, hedge funds offer the
investment manager an unconstrained opportunity set. For
example, if the manager was optimistic on the South African
equity market, the hedge fund might have more than 100% of
the fund’s NAV invested in local equities (by using leverage).
Conversely, if the manager was negative on South African
equities as an asset class, the fund may be net short local
equities. These are extreme examples but highlight the flexibility
available to hedge funds.
Of course, it is critical that this flexibility does not jeopardise
the overriding capital preservation objective of the hedge
fund. The two objectives should be managed symbiotically
and not individually.
Advisors can access a multitude of hedge funds across several
asset classes such as equities, fixed income and commodities.
Each fund offers unique risk, return and capital preservation
profiles which in many instances have low correlation to
traditional long only funds. Having access to funds with low
correlated returns will help advisors build portfolios for all
Established industry with full regulatory oversight
The industry has grown up. There are several funds, like ours, that
have been around for 15 to 20 years which allows investors to
evaluate performance through numerous macro events such as
the global financial crisis and the Covid pandemic. These funds
are run by established and respected investment managers
backed by sizeable teams and significant infrastructure. In
addition, since 2015, hedge funds have been regulated under
the Collective Investment Schemes Control Act. Investors should
accordingly have as much confidence in the oversight and
protection of assets as they do any traditional unit trust.
Liquidity and platform availability
Another key difference between 2005 and now is that hedge
funds are becoming more readily available on LISP platforms
with daily pricing and liquidity. Back in 2005 they were not
available on any platforms and there was only monthly pricing
and liquidity available. In addition to accessibility, the LISPs
also provide an additional filter/due diligence on the broader
funds in the market.
If managed according to their
strict definition, hedge funds are
designed to protect capital.
In 2005, hedge funds were renowned globally for charging
high management and performance fees. The key allocators to
the industry in South Africa were the hedge fund of funds, who
charged additional fees. The net result was the underlying investor
was incurring sizable annual management and performance fees
when expressed as a percentage of the fund’s total return. This
practice has changed materially led by the shift away from the
hedge fund of funds industry. Presently, many South African
hedge funds can be accessed at management fees like traditional
unit trust funds. While performance fees are still common, they are
often only generated after surpassing far stiffer hurdle rates than
historically, with a high-water mark principle applied.
Despite the positive points highlighted above, it is important
to emphasise that not all hedge funds are created equal. It
is crucial for advisors to do their homework on the different
range of hedge funds available, their approved mandates, their
appointed fund managers and their long-term track record. It
is especially key to understand how the historical hedge fund
returns have been generated – was it through fund manager skill
or leverage? If it was through high or excessive leverage, then it
could indicate that the fund may suffer significant drawdowns
in a challenging market environment.
At Bateleur Capital, we are firm supporters and proponents of
hedge funds. Almost 18 years of history operating in this space
supports our positive stance. We are currently appointed as the
fund manager for three different regulated hedge funds: the
Bateleur Long Short Fund referred to earlier, the Bateleur Market
Neutral Fund5 and the Bateleur Special
Opportunities Fund6. While all three
of these hedge funds have different
mandates and risk/return profiles, they
all have an overriding objective of
protecting investor capital.
From inception to the date of writing,
all three funds have generated strong
absolute net returns in excess of the JSE
All Share Index at substantially lower
volatility. This clearly advocates our longheld
view that the right hedge fund has a
relevant role to play for financial advisors,
especially in the current uncertain
Kevin Williams, CEO and
CIO, Bateleur Capital
1. Bateleur Capital (Pty) Ltd is an authorised financial services provider, FSP No. 18123 2. Bateleur Long Short Prescient RI Hedge Fund 3. Returns have been calculated using the
published fee class from January 2005 to August 2022. The growth of R1m invested in 2005 is based on the published fee class with distributions reinvested. Past performance is not
necessarily a guide to future performance. 4. 30-Day rolling volatility as calculated by Bateleur. 5. Bateleur Market Neutral Prescient QI Hedge Fund 6. Bateleur Special Opportunities
Prescient QI Hedge Fund
For those who
For those who do not, none will suffice.
significant amount of progress has been made since
hedge funds first became regulated under CISCA in
2015. The regulatory overhaul did not bring about an
immediate increase in the popularity of hedge funds,
however, especially considering the benefits they can offer
investors. At first it was mostly due to their inaccessibility, but
nowadays one can choose between a list of leading hedge funds
on LISP platforms.
Scepticism among financial advisors remains, with fees
and complexity at the top of the list of concerns for those
advisors who haven’t made an allocation to hedge funds yet.
The mere fact that these concerns have been voiced, means
that we are at least having the dialogues necessary to get to
the next step – debunking the myths and misconceptions
regarding hedge funds.
Deciding which hedge fund to invest in is similar to choosing
what type of car to buy. Just like you get sedans, SUVs,
hatchbacks, trucks, etc., there are many different hedge fund
strategies to choose from. Some of the different hedge fund
strategies include fixed income arbitrage, macro, event-driven,
commodity trading, market neutral and long/short equity. The
latter strategy makes up the lion’s share of hedge funds, both in
South Africa and globally. It is also the most “vanilla” of all hedge
fund strategies – long/short equity funds buy the shares they
expect to go up in price (like traditional equity funds), and, in
addition, short the shares they expect to fall in price.
One misconception that still exists, is that all hedge funds
following the same broad strategy are comparable. In practice,
even if two funds both follow a long/short equity strategy,
there might still be a difference in terms of their risk profile.
Some hedge funds will rise more than the market during a
bull market cycle but might have deeper drawdowns during
a bear market. Others attempt to deliver equity-like returns
with lower volatility, participating in most (but not all) of the
upside during a bull market, while limiting deep drawdowns
in a bear market. In other words, some hedge funds are return
enhancers, while others are risk diversifiers. It is therefore
imperative to understand what the specific hedge fund’s
objective and risk profile is before investing, to avoid an
South African hedge funds are arguably the most
regulated in the world, which means information regarding
FSCA-approved hedge funds is readily available. Minimum
disclosure documents for hedge funds are generally
available on the hedge fund manager’s website and include
transparency on fees and performance. Another benefit to
financial advisors who want to include hedge funds in their
client solutions or model portfolios, is that a LISP platform
would have performed additional due
diligence on those hedge funds available
on the platform.
The South African hedge fund industry
passed the R100-billion mark in June
2022, but it is still only a fraction of the
size of the traditional unit trust industry.
Nonetheless, broader adoption of hedge
funds is growing, as investors become
more comfortable with the nuances of the
industry. By educating themselves about
the benefits hedge funds can offer, financial
advisors are solidifying the key role they
play in ensuring better client outcomes.
If you aren’t a believer yet, now’s the time
to take another look at hedge funds – feel
free to contact Protea Capital Management
if we can assist in this regard.
Edrich Jansen, Head:
Protea Capital Management
The South African investment industry is a dynamic and world-class
industry that we as South Africans can rightly be proud of.
Over the years, it has evolved and adapted to be the
custodian of the savings and investments of a broad array
of citizens and businesses and as such plays a critical role
in shaping the South African economy and landscape.
As part of the broader world of global investments, the local
industry has evolved in consequence to global developments but
also importantly in service of our homegrown needs.
Over the last few decades, we have seen the rise of boutique
and specialist asset managers, and tracking and index funds
have taken off. Over the last few years there has also been
an increase in smart beta funds, which are funds that are
managed passively but are based on algorithms to pick stocks
and investments that have specific characteristics, including
value, growth and momentum.
During this period, we have also seen the systematic relaxation
of exchange control and as a result different approaches have
developed to manage the offshore portion of South Africanbased
The announcement by the finance minister in the February
2022 budget speech, further relaxing exchange controls
whereby up to 45% of retirement funds can be invested in
offshore assets, is both a continuation of a longer-term trend
but also now makes offshore assets one of the most material
exposures within a portfolio.
As a result of the changes to exchange control over the
years, we have seen asset managers adopting and evolving
their models of managing their offshore assets, from a
simple allocation to an offshore mandate and manager,
to setting up offices overseas and partnering with global
I fully expect that, with the current levels of permissible
global exposure, the need for offshore partnerships will increase
materially as the global investment landscape dwarfs the local
investment arena. It is unlikely that a local asset manager
can realistically manage the offshore component of their
assets without setting up substantial offshore operations and
partnering with a global player that has the requisite strength
and resources to create a credible offshore offering.
At Momentum Investments, we have done both. Our
global operations are based in London under the brand
Momentum Global Investment Management (MGIM) and we
have partnered with Robeco, based in Amsterdam, to give us
access to their well-known and regarded financial engineering
and smart beta skillsets.
We will see the details of how the South African investment
industry adapts to the relaxation of exchange control, which
poses both an opportunity and a threat to the local industry.
At the moment, based purely on geopolitical risk and slightly
better valuations in the South
African market, there has not yet
been a large-scale movement of
assets offshore. Over time as global
geopolitics stabilises or achieves
some form of new normal and the
current inflationary and growth
risks subside, I expect that asset
managers will start to allocate
more capital offshore.
This will reduce the size of the pool of domestic-based
investable assets in the South African markets, which are
likely to impact how our local markets operate. Over the
years we have seen a significant uptick in the ownership of
local assets by foreign investors and their continued support
and investment in our markets will be a critical factor to the
continued health of our markets. As such, maintaining the
highest standards and reputation of the local financial industry
is critical as we navigate through the implications of this.
In this process there will be winners and losers. As an
investor, it will be important to keep an eye on the sustainability
of the asset managers that are used.
Sustainability is the other trend that has gripped the global
and local industry. I prefer to use the word sustainability as it
encapsulates the environmental, social, and governance (ESG)
trend that is currently all the rage. Just reading or watching
the news gives an insight into why ESG is so important.
The floods in the US and droughts in Europe are placing
a key focus on the challenge of climate change. The term
sustainability captures the broader scope of what we
need to balance when considering ESG factors. The real
impact of ESG is to balance the various facets in a way
that considers the practical realities of what we need to
prioritise and achieve.
We are the custodians of our clients’ money first and
foremost and need to deliver returns. To do this responsibly,
we need to make sure that our business is sound and in good
financial health and also take into account the sometimesconflicting
aspects of ESG. For example, a singular focus on
one factor, the environment, can have social impacts over the
As an investor, it will be
important to keep an eye on
the sustainability of the asset
managers that are used.
short term on communities that depend on traditional power
production methods for their livelihoods. This is why we
support the Just Transition, which means that as we consider
climate action, we also need to take into account the social and
people implications of the needed energy transition.
Clearly not addressing climate change has significantly
longer-term social implications, that absolutely do need to be
addressed. Europe was at the forefront of climate action until
the roll-over effects of the Russia/Ukraine war posed risks to
European energy security. As a result the role of nuclear and
coal is being reconsidered, at least in the short term, which risks
undoing the progress made. Hence the need for a sustainable
and considered approach to
Another area that is a focus for
the asset management industry is
that of infrastructure investment.
There is a dire need for significant
investment in infrastructure in our
local economy. The government
does not have sufficient resources
to realise the scale of development required and as such needs
to crowd in the private sector.
There are many considerations that must be taken into
account when we invest in infrastructure. Our investors need
an appropriate return on investment, there is a trust deficit with
government and a new compact and way of work needs to be
established, and with the relaxation of exchange control a big
chunk of South African-based assets is going to be invested
offshore, thereby reducing the available capital.
Another consideration is liquidity – infrastructure investments
are illiquid. This means that the level of exposure that we invest
in our portfolios needs to be carefully calibrated taking into
account a wide variety of portfolio management considerations.
We need to invest in accordance with our mandates that
reflect the needs and desires of our clients. This requires a
spread of asset classes and appropriate diversification within
asset classes to achieve a prudent spread
of desired risks and sufficient levels of
liquidity. The consequence is that the
level of infrastructure investments in
portfolios will likely be conservative.
The South African asset management
industry is an exciting, dynamic and everevolving
industry. There are a myriad of
challenges and opportunities that we
need to consider when investing our
clients’ money with the due care and
skill that has been entrusted to us. This
is a charge that the industry, Momentum
Investments and myself take very seriously,
because with us, investing is personal.
Mike Adsetts, Deputy
Chief Investment Officer,
Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider (FSP 6406).
The biggest financial decision that many people face when they retire is how best to use their accumulated
retirement savings from approved retirement funds to provide them with a sustainable income in retirement.
Traditionally, the choice was between a life annuity and
a living annuity, each with its own unique features
and rules. Even if people decide to use some of their
retirement savings to purchase a life annuity and some
to invest in a living annuity, they may end up with two separate
retirement income products that can make it difficult to manage
their income during retirement. There is a better way for financial
advisors to help their clients plan and structure their finances
when they retire to solve the need for certainty and flexibility.
ENHANCED RETIREMENT INCOME OPTION
We have enhanced our living annuity product, the Retirement
Income Option on the Momentum Wealth platform, to help clients
structure their retirement income plan better. They no longer
have to choose between the certainty of a life annuity and the
flexibility of a living annuity – clients can have the best of both in
one retirement income solution.
This hybrid structure introduces richer advice opportunities for
financial advisors. With traditional solutions, the relationship
between the advisor and client in many cases reaches the
end phase once the client chooses the life annuity. There is
therefore a single point in time where advice is required.
Contrast this with a world where clients’ needs can be better
met by blending a life annuity with a living annuity. In this structure
the life annuity becomes one of many components that a client
can choose from within a living annuity. Financial advisors can
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 to protect. By
allocating a portion of their retirement savings to a life annuity
component within their living annuity, financial advisors can help
their clients personalise their income plan by helping them decide:
• How much of their retirement savings they want to use to cover
their essential “life expenses”.
• How much they want to use for flexible “living expenses”.
This product enhancement will help financial advisors and
their clients make more informed decisions about their retirement
Clients can choose to allocate a portion of their retirement
savings to the new Guaranteed Annuity Portfolio that will pay a
guaranteed income for as long as they live. At the same time, they
have the investment flexibility to benefit from potential growth
from investment markets and the possibility to leave a legacy, all
in one living annuity.
The Guaranteed Annuity Portfolio is a life annuity, which is
available as an optional investment component to clients starting a
new Retirement Income Option or who already have a Retirement
INVESTING IS PERSONAL
We understand that a client’s investment is not just another
investment – it’s something personal – and it helps them
to achieve their financial goals on their life journey. When
something is personal, it really matters. That is why with us,
investing is personal.
By blending the best of both worlds
– the income certainty of a life annuity
and the investment flexibility of a living
annuity – we are partnering with financial
advisors to help clients:
• Structure and implement suitable
income solutions when they retire.
• Optimally manage their income during
retirement to cater for changing
THE BEST OF TWO WORLDS
Our blended product solution gives
people the best of two worlds: the
flexibility of a living annuity that can
give clients investment growth and
the certainty of a life annuity that pays
them a guaranteed income for life.
With our new Guaranteed Annuity
Portfolio financial advisors can help their
clients make the rest of their life, the best
of their life.
It’s retirement reimagined.
Fränzo Friedrich, Head of Marketing,
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 article 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.
Do you have the Will
to secure your client’s
There is much talk about building generational wealth
as a society, yet very little guidance on how to do
so. As a wealth manager and life insurer, we have a
dire responsibility towards providing these guiding
principles and ensuring that consumers have access to the right
tools, products and services to enable such wealth and that they
are given the right advice to build their wealth.
More so, we are intrinsically “liable” to ensure that the
wealth we are helping create for our clients can be passed
on responsibly to their future generations. Traditionally, this
has meant providing the right products – whether that’s
investment, long-term insurances or the like. However, we
must think deeper – clients have worked hard for their wealth
so how do we ensure that we help them decide now, what will
happen to it later?
Estate planning is a crucial consideration in the wealth mix
and is often overlooked by consumers.
It is our responsibility to enforce good estate planning
principles, such as ensuring clients have a valued, signed and
securely stored will. Not only does this guide loved ones on
how assets should be distributed, avoiding a stressful process
for the family, but also ensures that they can avoid wealth
leakage through exorbitant inheritance taxes. The updating
of their will at key life stages is crucial, ensuring it is valid and
correct so that assets are split according to their wishes and
that the document is safely stored and accessible for when
the family needs it. Too often, wills are tucked away but today
technology offers us the opportunity to digitally store it with
other important documents and to provide access for the
family to these documents.
It is not just about the paper though – when it comes to estate
planning, the costs of winding up an estate and the immediate
costs that are associated with death are often overlooked. For
example, the average cost of winding up an estate is around
3.5% plus VAT of the gross value of the assets. This type of cost
needs to be worked into the investment planning to ensure that
the money a consumer thinks their family is getting is realistic.
Furthermore, with death comes funeral costs and today these
start at around R15 000 and go all the way up to R100 000 or
more. Even if you are at the upper end of the earning spectrum,
let’s be honest… a R100 000 funeral can set most people back.
Therefore, we need to encourage consumers to ensure
that they are planning properly for the unforeseen – that
they have life and funeral cover in place to protect their
family’s financial future. This aids with not only living costs
and obligations but with creating a buffer for the wealth one
We are now seeing growth in products that offer a “bit of
both” ie life and funeral insurance together in one product
(Pure Life Plus), with this combination in the more affluent
market witnessing a higher sum assured. We have also
identified the need for more tailored products specific to
certain diseases – ensuring that customers are paying for
something that is more likely to happen instead of paying a
premium for products that are unlikely to result in claims. This
will significantly change the status quo in certain product
lines and those insurers who get it right will then have very
unique and competitive products to offer the market – based
on actual needs.
As consumers are pressed to conserve their budgets
while still delivering on their families’ financial futures
– a combination product such as 1Life’s Pure Life Plus is
creating a more cost-effective yet suitable way to manage
their wealth. Some policies that allow
for multiple covers and benefits may
also offer savings on premiums for
additional covers. For example, in our
environment, consumers can save up
to 28% on their premium compared to
taking multiple stand-alone policies.
Today, estate planning is not a nice
to have, it is fundamental if we hope to
preserve wealth for future generations.
As a financial advisor and life insurer, we
can play an active role in ensuring that
we are a) providing the right products
to meet changing budgets b) providing
the right advice and c) creating access
to technology and tools that enable
effective and sound financial planning
and that future-proofs their families’
Kobus Wentzel, Head of
Distribution, 1Life Insurance
When it Comes to Conviction
Investment, “Quality Will Out”
Attractive returns with risk control can be a reality.
But it requires conviction investing, bottom-up analysis
for quality and a rigorous discipline in valuation.
Global Equity investing is about setting the widest possible horizons,
freeing yourself from artificial boundaries and following your strategies
wherever they lead.
Nomura Asset Management (NAM) is a leading global investment
manager and, with $463 billion¹ assets under management, we take
a truly global view – a vision which lies at the heart of our flagship equity
fund – the Global High Conviction Strategy (GHC).
The fund is managed on a day-to-day basis by the London-based investment
team. The team manages $4.5 billion 2 in global equities.
We define our Nomura Global High Conviction Fund as a ‘Quality-Core’ strategy,
with a bottom-up approach. This is to say the investment style is agnostic and
not restricted or defined by sectors or geographies; nor is it distracted by short-term
market trends or fluctuations. The team is driven by one thing only, to seek out Quality
companies trading below their intrinsic values.
Our Philosophy of Conviction
The GHC philosophy of quality investment is underpinned by four key criteria – companies
must meet all these metrics to be considered for the GHC portfolio:
• Competitive advantage
• Consistent cash returns
‘Companies that meet these criteria can sustain strong returns over long time periods and they are far less likely to suffer
irreversible declines in profitability. We use a proprietary model to identify stocks with strong and robust cash flow. This
quality is often missed by the wider market and this creates the opportunity for our philosophy,’ says Francis Paxton, who
oversees distribution of GHC into the South African market.
The quality philosophy means GHC looks across the global universe of stocks, applying a ‘core’ approach, and
unconstrained by any growth vs value overlay. ESG (Environmental, Social and Governance) factors are embedded in
the selection process and unsustainable investments are screened out entirely. Quality, as an investment philosophy, is
distinct from Growth and Value approaches, and allows GHC to function as a ‘Core’ style, combining both Value and
Refining for Quality
• Skilled management
• A history of attractive returns on capital
These filters narrow down the global equities markets to about 250 stocks that are in the NAM investment list. GHC then
goes a step further and identifies only those stocks with significant upside to fair value. The team discusses in detail the
profile of every potential investment and pinpoints a highly concentrated portfolio of about twenty stocks selected as
high conviction quality investments.
GHC buys into these equities at discount valuations – when prices are below long-term fair value. The
strategy then realises profits as the equities return to exceed that fair value, generating cash to reinvest in
the next quality opportunity. The aim is to be fully equity invested, but GHC does not shy away from
temporarily holding cash when necessary – the philosophy is to buy quality stocks when
they are under-priced, not to buy for the sake of buying.
NOMURA ASSET MANAGEMENT
Beating the Benchmark
The outperformance of quality stocks has been a feature of global markets for decades.
The MSCI’s Quality Index has outperformed the MSCI World Index by 2.5x over the last 40 years 3 .
Market prices have regularly under-valued quality stocks in periods of turbulence.
Performance of MSCI World Quality relative to MSCI World
Source: Bloomberg and Nomura Asset Management. This chart shows MSCI world Quality total return index divided by MSC World total return index
rebased to 100.
‘It is this market inefficiency that gives us the opportunity to buy at a discount valuation for all of the $5bn our team
manages. We invest at below the intrinsic value of companies and the result is attractive alpha with strong risk controls,’
says Francis Paxton. The team has a quality bias, and they never move away from that. Clients know what they have
invested in, which Nomura believes is very important.
The team’s shared philosophy, underpinned by a rigorous analysis and valuation discipline, allows GHC to target threeyear
rolling average returns of 3-5% (gross of fees) above the benchmark MSCI All Country World Index.
‘Our team never lose sight of the core quality factor, because behind the markets’ fluctuations and the trends for sectors
and geographies it is quality that counts in the end,’ says Francis Paxton.
1) As at end of June 2022, Nomura Asset Management.
2) As at end of July 2022.
3) Source: Bloomberg, Nomura Asset Management.
This document was issued and distributed by Prime from sources it reasonably believes to be accurate.
The information in this report is not intended in any way to indicate or guarantee future investment results as the value of investments may go down as well as up. Values may also be affected
by exchange rate movements and investors may not get back the full amount originally invested. Before purchasing any investment product, you should read the related risk documentation in
order to form your own assessment and judgement and, to make an investment decision.
The fund is a sub-fund of Nomura Funds Ireland plc, which is authorised by the Central Bank of Ireland as an open-ended umbrella investment company with variable capital and segregated
liability between its sub-funds, established as an undertaking for Collective Investment in Transferable Securities under the European Communities (Undertakings for Collective Investment in
Transferable Securities) Regulations 2011. The UCITS fund is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be
contrary to law or regulation.
This is a marketing communication. Please refer to the prospectus and to the KIID before making any final investment decisions.
The prospectus, key investor information document (KIID) and other fund related materials are available in English and, for the KIID, in the official language of the countries in which the fund is
available for distribution on the Nomura Asset Management U.K. Ltd. website at https://www.nomura-asset.co.uk/fund-documents/
Nomura Asset Management U.K. Ltd. is authorised and regulated by the Financial Conduct Authority.
A summary of investor rights in English and information on collective redress mechanisms are available at https://www.nomura-asset.co.uk/download/funds/how-to-invest/Summary_of_
investor_rights.pdf. Nomura Asset Management U.K. Limited may at any time decide to terminate arrangements it may have made for the marketing of units of a fund in a state other than its
home member state.
The sub fund has been approved by the Financial Services Conduct Authority (FSCA) as a section 65 fund. Prime Collective Investment Schemes Management Company (RF) (Pty) Ltd (“Prime CIS”)
is a registered Collective Investment Schemes Manager in terms of Section 5 of the Collective Investment Schemes Control Act (CISCA) and the South African representative office for this fund.
Please refer to the MDD of the fund on the Prime Website (www.primeinvestments.co.za) for more information about the fund and a full disclaimer specifically related to South African investors.
The EU Sustainable Finance Disclosure Regulation (“SFDR”) requires investment firms to formalise how sustainability is integrated into their business and processes, and to make new public
and client-facing disclosures on sustainability matters. The aforementioned disclosures relating to Nomura Asset Management U.K. Limited are published on our website at https://www.
nomura-asset.co.uk/responsible-investment/esg-sustainable-investment/. Product related disclosures regarding Nomura Funds Ireland Plc and its sub-funds can be found in the prospectus.
Nomura Funds Ireland – Global High Conviction Fund is an Art. 8 fund according to SFDR.
A partnership worth its weight in gold
Welcome to a world of complete financial flexibility. Bringing back the gold standard,
with state-of-the-art technology taking gold out of the dark and into the light.
For over 50 years, we have brought the most popular gold
bullion and numismatic (collection of coins) products
to South Africa, and we are constantly evolving to
find a future that redefines gold ownership for all. In
2021, we recognised the innovation of Troygold’s Fractional
Ownership Technology, which allowed clients to access their
gold holdings on an app and save and spend with a single tap.
As a result, we have continued to build our relationship with
Troygold, the non-bank for gold believers.
This collaboration was motivated by Troygold aligning with
our belief that gold is for everyone. Troygold is building financial
tools for gold owners, allowing customers to save, spend and now
access liquidity. Co-founders, Dane and Bastiat Viljoen, saw a gap
for a technology-led solution that would extend financial services
to physical gold owners.
Troygold is shaking up the gold value chain by introducing the
Troygold Loan Facility. Holders of physical gold can now transact
and borrow within the secure ecosphere of the Troygold app and
accompanying Mastercard. Today, Troygold is bringing back the
gold standard, with the client in control.
How does this work? Troygold clients will be able to access cash
instantly – have immediate cash liquidity on hand, secured by your
gold holdings as collateral (up to 75% credit to holdings value
ratio and interest-only monthly repayments). In addition, a bank
cheque account is also included – a world-first gold monetisation
Gold has a 6 000-year track record as a
safe store of value and is the only money
that carries no counterparty risk.
and payment platform. This cheque account is sponsored by
AccessBank SA and allows spending at 40-million-plus locations
with no monthly bank account fee.
What does this mean for The South African Gold Coin Exchange
& The Scoin Shop? This exciting product from Troygold and our
continued teamwork allows us to offer new and meaningful
benefits to our clientele with whom we have built trusted
relationships for over half a century. Our collaboration created an
instant retail store network of physical on-ramps into the digital
Troygold platform. The Troygold loan facility means we can offer
new solutions to our clients who have become accustomed to
gold coin collecting, introducing continued innovation to reshape
the industry and advance the relevance of gold in the digital age.
Gold has a 6 000-year track record as a safe store of value
and is the only money that carries no
counterparty risk. In a volatile world,
gold offers a haven asset that always
maintains value. However, most gold sits
in the dark in vaults and in safety deposit
boxes. Troygold has engineered a way to
“light up” that gold with utility and turn
it into something gold owners can use
for day-to-day transactions and finance.
This agreement will enable a broader
market to save and transact in fractions
of gold. This is particularly appealing,
especially since gold is a finite resource
that has stood the test of time and is free
from the uncertainty and volatility of fiat
currency and cryptocurrency.
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
why and how?
The Johannesburg Stock Exchange (JSE) announced
in early September that actively managed exchangetraded
funds (ETFs) will be allowed to list from October
2022. This is a notable milestone for the ETF industry in
South Africa. ETFs are an efficient wrapper that can make a wide
range of investments easily accessible to all types of investors.
This news once again reminds us why we describe the rise of
ETFs as “the democratisation of investing”.
The market for ETFs has exploded in recent years as
institutional and retail investors seek to diversify their
portfolios while keeping costs in check. However, given the
wide range of funds available, many investors are apprehensive
about how these funds work and where to start.
In this article, we’ll unpack some of the ways that wealth
managers use ETFs in their clients’ portfolios.
For example, an investor may choose to have a core exposure
to South African equities while boosting yield income by adding
South African property and bonds as satellite investments.
They can then enhance diversification by including satellite
investments into global equities, global property and global
bonds. This example is illustrated below, however there are
many more possible iterations. For example, an investor may
want to have meaningful allocations towards Asian equities, the
US tech sector or a theme such as electric vehicles.
CoreShares Investment Managers
CoreShares Investment Managers
ETFs are generally liquid funds, which means that multi-asset strategists
can tilt their portfolios to express tactical views cheaply and easily. Broad
market exposures can also be upweighted or replaced by sector-specific
views and/or thematic ETFs as needed.
ETFs are simple, accessible and appropriate for all types of
investors and can play a number of important roles in all
ETF USE CASE 1: THE MULTI-ASSET STRATEGIST
When constructing a portfolio with financial goals in mind,
the first place to start is asset allocation – deciding how
much to allocate towards different types of assets. In this case,
ETFs focused specifically on the individual exposures can be
used as building blocks to create a bespoke portfolio. These
products offer a simple, efficient and cost-effective way to gain
exposure to entire asset classes, sectors, themes or regions.
ETF USE CASE 2: CORE-SATELLITE
Passive ETF in the core
Another common approach to using passive ETFs in a portfolio
is the “core-satellite” model. By using ETFs in the “core” of their
portfolio, an investor instantly achieves low-cost, broad-market
exposure and diversification. This is a cost-effective and simple way
to accurately implement asset allocation decisions, while avoiding
any style drift that might creep in when using an active manager.
Once the core investment – or building block – is in place,
the investor may seek outperformance by adding satellite
investments – for example, high-conviction stock picks or even
actively managed funds.
CoreShares Investment Managers
MORE ETF USE CASES
In addition to forming long-term holdings in the core, the
satellite or as building blocks in a multi-asset global strategy
(as seen in the use cases 1 to 3 in this series), ETFs can also be
used very effectively as portfolio management tools for other
purposes. For example:
• Tactical tilting
• Short-term equitisation of smaller cash flows
• Transition management
• Liquidity sleeve
• Immediate and/or short-term access to theme or geography
while completing the research to make high-conviction single
stock or active manager selections
• And many more…
Under this approach, the investor blends both active (stock
picking) and passive investment strategies (ETFs) to build a lowercost
portfolio that can deliver outperformance (alpha) relative to
pure market returns.
ETF USE CASE 3: CORE-SATELLITE
Passive ETF in the satellite
By contrast, many portfolio managers find themselves
managing a long-term basket of high-conviction stock picks for
an investor; however, for a variety of reasons, the portfolio may
not be entirely suitable for current market conditions or the
immediate needs of the investor. In these situations, ETFs form
handy satellite investments which are built around the longterm
share portfolio in the core, to tweak the overall portfolio
for the desired purpose. For example, an investor may require
a higher yield than that currently offered by the long-term
share portfolio, in which case the portfolio manager can add
higher yielding asset classes such as bonds or property ETFs
for example. Alternatively, the portfolio manager might have
a high-conviction tactical market view on a particular asset
class, sector or theme, which can easily be accessed via an
ETF and added to portfolio as a satellite investment.
The market for ETFs has exploded in
recent years as institutional and retail
investors seek to diversify their portfolios
while keeping costs in check.
Credit: CoreShares Investment Managers
CoreShares Investment Managers
In summary, ETFs are used by
a wide variety of investors in
many ways. Research shows
that investors who start to
use ETFs will, in almost all
cases, go on to use them more
extensively, in larger sizes and
in more ways than one. They are
efficient and cost-effective tools
that “do what they say on the
tin” and we will continue to see
widespread adoption in South
Africa, as we have globally.
Michelle Noth, CFA, Client
Coverage Executive, CoreShares
FORGET SOFT LANDINGS
How much of a recession is needed to tame inflation? We look back at how inflation
responded in previous downturns to help gauge the scale of the adjustment
in growth and unemployment needed to tame it this time around.
Since the last interest rate move by the Federal Reserve
(Fed) on 27 July, investors have taken a more optimistic
view of when the central bank can bring monetary
tightening to a close. Markets are now pricing in a “Fed
pivot” in late 2023, when the central bank is expected to cut
interest rates. Two factors have supported the move.
First, Jerome Powell, chair of Federal Reserve of the United
States (US), has said that US interest rates are now neutral,
indicating that the initial adjustment from the ultra-easy
pandemic policy is over and that future rate decisions will be
taken on a meeting-by-meeting basis depending on the data.
Second, that data shows the economy cooling as retail
spending and housing slow. The latest GDP figures showed the
US economy contracted in the first two quarters of the year and
although they overstate the weakness of the economy, final
demand clearly softened.
However, despite signs of slowdown the likelihood of a more
pessimistic outcome on policy, where interest rates must remain
higher for longer, has significantly increased in our view. The
obstacle to a Fed pivot is the high level of underlying inflation
and the strength of the labour market, as evidenced by the
latest employment report which showed a significant increase
in payrolls and a further fall in unemployment.
An analysis of past cycles shows that it would be a rare
achievement for an economy which is so late in its cycle to bring
inflation back to target without a fall in activity, or an outright
recession. In our view, it would be better if the Fed took a leaf
out of the Bank of England’s playbook and acknowledged this,
rather than projecting soft landings.
CYCLES AND INFLATION: A LOOK BACK AT THE PEAK
The rapid rebound in the US since the economy reopened from
Covid restrictions last year has taken activity above its long-run
trend, as evidenced by a tight labour market and high-capacity
utilisation rates in industry. At 3.5% the unemployment rate is
well below estimates of equilibrium, or the Non-Accelerating
Inflation Rate of Unemployment (NAIRU) (the lowest level of
unemployment that can occur in the economy before inflation
starts to rise). The Congressional Budget Office (CBO) put this at
4.4% in the second quarter. Meanwhile, CPI inflation has risen
to 9.1%, its highest level for 40 years. Relative to previous peaks
since 1960, the current position compares with an average CPI
inflation rate of 6.1% and an unemployment rate 0.5% below the
NAIRU (Chart 1).
Chart 1: US inflation and unemployment – today versus previous cycles
Source: Refinitiv, NBER, Schroders, 1 August 2022. 605742
Chart 2: Growth – inflation trade-offs during recessions
Source: Refinitiv, NBER, Schroders, 1 August 2022. 605742
The US is clearly late in its cycle and as signs of slower growth
come through, we would argue that the economy probably
reached a peak relative to trend in the current quarter.
How much of a slowdown in activity is needed to bring the
To help answer this we have looked back at previous peaks in
the cycle to gauge the effect of the subsequent contraction in
output on unemployment and inflation.
According to the NBER, there have been nine previous
occasions since 1960 where the economy has been at a peak.
In each case the economy then went into recession, before
troughing out several months later. The last such contraction took
place between February and April 2020 – the shortest recession
Prior contractions in the US since 1960 have lasted between
six and 18 months and are more typical of what we might expect
going forward. Looking at those eight cycles, the average fall
in GDP was 1.6% from peak to trough and the unemployment
rate rose by 2.5 percentage points (pp), moving from below to
above the NAIRU. On the CPI measure, inflation fell by 1.5 pp
There was a wide range of experience, with inflation falling
by more than average during the “Great Recession” of 2007-09
and the second “Volcker” recession of 1981-82, when GDP fell
3.8% and 2.5% and inflation by 5.5 and 6.2 pp respectively. The
worst outcome in terms of the growth-inflation trade-off was
1973-75 when, despite a contraction of 3.1% in GDP, inflation
rose 2%, a severe case of stagflation (see Chart 2).
So how does this relate to the current position? So far, we
have seen that a significant fall in GDP has been needed to bring
a major fall in inflation. For example, a six pp fall in CPI inflation
from current levels to 3% would require a decline in GDP of just
over three pp based on the two major recessions mentioned
above. In terms of the impact on jobs, the unemployment rate
would rise by around four pp to 7½%.
From this perspective, the Fed’s projected soft landing
where growth slows to just below 2% and inflation falls below
3% in 2023 looks like wishful thinking. However, before we
dismiss the Fed’s forecasts completely, we need to dig deeper
into the current high CPI inflation rate. Are there reasons to
believe that inflation may come down more easily, ie with less
output loss or a smaller increase in unemployment?
To start, commodity prices have played a significant role in
boosting inflation. If we strip these out, then inflation on the
Fed’s preferred measure (the core PCE deflator) is running at
5.2%. A fall in inflation back to 2% from here would be less
onerous. However, the sensitivity of core PCE inflation to changes
in GDP is also lower. For example, in the two major recessions
cited earlier the impact of GDP on inflation is more than halved,
so we would still need a three pp fall in GDP to generate a fall in
core inflation of just over 2%.
Nonetheless, that would still bring inflation closer to target.
Would such a downturn in the US also lead to lower commodity
prices, helping to drive headline inflation down further? In the
past a US recession could be expected to trigger just such a
fall as global demand weakens, but today the outcome would
be very dependent on how the world economy adjusts to the
potential loss of Russian supply. It is possible that shortages
keep oil (and commodity prices in general) elevated, even
with a US recession.
So far it looks as though a significant slowdown
in GDP will be needed to hit the Fed’s inflation goals.
However, our historical comparison does not capture the
structural changes in the world economy over the past
60 years. The success in keeping inflation low and stable
for a considerable period of time means that inflation
expectations remain well anchored.
One of the reasons inflation proved so stubborn during
the 1970s and early ’80s was the pick-up in wages which
followed the initial spike in inflation. Subsequent secondround
effects kept inflation high as wages and costs rose.
To a large extent this reflected a lack of belief in the ability
of the authorities to bring inflation down.
Chart 3 shows that inflation expectations (both short
and medium term) were elevated in the late 1970s
and when combined with strong trade unions and
labour bargaining power, it was not surprising that pay
accelerated and the economy entered a wage price spiral.
Consequently, unemployment had to rise significantly to
bring wage growth down.
Chart 3: Faith in the Fed? Inflation expectations rise short term but not further out
Source: Refinitiv, University of Michigan, Schroders, 2 August 2022. 605742
Today the picture is different, although short-run
inflation expectations and wage growth have picked
up with the tight labour market, medium-term price
expectations remain stable. Short-run expectations,
which tend to be sensitive to the price of gasoline, have
risen, but over five years households expect inflation to
be close to target. If sustained, this bodes well for the
labour market adjustment; unemployment need not rise
as much if wage growth is contained.
Greater central bank credibility
and possibly lower commodity
prices could help bring inflation
down faster than in the past and
at less cost in terms of output
and employment. However, the
fundamental problem remains:
the US economy and much
of the world is late cycle and
Monetary policy is a blunt
instrument in these circumstances,
with central banks being forced to
tighten until unemployment rises
and sufficient slack is created. In
our view, this would point to a fall
in GDP of around 2% from peak
to trough, less than in the Great
Recession or Volcker era, but still
significant and more than the
current consensus of economists.
Keith Wade, Chief Economist and
FORGET THE SOFT LANDING
To achieve this the Fed will have to tighten further and take
interest rates above their current view of neutral. Rates will be
higher for longer, but that does
not mean tightening relentlessly
until unemployment is 6% or 7%,
for example. The lags from higher
rates to the economy mean that the
Fed should proceed cautiously as
the full impact is not felt for many
months later. In this respect there
is scope for a Fed pivot toward the
end of next year, with rates likely
to be easing as the economy falls
Although the Fed’s options
are limited, it could take a leaf
out of the Bank of England’s
(BoE) book. The BoE has taken
considerable flack for forecasting
a significant recession in the UK
with inflation only moving slowly
towards target. However, no-one could argue that they have
not warned people, giving households and businesses a signal
to what is ahead.
In this respect it would be helpful if chair Powell and the Fed
stopped projecting a US soft landing. A look back at history shows
that such forecasts only give false hope and create a further
misallocation of resources. Politically this is difficult, but the earlier
households and firms can start to make the inevitable adjustments
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Will financial planners
ever be professionals?
In a recent article in Citywire, Stephen Cranston states that
“Financial advisors are not, and never will be, professionals
like doctors, lawyers and accountants.” He suggests that
financial planners don’t “go through years of university
training and articles” and that most financial planners join the
industry from one of the large agency forces where they have
received “great training” from the life offices in “sales and client
As a CFP® professional, I am disappointed by Cranston’s
comments. I work closely with many financial planners who
were lawyers or accountants in a previous career or have
completed their MBA, CFA or other postgraduate qualifications
and are CFP® professionals. Furthermore, universities now
offer degrees in financial planning and the CFP® professional
designation requires post-graduate study and work experience
akin to articles. But we only have around 3 500 practicing
CFP® professionals in South Africa, whereas according to
PI Financial Intelligence Services there are 11 750 financial
service providers (FSPs) and 197 000 representatives in South
Africa. Clearly there are many salespeople out there peddling
financial products under the guise of financial advice, which
provides some rationale for Cranston’s comments.
His comments are made in the broader context of an
article which considers the merits of financial advisors using
discretionary fund managers (DFMs). Cranston does suggest
that “realistically it makes sense for financial advisors to
outsource fund selection and asset allocation – unless they
belong to larger integrated practices which have a strong
investment management competence in their own right”.
However, for those financial planners who do use a DFM, he
questions their professionalism.
As Cranston says, “Financial advisors love to use the
analogy of the family doctor or GP. Following that logic, GPs
can write a script prescribing the medicine patients need
when they have flu, so equally advisors should be able to
take out their pad and ‘prescribe’ the medicines, or funds,
their clients need.” He goes on to say, “You would be puzzled
if you arrived at the GP’s office and he or she said: ‘We don’t
The two most important professions of the
21st century are, undoubtedly, the medical
profession and the financial planning profession.
believe in this practice that we have the competence to pick
prescription drugs, so I have hired a third party to do that
The analogy of the GP is wholly appropriate. Financial
planners require knowledge and skills to advise clients not
just on investments, but a range of matters from budgeting,
tax and estate planning, to long- and short-term risk
planning and healthcare. And these are just the technical
aspects of a financial planner’s job. The important human
aspect of financial advice, where a financial advisor helps
a client integrate their life and money decisions, is gaining
recognition with the inclusion of Financial Psychology in
CFP® curriculums around the world.
When a financial planner uses a DFM, it’s not like a
GP saying they don’t have “the competence to pick
prescription drugs”. Rather it’s like a GP using a specialist,
be it a cardiologist, physician or nutritionist. The financial
planner will determine what is needed from a client’s
investment and what would be an appropriate portfolio
to invest in, but it will be structured and implemented
using a specialist. In the same way, a GP may pick up
an anomaly in their client’s heartbeat, but they won’t
intervene in an area where a cardiologist is the specialist.
As most financial planners are GPs, they may use
specialists in other areas beyond investments, such as
tax consultants or fiduciary specialists. Importantly, in
the same way that a GP will collaborate with a medical
specialist about a patient’s condition, much collaborative
work happens between the financial planners and the
specialists they use. After all, the financial planner remains
the guardian of the client’s financial health.
As a follow-up to his Citywire article, Cranston tweeted, “I
hear the core job of the financial advisor is to talk you off the
ledge for 100 basis points a year. My psychologist can do the
same job for the equivalent of 0.05 basis points a year.” There
are many potential ledges that a client can find themselves
on, but I am assuming in this instance talking a client “off
the ledge” means preventing a client from capitulating when
markets are down, rather than doing something stupid with
their money like buying a fancy car they can’t afford.
If a financial planner can prevent a client from cashing in
their investments to lock in losses, then they are likely to be
saving a client a lot more than 100 basis points a year. Since
1984, independent investment research firm Dalbar Inc. has
published its annual Quantitative Analysis of Investor Behavior
report, which studies the returns that investors get versus
the returns of their investments. The study consistently finds
investor returns are materially lower than their investments.
The gap between the two is often referred to as the “behaviour
penalty” which according to the 2022 Dalbar study, was 3.5%
per annum over the last 30 years. In the short term, the gap
can be higher, as in 2021 when the number was closer to 10%.
No surprise given the uncertainty and stress that many clients
experienced during the Covid pandemic.
The 2022 edition of the Dalbar report concludes that
investment results are more dependent on investor behaviour
than fund performance. It seems there is some value to talking
clients off the ledge. I believe influencing a client’s behaviour
is a key part of a financial planner’s role but is most effective
once a long-term financial plan funded by a sound longterm
investment portfolio is in place. How much value does
influencing behaviour add? Vanguard estimates that a financial
planner adds about 3% per annum to a client’s portfolio, half
of which is through behavioural coaching while a 2021 paper
by Russell Investments puts the number at 2.02% per annum.
Ironically, the World Economic Forum (WEF), in its 2018
Future of Jobs Report, predicts that technology will make
accountants and lawyers redundant, as well as sales agents
and brokers. Financial and investment advisors on the other
hand are predicted by the WEF to be stable professions. This
is of course only if a key part of their role is “talking their
clients off the ledge”. Technology after all will do much of the
technical work for financial planners. In fact, Michael Kitces,
a leading US financial planner and commentator, has stated:
“The future of financial planning is not about dispensing
expert financial advice, but helping clients engage in financial
The role of a financial planner is so much more than writing
a prescription for investments or any other financial product.
It is about helping clients achieve holistic financial health
and this is where the analogy with the GP comes full circle.
The two most important professions of the 21st century are,
undoubtedly, the medical profession and
the financial planning profession. People
are going to live longer and they are going
to need their money to last longer. Nobody
would entrust their physical health to a
distributor of pharmaceutical products rather
than a doctor. Nor should they entrust their
financial health to a distributor of financial
products, but to a professional financial
planner who prescribes products rather than Rob Macdonald, Head of
sells them. That’s of course when they are not Strategic Advisory Services,
talking their clients off the ledge!
Dalbar Inc, Quantitative Analysis of Investor Behavior, 28th Edition
Stephen Cranston, “Investor Notes: How I’ve come around on DFMs”, Citywire, 9 September 2022
World Economic Forum, “The Future of Jobs Report”, 2018
CX changes everything
Unless you have a monopoly, customer experience, or
CX as it is sometimes referred to, is the single most
important thing that you need to get right for your
business to thrive. The difficulty is that it is pervasive
to your business and covers everything from your first contact
with the client to the last.
Think about your own experiences as a customer. Start
with companies where you had a poor experience. There are
many things that drive poor experience, but they are usually
tangible like bad products or shoddy service. Because of your
bad experience, you probably have not gone back to those
companies and, more importantly, you may have told your
friends and family about the poor experience.
By contrast, think of companies where you had a fantastic
customer experience. In these instances, it is possible that
it was something tangible that made it exceptional, but it is
equally likely that it was the way that you felt that made all
the difference. And I’m pretty sure that you returned to those
companies and referred some of your friends.
If you want to create great experiences for your customers,
all you need to do is think about your business from their
perspective. There isn’t sufficient space in this article to cover
all aspects of your CX, but let’s make this real by considering the
example of the first meeting with a potential new client who
has been referred by an existing client.
Are your offices easy to find? Is there parking nearby? Did
someone offer them tea, coffee or water? Was it good tea or
coffee? You don’t want their first experience to be awful coffee
– remember, your goal is for the client to want to return to your
office. Did you explain all the services that you offer?
By far the most important thing in a first meeting is whether
the client felt that you made an effort to understand their context
and the problems that they are trying to solve. Did you listen
or were you merely waiting to continue talking about yourself?
You need to apply the same logic when looking at every
touchpoint with the client. In some instances, your CX needs
to be very good, while in others it merely mustn’t be bad. That
If you want to create great
experiences for your customers, all
you need to do is think about your
business from their perspective.
might sound strange, but you must remember that this all
comes down to a return on investment, and you’ll find that the
return on a very expensive carpet is poor.
Even if you work through your entire business, you may
have blind spots that are important to your clients. Just think
of the famous example of the advisor who unexpectedly lost a
few older clients because they found his sofa too soft and were
too embarrassed to say that they couldn’t stand up. Therefore,
it is always a good idea to ask your clients for feedback on what
they do/don’t like about your practice.
A final thought is that you do not have enough time or
money to give all your clients the same fantastic experience.
This means that you need to segment your clients and ensure
that your C and D clients get a good
experience, your B clients get a
better (more expensive and timeconsuming)
experience, and your A
clients get the best experience.
In conclusion, great CX improves
client retention, increases referrals,
grows profit and enhances the
value of your business. In some
cases, you’ll need to implement the
right technology to do things like
communicating effectively with all
your clients. But the biggest changes
will come when you implement
new processes, upskill your staff and
change some of your habits.
Guy Holwill, Chief Executive
Officer, Fairbairn Consult
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In need of a crisis
Why do we so often wait for a crisis before we act?
PORTFOLIO FINANCIAL PLANNING CONSTRUCTION
Why do we wait for the day we get a health scare
like a heart attack or cancer before we decide to
change our lifestyle? Why do we push to the point
of burnout before we scale back a bit? Why do we
wait until our 60th birthday before we decide to start planning
When the oil magnate John D Rockefeller’s doctor was asked
to comment on how he lived to the age of 97 he revealed a skill
many of us can envy: “[he] gets up from the table while still a
There is more than one reason why we don’t act. The
procrastination tendency is one for sure. What are the reasons
we procrastinate? Might it be because we do not know when
an event will happen?
If you knew without doubt that the next unhealthy meal
would be the last before a heart attack struck, would you
consume it? If an F1 driver knows that if he keeps on pushing,
his tyres will fail and he will be out of the race during the next
lap, will he keep on pushing? If we know that markets will
come crashing down after a big rally, would we leverage up
and buy more?
Deep down inside I would desperately like to think that all
of us would answer a resounding “no” to the questions posed,
I am not sure that will always be the case.
Even if we know something will happen, if we have not
experienced So, it before, will the even US still if we be have the largest read it, economy it is the exceptional over the next few
self-disciplined decades? that Will will China act take rather their than crown? react Will and Europe reach or for Japan more. wake up
Another again? reason And will why their we respective do not act markets when follow? it is so No-one clear knows, we even
need to, though doesn’t many come has down an opinion. to, “I just Either didn’t way, have buy a time low-cost to get index that
to it today.” references It simply the comes major stock down markets to priorities. and economies of the world. An
In essence, example, what the you Vanguard are saying Total World when Index you with are “so a fee busy, of only that 0.08% per
I just do annum. not have Buy the and time,” hold is for “this as long is not as possible. a priority at this point
of my day or The life, overall I will asset get to allocation it later when and in it particular is”. But, alas, the we allocation
rarely do. to bonds is a bit trickier. The average US 10-year bond yield in
If we 1980 redefine was 11.43%, the consequences versus the average of not prioritising, yield in 2020 we of 0.89%.
might be Remember able to change if yields the decrease, way we think bond about prices the increase, future and so this was
hopefully a aid phenomenal us in our decision-making bond bull market. process Could of rates when go to lower act. still?
Grant Possibly. Statham Are is an rates avalanche going forecaster to go consistently at Parks Canada. lower for His the next
title is descriptive few decades? in that Probably his job not. is to try to predict when, and
the severity The of, avalanches allocation to in bonds the park. and Statham bond alternatives has a definition versus equity
of risk that depend is worth on two contemplating. aspects that are intertwined. He describes Firstly, risk your as “the investment
likelihood period of something and secondly, happening your ability times to stomach the consequence volatility. The of longer
that event”. your He time goes horizon, on to ask, the “Are lower you your skiing allocation a large, to open bonds slope should be
or a short, and narrow the lower one? your Are volatility you skiing absorption in the trees threshold, or out the in higher the your
open? How allocation exposed to bonds are you should if an be. avalanche A quality occurs?” financial advisor should be
able to assist here with ease.
What are the There avalanches are alternatives you or your to traditional clients should sovereign heed bonds more in highyield
to? corporate bonds. Although the probability of default is
Will the higher avalanche than of their having sovereign no life counterparts, insurance cause so too a is family the expected
to be in return. enormous If, however, financial offshore difficulty bonds if it does are not happen? expected Small to provide
likelihood an on inflation-beating any given day, return but large in the consequence.
medium to perhaps even the
Will you long be term, in trouble are there at age other 60 tools if you a private have not investor spent any can access
time, up that until provide then, on some planning sort of for downside the future? protection High likelihood, with a higher
probability than bonds to deliver inflation-beating returns?
Will your investment portfolio suffer destructive consequences
if it is well diversified, and another Enron or Steinhoff event
happens? Low likelihood, low consequence.
One of the world organisations (not named here out of the
respect of the great work they do we), has a “top priority list” of
more than 100 priorities it aims to focus on. Having 100 focus
points is not a priority list, it is not even a shopping list, it is
more like a wish list.
Incrementalism is a philosophy
we should all have as
part of our arsenal.
What if we started to focus, but really focus our priorities
when it comes to dealing with clients?
What if we focus a particular year on just making sure the family
will be looked after if something happens with the primary
breadwinner? A laser focus. Will the probability that this task is
completed at the end of the year increase or decrease?
What if we make sure, this year, that our primary focus is
on making sure that the asset allocation of our investments
reflects our objective and ability to tolerate volatility? If that
is our primary focus, how likely is it to be “sorted” at the end
of the year? I believe the answer is yes.
Incrementalism A unit trust is portfolio a philosophy has the we obligation should to all provide have as liquidity part to unit
of our arsenal. holders whenever required. If I want to withdraw my funds, I put in a
The basis redemption of incrementalism request and have is to access improve, to my even funds if a it few is only days later (in
by a small most measure, cases). Hence, during management a particular of period, these funds and needs that this to be done
small improvement in such a way that will liquidity lead to big is readily changes available. over An time. individual What on the
would your other outcome hand has, be with if you the could right financial increase coach, returns, the through ability to take on
cost savings illiquid or positions. a better return, by something small as 5bps a
year, that is Structured 0.05%? notes that are designed to provide a high probability
If you of invest coupon R100 payments at 8% per year (quarterly, for 40 years, semi-annual your investment or annual) and
would be provide worth some R2 172.45 downside at the protection end of the can period. be a If, great however, alternative to
you earned traditional 8% in bonds. the first Individuals year, 8.05% have in the the option second, to take 8.1% advantage in of
the third, the etc, illiquidity your premium investment that would most retail be portfolio worth R3 managers 110.51 cannot.
at the end Constructing
of the investment the
horizon. core A 43% of any higher strategy outcome is
by improving literally net the returns centre by of a
minute the 5bps investment each year. process. (Given,
nothing The goes next up in steps a straight are the line,
except Bernie satellites Madoff’s that can fund, provide this
is however exposure to prove to some a point.) totally
The five-basis unique assets. point analogy Think is
not restricted infrastructure, to investments the green and
can be applied economy, to innovation various aspects and
of life. If disruption you sharpen and health your focus, and
concentrate wellness on to the name top a priority few.
for today perhaps With the even right this advice, year,
you will you not can need build a crisis something before Hannes Viljoen, CFA, CFP®,
starting truly to improve. special and Even unique if it is Hannes CEO and Viljoen, Head of CFA, Investments, CFP®, CEO and
only 0.05% to your this personality. year. Head Kudala of Wealth Investments, Kudala Wealth
Five steps to a
According to the South African Treasury, only six out of
every 100 South Africans will be able to retire comfortably.
And a recent BusinessTech poll shows more than a
third of middle-class South Africans aren’t putting any
money at all away for their retirement.
As a result, growing numbers of consumers are turning to
direct investments on online trading platforms to try to boost
their retirement savings – but it’s a high-risk strategy that
ignores the fundamentals of proper retirement planning, says
Dieter Schmikl, a financial advisor at employee benefits firm,
“As more consumers get educated and digital, we hear many
stories of people making quick money trading forex or shares
online. But that’s not how you plan for retirement. The fact is
that if something sounds too good to be true, it probably is,”
So how do you get yourself on the road to good financial
health and a comfortable retirement? It’s a smart, measured
five-step process that looks after your priorities.
Step 1: Spend less than you earn
“Find a lifestyle that gives you the capacity to breathe financially,
and to enjoy the quality of life that you’re looking for, with
some money left over every month to save or put away for your
retirement,” says Schmikl.
Step 2: Take care of risk
If you can’t earn an income because of injury or illness, who’s
going to pay your bills and monthly obligations? Before you
save for anything else, make sure you have income protection
in place. It’s a critical part of any balanced financial plan, with a
long-term view to a secure retirement.
Step 3: Make provision for retirement
The biggest reasons that most South Africans can’t retire
comfortably is that they start putting away money too late
for their retirement, or they don’t put the right amounts away.
“Retirement funding is a numbers game. It’s critical to sit down
with an advisor and work out how much money you’ll need in
your retirement, how much you’ve got, and what the difference
is,” says Schmikl.
The rule of thumb is that of you start putting away 15%
of your earnings at the age of 28, you’ll be able to retire
comfortably at 65, with 75% of your earnings. The later you
start, the higher this percentage becomes.
If you don’t have enough retirement savings, crunch the
numbers. For every million rand you have in retirement savings,
you’ll get around R4 000 a month at sustainable draw-down
levels, increasing with inflation. “Ask yourself how much you
will you draw down per month to support your lifestyle. Can
you put away more every month? Or do you need to carry on
working for a few extra years? If your house and car are paid off,
you probably need less than you think,” says Schmikl.
Step 4: Look at short-term investments
“When, and only when, you have taken care of your risk and
your retirement, you’ll be able to start looking at short-term
investments, like unit trusts. But be focused on which investments
you want to invest in and try to diversify your portfolio to smooth
out the bumps along the road,” explains Schmikl.
Step 5: If you still have money left, go high risk
We’re bombarded daily with advertisements that promise
exponential returns through trading forex, cryptocurrency or
equities. If you have some spare
cash, feel free to dabble. But where
many of these platforms offer high
rewards, but they generally come
with high risks too, warns Schmikl.
“You’re not going to turn R10 000
into millions in the space of three
years. That’s not how it works.”
“Ultimately, retirement is all
about diversification, spreading
your risk and beating inflation on an
annual basis. If you get that right,
you’ll be able to retire comfortably
at the age you choose.”
Dieter Schmikl, Financial Advisor,
Independent Specialist Advisers
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The importance of nominating
Retirement fund members who are entitled to death benefits
must keep their nomination of beneficiary forms up to
date to ensure their beneficiaries receive these benefits
timeously in the event of a member’s death.
A valid nomination of beneficiary form completed by
a member plays a critical role in facilitating the speedy
payment of the death benefit to the ultimate beneficiaries.
Without a valid, up-to-date form, investigating who is entitled
to the benefits could take much longer and some potential
beneficiaries might even end up being excluded.
Members of retirement funds are typically covered for death
benefits through a group life assurance policy that is either
owned by a retirement fund (“approved”) or by an employer
(“unapproved”). The terms “approved” or “unapproved” refer to
the vehicle (retirement fund or insurance policy) which pays the
death benefit out to beneficiaries and its tax treatment.
An “approved” benefit is recognised by the Registrar of Pension
Funds and approved by the South African Revenue Service for tax
deduction purposes. An “unapproved” benefit is not offered under
a tax approved retirement fund in terms of the Pension Funds
Act. Instead, unapproved benefits are offered through a separate
insurance policy. Whether you are dealing with an approved or
unapproved policy, a valid nomination of beneficiary form helps
to ensure dependants are not excluded from the distribution of
death benefits in the event of a member’s death.
Death benefits under approved policies
In the event of death of a member under an approved policy, the
deceased member’s savings accumulated in the fund plus the
death benefit are paid to the member’s beneficiaries as a fund death
benefit. Fund death benefits are subject to Section 37C of the
Pension Funds Act, which means that the fund trustees need to
investigate to determine who the beneficiaries are and distribute
the benefit to those beneficiaries in an equitable manner, based
on among other factors their extent of dependency on the
deceased member. A completed nomination of beneficiary form
guides the fund trustees in their investigation to determine
the member’s beneficiaries. The ultimate decision on who to
distribute the death benefit to, and in what proportions, lies
with the trustees, with the nomination of beneficiary form
savings accumulated in the fund are paid as a death benefit from
the fund and Section 37C applies to this portion. Therefore, in the
case of an unapproved policy, the death benefit due from the
policy is dealt with slightly differently to the death benefit due
from the fund itself.
With unapproved benefits such as a benefit payable under
an employer-owned group life policy, a member may nominate
anyone who they wish to receive the benefit, including nondependants
and payment will be made accordingly. There is
no Section 37C investigation which takes place and payment
is strictly made according to the completed nomination of
What happens to unapproved policy benefits if there is no valid
nomination form in place?
In the absence of a signed, valid nomination of beneficiary form,
the insurer is required, in terms of policy terms and conditions
as well as legislation, to pay the benefit to the deceased's estate
(or according to a written instruction by an authorised person
confirmed by a letter of authority issued by the Master of the High
Court where applicable).
Having a valid nomination of beneficiary form in place,
particularly in the case of benefits from an unapproved
policy, makes it easier for death benefits to paid timeously
serving as a good guide in identifying beneficiaries. It is also
important to note that financial dependency on the member is
one of the key elements considered by the trustees during the
Section 37 investigation and distribution of the death benefit.
What happens to approved policy benefits/fund death benefits
if there is no valid nomination form in place?
If the fund has not been given a completed nomination
of beneficiary form, the trustees will have to conduct their
investigation without an expression of the deceased member’s
wishes. This could delay the investigation process and so delay
the ultimate payment of the benefit to beneficiaries who may
be in desperate need of financial support. It could also result in
other dependants being omitted from the distribution of the
death benefit (eg a child born out of wedlock and not known to
the deceased’s family).
Death benefits under unapproved policies
Section 37C of the Pension Funds Act does not apply to
unapproved policy benefits, although the deceased member’s
Nomination of beneficiaries and funeral policies
Nomination of beneficiary forms are also required for the
payment of benefits from employer-owned funeral policies.
When the main member of a funeral benefit policy passes away,
the benefit will be paid out in terms of the signed nomination
of beneficiary form.
If the nomination of beneficiary form has not been
completed, the payment will be made to the deceased’s estate.
Payment of the benefit cannot
be made to the employer or any
other person with control over the
deceased’s affairs. This could result
in hardship as the funeral policy is
meant to assist with the cost of the
funeral and the money to cover the
costs is normally required urgently.
When preparing for the future and
for unforeseen circumstances such
as death, the main priority is that
members can care for their families
and ease the burden on them. Ensuring
that members have completed the
necessary nomination of beneficiary
forms and keeping them up to date is
the best way to ensure members are
able to care for their loved ones.
Adv. Beverly Jubane, Specialist
Customer Service, Liberty
Consultants and Actuaries
what the recent
means for you
On 11 May 2022, the Pretoria High
Court made a revolutionary judgement
declaring section 7(3) of the Divorce Act
to be inconsistent with the Constitution.
But what does this mean for you? Bianca
Maritz, Wills and Estates Specialist
at Sentinel, has all the answers.
Section 7(3) currently provides that spouses
married out of community of property before
1984, may apply to the court for a redistribution
of assets, despite their marital regime being
out of community of property.
What’s so special about 1984?
It’s the year in which the Matrimonial Property Act
introduced the accrual system for marriages out
of community of property. Couples married out of
community of property before 1984 didn’t have the
option of accrual so it’s not applicable to their marriage
– unless they subsequently applied to change their
The public are generally familiar with accrual being
the ability to have the best of both worlds. It allows you
to retain separate property and act independently of
your spouse, while still enjoying a form of joint estate
whereby anything accrued during the marriage is shared
between the spouses. We commonly hear of there
being an “accrual claim” (meaning a claim to split assets
acquired during the marriage) by one of the spouses,
either on death or divorce.
Now that’s settled, let’s return to the judgement
First things first, it’s important to bear in mind that
this judgement doesn’t deal with the question of
spousal maintenance, but rather with overriding the
If you fail to plan, you plan to fail.
provisions of an antenuptial contract in order to allow a
spouse to share in their spouse’s actual assets. There will,
accordingly, be a plethora of influential factors in each
spouse’s attempt to make their claim.
In the case at hand, the estranged wife of a wealthy
farmer sought the court’s assistance in declaring section
7(3) unconstitutional as it didn’t allow for a redistribution of
assets in her circumstances. The parties were married in 1988
out of community of property, without accrual. One would
be inclined to argue that the wife had a choice of accrual at
However, she claims she was forced into signing an
antenuptial contract, without accrual and now has no
claim to the empire her husband built with her help.
(And what an empire. You can read all about it in the
bestselling book Fortunes – The Rise and Rise of the
Afrikaner Tycoons where he is described as a “megafarmer
Core to her argument was that the provision only
allowed spouses married out of community of property
to seek a redistribution order if their marriage was entered
into prior to 1984. This, coupled with a very convincing
argument centred around the wife’s contribution to the
marriage, the household, working on the farm and raising
the children, is what led the court to take exception with
the words “prior to 1984” used in section 7(3).
The court declared this phrase to be inconsistent with
the Constitution as it afforded the option only to those
married out of community of property prior to 1984, while
excluding those married out of community of property
after 1984. It’s this imbalance in equal opportunity that
the court took issue with.
The fight is not yet won
All eyes will now turn to the Constitutional Court to see if
the highest court in the land agrees with the Pretoria High
Court. If they do, this will then pave the way for all spouses
married out of community of property without accrual
to seek some form of relief when they’ve contributed to
a marriage in non-financial ways. Alternative means of
contribution to a marriage have long been recognised
during South African divorce proceedings. This, coupled
with the fact that the core objective of our Constitution
is equality before the law, is why legal professionals are
largely anticipating that our Constitutional Court will
agree with the Pretoria High Court’s views.
What does this mean for me?
Generally, if you’re married out of community of property,
your estate planner will note it and move on. If you’re
married subject to the accrual system, further discussions
with your estate planner and/or financial advisor might
centre around who has a potential claim – and attempting
to try to plan for that by providing for some liquidity.
With this judgement so fresh, it’s too early to issue
general rules of thumb about planning for the possibility of
a redistribution. One can only deal with the possibility on a
case-by-case basis until more generally accepted forms of
guidance are available. After evaluating the case, your estate
planners and financial advisors can determine whether
you’re at lower or higher risk of a redistribution.
What about deceased estates?
Although the Divorce Act is currently the focus, there’s
a possibility that a spouse will see this judgement as an
opportunity to make a claim against a deceased estate.
Death is, after all, an event that annuls a marriage. Allowing
this would surely be seen as providing equal opportunity
– a core objective of our Constitution.
If this were to happen, executors would have to be
guided by the court order that would set out what relief
must be awarded or not awarded. Bear in mind that
litigation in the estate will result in delays in the finalising
of your estate and might even see a rise in executor fees,
or the disallowance of any dispensations previously offered
by the relevant executor on their fees.
The bottom line
It’s never a bad idea to plan ahead. As Benjamin Franklin
said, “If you fail to plan, you plan to fail.” It’s crucial to have
comprehensive estate planning if you
discover that you might be at higher
risk of falling victim to things like a
potential redistribution in terms of
section 7(3). At Sentinel, our estate
planners have hugely symbiotic
relationships with your financial
advisors, making this a dream team
for you and your estate planning
needs. For more information, or to
sit down with a professional, contact
Sentinel International Advisory
Bianca Maritz, Wills and
Estates Sentinel International
Navigate your client’s
complex wealth solutions
with a trusted partner
Total private wealth in Africa is expected to rise by 30%
over the next eight years, reaching $2.6-trillion by 2030
with South Africa home to an estimated 182 000 dollar
millionaires. Given this backdrop, wealth creators, such
as independent financial advisors and CERTIFIED FINANCIAL
PLANNERS®, are increasingly required to draft and implement
complex wealth solutions and integrated wealth management
strategies to grow their clients’ wealth. The recent increase in
people emigrating from South Africa means that advisors must
have a broad knowledge of offshore tax and fiduciary matters in
several jurisdictions or face real risk.
“We regularly partner with independent financial
advisors to manage these complexities, which includes
advice and support around tax and fiduciary matters,
particularly for wealthy clients with multi-jurisdiction assets
and investments,” says Andrew Ratcliffe, a director at Private
Client Holdings (PCH), a multi-family office based in Cape
Town, that has been managing high-net-worth individuals’
(HNWI) wealth for over 30 years.
Ratcliffe cautions that complex wealth management often
results in complex fiduciary requirements despite executorship
and deceased estate administration being highly regulated in
South Africa. “Leaving a legacy is a wonderful gift; however,
poor planning often means this doesn’t happen. Thorough
estate planning is critical as it provides a solid platform for
wealth management and minimises unforeseen risk,” he says.
“Our fiduciary team is very experienced in fiduciary matters
domestically and abroad, which enables us to draft estate
plans and handle deceased estates, no matter how complex,
timeously and with the greatest care and professionalism at a
time when a family needs it the most.” The PCH team also offers
advice and support to independent financial advisors when it
comes to drafting wills, forming trusts and trust administration
for their clients.
Similar complexities arise when it comes to global taxation.
PCH initially started as a tax consultancy in 1990 and tax
planning remains one of its core competencies. “Our goal is
to legitimately minimise tax payments and maximise after-tax
returns by structuring customised solutions for clients,” says
Ratcliffe. The company provides both local and offshore tax
advice regarding dealing with Capital Gains Tax, Provisional
Tax, Employees' Tax, Estate Duty Tax and
Offshore Tax matters. “We strive to support
independent financial advisors who may
not have the capacity in their practices to
navigate the complexities of compliance by
creating a solution that meets their clients’
needs,” adds Ratcliffe.
Ratcliffe firmly believes that “good advice
at the right time can save you money”. If you’re
looking for a partner to navigate your clients’
complex wealth management strategies,
with demanding fiduciary and tax structuring
requirements, contact Andrew Ratcliffe CFP®
on firstname.lastname@example.org or visit our
Andrew Ratcliffe CFP®, 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 article 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.
PRIVATE CLIENT HOLDINGS IS AN AUTHORISED FINANCIAL SERVICES PROVIDER.
The licenses we hold with the Financial Sector Conduct Authority (FSCA) are: Private Client Holdings – FSP 613,
Private Client Portfolios – FSP 399 78 and Private Client Wealth Management – FSP 399 79.
PRIVATE CLIENT TRUST . BLUE CHIP MAGAZINE 2022
How to build a technology-enabled
practice? By design, that’s how
It’s virtually impossible to run a financial advice business
without technology these days. What might a truly
technology-enabled practice look like? More to the point, is
The right tools for the right job at the right time
The most obvious starting point is the toolkit of software and
technology services that a business could use to fulfil its needs,
wants, and obligations. There are more than ever to choose from.
The bottom line is that, despite the breadth of
features offered by any piece of tech, it’s tough
to find an advice business that uses a single
solution for everything.
So, if we accept that most advisors use
multiple systems for distinct purposes, and that
the one-stop-shop model steadily continues
to lose popularity, a business that prioritises
technology-enablement would invest in making
good choices about appropriate combinations
of technology as well as when and how to
implement each component.
Is it possible? Absolutely. With some solid
research, clarity of purpose, sensible planning
and regular review, it’s not that difficult for
even the smallest independent financial advisor
(IFA) practice to come up with a technology
strategy that allows one to make software buying decisions
with the end in mind, enabling the most appropriate selections,
implementing the basics first and growing a complementary
toolkit over time.
Integrated and efficient
The downside of using multiple technology tools is lack of
integration between systems and, by all accounts, it’s an oftnoted
frustration in our industry. Nevertheless, the best-of-breed
approach is valuable because it allows advisors greater flexibility
in delivering compelling and differentiated, rather than just
compliant, services. An integrated model improves both the
business and client experience by reducing duplication and
manual data maintenance and by enabling access to pertinent
information via different front-end applications by different
types of users.
74% 89% 58%
Three quarters of financial
advisors in South Africa
to serve different needs
across their businesses
Of those, almost all use
between applications and
More than half identify
“lack of integration options”
as their single
Is it possible? Definitely. If effort has been applied to
planning and balanced purchasing decisions regarding the
selection of tools, integration options will already have been a
key consideration in designing the most optimally connected
model possible. Many technology providers recognise the
value of seeking standard integrations with complementary
solutions and the options for users are growing. Connectors are
increasingly available to help financial service providers (FSPs)
to connect commonly used applications and data sources more
easily and cost-effectively than via complex in-house custom
The limitation? Duplication of effort and information
exchange between advice businesses and product providers
are still a challenge, such as for digital onboarding and straightthrough-processing
purposes, but there’s more action than ever
in the application programming interface (API) space among
This is really the point, isn’t it? All technology considerations
ultimately boil down to being able to offer better financial advice
to more clients.
If the ideal client is connected and engaged, understands
the worth of financial advice and enjoys a trusted relationship
with an advisor, then surely technology should be harnessed
to augment an appropriate level of engagement that suits the
client’s journey, not an arbitrary A/B/C sliding scale of attention.
It may not be in the best interests of an advisor, much less his
or her clients, to blanket offer “high-touch” (which – let’s face it
– typically translates to “manual”) services to high-value clients
and “low-touch” services to less profitable ones. Automation in
servicing is becoming so well-developed in daily online life that
high-tech/low-touch approaches are arguably more effective
in many ways because they are designed to deliver
the right information at the right time and to simplify
complex things, allowing people the opportunity of
self-service in areas where it makes sense.
Client portals have been
a bit of a buzz-thing for
the last few years.
No advisor who has a strong relationship with clients
can easily be “disintermediated”, so it’s somewhat
counter-intuitive for advisors to intentionally disconnect
from the lower 80% of client relationships based only
on perceived profitability. A truly technology-enabled
business, I think, would aim to use technology to best facilitate
the automation of functions that are not primarily valuable to
the relationship, thus being able to spend more time on human
connection and allow clients to have some choice in just how
digital their relationship is. Clients should be able to participate
in the planning process in more meaningful ways than over a
coffee and a pile of papers once a year.
Is it possible? Sure – with a bit of design thinking. Client
portals have been a bit of a buzz-thing for the last few
years, though it’s tricky to get it right without the use of
appropriately selected tools
and, more importantly, access
to aggregated data. Everything
from onboarding to ongoing
financial education to tracking
against financial goals can
be digitised and placed in
clients’ hands in such a way
as to enhance advisor-client
relationships without the need
to intercept every action.
A tech-enabled business
would consider the best ways
to curate its digital customer
journey and empower both the
client and the advisor. Jen McKay, Director, Linktank
2C or not 2C
When to apply Section 2C of the Wills Act 7 of 1953 and when not to.
Uncertainty has always been the pet peeve of any legal
system. This is even more so in the case of an inheritance
or legacy being made in a will to family or friends, where
the will has not provided substitutions and the deceased
testator cannot be called in to clarify.
Let us consider the following scenario for some context.
Christof bequeathed his estate in equal shares to Elsa and Anna.
Elsa repudiated the inheritance. Elsa has two sons.
It must be noted first that in terms of section 24 of the General
Law Amendment Act 32 of 1952, a provision was made for implied
substitution. This had the result that if Elsa was Christof’s daughter
and she passed away, her two sons would have been entitled per
stirpes to their mother’s benefit unless the will stated otherwise.
Section 24 has been repealed by section 1 of the Law of Succession
Amendment Act 43 of 1992. However, the effect of this implied
substitution was adopted by Section 2C of the Wills Act 7 of 1953.
The first subparagraph (1) of the section has the effect that
if the descendant renounced and there is a surviving spouse of
the testator, the renounced benefit will go to the spouse of the
testator. The second subparagraph (2) has the effect that the
legacy or inheritance of a descendant of a testator that is still alive
but had been disqualified or renounced (and there is no surviving
spouse) will go to the descendants of that descendant per stirpes
unless the context of the will indicates otherwise.
In this scenario, Elsa renounced her benefit after her
father’s passing. This would mean that in terms of Section
2C (2), Elsa’s two sons will substitute her per stirpes for the
benefit that she renounced.
How would the outcome differ if Christof was not Elsa and
Anna’s father, but merely a friend that made a bequest to them
in terms of his will? Firstly, it should be noted that Section 2C
only applies to descendants of the testator and consequently,
that Section 2C will not apply in this scenario. If the will is
silent on what should happen to the repudiated benefit, the
person who repudiated shall be deemed to have predeceased
This will have the effect that in the case of a legacy, the benefit
will fall into the residue of the estate and devolve however the
residue is bequeathed in the will. In the case of an inheritance, it
will devolve upon the remaining heirs “unless the jus accrescendi
has been excluded so that the testator will have died intestate in
respect of that portion of his estate” (Meyerowitz 2010: para 5.29
and para 18.11).
The benefit of Elsa would consequently
fall into the intestate portion of Christof’s
estate and devolve upon his intestate
heirs. This will also be the case if Elsa was
a descendant of Christof but did not have
any children of her own to substitute her.
In an intestate estate, the person who
renounced their intestate share would
also have been deemed predeceased and
fall back into the intestate estate.
Evidently, the best course of action
is not to leave your will open for other
interpretations that the legal rules will
attempt to clear up after your passing. It is,
therefore, best practice to make provision
for all contingencies in your will to clear up
any possible future confusion.
Dr Rika van Zyl CFP®, FPSA®,
School of Financial Planning
Law, UFS, (member of FPI
Planning is recruiting
for a new future for
the industry and the
outh Africans are in a financial tunnel, and the
only way many of them are going to see the light
is by increasing their level of financial literacy.
The vast majority of the population doesn’t
have medical aid, over 65% of vehicles on our
roads are uninsured and 9 out of 10 retirees
have to continue working just to get by. Add in the reality of a
skyrocketing price of life, and it becomes clear that financial
literacy has never been more important.
This begs the question: How can a new generation rise to meet
the demands of a challenging economy? Who will be there to
guide them on their journey to success?
According to the head of human capital at Momentum
Financial Planning (MFP), Marina Karstel, this duty will fall on
expert financial advisers. However, she says true economic
empowerment requires a drastic reformation of the financial
“To relate to most South Africans, we need to empower an
emerging young financial adviser workforce and close the age
gap” says Karstel.
This is exactly what MFP did. In a recent and ongoing
recruitment drive, MFP has been on a mission to fire up
financial planning and make it known to all success seekers,
go-getters and trend-setters to join the financial revolution and
kickstart their careers.
“By embarking on a purposeful and meaningful drive to build
a more inclusive and relatable industry, we are confident that
financial planning as a practice will evolve to meet the needs
and ambitions of younger South Africans,” says Karstel.
To create an accessible mountain of potential, Karstel had to
acknowledge the need to evolve the recruitment process. “It is
well-known that the reliability of an interview as the only medium
of selection is very low. In fact, it is around 12% and a change was
needed to grow our footprint sustainably in the market.”
By adopting digital attraction, screening and assessment
tools, partnering with international thought leaders to develop
customised competency-based assessment specific to the role
of a financial adviser and integrating this in a comprehensive
battery of psychometric assessments, MFP attracted over
22,000 aspirational, young financial advisers. Up to date, just
below 300 have been successfully appointed. The scale of this
process was made possible by partnering with Trending Talent
and Wamly; two forward-thinking digitally-based companies in
the field of HR services.
In the end, Karstel said MFP had identified three overarching
characteristics of a successful young adviser. These included:
• All the competencies of an entrepreneur and self-starter.
• A customer advocate who could align advice with
• A social networker able to build a network of clients
both online and face-to-face.
“The environment is changing, and therefore, so should the
competency requirements of a financial adviser,” says Karstel.
“How can we expect people to seek out advice when they
don’t see themselves in the adviser that they put their trust in?
How can they believe that the adviser knows what they want
out of life? A younger population requires a credible youthful
perspective and drive.
Along with the MFP recruitment drive, the Momentum Institute
of Financial Planning (MIFP) was established in July 2021
and has served to upskill new-to-industry financial advisers,
enabling them to thrive in a competitive environment. The
MIFP is fully virtual, allowing students to engage with content
and study materials online, from anywhere in the world and at
any time. Courses are completed by performing assessments
which require an 80% pass rate, and each course carries a
CPD point rating, allowing existing financial advisers to fulfil
their obligations to develop professionally and improve their
performance in the workplace. The Momentum Institute of
Financial Planning further serves as an educational initiative,
providing planning and advice that is accurate, using
information that is current and most importantly, providing
practical application to further increase the value they offer
to their clients.
According to Karstel, “This is an opportunity for young people
as well as career changers with work experience who are
inclined towards starting their own businesses. We simply
give them a platform to join the market and turn their passion
into power by assisting them with their business needs and
requirements. It’s a win-win for MFP, we get to tap into an
unmet need, and young advisers get to tap into the future of
For Karstel, this new recruitment process is set to make a
vast difference in the South African financial landscape.
“This is our purpose, and it is the north star which guides us.
Financial services have a huge role to play in building a stronger
economic future, and the onus is on us to make it work.”
Momentum, here for your
journey to success.
THE PANDEMIC’S INFLUENCE
ON CANCER DIAGNOSIS
Cancer is one of the leading causes of death globally, causing one
in six deaths as stated by the World Health Organization.
It has been shown that early diagnosis, treatment and
constant monitoring of cancer patients is crucial in order
to achieve higher survival rates. Hence, cancer is one of
the diseases with high monitoring and awareness across
the globe. However, in the recent years, the world’s attention
was redirected to another deadly threat in the form of the
Covid-19 pandemic. With the numbers of cases and deaths
increasing exponentially from Covid-19 infections, the
pandemic took centre stage, while all other serious illnesses
took a back seat.
Number of cancer cases
A study on the initial impact of the Covid-19 pandemic on the
diagnosis of new cancers at a large pathology laboratory in
Cape Town presented the results below. The changes represent
the number of new diagnoses in the different cancer types,
from 1 April 2020 to 30 June 2020, compared with the prepandemic
• Prostate cancer cases decreased by 58%
• Oesophageal cancer cases decreased by 44%
• Breast cancer cases decreased by 33%
• Gastric cancer cases decreased by 33%
• Colorectal cancer cases decreased by 7%
The number of new cancer cases combined decreased by
36.3% from the year 2019 to 2020. This trend was also seen
in the data collected by Cancer Research UK that showed in
the first year of the pandemic, one-million fewer screening
invitations were sent, 380 000 fewer people saw a specialist
after a suspected cancer referral and 45 000 fewer people
started their cancer treatments.
Reduction in cancer cases
We have seen a similar trend on our group risk critical illness
claims, where claims reduced by 30% from 2019 to 2020.
The level of reduced claims continued into 2021 as well. The
reduction in cancer cases diagnosed during the pandemic, seems
to be prevalent in many countries. However, the decline is not
because of fewer people contracting cancer, but due to delays
in diagnosis and treatment.
There are many factors that resulted from the global response
to the pandemic that may have caused this phenomenon,
including but not limited to:
• The decision to implement national lockdowns in many
countries, which restricted the daily movement of many citizens
• Many people became less likely to visit their physicians for
routine check-ups, out of fear of contracting Covid-19. Fewer
individuals went for screening and thus, if they had cancer, it
would not have been detected at an early stage
• Hospitals were saturated with Covid-19 patients and there
were not enough resources to be redirected to cancer patients.
As such, individuals that were a high risk could not get the
required treatment in certain instances
employees, if they are diagnosed with a critical condition. There
are a range of products that provide payouts to assist with the
added financial burden, should an individual be diagnosed with
a critical illness.
The long-term implications
As we move out of the pandemic, we expect to see more cancer
diagnoses as more people return to their routine check-ups.
However, the long-term implications resulting from the delay in
diagnosis is a major concern as with cancer treatments, delayed
treatment may likely lead to lowered rates of recovery. The
population, at large, must be encouraged to visit their physicians
for routine check-ups to ensure early diagnosis.
As more and more people go for routine check-ups, there
may be a surge in cancer cases. Being diagnosed with cancer has
a significant financial impact on any family and most individuals
will need financial assistance to deal with the additional costs
associated with treatment.
Critical illness insurance is one of the least taken up-types of
insurance cover for individuals. Group critical illness products
enable employers to provide comprehensive cover for their
Actuarial Manager: Risk Product
Development, Liberty Corporate
Blessing Soxa, Specialist:
Actuarial Analyst Risk Product,
Shifting the way people think,
feel and behave with money
Convincing my 14-year-old to hug me is as frustrating
as getting my name removed from a cold-calling
sales database. I am beginning to wonder if either
is worth fighting for. Raising my teen to become her
own person, and satisfying my own parental needs is a balance
I am yet to master. Everything is a negotiation or requires some
sort of explanation. So, how do I even convince her to give me
a simple hug?
I decided to approach this challenge by reflecting on some
of the lessons I have learnt when trying to shift my own clients
to change their behaviour and thinking.
Persuading others is not as easy as I thought
One thing is clear and that is my passion for what I do. This is
evident when I walked away from a secure income as a single
mom amidst a pandemic to pursue my passion. My naivety
made me realise that not everyone is as enthusiastic about
this topic as I am, people have different priorities and are
motivated by their own agendas. I realise that passion must
be accompanied by persistence and patience.
Authenticity and vulnerability are key to building trust
Strong connections are forged when others can resonate
with you. It took me a long time to embrace being vulnerable
and share my money story openly. As Brené Brown says,
“Imperfections are not inadequacies; they are reminders
that we’re all in this together.” Clients prefer to learn from
someone they can relate to, someone who they share common
experiences with and someone who has erred and overcome.
Real success stories are easier to sell. As I continue to share my
feelings and experiences, I know it gives others the courage
and permission to do the same.
Coaching is by far the most effective tool in shifting behaviour
While my proposition includes a range of solutions to suit client
needs, learning styles and affordability, I am reminded of the
irreplaceable value of human conversation and engagement.
Changing behaviour is reliant on the individual’s level of drive.
Coaching is the most effective approach in yielding results.
However, the limited hours in a day makes coaching difficult
Cut-and-paste approaches are ineffective
To change behaviour, we must consider the individual’s
personal circumstances, needs and goals. Cut-and-paste
solutions are tick-box approaches that provide a false sense of
satisfaction that we are performing our fiduciary responsibility
as financial service providers to improve financial wellness, but
are we really? We need to adapt our approach. My approach
initially focused on teaching the technical skills required to
manage money and now includes our emotional relationship
with it. I am now including a third dimension, the spiritual
connection we have with money.
Shifting mindsets is
not an easy task.
Prevention is better than cure, but ignorance is still bliss
We all know that smoking is bad and over-indulging will cause
health problems down the line, yet we still do it. We also know
that not saving adequately will prevent us living our dream
retirement, yet we continue to delay this.
While many are living below the breadline they simply
cannot afford to save for tomorrow when they are struggling
to survive today. But there are also those who can afford to save
but the rewards of instant gratification are far more appealing
than saving for something that will only occur decades down
the line. Shifting mindsets is not an easy task.
Not all clients can be helped, or can they?
The market I deal with is primarily those who do not have
access to financial advice or cannot afford financial advice.
Fortunately for them, my services are funded by their
employers. The toughest part of my day is dealing with those
clients who are doing all they can with the little they have. It
is these clients that need our help the most. While many of
these clients’ situations are dire, they are
not helpless or hopeless and we need to
find creative solutions that will help them.
Changing behaviour requires constant
engagement, persistent action and various
approaches. Each of us are motivated by
different drivers. And while I may never
convince my teen to give me a hug, I know
that I love her enough to continue to meet
her where she is at.
And when it comes to my clients, I pray
that my journey is made sustainable by
those who see value in what I do so that
I can continue to help those that need it
Jean Archary CFP®, Author,
Speaker, Founder, Financial
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