Blue Chip Issue 86

Blue Chip Journal 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. Visit Blue Chip Digital: https://bluechipdigital.co.za/

Blue Chip Journal 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. Visit Blue Chip Digital: https://bluechipdigital.co.za/


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BLUE<br />

CHIP<br />

0.5 CONTINUOUS<br />



<strong>Issue</strong> <strong>86</strong> • January/February/March 2023<br />

www.bluechipdigital.co.za<br />

0.5 CONTINUOUS<br />






1.5 CONTINUOUS<br />


1.5 CONTINUOUS<br />








Bridging the gap<br />


Meet the 2022 Financial<br />

Planner of the Year<br />

What lies<br />

ahead for 2023?<br />


Jeanette Marais, CEO, Momentum Investments


MONEY<br />


Invest in global markets and benefit from<br />

the lowest exchange rate available.<br />

Scan here for more<br />

https://www.discovery.co.za/investments/offshore-investing<br />

This document is meant only as information and should not be taken as financial advice. For tailored financial advice, please contact your financial adviser. Discovery Life Investment<br />

Services Pty (Ltd), registration number 2007/005969/07, branded as Discovery Invest, is an authorised financial services provider. All life insurance products are underwritten by<br />

Discovery Life Ltd, registration number: 1966/003901/06,<br />

an authorised financial service provider and registered credit provider, NCA Reg No NCRCP3555.<br />

Product rules, terms and conditions apply. This document does not include the full details of how our investment plans work. The information in this document must be read with the<br />

relevant fact files.<br />


Welcome to<br />

<strong>Blue</strong> <strong>Chip</strong> 2023<br />

In A focus on the future of investing, Jeanette Marais, CEO of Momentum Investments,<br />

discusses the complexity and rapid change that shapes the sector (page 26). She<br />

questions whether we understand how to disrupt our own value propositions. The<br />

volatility in today’s world ensures that none of us truly knows what our future has in<br />

store for us, so Marais advises that we disrupt ourselves rather than be disrupted. “With<br />

increasing complexity, we need to focus on our speciality and niche and find the right<br />

partners to journey towards success with,” she says.<br />

Is a discretionary fund manager the right partner for success? Bennie Crous from<br />

Equilibrium says that partnering with a DFM will ensure that an investor’s distinctive<br />

financial needs are met. South Africa has world-class investment managers who are<br />

specialists that rarely speak to an investor’s unique financial requirements (page 48). A<br />

DFM, however, understands the intricacies thereof. Marais concurs: “Partnering with a<br />

DFM frees up your capacity to focus on your value adds.”<br />

In 2022, Discovery Group announced the launch of South Africa’s first “truly global”<br />

DFM with the ambition of significantly enhancing the business of wealth creation in the<br />

country. Speaking at the launch, Discovery CEO Adrian Gore contextualised the rationale<br />

for the new business by describing two trends transforming the global and local investment<br />

industries. Find out more on page 19.<br />

The disruptive ideas and societal changes in our world today create opportunities<br />

alongside them. Eugene Botha from Momentum Investments says, “Technological<br />

innovations, demographic and social trends, urbanisation and environmental challenges<br />

are here to stay, and the importance thereof is continuously being forced into the<br />

spotlight.” These developments converge into larger themes that endure over the longer<br />

term and create investment opportunities that will persist as disruptive ideas and<br />

technological advancements reshape our environment. Uncover the art of identifying<br />

these opportunities, called thematic investing, on page 31. Rob Macdonald speaks about<br />

technology being the lifeblood of the new world of work. He asks that if financial advisors<br />

still have a role to play in people’s lives, what is that role and how will it impact on client<br />

engagement in the context of rising dependence on technology? (Page 50)<br />

Well, turn to page 56 for insights into financial advisors’ relationships with tech from the<br />

Linktank technology survey. According to the survey, financial advisors’ greatest challenges<br />

are “still topped by integration options, the industry remains frustratingly paper-based,<br />

and there’s an unbudging gap in the perception of value vs cost of technology”. Kobus<br />

Kleyn says that as financial professionals in a noble profession, we must change people’s<br />

lives for the better (page 18). And one person who will be changing people’s lives for<br />

the better is Palesa Dube, CFP®, director at Wealth Creed, and the current FPI Financial<br />

Planner of the Year. Dube believes that finances are a very personal matter and with the<br />

inclusion of female professionals in the financial services industry, diversity and inclusion<br />

will help the profession develop products and solutions that truly speak to the needs of<br />

the growing segment of females in the profession in a manner they want to be addressed.<br />

Enjoy this issue!<br />

Alexis Knipe, Editor<br />

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

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

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

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

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

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

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

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

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

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

blue-chip-journal<br />

ISSUE <strong>86</strong> |<br />

JAN/FEB/MARCH 2023<br />

BLUE<br />

CHIP<br />

Publisher: Chris Whales<br />

Editor: Alexis Knipe<br />

Online editor: Christoff Scholtz<br />

Digital Manager: Charl Daniels<br />

Designer: Tyra Martin<br />

Production: Yonella Ngaba<br />

Ad sales:<br />

Sam Oliver<br />

Gavin van der Merwe<br />

Bayanda Sikiti<br />

Venesia Fowler<br />

Vanessa Wallace<br />

Managing director: Clive During<br />

Administration & accounts:<br />

Charlene Steynberg<br />

Kathy Wootton<br />

Distribution and circulation manager:<br />

Edward MacDonald<br />

Printing: FA Print<br />


Global Africa Network Media (Pty) Ltd<br />

Company Registration No:<br />

2004/004982/07<br />

Directors: Clive During, Chris Whales<br />

Physical address: 28 Main Road,<br />

Rondebosch 7700<br />

Postal address: PO Box 292,<br />

Newlands 7701<br />

www.bluechipdigital.co.za<br />

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Email: info@gan.co.za<br />

Website: www.gan.co.za<br />

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

of the copyright owner. The opinions expressed are not necessarily<br />

those of <strong>Blue</strong> <strong>Chip</strong>, nor the publisher, none of whom accept liability<br />

of any nature arising out of, or in connection with, the contents of<br />

this book. The publishers would like to express thanks to those who<br />

support this publication by their submission of articles and with their<br />

advertising. All rights reserved.

INVESTMENT | Offshore<br />

Glacier International: moving towards a<br />

seamless global investment portfolio<br />

By Andrew Brotchie, Managing Director of Glacier International<br />

The case for offshore investing has been increasing over<br />

many years, as local investors look for diversification, an<br />

increased opportunity set, as well as hedging against<br />

political and economic risk.<br />

Exchange control relaxation<br />

The reasons for offshore investing have traditionally been facilitated<br />

by increases in the discretionary allowances. Currently, South African<br />

investors can take out R11-million per year per person. We believe that<br />

regulatory relaxation in the institutional space locally will drive the next<br />

wave of offshore inclusion for South African investors. A big change<br />

announced in February 2022, in the institutional space, is that pension<br />

fund investors can now have up to 45% invested offshore with no<br />

minimum or maximum allocation to Africa. Another point to note is that<br />

there is no longer a 5% to 10% difference (which there was previously)<br />

between what local collective investment schemes (CIS) could invest<br />

offshore versus what was allowed for retirement funds. This has now<br />

been harmonised and is significant for the reasons discussed below.<br />

Significant impact on the wealth advice landscape<br />

1. A management company (or CIS) will, at certain times, use the<br />

full 45% offshore allowance in its retirement funds, which would<br />

BLUE<br />

CHIP<br />

then leave it no capacity to offer feeder funds. This will lead to a<br />

gradual decline in the availability of feeder funds in the South<br />

African market, and an additional R400-billion to R600-billion<br />

offshore investment flows from South Africa.<br />

2. Traditionally, local and offshore investment portfolios have<br />

been quite separate. Going forward, we expect clients to start<br />

looking at their investment portfolio holistically. Previously,<br />

an offshore allocation in pension funds of 30% was typically<br />

allocated to global equities. Now that the offshore allocation is<br />

at 45% – almost half of the portfolio – the guidance will be more<br />

nuanced. The emphasis going forward will be on looking at the<br />

local and international portfolios as one whole, to see how they’ll<br />

complement each other. This will, in turn, see the investment<br />

process and portfolio construction process change in future.<br />

Glacier International’s solution set<br />

Investment platforms will also need to adapt to these changes.<br />

Glacier International’s solution set has been steadily evolving and<br />

offers a diverse range of options.<br />

Uncertainty in the markets is expected to prevail for the<br />

foreseeable future. A well-diversified, long-term investment<br />

strategy remains key. <br />

Glacier International is a division of Sanlam Life Insurance Limited, a Licensed Life Insurer, Financial Services, and Registered Credit Provider (NCRCP43).<br />

That’s what a single access point<br />

to the widest range of investment<br />

funds feels like.<br />

Glacier by Sanlam’s investment platform offers you the<br />

widest choice of local and global funds, from different fund<br />

managers, that you can mix and match, all in one place.<br />

With Glacier, you are at the centre of all investment<br />

recommendations. Your adviser will work with you to<br />

customise your selection for the ultimate personalisation<br />

and ease.<br />





Ours is an ocean of limitless possibility.<br />

What could be better than that?<br />

Ask your financial adviser why you’re not with Glacier.<br />

Visit www.glacierinsights.co.za for more information<br />


Glacier Financial Solutions (Pty) Ltd is a licensed financial services provider.


JAN/FEB/MARCH 2023<br />

ISSUE<br />

<strong>86</strong><br />

02<br />

08<br />


By Alexis Knipe<br />



Message from FPI CEO<br />

10<br />

15<br />

16<br />


Milestones, news and snippets<br />


Advice to combat money laundering<br />


Column by Rob Macdonald, Head of<br />

Strategic Advisory Services, Fundhouse<br />

17<br />


WORLD<br />

Column by Florbela Yates, Head of Equilibrium<br />

18<br />


By Kobus Kleyn, CFP®, Tax and<br />

Fiduciary Practitioner, Kainos Wealth<br />

19<br />



Discovery Invest says that there is a need for global<br />

investment expertise for the local advice industry<br />

20<br />



<strong>Blue</strong> <strong>Chip</strong> speaks to Palesa Dube, CFP®<br />

26<br />



By Jeanette Marais, CEO, Momentum<br />

Investments, and Deputy CEO,<br />

Momentum Metropolitan Holdings<br />

29<br />



By Mike Adsetts, Acting Chief Investment<br />

Officer, Momentum Investments<br />

30<br />




Almost every financial decision your<br />

clients make has a tax implication<br />

31<br />



Eugene Botha, Deputy Chief Investment Officer,<br />

Momentum Investments, tells us about the<br />

increasing popularity of thematic investing<br />

32<br />



Cryptocurrencies are sweeping the world in<br />

terms of news headlines<br />

33<br />



Kapil Joshi, Head of Momentum Collective<br />

Investments, writes on consumerism and investing<br />

34<br />



Was 2022 the birth of the next phase of wealth<br />

creation? By Ian Jones, CEO, Fundhouse<br />

36<br />




By Andy Howard, Schroders<br />

4 www.bluechipdigital.co.za

SCAN<br />



JAN/FEB/MARCH 2023<br />

ISSUE<br />

<strong>86</strong><br />

38<br />


Preparing for the “Mother” of all market<br />

conduct legislation. By Anton Swanepoel<br />

41<br />


One thing we can always be sure of is<br />

change, says Visio<br />

42<br />



By the Petroleum Agency South Africa<br />

44<br />



How to get servicing your clients right. By<br />

Andies de Jongh, Seed Analytics<br />

46<br />



And the rationale for using a DFM.<br />

By Dez Tswaile<br />

48<br />


BALL SHOW FOR 2023?<br />

By Bennie Crous, Senior Portfolio Manager,<br />

Equilibrium<br />

50<br />




Technology is the lifeblood of the new<br />

world of work. By Rob Macdonald<br />

52<br />



By Roland Cox, Executive Coach, Aspiral<br />

Coaching and Leadership<br />

54<br />


How adapting the way you<br />

communicate with your clients can improve<br />

long-term outcomes<br />

56<br />



Insights into financial advisors’ relationships<br />

with tech from the 2022 Linktank Advice<br />

Technology survey. By Jen McKay<br />

59<br />



The top five CFP® Professional Competency<br />

Examination candidates are alumini at the<br />

University of the Free State<br />

60<br />



Lessons we’ve learned. By Johannes Landman,<br />

Omega Capital<br />

62<br />



SAY YES<br />

Babalwa Nonkenge speaks about her podcast,<br />

Epokothweni with Babalwa Nonkenge<br />

64<br />


How can you identify it and help your<br />

clients deal with it? By Louis van der Merwe<br />

66<br />


Profile of an FPI Approved Practice:<br />

Integral Wealth Management<br />

70<br />




By Andrew Ratcliffe, Director, Private<br />

Client Holdings<br />

72<br />

74<br />

Awards 2022<br />


By FPI<br />


The FPI Financial Planner of the Year

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FPI UPDATES | CEO message<br />

Lelané Bezuidenhout, CFP®,<br />

CEO, Financial Planning<br />

Institute of Southern Africa<br />

Time linked with<br />

financial planning,<br />

done right<br />

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

shares FPI’s latest news.<br />

Is the earth spinning faster and how can we link this to<br />

financial planning?<br />

The world is moving at a pace unknown to the ’80s, ’90s<br />

and early 2000s. It prompted me to google: “Is time running<br />

faster than before?”<br />

Google’s answer: “It’s part of the nature of life for time<br />

to accelerate as we age.” Did Google just tell me that I am<br />

getting old?<br />

I googled again as I did not like the first answer, and this<br />

time it shot out: “The earth is spinning faster and recently<br />

recorded its shortest day ever. June 29, 2022, was 1.59 milliseconds<br />

less than one average day.” Now that’s less of a<br />

personal disaster for me, but not necessarily for the worldat-large.<br />

This made me think, and appreciate, that the most<br />

valuable commodity we have is time.<br />

Time linked with financial planning, done right<br />

It is well known that the basic elements and economic<br />

principles of investments are reward (return), risk and time.<br />

Far too many consumers leave retirement planning for their<br />

mid-40s to early 50s. This is too late. Investment, as we know,<br />

is not a short-term thing; it is long-term in its nature. The<br />

time-value-of-money should never be underestimated.<br />

But how do we get consumers to realise this? It does not<br />

help that pending legislative changes will make it possible<br />

for consumers to make withdrawals from their retirement<br />

savings before retirement. But in this lies the opportunity<br />

for financial planning and professional financial advice as<br />

it presents an opportunity to help consumers with, not just<br />

retirement planning, but holistic financial planning. More than<br />

eight out of 10 CFP® professionals responding to the Financial<br />

Planning Standard Board’s (FPSB) Future of Financial Planning<br />

Practice survey agree that consumer demand for financial<br />

planning will increase in the next five years.<br />

We also see the demand for FPI professional members<br />

growing as an increasing number of financial institutions,<br />

especially in the banking sector who are starting to employ<br />

only CERTIFIED FINANCIAL PLANNERS® or designated financial<br />

advisors. We encourage financial advisors who are not<br />

professional members of FPI yet to contact us and establish how<br />

close they are to being awarded a professional designation.<br />

Some updates from FPI<br />

I just returned from the FPSB Chief Executive Committee<br />

meetings held in Washington DC. I am humbled to act as chair<br />

of these meetings and confirm that the discussions focused<br />

on the future of financial planning, especially as it relates to<br />

generational financial planning and the ever-changing global<br />

financial landscape. Great discussions were held around crypto<br />

assets and decentralised finance (DeFi) and how they fit into<br />

financial planning. The FPSB also confirmed that the new<br />

financial planning competency framework, which includes the<br />

psychology of financial planning, will come into effect on 1 April<br />

2023. FPI will subsequently align and localise its curriculum and<br />

standards accordingly.<br />

If you have not yet registered for the 2023 Annual Refresher<br />

Workshop, please do so – spots are limited and selling out<br />

fast. This is the masterclass of the year with great insights from<br />

8 www.bluechipdigital.co.za

We encourage financial advisors who are not<br />

professional members of FPI yet to contact<br />

us and establish how close they are to being<br />

awarded a professional designation.<br />

speakers such as Wessel Oosthuizen, CFP®, Errol Meyer, CFP®,<br />

the 2022 FPI Financial Planner of the Year, Palesa Dube, CFP®,<br />

and FPI’s former head of policy and engagement David Kop,<br />

CFP®. I will also be giving an update on Ombudsman cases.<br />

Visit www.fpi.co.za to register for this event.<br />

As we enter 2023, I want<br />

to sincerely thank you for<br />

your support during 2022.<br />

Please be on the lookout for a consumer survey, to be run<br />

by +-15 FPSB affiliates globally, that will come out in 2023.<br />

The main purpose of the survey is to establish the value of<br />

financial advice and to gain insights into consumer awareness<br />

of who and what a CFP® professional is.<br />

As we enter 2023, I want to sincerely thank you for your<br />

support during 2022. As alluded to earlier, 2022 flew by in<br />

a wink.<br />

May 2023 be a bit of a slower year, with more time for us to<br />

collectively reach new heights as a profession.<br />

Until next time,<br />

Lelané Bezuidenhout, CFP®, CEO,<br />

Financial Planning Institute of Southern Africa<br />

www.bluechipdigital.co.za<br />


BLUE<br />

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BLUE<br />

CHIP<br />

On the money<br />

Making waves this quarter<br />

Glacier investments and illiquid assets<br />


Investors can now make an investment using foreign currency – and<br />

there’s no need to have an offshore bank account or complete copious<br />

amounts of paperwork. This is made possible by Shyft, a forex payment<br />

app that makes offshore investing so much easier.<br />

Now, investors simply need to transfer their investment in rands<br />

from their South African bank account onto Shyft, convert it to the<br />

required currency (US dollars, Australian dollars, euros or pound<br />

sterling) and make the forex payment into the<br />

offshore investment. Shyft is free to use with no<br />

monthly fees. The app also offers some of the<br />

best and cheapest foreign exchange rates in the<br />

market, with low transaction fees.<br />

Contact your Glacier International representative<br />

for more information.<br />

Glacier International is a division of Sanlam Life Insurance Limited, a Licensed Life Insurer, Financial Services and Registered Credit Provider (NCRCP43).<br />


The Investment Forum is South Africa’s premier gathering of investment<br />

managers, discretionary fund managers, multi-managers and financial<br />

advisors/wealth managers. Now in its 13th year, it continues to focus on<br />

thought leadership content spanning the world of investing. There is no<br />

“product push” at the conference, thus allowing delegates to glean insights<br />

impacting investment themes across the world.<br />

The world continues to be at strife with itself and wherever you look,<br />

uncertainty prevails on all fronts. Navigating this uncertain world, trying<br />

to ensure that investors remain invested throughout this cycle, is virtually<br />

impossible with distractions from all directions.<br />

The brightest minds from the investment management industry<br />

will offer their insights on the global macro-economics at play – where<br />

inflation is public enemy number one, the geopolitical landscape that<br />


is tense and fragile, anticipated company earnings results and where<br />

these are headed across all sectors, as well as insights into where these<br />

investment managers are unlocking valuable investment opportunities<br />

across currencies, geographies and asset classes.<br />

Register for the Investment Forum 2023 where the conference will<br />

unpack “The Butterfly Effect – When nothing is certain, anything is possible!”.<br />

Seats sell out quickly, so go to www.theinvestmentforum.co.za and<br />

register now.<br />

Professional investors and family offices are increasingly turning to illiquid<br />

assets, including private debt, in response to the combination of ongoing<br />

volatility and rising interest rates and inflation, new research shows. The<br />

study from Aeon Investments with family offices, controlling more than<br />

$98.4-billion assets under management, found 90% expect increased<br />

demand from investors for illiquid assets over the next two years. Around<br />

12% predict demand will increase dramatically.<br />

The research found that the key reason is their need to protect from<br />

macro uncertainty with private debt investments often offering strategies<br />

providing a floating rate coupon which has the potential to be a natural<br />

hedge against inflation.<br />

Family offices also highlighted the fact that private debt offers new<br />

investment opportunities and a growing array of assets as well as its role<br />

in the diversification of portfolios and access to ESG benefits in sub-asset<br />

classes in private debt. Aeon’s study found widespread agreement that the<br />

highest quality private debt instruments provide safety. Almost all (99%)<br />

questioned pointed to the combination of attractive yields and structural<br />

protections such as debt covenants and credit enhancement as offering a<br />

high degree of safety.<br />

That is being bolstered by the expectation of improved regulation in<br />

the sector – more than a quarter (26%) expect dramatic improvements in<br />

regulation for private debt over the next two years while 52% expect slight<br />

improvements in regulation. Evgeny van der Geest, managing director,<br />

Aeon Investments says: “Ongoing volatility coupled with rising interest<br />

rates and inflation has highlighted the attraction of illiquid assets including<br />

private debt, and investors expect demand to grow. There is growing<br />

recognition that private debt can deliver attractive yields and high levels<br />

of protection which are very valuable in the current macro conditions.”

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OUTvest is an authorised FSP. Ts and Cs apply. OV22/0426/E

BLUE<br />

CHIP<br />

On the money<br />

Making waves this quarter<br />

The future of the local DFM sector and a motivational read<br />


South Africa’s Discretionary Fund Managers (DFMs) will play a vital role<br />

to financial advisors and wealth managers as they face a barrage of<br />

complex investment decisions, a new report reveals. The report, created<br />

by The Collaborative Exchange and sponsored by financial technology<br />

provider Bravura, pinpoints the growing prominence of global passive<br />

investments and ESG filters in portfolio construction, combined with<br />

the rise of alternative strategies as a driving force of change across the<br />

market. This leaves a large proportion of financial advisors and wealth<br />

managers now sub-delegating their selection of investment managers<br />

and asset allocation to DFMs, particularly to those who underpin their<br />

offering with technology to aid investment decisions. While this is good<br />

news for DFMs, the report identifies various longer-term challenges for<br />

the sector that has mushroomed over the past two years. These include<br />

potential regulation from industry bodies including the Association<br />

of Savings of South Africa, which could place DFMs under further<br />

scrutiny, and may include more onerous barriers to entry and the<br />

standardisation of investment performance analysis.<br />

However, larger DFMs with access to scale, market-proven<br />

technology and extensive research capabilities will be able to weather<br />

these challenges and are set to increasingly dominate, according to<br />

the research. The report also predicts there may be several corporate<br />

actions and mergers in the pipeline, such as Glacier’s recent acquisition<br />

of Absa, to help with further market consolidation. Kevin Hinton, CEO<br />

of The Collaborative Exchange, said: “While this research paints a mixed<br />

picture, ultimately it highlights the crucial role DFMs play for wealth<br />

managers and financial advisors. DFMs have shown good growth in<br />

assets under management or administration since 2019, although we<br />

expect a combination of regulation and<br />

market saturation to put a dampener on<br />

this in the future.”<br />

Carolyn Erasmus, Country Head South<br />

Africa at Bravura, added: “Across the board,<br />

the current backdrop of a worldwide<br />

downturn and inflation is causing huge<br />

pressure in the sector. With regulation<br />

expected to arrive shortly, we’re seeing elements of this report mirrored<br />

in real life conversations, as DFMs look to cement their position in the<br />

market with industry-leading technology that helps make sense of<br />

complexity and create value right through the industry chain.”<br />

According to The Collaborative Exchange’s data, the larger DFMs have<br />

been growing their ZAR assets by more than 15% Compound Growth<br />

Annual Rate (CGAR) over the past three years ended 31 December<br />

2021. There are, however, several outliers that have underperformed<br />

while exposing investors to higher volatility. Moreover, there has been a<br />

plethora of new entrants, since The Collaborative Exchange’s last report<br />

in 2019.<br />

The research was conducted as part of The Collaborative Exchange’s<br />

South African Discretionary Fund Manager Survey which aims to create<br />

a single reference and guide capturing the breadth of information<br />

regarding DFM service models in South Africa. In total, 26 DFM businesses<br />

were surveyed, including 11 larger DFMs with AUM greater than R2.5-<br />

billion were surveyed in 2021.<br />

The report can be accessed via this link (note subscription required)<br />

https://www.thecollaborative.co.za/dfmsurvey.<br />



MitonOptimal provides advisers with peace of mind by offering<br />

established investment expertise, dedicated support and long-term<br />

partnership in managing their clients’ investment affairs.<br />

George Dell | Executive Director, Discretionary Fund Management | E: george@mitonoptimal.com | T: 021 689 3579 | www.mitonoptimal.co.za<br />

<strong>Issue</strong>d by MitonOptimal Southern Africa Group (MitonOptimal). MitonOptimal South Africa (Pty) Ltd, registration no. 2005/032750/07, an authorised Financial Services Provider (“FSP”) with<br />

license no. 28160. MitonOptimal South Africa (Pty) Ltd complies with all the requirements of the Financial Advisory and Intermediary Services (FAIS) Act (Act 37 of 2002).

South Africa’s Premier Investment<br />

Conference is now open for registration<br />

CAPE TOWN: 8 & 9 MARCH 2023<br />

JOHANNESBURG: 13 & 14 MARCH 2023<br />

Access to the latest<br />

investment themes<br />

Local and international<br />

content<br />

Divergent Investment<br />

views<br />

Industry networking<br />

CPD hours<br />



BLUE<br />

CHIP<br />

On the money<br />

Making waves this quarter<br />

Regulations and a new range of model portfolios<br />


By Webber Wentzel<br />

In 2019, the Financial Action Task Force (FATF) red-flagged South<br />

Africa for high levels of corruption. That means South Africa must<br />

address its partial compliance or non-compliance with 20 of the<br />

FATF’s “40 recommendations” by February 2023.<br />

South Africa has taken various steps to tackle corruption. The<br />

National Prosecuting Authority has enrolled cases, the Asset<br />

Forfeiture Unit has frozen or granted preservation orders, the Special<br />

Investigating Unit has instituted High Court cases and SARS has<br />

launched investigations. South African banking institutions have<br />

sound policies in place to combat terrorist financing. However,<br />

many loopholes remain, and this<br />

makes it urgent to enact the necessary<br />

regulations in place and ensure<br />

institutions have appropriate systems<br />

in place.<br />

Webber Wentzel will be conducting<br />

sessions on the implications of<br />

greylisting by the FATF for South Africa<br />

with our financial and corporate clients<br />

to address these issues.<br />


We are extremely excited to launch our much-awaited ASTUTE range<br />

of model portfolios, containing only absolute return funds and hedge<br />

funds. We saw a gap in the market for these types of investments due to<br />

their ability to limit the downside in market drawdowns, but still benefit<br />

from risk asset exposure. Our range includes:<br />

• MitonOptimal ASTUTE Guarded Model. Focused on capital<br />

preservation while targeting a total return of CPI +4% after all fees. This<br />

model was created with the living annuity market in mind, especially<br />

those clients in the early years of retirement, where “sequence-ofreturns”<br />

risk is at its highest.<br />

• MitonOptimal ASTUTE Bold Model. Focused on<br />

capital appreciation and looking to benefit from the<br />

underlying managers’ best ideas. This model will<br />

target all-out risk and is not for the faint-hearted.<br />

Due to Reg 28 restrictions, these products will only<br />

be available in discretionary products, endowments<br />

and living annuities.<br />

For more information on the range, please contact<br />

george@mitonoptimal.com.<br />

MitonOptimal South Africa (Pty) Limited is an Authorised Financial Services Provider License No. 28160 regulated by the Financial Sector Conduct Authority (FSCA). Registration No. 2005/032750/07.<br />

Jacques de Kock,<br />

Quantitative Analyst<br />

and Portfolio Manager,<br />

MitonOptimal<br />


As a child, an intense interest in property meant that Rael Levitt<br />

was early in the game. A chance encounter as a teenager led<br />

him to his first auction that ignited a fervent passion. By 17, he<br />

regularly attended property auctions and at 20, he had bought<br />

and sold 20 bank-foreclosed houses. While studying law at<br />

UCT, Levitt launched an auction company from the canteen,<br />

which changed the face of auctioneering in South Africa. His<br />

company, Auction Alliance, transformed the industry, bringing<br />

glamourised high-profile sales to the public eye.<br />

In 2004, Levitt was caught in the historic tsunami that claimed so many<br />

lives in Thailand. Seven years later, he faced a different kind of tsunami that<br />

destroyed his reputation. The Quoin Rock Wine Estate auction was the<br />

last time Levitt ascended the auction podium. The wine estate, belonging<br />

to billionaire Dave King, was being bid on by Wendy Applebaum,<br />

the country’s wealthiest woman. The series of mistakes Levitt made<br />

following the auction would herald Auction Alliance’s rapid demise.<br />

Levitt became a subject of “trial by media” in the court of public opinion<br />

– later cleared of wrongdoing by the country’s courts. A decade later,<br />

Levitt reflects on the lessons he has learnt. In the wake of his last-ever<br />

auction, he built a successful new property business, Inospace, which<br />

has become the largest owner and operator of logistics parks in South<br />

Africa, having grown into a R3-billion company.<br />

It takes a tsunami is a riveting read that incorporates the story of one<br />

of the biggest property scandals of recent times into a deep reflection<br />

on failure and fallibility – and what it takes to survive and bounce back.<br />

Available at bookstores nationwide or www.ittakesatsunami.com.

PRACTICE MANAGEMENT | Compliance<br />

BLUE<br />

CHIP<br />


Financial service providers must apply a risk-based approach<br />

to assist in combating money laundering.<br />

The products and services that financial service providers<br />

(FSPs) offer can be abused by criminals for money<br />

laundering, the financing of terrorist activities and<br />

proliferation of weapons of mass destruction activities.<br />

It is important that FSPs implement a risk-based approach to<br />

combating money laundering, terrorist financing and proliferation<br />

financing. Comprehensive guidance on implementing a risk-based<br />

approach is available in Financial Intelligence Centre (FIC) Guidance<br />

Note 7 and FIC public compliance communication 53 (which are<br />

both found on www.fic.gov.za).<br />

In 2019, the Financial Action Task Force (FATF) assessed South<br />

Africa’s capability and capacity for combating money laundering,<br />

terrorist financing and proliferation financing and identified<br />

certain weaknesses, including the inadequate adoption of a riskbased<br />

approach among designated non-financial businesses<br />

and professions. “South Africa should ensure that accountable<br />

institutions adequately implement a risk-based approach, including<br />

through better assessing and understanding their inherent risks<br />

as well as refining and implementing their risk management and<br />

compliance programmes to mitigate their risks,” FATF highlighted<br />

in its assessment report published in October 2021.<br />

Implementing a risk-based approach<br />

As part of the risk-based approach, an FSP must conduct businesslevel<br />

assessments, new product and process-risk assessments as well<br />

as client-level assessments. The controls the FSP implements must<br />

be in proportion to the level of inherent risk identified. Where there<br />

is a heightened risk of money laundering and terrorist financing, the<br />

FSP must have more stringent controls in place such as enhanced<br />

due diligence and monitoring. Various factors may impact the level of<br />

money laundering, terrorist financing and proliferation financing risk<br />

the accountable institution may face. These factors include the client,<br />

product or service type, the delivery channel, the geographic area as<br />

well as any other factor the accountable institution deems relevant.<br />

Practically speaking, different client types pose different levels<br />

of risk; for example, it is widely accepted that foreign prominent<br />

public officials and certain domestic prominent influential persons<br />

pose a heightened risk. See Public Compliance Communication<br />

(PCC) 51 for additional information.<br />

There are various other client types that may be deemed as high<br />

risk. Where a client’s beneficial owners pose a heightened risk, this<br />

should be considered as part of the client-level risk assessment.<br />

The different delivery channels or way the client is onboarded<br />

presents different risk levels. For example, where a client is<br />

onboarded face-to-face there is less risk of client identification<br />

misrepresentation, whereas non-face-to-face scenarios where a<br />

client is onboarded digitally could present a heightened risk.<br />

FSPs must understand the vulnerabilities of the different<br />

type of products and services that they offer, for example a<br />

product that allows for third-party payments to high-risk<br />

countries would potentially pose a heightened risk. PCC 49<br />

and PCC 54 set out additional guidance on geographic area<br />

risk factors that should be considered.<br />

In addition to the factors highlighted above, the FSP may<br />

take into account any other relevant factors when conducting<br />

the risk assessment. Risk factors must be assessed holistically<br />

to determine an overall risk that the particular business<br />

relationship or single transaction with a client may pose.<br />

Risk management compliance programme<br />

The manner in which the FSP implements a risk-based approach<br />

and the controls implemented in accordance with section 42<br />

of the FIC Act must be set out in the risk management and<br />

compliance programme.<br />

For more compliance information and guidance offered to FSPs,<br />

refer to the FIC website (www.fic.gov.za). For further information<br />

contact the FIC’s compliance contact centre on +27 12 641 6000<br />

or log an online compliance query on the FIC website. <br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

COLUMN<br />

Beware the Twit<br />

Giving voice to the people: your new reality.<br />

Rob Macdonald, Head of<br />

Strategic Advisory Services,<br />

Fundhouse<br />

Rob Macdonald has held<br />

several senior positions in<br />

the investment industry.<br />

At Fundhouse, he acts as<br />

a consultant and coach<br />

to financial advisors and<br />

develops and facilitates<br />

training programmes in<br />

behavioural coaching and<br />

practice management. Before<br />

joining the financial services<br />

industry, Macdonald was<br />

MBA director at the UCT<br />

Graduate School of Business.<br />

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

Rethinking Leadership and has<br />

consulted, written and spoken<br />

widely on a range of topics.<br />

Macdonald has a Master’s<br />

degree in Management<br />

Studies from Oxford University<br />

and is a CFP® Professional.<br />

Early in his tenure at Twitter, self-titled<br />

Chief Twit Elon Musk tweeted, “I’m not<br />

saying we should downplay journalists.<br />

I’m simply saying we should give voice/<br />

elevate the people. Vox populi.” Whatever Musk<br />

does either to build or destroy Twitter, voice has<br />

already been given to the people. Journalists are<br />

no longer the guardians of our news flow.<br />

Cape Talk, the first talk show radio station<br />

in Cape Town, recently celebrated its 25th<br />

birthday. John Maytham hosted the station’s<br />

first show 25 years ago and now hosts the<br />

Afternoon Drive show. Reflecting on the past<br />

25 years, Maytham shared his perspective as a<br />

journalist in a pre-cellphone, pre-social media<br />

world where he would observe the story he was<br />

tasked to report on, write it up and then find a<br />

way to phone that story into the radio station,<br />

either using a public payphone or knocking on<br />

the door of a local household and asking to use<br />

their phone.<br />

When phoning the story in, Maytham<br />

explained that it was communicated unfiltered<br />

through his eyes. Journalists had autonomy over<br />

what to observe, how to interpret whatever they<br />

saw, and then of course total freedom in how<br />

they wrote and reported on the story. In today’s<br />

world of social media and mobile phones, the<br />

journalist is no longer the sole arbiter of news<br />

information. Anyone anywhere can share news<br />

on their platform of choice, whether that news<br />

is true or not.<br />

The implication of this is that journalists<br />

must reinvent themselves to remain relevant.<br />

They cannot simply be a source of information<br />

but must play the role of analysts, helping us<br />

make sense of the news that is out there. Their<br />

role as watchdogs for society is being taken to<br />

a new level through investigative journalism<br />

which, as we have seen in South Africa, is<br />

key to uncovering the ills of society across all<br />

sectors. Journalists are also having to redefine<br />

their economic model. With the surplus of<br />

information in the metaverse, the public is<br />

more discerning about what they will pay for.<br />

And as Musk is discovering with the exodus<br />

of advertisers from Twitter, advertisers have<br />

multiple channels to access “the people”.<br />

The parallel between the worlds of financial<br />

planning and journalism is striking. Only<br />

25 years ago, financial planners were the<br />

guardians of all financial information. Today,<br />

my 92-year-old mother laments the fact that if<br />

radio journalist Bruce Whitfield was hosting The<br />

Money Show when she was earning money, she<br />

and my father would have been so much better<br />

informed about their financial decisions. As my<br />

mother is now blind, listening to the radio is<br />

her main window on the world. My guess is she<br />

would be complaining even more about not<br />

being informed if she could access the swathe<br />

of real-time digital information, available from<br />

literally hundreds of thousands of sources, at<br />

the click of a button.<br />

It’s not ideal for long-term<br />

investors to be accessing<br />

their investment values daily.<br />

Recently I asked several groups of financial<br />

planners about the biggest challenges they<br />

face. Controlling the frequency of clients’<br />

access to information came up repeatedly as<br />

a concern. This is understandable. For example,<br />

it’s not ideal for long-term investors to be<br />

accessing their investment values daily, a<br />

recipe for self-sabotaging investor behaviour.<br />

But in the same way that journalists can no<br />

longer control access to information, nor can<br />

financial planners. Journalists have had to<br />

redefine their value offer and their economic<br />

models; financial planners are now being<br />

challenged to do the same. It is imperative<br />

that financial planners take up this challenge<br />

to ensure that clients don’t fall foul of the<br />

suggestion, that at least one Twit is likely to<br />

make, that in this digital age people have the<br />

power to do it for themselves. <br />

16 www.bluechipdigital.co.za

COLUMN<br />

BLUE<br />

CHIP<br />

It’s a Cruel, Crazy, Beautiful World<br />

And it was a cruel, crazy 2022.<br />

Florbela Yates,<br />

Head of Equilibrium<br />

Florbela Yates is the head of<br />

Equilibrium in the Momentum<br />

Metropolitan group.<br />

Equilibrium is an independent<br />

discretionary fund manager<br />

that partners with financial<br />

advisors to help them enable<br />

their advice outcomes.<br />

Equilibrium brings balance to<br />

an advice practice by delivering<br />

services and investment<br />

solutions to help clients achieve<br />

their defined investment goals.<br />

Johnny Clegg was one of my favourite<br />

South African artists, and as I sat down to<br />

write this month’s column, his song “Cruel,<br />

Crazy, Beautiful World” came to mind. The<br />

song depicts how I felt about investment markets<br />

in 2022.<br />

I started the year faced with hope for what<br />

lay ahead, Covid was behind us and the future<br />

seemed bright. South African equities and bonds<br />

were well priced and there seemed to be some<br />

renewed optimism from both investors and asset<br />

managers alike.<br />

On 25 February 2022, it all changed when<br />

Russia invaded Ukraine. More broadly, we started<br />

to see signs of rising global inflation and the<br />

potential for a recession in the US. Suddenly our<br />

beautiful world morphed into a crazy one, filled<br />

with increased volatility, lost hope and pessimism.<br />

Locally, this was exacerbated by Eskom’s issues<br />

and another period of rand weakness.<br />

Uncertainty nearly always results in investors<br />

unable to make any new investment decisions.<br />

For some, it could even lead to disinvesting or<br />

de-risking by moving to perceived risk-free<br />

assets. This time was no different. As volatility<br />

increased, South African investor flows moved<br />

out of balanced funds into fixed income and<br />

money market solutions. This trend continued<br />

for most of 2022. We also saw a decrease in the<br />

demand for offshore investments.<br />

History has taught us that investors wishing<br />

to meet their investment objectives should be<br />

more concerned about “time in the market”<br />

than “timing the market”. By disinvesting when<br />

markets are down, investors lock in those<br />

negative returns. And then they miss out on<br />

the upside when markets once again begin<br />

to perform. In a world where people are living<br />

longer and saving too little, seeing this erosion<br />

of wealth is heartbreaking for financial advisors<br />

and asset managers alike, who are both set on<br />

helping clients to achieve their financial goals.<br />

Despite all the evidence and conversations<br />

pointing to the need to remain invested, many<br />

clients would have ended the year with reduced<br />

investment amounts – ignoring the advice of<br />

their trusted financial advisors and destroying<br />

their personal wealth.<br />

Looking back, it is sad to see clients who chose<br />

to disinvest who are now faced with insufficient<br />

capital for their needs. However, we can help<br />

them by continuing to manage portfolios that<br />

cater for those outcomes. I cannot predict when<br />

the market will turn, but I do know that only<br />

those who stay invested will reap the rewards of<br />

market performance. It is reasonable to say that<br />

the current market offers value, so now might<br />

be the time for clients waiting on the sidelines<br />

to start considering getting back in. For clients<br />

who continue to be cautious, it’s not necessary<br />

to invest everything at once – you could consider<br />

a phasing-in approach.<br />

At Equilibrium, we make it easy for you to<br />

help your clients achieve their goals and stay<br />

invested. We are here to help you get your clients<br />

to their goals with more certainty and less anxiety,<br />

keeping them on their journey to achieving their<br />

investment outcomes. Our purpose is to create<br />

a sustainable investment proposition built with<br />

your clients’ objectives in mind. We know you and<br />

your clients are unique, and investing is personal.<br />

That’s why we offer purposefully built solutions<br />

capable of achieving particular and defined<br />

investment outcomes.<br />

We really do live in a world that is, at times,<br />

crazy or chaotic (2022 is a prime example of this),<br />

it can be cruel (especially to those whose capital<br />

has been eroded or who haven’t saved enough)<br />

but most of the time, it’s beautiful.<br />

At the beginning of a new year, I am filled<br />

with optimism and excitement. Most of all, I am<br />

confident that our partnership with our advisors<br />

will continue to help us get their clients to their<br />

financial goals. I am grateful for the opportunity<br />

to make a difference in people’s journey to<br />

financial freedom and I am blessed to work with a<br />

team of investment professionals who truly care<br />

about making a difference in their clients’ lives.<br />

The best that I can hope for is that logic<br />

prevails, clients stay invested (or start investing if<br />

they haven’t yet) and that together we can build<br />

a better financial future for all. <br />

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

BLUE<br />

CHIP<br />

COLUMN<br />

A NOBLE<br />


Improving the lives of others.<br />

Kobus Kleyn, CFP®, Tax<br />

and Fiduciary Practitioner,<br />

Kainos Wealth<br />

Kobus Kleyn has published<br />

over 200 articles and authored<br />

three books. He is a multiple<br />

award-winning professional<br />

and holds eight memberships<br />

with professional associations.<br />

His most recent awards were<br />

lifetime achievements awards<br />

from the FPI (Harry Brews), The<br />

Million Dollar Round Table (Top<br />

of the Table Life Membership)<br />

and Liberty Group (Life<br />

Membership) in 2021/22.<br />

As financial professionals in a noble<br />

profession, we must change people’s lives<br />

for the better while we, consequently,<br />

improve our lives too.<br />

In the process, we take care of clients and their<br />

families. Taking care of families through their life<br />

cycles and during life-changing events can be<br />

emotional for us as professionals and our staff.<br />

Financial advisors are, in most cases, significantly<br />

more stressed than their clients. According to a<br />

study by the Financial Planning Association, 63%<br />

of clients experience high or moderate stress, while<br />

71% of advisors admit to being stressed.<br />

Stress levels year on year are increasing, with<br />

28% of advisors having more stress than a year ago<br />

and 44% having more than five years ago. The same<br />

questions indicate lower stress levels for clients. The<br />

pandemic has played a significant role in advisor<br />

stress levels, and there is no doubt that advisors’<br />

health was impacted. <strong>Issue</strong>s like global inflation,<br />

market volatility, the new digital virtual world and<br />

the cost of running a practice are not helpful.<br />

When clients or family members pass away or<br />

have a disability or critical illness, it can bring raw<br />

emotions to the front and we, as advisors, have<br />

to take it all in while staying calm and focused on<br />

ensuring we take care of our fiduciary duties in<br />

support of the family when most needed. In the<br />

last 30 months many of us lost more clients, than<br />

during our whole time in our profession.<br />

A close bond will form if you have been a<br />

custodian of a client’s financial plan and servant<br />

for 20 years. If something were to happen to the<br />

client or family, you cannot avoid being impacted<br />

by the emotions. That conversation during an ugly<br />

divorce, a chat about teenage children involved<br />

with drugs or the loss of a family member or job will<br />

bring emotions and stress to you, your client and<br />

your staff. The question that comes to mind is, while<br />

you take care of your clients, who is taking care of<br />

you? What can you do to ensure self-care? If you do<br />

not take care of yourself, you may not be there long<br />

enough to keep taking care of your clients!<br />

Apart from the emotional part of our profession,<br />

many professionals work very long hours in a most<br />

challenging profession to build a sustainable<br />

practice while achieving minimum qualification<br />

and experience, with the most severe financial<br />

constraints and income restrictions. If the stress<br />

and emotional aspects are not controlled, it can be<br />

a disaster waiting to happen with our health and<br />

practice survival. We have to mitigate these danger<br />

areas by working towards a balanced lifestyle.<br />

Fortunately, the pandemic had some silver<br />

linings as well and the major one to me is that it<br />

pulled the digital virtual world forward by five<br />

to 10 years. It did the same with technology and<br />

allowed us to create hybrid practices. Concepts<br />

like #workingfromhome, #workingfromanywhere<br />

and even #workingfromtravel became the new<br />

buzzwords. It is now in our hands as entrepreneurs<br />

to embrace these concepts where possible to<br />

mitigate stress levels by removing some negative<br />

stress items (office politics and traffic) and replacing<br />

them with positives like a tranquil scenery, more<br />

family time, better working hours and efficiency<br />

to name but a few, while reducing overheads and<br />

financial stress on the practice and family.<br />

Find ways and means to take care of yourself<br />

through ongoing initiatives to allow you to keep<br />

taking care of your clients and our profession. It<br />

is important to identify stress issues, control what<br />

can be controlled and do not stress about matters<br />

outside of your control. Once you have recognised<br />

these stresses, you can manage, plan and organise<br />

around them in your practice. It is critical to work<br />

on the whole person concept and always embrace a<br />

balanced lifestyle with a positive attitude. It is about<br />

mindset, mindfulness and the pursuit of happiness<br />

in your and your family’s lives. “If you don’t make<br />

time for your wellness, you will be forced to make<br />

time for your illness” - anonymous. <br />

18 www.bluechipdigital.co.za

The local need for<br />

truly global advice<br />

The need for truly global investment expertise to support the<br />

local advice industry is more pressing than ever, but why?<br />

In August 2022, Discovery Group announced the launch of<br />

Cogence, South Africa’s first “truly global” discretionary fund<br />

manager (DFM) with the ambition of significantly enhancing<br />

the business of wealth creation in the country. Speaking at the<br />

launch, Discovery CEO Adrian Gore contextualised the rationale for<br />

the new business by describing two trends that are fundamentally<br />

transforming the global and local investment industry.<br />

Firstly, investors need – and have been afforded – greater<br />

global reach. However, the global investment landscape is<br />

becoming even more vast, complex, sophisticated and volatile.<br />

Secondly, the global shift to defined-contribution retirement<br />

schemes means that the investment, as well as behavioural and<br />

longevity risk associated with long-term investing has been<br />

transferred almost entirely to the individual.<br />

“Together, these trends create gaps in the local DFM market,<br />

necessitating a ‘step up’ in the burgeoning advice industry,” says<br />

Gore. To best equip financial advisers and their clients to take<br />

advantage of the immense world of opportunity that comes with<br />

offshore investing, the local savings industry stands to benefit<br />

from truly global asset management expertise.<br />

What’s all this global investment interest, anyway?<br />

While there are numerous reasons why individual investors might<br />

want to gain access to global markets, it ultimately boils down<br />

to diversification. By diversifying a portfolio with an appropriate<br />

mix of assets, it is possible to maximise expected returns for<br />

a given level of risk. Naturally, the wider the choice of assets,<br />

funds, management styles, markets, geographies, sectors and<br />

so forth available to construct a diversified portfolio, the better<br />

the theoretical risk/return balance. With South Africa’s market<br />

representing only 1% of the global equity market, it’s easy to see<br />

that constructing a portfolio of purely local assets bucks the logic<br />

of diversification by limiting choice. In fact, the logic for global<br />

diversification holds true, no matter where in the world you might<br />

call home. Beyond optimising for risk and return, investing globally<br />

further provides investors with access to promising industries and<br />

themes that have little or no representation in the local market.<br />

Think big tech, healthcare or automobiles.<br />

With the offshore limit under Regulation 28 of the Pensions<br />

Fund Act having been relaxed to 45%, local investors are afforded<br />

an unprecedented opportunity to take advantage of all the world<br />

has to offer. Says Gore, “No matter how you look at it, a rational<br />

investor would want exposure to global markets.”<br />

Why the need for a “truly global” DFM?<br />

DFMs assist financial advisers in enhancing the investment<br />

outcomes for their clients. In part, they achieve this by performing,<br />

or advising, on the strategic and tactical asset allocation required<br />

to construct diversified portfolios tailored to the individual risk<br />

tolerance and circumstance of the investor. Gore says that while<br />

the rapidly growing DFM industry offers some investment choice,<br />

control, local advice, reporting and modern technology – there is<br />

a “need for change”. The sheer scale of global markets suggests<br />

that for any local business to keep fully abreast of the fund<br />

and asset choices available abroad would be a daunting, if not<br />

impossible, task. While it is possible for a local firm to monitor local<br />

opportunities – the local partner to Cogence, RisCura, conducts<br />

research on every asset manager in the country to inform its<br />

local manager allocations in the Cogence model portfolios – this<br />

scale explodes by orders of magnitude when looking abroad.<br />

Moreover, global markets are volatile and growing increasingly<br />

complex due to the rise of alternative asset classes such as private<br />

credit and equity and hedge funds.<br />

There are few companies in the world that have the analytic<br />

capabilities and global presence required to carry out the<br />

research to develop a comprehensive understanding of the risks<br />

and opportunities that exist in such a sophisticated investment<br />

universe. While some local DFMs have a global footprint, none<br />

previously have had a full global reach.<br />

It is for this reason that Cogence brought the global model<br />

portfolio asset allocation advice of BlackRock, one of the world’s<br />

leading asset managers, along with its leading investment and<br />

risk management technology platform, Aladdin Wealth, to the<br />

service of local advisers. As a truly global asset manager, BlackRock<br />

in September 2022 counted the expertise of over 2 600 investment<br />

professionals focused on research, portfolio management and<br />

trading from its offices in more than 35 countries to administer<br />

more than USD8.5-trillion in assets. That is over 45 times the assets<br />

under administration of the entire South African unit trust industry.<br />

“Cogence will leverage off the full scale of BlackRock’s<br />

investment research and global expertise, which is essential in<br />

such a complex world,” says Kenny Rabson, Discovery Invest CEO.<br />

“BlackRock is uniquely positioned to help clients navigate this<br />

complex global environment and evolve client portfolios to aim<br />

to maximise the success of future outcomes,” believes Rabson.

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FPI | Financial Planner of the Year<br />

Meet the 2022 FPI<br />

Financial Planner of the Year<br />

<strong>Blue</strong> <strong>Chip</strong> speaks to Palesa Dube, CFP®, the 2022 winner<br />

of the Financial Planner of the Year Award.<br />

Palesa Dube, CFP®, Director and Wealth Manager, Wealth Creed

FPI | Financial Planner of the Year<br />

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The Financial Planner of the Year Award, launched in 2000, is<br />

the most prestigious award in the industry. It recognises South<br />

Africa’s top CERTIFIED FINANCIAL PLANNER® – a first-class<br />

financial planner who demonstrates exceptional service and<br />

impeccable ethics in client service and who brings innovation, flawless<br />

skill as well as all-round excellence to the profession.<br />

Palesa Dube, CFP®, director at Wealth Creed, is a seasoned<br />

professional and practising member of the FPI with 18 years of<br />

industry-related experience. She exudes a passion for wealth<br />

management and has expertise in investment and retirement<br />

planning, estate as well as legacy planning for high-net-worth<br />

individuals and corporate clients.<br />

When Dube looks back to the beginning of her career in the<br />

early 2000s, she realises how limited a horizon her younger eyes<br />

could see. Her ambition was to build something that had value. She<br />

believes that the profession allows her to do just that as it offers the<br />

opportunity to help individuals and families fulfil their financial and<br />

legacy aspirations.<br />

Palesa, well done! After a gruelling competition, you have been<br />

named the FPI Financial Planner of the Year for 2022. What does<br />

winning the award mean to you?<br />

Thank you very much. Stepping out of the corporate environment<br />

to start an independent advisory firm with little to no backing was<br />

a massive leap of faith. And to keep going despite the challenges<br />

the environment posed, especially in the last two to three years,<br />

truly was an ask. This award makes the journey so far entirely worth<br />

it. It is testament firstly that there is a place and need for our clientcentric<br />

approach to wealth management. Secondly, it gives us great<br />

confidence that we are building a formidable practice [Wealth<br />

Creed] that firmly holds its ground in the market and which our<br />

current and prospective clients can be proud to be associated with.<br />

What was your motivation for entering the Financial Planner of<br />

the Year Award?<br />

I saw the competition as an ideal platform to showcase the<br />

experience and expertise that exist in our profession, more<br />

especially of black and female financial planning professionals. The<br />

profession thankfully looks much more diverse now than what it was<br />

when I began my career, but there’s still a long way to go. It was an<br />

opportune time to shine a spotlight on the strides we’ve been able<br />

to achieve so far. My hope is that my journey and success so far will<br />

encourage others to pursue a career in financial planning.<br />

Besides winning the FPI award, what has been the highlight of<br />

your career?<br />

I am especially proud of the business we are building. One of the<br />

pivotal reasons for us starting an independent wealth management<br />

firm was so that we would be in a position to provide holistic<br />

financial planning services of a high standard to a broader base of<br />

the community, where our eye would remain solely on improving<br />

the lives of our clients. It has been truly gratifying to see that vision<br />

take shape and grow in the way that it is.<br />

Our profession affords us the<br />

opportunity to help clients achieve<br />

their highest and most important<br />

financial and life aspirations.<br />

What do you consider to be the most important trait of an<br />

accomplished financial advisor?<br />

You must be able to put the client first in all that you do. Our<br />

profession affords us the opportunity to help clients achieve their<br />

highest and most important financial and life aspirations. In my<br />

experience, clients want the assurance and comfort that their<br />

advisor is attuned to their goals and always has their best interests<br />

at heart. In return they will stay committed to the solutions you<br />

advise, and, in the process, all our interests can be met without<br />

conflict. It is also important that the advisor is a professional<br />

member of FPI. As we know, FPI is the standard setter for financial<br />

planning and professional financial advice in South Africa.<br />

What changes would you like to see in the profession?<br />

I believe that there is an important role that independent financial<br />

advisory firms can play in the market, but they need to be better<br />

supported by the various industry bodies through measures such<br />

as development programmes that cater for the progressive life<br />

stages of these enterprises. Often the need for growing financial<br />

service providers (FSPs) is working capital or funding to assist in<br />

scaling the business. The funding models available need to speak<br />

to this and be flexible.<br />

As a profession, I think we need to take pride in the strides<br />

we have made in the industry over the years. When I started my<br />

career 18 years ago, the conversation was around moving from<br />

a product-led to a client-centric industry with professionals that<br />

adhere to high ethical standards and use their technical skills to<br />

positively impact the lives of the clients we serve.<br />

The CFP® designation as well as the more recent REGISTERED<br />


designations are a clear indication of our commitment to further<br />

professionalising financial planning. The ball is now in our court<br />

as practising members, tied and independent, to increase the<br />

prominence of these designations by proudly associating with<br />

them and living up to the high standards required of us by our<br />

peers and importantly the broader community we serve. It is also<br />

not who you work for (tied or independent) but about adhering<br />

to the professional standard and always putting your clients’<br />

interests, first.<br />

As this year’s FPI ambassador, how will you use this platform to<br />

motivate change?<br />

Part of FPI’s strategic objectives for the coming year include driving<br />

growth in the number of new graduate entrants into the financial<br />

planning profession and seeing them pursuing the three South<br />

www.bluechipdigital.co.za<br />


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FPI | Financial Planner of the Year<br />

African Qualifications Authority (SAQA) registered designations<br />

it offers. They are also focused on encouraging more experienced<br />

members to reinstate their membership.<br />

My efforts therefore will be in support of these objectives<br />

through mentoring and other activities so that the next<br />

generation see financial planning as a profession of choice. We<br />

also need to place emphasis on the challenges that cause more<br />

experienced planners to leave the profession which among<br />

others is an environment that doesn’t adequately support<br />

entrepreneurship in the sector.<br />

You feel strongly about making financial planning more<br />

accessible to a broader spectrum of the community. Please<br />

share your thoughts on this. How should the profession go<br />

about doing this?<br />

Financial inclusion, consumer protection and financial education<br />

are some of the imperatives that the Financial Sector Conduct<br />

Authority and National Treasury are tasked with, which they<br />

address through initiatives such as Money Smart Week SA’s annual<br />

campaigns. Furthermore, the Financial Sector Codes and current<br />

retirement fund legislation also place responsibility on those<br />

22 www.bluechipdigital.co.za

FPI | Financial Planner of the Year<br />

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industry players to educate and empower the markets they serve<br />

so that consumers can make more informed financial decisions for<br />

themselves. Being in the advisory space, we know that there is a gap<br />

between consumers understanding the theoretical aspects of finances<br />

and implementing the knowledge in a manner that best serves them.<br />

This gap can be neatly bridged by incorporating an advice process and<br />

will ultimately improve consumer outcomes. I believe our profession<br />

is well positioned to support such initiatives in a manner that ensures<br />

that all interests are appropriately aligned.<br />

More than anything, it has given our practice the<br />

confidence to continue on our growth journey with the<br />

assurance that our value proposition and approach to<br />

financial planning is sound. <br />

As a profession, I think we need to<br />

take pride in the strides we have<br />

made in the industry over the years.<br />

Please speak to us about the importance of representation in the<br />

financial planning profession, particularly that of females and those<br />

of colour.<br />

The importance of diversity and inclusion for the sustainability of any<br />

industry is well established. Companies thrive when they embrace<br />

different races, cultures and backgrounds because this better<br />

positions them to respond to the needs of their clients. Ethically and<br />

morally, it is simply the right thing to do. Finances are a very personal<br />

matter and inclusion of female professionals in the room can help<br />

the financial services industrydevelop products and solutions that<br />

truly speak to the needs of this growing segment in a manner they<br />

want to be addressed.<br />

This award makes the journey<br />

so far entirely worth it.<br />

How should the profession improve clients’ experience of financial<br />

planning and ultimately their financial planning outcomes?<br />

I believe we do well if we consistently try to improve our clients’<br />

experience and remove the proverbial “rubs” when it comes to<br />

managing wealth. Our profession remains fragmented, resulting in<br />

clients typically having to consult a number of professionals in order<br />

to address all aspects of their financial and risk management.<br />

To address this, we need to collaborate with other professionals<br />

in aspects we are not licensed to give advice or if another skill set<br />

is required. I like to use the example of a conductor in an orchestra.<br />

We increase our value in the client’s life if we view ourselves as a<br />

conductor in managing wealth and demonstrate to them how all these<br />

aspects from financial, legal, risk and tax come together in harmony to<br />

solve their most pressing issues.<br />

Please share a message of motivation for those that have considered<br />

competing for the FPI Financial Planner of the Year Award.<br />

I certainly encourage you to enter the competition because if<br />

anything it gives you the opportunity to revisit your financial<br />

planning process and assess it against the benchmark set by FPI.<br />

We have incorporated those learnings in our processes, reporting<br />

and documentation and can attest to how this has further elevated<br />

the standard of our work.<br />


2019 – Present: Director and Wealth Manager | Wealth Creed<br />

2015-2018: Wealth Manager | Absa Wealth<br />

2005-2014: Advisory Partner | Citadel<br />

2004-2005: Graduate Financial Planner | Absa PFS<br />


2022: Advanced Diploma in Trust and Estate Administration<br />

[University of the Free State]<br />


2007: Post Graduate Diploma in Financial Planning [University<br />

of the Free State]<br />

2003: BCom (Investment Management) [University<br />

of Johannesburg]<br />

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A focus on the future<br />

of investing<br />

If we had a time machine, we could go back in time and once<br />

again experience what the investment industry was like just<br />

a few years ago to realise how things have changed.<br />

Jeanette Marais, CEO, Momentum Investments and Deputy CEO, Momentum Metropolitan Holdings


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In 1995, there were less than 40 unit trusts (collective<br />

investment schemes) in South Africa when we launched<br />

Momentum Wealth, South Africa’s first insurer-owned Linked<br />

Investment Service Provider (LISP). Today, there are over 2 000<br />

unit trusts in South Africa.<br />

The industry is characterised by immense complexity and<br />

rapid change. The number and sophistication of industry players<br />

has increased, we are bombarded by product choice and digital<br />

transformation is shaping how we need to think about the future.<br />

When we speak about investing of the future, words like<br />

“megatrends” and “digital disruption” come to mind. We can<br />

analyse how these trends are disrupting the industry, but do we<br />

understand how to disrupt our own value propositions?<br />

Niels Bohr, the Nobel laureate in Physics and father of the<br />

atomic model, once said: “Prediction is very difficult, especially if<br />

it’s about the future!”<br />

None of us has a crystal ball, making the future a mysterious<br />

but exciting destination. What we can do, is position ourselves<br />

according to what we know and disrupt ourselves, rather than<br />

be disrupted.<br />

In my opinion, the key lies in partnerships. With increasing<br />

complexity, we need to focus on our speciality and niche and find<br />

the right partners to journey towards success with.<br />


A natural place to begin is with the client of the future.<br />

I often quote a study done by Morningstar in 2019, where<br />

researchers gave investors a list of 15 attributes and asked them<br />

to rank them according to what was most important for them in<br />

their financial advisor. They also gave the same list to financial<br />

advisors and asked them to rank the attributes according to what<br />

they thought investors valued.<br />

The first disconnect was with the attribute of “help me reach<br />

my financial goals”. Investors ranked this as their top priority, while<br />

financial advisors thought that “understand me and my unique<br />

needs” would have been their top priority. Investors ranked “help<br />

me maximise my returns” as the fourth-most important, while<br />

financial advisors ranked this only 14th. Clearly, there is some work<br />

to be done to understand the client of the future before we can<br />

position ourselves to meet them.<br />

The client of the future also wants to be met in a different way.<br />

According to the Millennial Disruption Index (MDI), over 70% of<br />

millennials said they would be more excited about a new offering<br />

in financial services from the likes of Google, Amazon, Apple and<br />

PayPal than from their own bank.<br />

Changing demands of clients, the rise of the self-help investor<br />

and advanced digital capabilities are pointing to a future where<br />

our engagement with our clients will be very different. We need to<br />

give clients what they want, not what we think they want.<br />


Rising complexity means that success in the future will not be a<br />

one-man game. The financial advisor, investment manager and<br />

With increasing complexity, we<br />

need to focus on our speciality and<br />

niche and find the right partners<br />

to journey towards success with.<br />

investment platform of the future must partner with each other<br />

and disrupt their value propositions to meet the needs of our<br />

clients. In my mind, I see this partnership as a triangle between<br />

financial advisors, investment managers and investment platforms,<br />

with the client at the centre.<br />

Financial advisors need to partner with other industry players<br />

to give their clients the best outcomes. One such benefit can be<br />

seen in partnering with a discretionary fund manager (DFM), such<br />

as Equilibrium by Momentum.<br />

According to a study conducted by Rathbones in the United<br />

Kingdom in 2019, advisors who partnered with a DFM experienced<br />

several benefits. For example, more than 70% of advisors saw<br />

an increase in client portfolio performance and 66% quoted<br />

improvements in their clients’ risk/return profile. On top of<br />

this, about 60% saw an increase in revenues from their existing<br />

clients because they could devote their energy to building those<br />

relationships and delivering financial advice. Partnering with a<br />

DFM frees up your capacity to focus on your value adds.<br />

On our own investment platform, Momentum Wealth, we<br />

analysed to determine the internal rate of return (IRR) that advisors<br />

achieved for our joint clients over the last 10 years, ending in<br />

December 2021. Over the period, the average yearly inflation rate<br />

(CPI) was 5.03%. A shocking 14% of financial advisors returned<br />

less than CPI over the period, while 61% returned CPI+2% or less.<br />

The worrying factor is what happens to clients who need to draw<br />

5% of their income from their living annuities, while protecting<br />

their capital. Only 12% of advisors would have had clients who<br />

could achieve this.<br />

Partnering with a DFM such as Equilibrium, which specialises<br />

in bringing balance into an advisor’s practice, can greatly enhance<br />

a client’s outcomes with access to diversified portfolios and<br />

professional investment management, while also serving as a<br />

business partner, so that advisors can spend more time with their<br />

clients and grow their practices.<br />


There is also a strong case to adopt digital. The 2019 US Advisor<br />

Metrics report from Cerulli Associates showed that “heavy<br />

technology” advisory firms spend 34% less time resolving client<br />

service issues and have 24% more time for practice management<br />

activities, highlighting the effectiveness of technology for<br />

increasing advisors’ ability to focus on the most important parts<br />

of growing their business. Heavy technology-using advisory firms<br />

also report an average of double the assets under management<br />

of their “light” technology-using counterparts.<br />

www.bluechipdigital.co.za 27

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Do we understand how to disrupt<br />

our own value propositions?<br />

Clients are demanding this digital world. In fact, a report by<br />

McKinsey issued in June 2015 already showed that at the time of the<br />

report, 40-45% of affluent consumers who switched their primary<br />

wealth management firm in the past 24 months moved to a direct,<br />

digitally led firm.<br />

We believe in the value of financial advice and a financial<br />

advisor who digitally transforms their practice and partners with<br />

an investment platform to integrate into their back office not only<br />

frees up their time to spend time with clients, but also provides a<br />

more seamless and superior personal service to clients. With us,<br />

investing is personal and our investment platform (Momentum<br />

Wealth) is embarking on a digital transformation journey so that<br />

we can empower financial advisors with the tools and solutions<br />

to help meet their clients’ financial needs and help them achieve<br />

their goals effectively.<br />

If you ask the question of what the future of investing looks like,<br />

you will likely get many different answers.<br />

What we do know is that clients are changing and digital<br />

transformation is non-negotiable. The way to navigate this<br />

changing world is to partner with specialists in those things<br />

that we are not. Warren Buffet said it perfectly: “Should you<br />

find yourself in a chronically leaking boat, energy devoted to<br />

changing vessels is likely to be more productive than energy<br />

devoted to patching leaks.” <br />

Momentum Wealth (Pty) Ltd (FSP 657) is an authorised financial services provider and part of Momentum Metropolitan Life Limited. Equilibrium Investment Management (Pty) Ltd (Equilibrium) (Reg<br />

no. 2007/018275/07) is an authorised financial services provider (FSP32726) and part of Momentum Metropolitan Holdings Limited, rated B-BBEE level 1. Momentum Investments is part of Momentum<br />

Metropolitan Life Limited, an authorised financial services (FSP 6406) and registered credit (NCRCP173) provider.<br />

28 www.bluechipdigital.co.za

INVESTMENT | Responsible investing<br />

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ESG: hype or pathway<br />

to a better future?<br />

There is hardly a conference or investment discussion lately<br />

that does not put environmental, social and governance<br />

(ESG) factors front and centre. There is a myriad of good<br />

reasons why this is the case, although I do sometimes<br />

share the view that the ESG discussion is driven more by the<br />

marketing agenda than from an investment perspective.<br />

As a broad basket of principles, I am totally on board with the<br />

intent of ESG. Environmental issues are real, and we need to address<br />

them or we will gift our children a future of turbulent weather and<br />

a planet that is more uncomfortable to live on than it is today.<br />

Looking at social factors, we cannot have a stable society if there<br />

are glaring inequalities between people.<br />

One of the future challenges will be intergenerational wealth<br />

transfer as the younger generation will have fewer opportunities<br />

compared to their parents in a more competitive and winnertakes-all<br />

environment. Governance and the proper functioning of<br />

business and ultimately markets is a key factor for the accumulation<br />

and growth of wealth.<br />

How should investors think about<br />

ESG and differentiate between the<br />

hype and real-world impacts?<br />

All participants need to get their fair share and bad governance<br />

allows different sets of stakeholders to get a disproportionate share<br />

of economic benefits, either through preference mechanisms or,<br />

in the worst-case scenario, through corruption.<br />

One of the challenges of ESG is that the three different<br />

components sometimes do not align and in other cases pull in<br />

opposite directions. As an example, addressing environmental<br />

concerns can have detrimental effects on the social factor. The<br />

transitioning away from coal can lead to job losses in areas that<br />

are dependent on the business and power stations that rely on<br />

coal as an energy source.<br />

How should investors think about ESG and differentiate between<br />

the hype and real-world impacts? To me, the obvious test is whether<br />

there is evident intent and transparency. A credible approach to<br />

ESG needs to be deliberate with a clear-cut approach and palpable<br />

outcomes. These outcomes and evidence should be shared openly<br />

and transparently. It is also important to recognise that there are<br />

many trade-offs involved and when evaluating whether the ESG<br />

approach undertaken by an investment manager is credible, it<br />

must be apparent that these trade-offs and conflicts need to be<br />

managed carefully.<br />

At Momentum Investments, we follow an integrated approach<br />

and consider how best and practically to apply ESG in different<br />

asset classes and investment vehicles. We have a climate change<br />

policy that incorporates a just transition, which recognises that<br />

action on environmental issues needs to consider the social<br />

impact, as well as incorporate the concept of fair share, meaning<br />

the main contributors to carbon emissions – the developed world<br />

– need to take the brunt of actions to address climate change.<br />

Fair share is not only a philosophical approach but also a practical<br />

one – the developed world has financial resources that are just<br />

not available in the emerging world.<br />

We therefore believe the right approach is a nuanced<br />

approach. We invest in renewable energy projects to address<br />

environmental issues but also recognise that we need to invest<br />

in Eskom bonds (government guaranteed of course), because<br />

energy security is important and currently one of the biggest<br />

threats to economic growth.<br />

Can adoption of ESG drive positive<br />

change and shape our future world? In<br />

my view undoubtedly so, but it needs<br />

to be a considered approach.<br />

At Momentum Investments, we drive<br />

both intentionality and transparency<br />

and openly share the progress<br />

(and pitfalls) that we have made in<br />

integrating ESG. For more information,<br />

visit our Responsible Investing page on<br />

momentum.co.za.<br />

At Momentum Investments, we take<br />

our role of managing clients’ money<br />

very seriously. We continuously assess<br />

what the best approaches and practices<br />

are to prudently manage clients’ capital.<br />

Through sustainable investment<br />

practices we can deliver real results<br />

for clients that ultimately benefit all<br />

stakeholders, because with us, investing<br />

is personal. <br />

Mike Adsetts, Acting<br />

Chief Investment Officer,<br />

Momentum Investments<br />

Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services (FSP6406) and registered credit (NCRCP173) provider.<br />

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Why optimising tax incentives<br />

is a great way to create wealth<br />

Almost every financial decision your clients make has a tax implication.<br />

Just as fuel efficiency is one of the important aspects to<br />

consider when buying a car, so should tax be an important<br />

consideration for any financial plan and investment strategy.<br />

With the smart use of tax-incentivised investment products,<br />

your clients can create significant wealth with help from the taxman.<br />

Tax can be complicated and confusing and for most people<br />

it is a sensitive and personal subject they choose to avoid. But<br />

with a few smart moves, especially when planning for financial<br />

independence or retirement, they can benefit significantly from<br />

tax incentives and increase the probability of them achieving their<br />

investment goals.<br />

They can use two tax-efficient ways to create wealth over time:<br />

a retirement annuity and a tax-free investment (also known as a<br />

tax-free savings account). If they are already using one or both,<br />

they can invest more into them, within the limits, to make full use<br />

of the available tax opportunities.<br />


Every tax year a person can claim a tax deduction for the money<br />

invested in a retirement fund. The tax deduction is limited to 27.5%<br />

of their taxable income or remuneration before any deductions<br />

are made, whichever is higher, subject to a maximum of R350 000.<br />

They can do this whether they are self-employed or earning<br />

a salary but not contributing the full amount to their employer’s<br />

retirement fund.<br />

If clients have not yet used the full tax deduction available<br />

to them for the tax year, they can make an additional lump sum<br />

payment to their retirement annuity before the tax year ends on<br />

28 February 2023.<br />

In addition to the tax break clients get on the money they invest,<br />

they also enjoy tax-free growth in their retirement annuity – they<br />

don’t pay income tax, dividends tax or capital gains tax while the<br />

money is growing.<br />

But, some people say, when you retire you will pay tax on the<br />

income. This is true, but after the age of 65 clients could pay less<br />

tax because of lower income levels in retirement, higher rebates<br />

and higher deductions for medical expenses.<br />


Although clients don’t get a tax deduction for money they invest<br />

in a tax-free investment, they still enjoy tax-free growth. And they<br />

won’t pay any tax on the proceeds when they decide to take money<br />

out of the investment.<br />

Since the 2021 tax year, clients can invest up to R36 000 every<br />

tax year (R3 000 per month) in a tax-free investment, limited<br />

to R500 000 over their lifetime. Before this, the yearly limit was<br />

R33 000. Government may adjust these limits from time to time.<br />

The illustration (above) shows the significant effect that tax-free<br />

growth, coupled with the wonder of compounding, could have<br />

on an investment over the longer term. Although a tax-free<br />

investment gives clients the opportunity to withdraw money at<br />

any time, the benefit of leaving the money to grow for as long as<br />

possible should outweigh the urge to withdraw money unless it<br />

is for an extreme financial emergency.<br />


Investing is personal and each client’s<br />

circumstances unique. The secret is to make<br />

sure that clients use these tax incentives<br />

optimally according to their specific situation<br />

every year and consistently over time. By<br />

doing this they can reduce the effect of tax<br />

on their investments and increase the growth<br />

potential on their journey to success. Using the<br />

Retirement Annuity Option and the Flexible<br />

Tax-free Option on the Momentum Wealth local<br />

platform can help you implement tax-efficient<br />

investment solutions for your clients so that<br />

they can reap the full benefits of tax incentives<br />

available to all taxpayers every year. <br />

Pierre Jean Marais,<br />

Retail Marketing,<br />

Momentum Investments<br />

Momentum Wealth (Pty) Ltd (FSP 657) is an authorised financial services provider and part of Momentum Metropolitan Life Limited. Momentum Investments is part of Momentum Metropolitan Life<br />

Limited, an authorised financial services (FSP6406) and registered credit (NCRCP173) provider.

INVESTMENT | Thematic investing<br />

BLUE<br />

CHIP<br />

The dawn of<br />

thematic investing<br />

We live in an increasingly complex, connected and<br />

ever-changing world, where unprecedented digital<br />

innovations are disrupting entire industries and at a<br />

time when we are facing major human and climate<br />

challenges to build the world of tomorrow for future generations.<br />

It is also changing the way we look at investing. Thematic<br />

investing has become progressively more popular and focuses on<br />

the future investment landscape, targeting economic development<br />

and trends that will shape the future. It is a holistic solution that<br />

will not only focus on a single event or area of development but<br />

will capture a wide variety of themes that may affect the world.<br />

Disruptive innovations, ideas and societal changes are embraced<br />

in today’s world, and this is creating opportunities alongside<br />

it. Technological innovations, demographic and social trends,<br />

urbanisation and environmental challenges are here to stay, and<br />

the importance thereof is continuously being forced into the<br />

spotlight. These developments converge into larger themes that<br />

will endure over the longer term.<br />

All these themes create unique investment opportunities that<br />

will persist as disruptive ideas and technological advancements<br />

are rapidly reshaping the world we live in. However, not all themes<br />

are created equal. Some are structural and long term in nature<br />

and some are short-term anomalies but every change represents<br />

an investment opportunity.<br />

Thematic investing encapsulates the art of identifying these<br />

opportunities, based on personal experiences and aligning<br />

investments with beliefs and ideas. The Momentum Future<br />

Trends Fund is premised on a top-down investment approach<br />

that helps investors gain exposure to trends and ideas through<br />

a portfolio of companies expected to benefit most from such<br />

transformative and structural changes.<br />

Our unique and innovative investment approach favours themes<br />

where the fundamentals are not only about one specific sector.<br />

We believe six mega-trends will shape the future:<br />

• Climate change<br />

• Technological innovation<br />

• Demographic change<br />

• Lifestyle<br />

• Space exploration<br />

• Shifting economic power<br />

Diversification is important, thereby reducing the risk should a<br />

certain trend fail to materialise.<br />

We believe that an active strategy is the way to implement<br />

and manage the Momentum Future Trends Fund. The underlying<br />

themes will be executed through specialist mutual funds or<br />

exchange traded funds (ETFs). This ensures that we have control<br />

over the risk and allocation to themes.<br />

The Momentum Future Trends Fund is suited for investors<br />

with a long-term investment horizon and consenting to a high<br />

level of risk, while seeking to diversify<br />

their portfolios. The fund provides<br />

compelling investment opportunities<br />

for those willing to take a different<br />

perspective and concentrate on the<br />

big picture. In a broader multi-asset<br />

investment portfolio, this fund will<br />

give investors access to future trends<br />

that will shape the future of the world<br />

we live in, giving them access to<br />

higher-yielding growth asset classes<br />

that focus on future innovation.<br />

With us, investing is personal.<br />

With the Momentum Future Trends<br />

Fund, clients not only can grow their<br />

capital over the long term, but it also<br />

gives them the opportunity to help<br />

fund the way the future will shape<br />

and unfold. <br />

For more information go to<br />

momentum.co.za/MCI or speak to<br />

your financial advisor.<br />

Eugene Botha, Deputy Chief<br />

Investment Officer, Momentum<br />

Investments<br />

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

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

is the trustee of the scheme. CISs are generally medium to long-term investments. The value of participatory interests may go down as well as up and past performance is not necessarily a guide to the<br />

future. The terms and conditions, a schedule of fees, charges and maximum commissions and additional risks are available on the minimum disclosure document (MDD) and quarterly investor report<br />

(QIR) for each portfolio which is available on www.momentum.co.za/mci. All performance figures are net of fees and represents the A class in each portfolio. Momentum Investments is part of Momentum<br />

Metropolitan Life Limited, an authorised financial services (FSP6406) and registered credit (NCRCP173) provider.<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

INVESTMENT | Cryptocurrency<br />


as an investment<br />

Cryptocurrencies are sweeping the world in terms of news headlines, but the question<br />

remains in terms of the suitability of the asset class other than pure speculation.<br />

There are two key questions that investors face to determine the<br />

suitability of including crypto assets in an investment portfolio:<br />

1. What are the requirements in terms of credit intermediation,<br />

regulation and infrastructure as well as cost?<br />

2. More importantly, what should the role be of crypto assets<br />

within a portfolio?<br />

These questions are addressed by looking at a couple of specific<br />

investment factors, risks and market dynamics.<br />


The investment case can simplistically be broken down into<br />

relevance and risks on the one side and then return expectations<br />

and diversification on the other.<br />

Rates of return are measured by an increase in the asset<br />

price and the interest paid or the dividend stream on a specific<br />

investment. The only source of return for a crypto asset is to<br />

increase in price. Given the nature of the change in price over<br />

time, driven by pure supply and demand and perhaps other<br />

speculative views, crypto assets do have the ability to behave<br />

very differently to traditional asset classes and perhaps provide<br />

a hedge against the volatility of global monetary systems and<br />

therefore a source of diversification.<br />

Although cryptocurrencies are permitted in most of the<br />

world’s major economies, there are still a range of risks, in<br />

addition to volatile market price movements, that should raise<br />

concerns for inclusion in an investment portfolio. These risks<br />

include security risks, valuation risk and uncertainty around the<br />

regulatory future.<br />

Besides these risks, there needs to be an internationally trusted<br />

marketplace for institutional-only cryptocurrency trading.<br />

However, the most interesting development in cryptocurrencies<br />

is in the world of investment fund management. Specialist<br />

cryptocurrency funds have been created which seek to buy and sell<br />

in the same way one might with equities or other securities. The<br />

expectation for this market is to grow quickly as people seek noncorrelated<br />

alternative investments.<br />

There are several possibilities to explore over time as risks<br />

subside and more visibility around regulations transpires:<br />

• Direct investments: these can be risky, however, especially<br />

when investing in larger amounts, given storage and<br />

execution risks.<br />

• Futures: available if one has the expertise to trade them.<br />

• Passive crypto funds: through exchange-traded products, for<br />

example. These offer capacity but are a blunt instrument. They<br />

have concentration risk (because of the dominance, for the<br />

time being, of Bitcoin).<br />

• Active hedge funds: exploitation of the inefficiencies<br />

presented by the market.<br />

• Venture capital funds: these can offer purer forms of Digital<br />

Ledger Technology (DLT) exposure, but often have long lockups.<br />

Cryptocurrency as an investment option would greatly increase<br />

fiduciary risk and liability. Traditional valuation methods for<br />

determining what a stock is worth do not necessarily work when<br />

evaluating crypto assets. Crypto volatility requires investors to be<br />

patient over the long term and during significant up and down<br />

swings, which could result in poor investment outcomes if you<br />

were to exit the sector too quickly.<br />

An improved infrastructure is needed to accommodate<br />

investments and encourage more widespread acceptance of<br />

cryptocurrency. Besides that, potential regulatory and legal<br />

hurdles create market hesitation to use cryptocurrency. Until<br />

a properly regulated and accountable fund exists, based in a<br />

respectable financial territory and with strong custodianship<br />

arrangements in place, we must tread with caution.<br />

At Momentum Investments, we relentlessly pursue and<br />

interrogate ideas and opportunities to best deliver on our<br />

outcome-based investing philosophy. With<br />

us, investing is personal, and we seek those<br />

investment ideas and opportunities that will<br />

allow our portfolios to meet clients’ long-term<br />

expectations and objectives as prudently and<br />

robustly as possible.<br />

While the simple yet profound wisdom<br />

of Warren Buffett – “If you don’t understand<br />

it, don’t invest in it” – provides the answer,<br />

some investors may still feel compelled. It<br />

is important to remember that the crypto<br />

space can be highly volatile. Even though<br />

cryptocurrencies have been declared as a<br />

financial product under the Financial Advisory<br />

and Intermediary Services Act of 2002 there<br />

is still a lot of uncertainty regarding the<br />

regulation of these instruments and therefore<br />

makes investing in them a risky proposition. <br />

Eugene Botha, Deputy<br />

Chief Investment Officer,<br />

Momentum Investments<br />

Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider (FSP 6406).

INVESTMENT | Collectables<br />

BLUE<br />

CHIP<br />

Why do people invest?<br />

Why do they save?<br />

Many people invest to fulfill their wants and desires.<br />

Every single person on the planet, no matter their<br />

background, race or circumstances, has dreams. And<br />

a dream is often molded by the tangible (somewhat<br />

materialistic) items money can buy.<br />

Consumerism is a term that came about in the early 1900s and<br />

today it is defined as the protection or promotion of the interests<br />

of consumers. I would change this definition and rather say, it<br />

is people that buy products and services that are created for<br />

people. And today we live in a world dominated by consumerism.<br />

The largest companies in the world like Apple, Amazon and Tesla<br />

all provide products to consumers like you and me. And if their<br />

size is anything to go by it tells us that the dominant theme is that<br />

people like us are buying items that fulfill our desires. It’s no longer<br />

just an iPhone but a watch and an iPad in one. It’s no longer just a<br />

car but one that drives itself and is focused on the sustainability of<br />

our planet. This is the essence of consumerism today.<br />

The next logical question is: can some companies be perceived<br />

as more desirable than others? The simple answer is, yes. Take the<br />

wonderful world of luxury watches. Recently Swatch partnered with<br />

Omega for a collaboration that celebrated Omega’s Speedmaster.<br />

Swatch has always been recognised as a hip and happening brand.<br />

Through a smart marketing brand-play it had people queuing for<br />

hours trying to get their hands on this piece. On the resale market,<br />

some of them were even going for quadruple the original sales<br />

price. This is a prime example of our world of consumerism.<br />

People save for months and years to buy an IWC or Jaeger-<br />

LeCoultre (both super-luxurious watch brands) and luxury<br />

sportscars like Ferrari or Lamborghini. These individuals have an<br />

acute understanding of how to get there to realise the dream.<br />

The recipe for success begins with having a financial plan and<br />

then finding a place to invest or save. For clients to realise their<br />

dreams, the gap to earning capacity and the price of the item is<br />

often too wide to save the cash under the mattress and hope for<br />

the best. There are two very important contributors to investing.<br />

Firstly, the return earned on a fund and secondly, having these<br />

returns reinvested month after month to build on the money<br />

already invested. This is how investors can make the eighth<br />

wonder of the world – compound growth – work for them.<br />

So how does the magic of compounding work? Using a<br />

simple example: if your client put R100 000 under their mattress<br />

five years ago they would still have the same amount today,<br />

but thanks to inflation that money is<br />

worth less. But if they invested in an<br />

established equity fund five years ago<br />

and this fund delivered a yearly return<br />

of 7% then the client would have R141<br />

477.82 or just over 41% growth based<br />

on quarterly compounding. If you<br />

chose not to reinvest and take your<br />

growth out every year your client would<br />

have received R35 000 – the magic of<br />

compounding allowed the investment<br />

to grow by an extra R6 477.82. Thanks to<br />

compounding, you get an 6.48% growth<br />

on your investment and bringing those<br />

dreams a little closer. With us, investing is<br />

personal. We understand that individuals<br />

are unique and have different needs<br />

(and dreams) and why it is important to<br />

partner with the right people to achieve<br />

your investment goals. <br />

For more information go to<br />

momentum.co.za/MCI.<br />

Kapil Joshi, Head of<br />

Momentum Collective<br />

Investments<br />

The calculation above is intended only as guideline, always speak to a financial advisor for financial advice. Momentum Collective Investments (RF) (Pty) Ltd (the “Manager”), registration number<br />

1987/004287/07, is authorised in terms of the Collective Investment Schemes Control Act, No 45 of 2002 to administer Collective Investment Schemes (CIS) in Securities. The Manager is the manager<br />

of the Momentum Collective Investments Scheme. Standard Bank of South Africa Limited, registration number 1962/000738/06, is the trustee of the scheme. CISs are generally medium to longterm<br />

investments. The value of participatory interests may go down as well as up and past performance is not necessarily a guide to the future. The terms and conditions, a schedule of fees, charges<br />

and maximum commissions as well as additional risks are available on the minimum disclosure document (MDD) and quarterly investor report (QIR) for each portfolio which is available on www.<br />

momentum.co.za/mci. All performance figures are net of fees and represents the A class in each portfolio.<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

INVESTMENT | Trends<br />

The Gale of<br />

Creative Destruction<br />

We may look back on the year 2022 as the formative<br />

period for what drives investment returns over the<br />

next decade and longer. While it may feel like a period<br />

of wealth destruction, in fact it may be the birth of the<br />

next phase of wealth creation.<br />

This concept of “creative destruction” is not new. In Hindu<br />

mythology, the three Gods Brahma the Creator, Vishnu the Preserver<br />

and Shiva the Destroyer (below left) work in a perpetual cycle with<br />

the belief that they need to coexist so that balance is maintained<br />

between old and new.<br />

Similarly, Joseph Schumpeter (below centre) spoke about this<br />

concept as a natural process of evolution, where old systems need<br />

to die to be replaced with new ones.<br />

Karl Marx (below right) applied it to finance and investments,<br />

however: “The idea of creative destruction or annihilation implies<br />

not only that capitalism destroys and reconfigures previous<br />

economic orders, but also that it must ceaselessly devalue existing<br />

wealth (whether through war, dereliction, or regular and periodic<br />

economic crises) in order to clear the ground for the creation<br />

of new wealth.” It feels a little like Marx was on the money in<br />

2022. We had all the features of his theory present in war (Russia/<br />

Ukraine), dereliction (cryptocurrencies) and economic crisis<br />

(inflation driving economic recession).<br />

Was wealth really being destroyed? In some cases, yes. The FTX/<br />

cryptocurrency failure destroyed wealth. Arguably an investor<br />

holding global government bonds also lost a substantial portion<br />

of their capital last year.<br />

But we are talking about larger events here. The Global Financial<br />

Crisis in 2008/09 was a period of wealth destruction which gave<br />

birth to a period of wealth creation. But this came with new rules:<br />

higher regulation on banks and the capital they hold; a new era<br />

of support and bailouts by governments; and suppressed interest<br />

rates which would continue for the next 14 years. These actions<br />

and others underpinned a massive period of wealth creation.<br />

The consequences of this phase started to be felt in 2022. Are we<br />

entering the next phase of creative destruction?<br />

34 www.bluechipdigital.co.za

INVESTMENT | Trends<br />

BLUE<br />

CHIP<br />

Are we entering the next<br />

phase of creative destruction?<br />

There are numerous examples of this theme playing out in<br />

global markets:<br />

• The rise of sustainable investing, or “ESG” investing driving the<br />

destruction of industries such as fossil fuels and the creation of<br />

industries such as electric-powered transport.<br />

• Chinese regulation on how companies can profit from<br />

the population, while simultaneously creating “common<br />

prosperity” is another example of creative destruction at<br />

work. Many Chinese technology-oriented companies suffered<br />

in 2021/22. What may we see a decade from now? Economic<br />

aspirations and human ingenuity will create a new opportunity<br />

for investors.<br />

• Global political tensions have started to break down the<br />

globalisation trend we have seen for several decades.<br />

“De-globalisation” is real and the destruction of the default<br />

outsourcing to the East approach is creating new investment<br />

opportunities for providers in other countries.<br />

• Higher interest rates (important: they are not yet high! Just<br />

getting back to normal) have wreaked havoc on assets which<br />

have not factored in the potential that financial support from<br />

governments may wane. Does this drive the reallocation of<br />

investment capital away from longer-term, higher-growth<br />

industries with big payoffs, but big uncertainties, towards<br />

industries which are more visible, more tangible and where<br />

investment returns are more likely to be lower but positive?<br />

• What to make of cryptocurrency? The destruction of value in this<br />

asset class we saw in 2022 may well lead to its viability in future.<br />

While it is built on the premise of “DeFi” , the likely regulation<br />

to come – which is what happens when the man on the street<br />

loses their money due to mismanagement or dereliction – may<br />

well underpin a more viable approach to using this technology<br />

in future.<br />

The current period of creative destruction is necessary, for without<br />

this release valve dampening financial excesses the problem may<br />

have become too big to fix.<br />

The GFC was a great example of this, born out of the Tech<br />

Bubble (1999/2000) and left to its own devices until it imploded<br />

in 2008. Recall also that Amazon and Google were born out of<br />

this tech bubble.<br />

As investors, we can’t change the course of history, nor can we<br />

change the mega-trends such as these highlighted above. But<br />

we can consider how to navigate these trends when looking to<br />

preserve and grow wealth.<br />

Rule number one is don’t lose capital permanently. FTX is<br />

a perfect example of what to avoid here, as it fails not only an<br />

investment merit case, but also a financial due diligence case<br />

(the assets were not held in any form of safe custody, and the<br />

business was established outside the ambit of strong oversight,<br />

transparency and regulation). We can mitigate this risk in wealth<br />

management by acting prudently with regard to what investments<br />

may be worth and ensuring that there is good governance in the<br />

underlying assets.<br />

At times avoiding these risks or the pressures to invest<br />

where capital may be lost is harder than it appears. Two<br />

fundamental ways to protect investors are: diversification (ie<br />

spread your investments across assets, regions, sectors and<br />

currencies) and position sizing (the amount of capital invested<br />

in any particular asset).<br />

Rule number two is to be humble. Acknowledge that you don’t<br />

have all the answers, that the world is too complex to forecast and<br />

that more things can happen than what you can consider may<br />

happen. Being humble does not necessarily mean you can’t make<br />

sensible investment decisions; in fact, it can help promote more<br />

sensible decisions as your typical behavioural biases and errors<br />

are less exposed.<br />

Context is important here. Most often clients are investors with<br />

multi-decade timeframes which<br />

means they will be caught up<br />

in both the excess of creation,<br />

as well as the devastation of<br />

destruction. But importantly, the<br />

trend is upwards. If you can help<br />

clients to hold on, the repeating<br />

cycles of creative destruction<br />

work in your and their favour to<br />

build wealth.<br />

Moods change quickly; just<br />

12 months ago investors were<br />

positive and returns were good.<br />

Where will we be in this creativedestruction<br />

cycle 12 months<br />

from now? <br />

Ian Jones, CEO, Fundhouse<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />


How supporting<br />

workers brings business<br />

and investment benefits<br />

Companies increasingly recognise the importance of<br />

supporting employees through difficult times. Many have<br />

taken a long-term view by investing in their people.<br />

The world had barely begun its recovery from the<br />

devastating human and economic effects of Covid-19<br />

before the conflict in Ukraine triggered a spike in<br />

commodity, fuel and food costs. More than 70-million<br />

people around the world could be pushed back into poverty as a<br />

result, the UN has estimated. Inflation in major economies is at the<br />

highest levels in three decades, which is putting disproportionate<br />

pressure on the poorest in society.<br />

This is reflected in markets, with investors recognising that<br />

governments have little fiscal room to manoeuvre. Against this<br />

backdrop, the pressure on companies to support vulnerable or<br />

lower-paid workers has intensified. At the same time, their financial<br />

flexibility to do so has shrunk. However, companies increasingly<br />

recognise the importance of supporting their key assets –<br />

employees – through these difficult times. Many have chosen to<br />

take a long-term view of their business by investing in their people.<br />

To better understand the challenges facing businesses and<br />

the choices they face, we have recently engaged with leading<br />

organisations in the field, with some of those conversations<br />

preserved through podcasts.<br />

Through those engagements and the weight of academic<br />

research, it’s clear that investing in workers’ wages can bring<br />

material business benefits. Lower staff turnover and more<br />

productive workers both make for more profitable and durable<br />

businesses. Companies must be sensitive to the competitive<br />

pressures of their industries, and blanket demands or<br />

approaches can be counter-productive if they result in<br />

reductions in workforce or increased costs of products, for<br />

example. But we consider the long-run benefits an important<br />

goal all companies should work towards. The investment<br />

benefits of paying a living wage are also clear. The chart on the<br />

right plots the returns of UK-listed companies, separated into<br />

36 www.bluechipdigital.co.za


BLUE<br />

CHIP<br />

Andy Howard, Global Head of<br />

Sustainable Investment, Schroders<br />

Source: Refinitiv, Schroder calculations<br />

those that have paid higher wages than the average<br />

of their sector peers over the last five years and those<br />

which have paid less. Higher-paying companies have<br />

outperformed lower-paying competitors by over 3%<br />

annually over the past five years.<br />

More and more companies seem to agree. In the UK,<br />

our analysis shows that more companies have become<br />

accredited Living Wage employers over the last year than<br />

over the previous five years combined.<br />

We have engaged with portfolio companies to<br />

encourage fair wages for many years. Our Engagement<br />

<strong>Blue</strong>print, published in 2022 laid out that expectation in<br />

detail. We will continue to use our voice and influence to<br />

encourage companies to continue to invest in their most<br />

important assets.<br />

Important Information<br />

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<br />

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<br />

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<br />

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<br />

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. Information herein is believed to be<br />

reliable but Schroders does not warrant its completeness or accuracy. <strong>Issue</strong>d in November 2022 by Schroders Investment Management Ltd registration number: 01893220 (Incorporated in England and Wales) which is authorised<br />

and regulated in the UK by the Financial Conduct Authority and an authorised financial services provider in South Africa FSP No: 48998.<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

FINANCIAL PLANNING | Legislation<br />

The impact of<br />

COFI on FSPs<br />

Preparing for the “Mother” of all<br />

market conduct legislation<br />

Anton Swanepoel, Founder, Trusted Advisors

FINANCIAL PLANNING | Legislation<br />

BLUE<br />

CHIP<br />

At the time of drafting this article, it is industry’s<br />

understanding that National Treasury is intending to<br />

submit the Conduct of Financial Institutions (COFI) Bill<br />

to Cabinet in the first half of 2023. When promulgated,<br />

COFI will replace the Financial Advisory and Intermediary Services<br />

(FAIS) Act and many other pieces of financial services legislation.<br />

The purpose of this article is firstly to create awareness, so that<br />

financial services providers (FSPs) will know what is coming in<br />

2023, and secondly, to provide some perspective on what the<br />

impact is going to be on FSPs. Lastly, to assist Key Individuals and<br />

representatives to prepare mentally for the transition from FAIS to<br />

COFI, which will happen in various stages over the next few years.<br />

To say that the capacity of financial<br />

services providers has already<br />

been stretched beyond the limit<br />

would be an understatement.<br />

Recognising the frustration<br />

Amid all the challenges and changes that financial advisors<br />

and intermediaries have had to endure over the years since<br />

the implementation of the Financial Intelligence Centre Act<br />

in 2001, the FAIS Act in 2004, Retail Distribution Review (still<br />

ongoing) and the more recent implementation of the Protection<br />

of Personal Information Act, I think it is fair to say that most<br />

advisors and intermediaries are “legislatively exhausted”. If we<br />

add the ripple effects of Covid, the crippling effect on businesses<br />

due to loadshedding, the ongoing political chaos, corruption,<br />

general lawlessness, and how all these factors impact the South<br />

African economy negatively, I for one do not blame advisors and<br />

intermediaries who find it hard to be filled with enthusiasm for<br />

COFI to be introduced.<br />

To say that the capacity of financial services providers<br />

has already been stretched beyond the limit would be an<br />

understatement. I have yet to find an advisor who does not<br />

believe that we are totally over-regulated as it is. In short, the<br />

world of advisors in South Africa is beyond a perfect storm<br />

already. Unfortunately, we have little choice but to brace<br />

ourselves for the next regulatory wave if we want to transition<br />

from FAIS to COFI effectively. I salute those who have been<br />

resilient enough to keep on going but, as if the recent past<br />

has not been challenging enough, your business will need yet<br />

another facelift as COFI is upon us.<br />

with the FSCA for activities as defined in the COFI Act when it<br />

comes into effect. The second observation is that the current<br />

FAIS Act, the fit and proper requirements, the FAIS General Code<br />

of Conduct, and a few Board Notices consist of approximately<br />

160 pages of legislation. COFI must be read with the provisions<br />

of the Financial Sector Regulation (FSR) Act and the Conduct<br />

Standards that will replace the provisions of the FAIS General<br />

Code of Conduct. When COFI comes into effect financial services<br />

providers will have to deal with over 900 pages of market conduct<br />

legislation, excluding FICA and POPIA. Purely from a volume point<br />

of view COFI is going to be like FAIS on serious steroids.<br />

I would not blame you if you wanted to stop reading at this<br />

point and shout, “When is this going to stop? Enough already!”<br />

but it is important that you read on after taking a moment to<br />

regain consciousness...<br />

The importance of perspective<br />

Welcome back! Based on my experience in the industry over a<br />

period of more than three decades, some people will react to the<br />

changes, and some are going to respond. Although thesauruses<br />

use these terms interchangeably, in practice a reaction is usually<br />

quick, without taking time to process or considering all the facts,<br />

and it is full of emotion. A response on the other hand is usually<br />

a reply after taking a breath to get past any emotional reactions,<br />

carefully considering the facts and circumstances, and gaining<br />

insight and perspective. It is of vital importance that you resist<br />

the temptation to (over) react.<br />

The impact of COFI on FSPs<br />

The first thing that FSPs will have to consider is that, subject to<br />

transitional arrangements, all FSPs will have to be re-registered<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

FINANCIAL PLANNING | Legislation<br />

We are hopeful that the Regulator will indeed take the<br />

principles of proportionality into consideration as highlighted<br />

in COFI and the FSR Act to reduce the impact on smaller FSPs.<br />

An informed response to COFI, after processing all the facts and<br />

gaining perspective, will be far more valuable and constructive<br />

than any quick, emotional reaction. Seek first to understand...<br />

Responding to COFI – calling all Key Individuals!<br />

As we get closer to the implementation of COFI, this is an<br />

important message to all Key Individuals (KIs) – those who<br />

are accountable for managing and overseeing the activities<br />

of everyone in the FSP. Don’t react! Respond. Don’t simply<br />

outsource COFI to your compliance officer(s). If you do, COFI<br />

will become yet another compliance conversation when it is a<br />

serious business consideration.<br />

Although I have a deep and authentic respect for the role<br />

of compliance officers and sincere appreciation for how many<br />

competent compliance officers do their best to assist FSPs, if you<br />

(as the KI) do not take extreme ownership of the essence of COFI,<br />

your business will be compliance driven instead of business driven<br />

in a compliant way. There is a significant difference between<br />

the two approaches. In my journey as a practice management<br />

and compliance consultant over the years I have seen countless<br />

businesses that have been crippled by a compliance-driven<br />

approach and with COFI it has the potential to get even worse<br />

due to the volumes and complexity the legislation. If you want<br />

your FSP to be business driven, rather than compliance driven,<br />

you will have to take the lead in the COFI conversation.<br />

By all means take your compliance officer(s) along on the<br />

journey, but you will have to be the leader who creates order in<br />

the regulatory overload, and even “chaos” for some, by breaking<br />

up the components of your FSP into small pieces and prioritising<br />

them. This is going to be a time for you to make sure that your<br />

business is built on a sound foundation.<br />

If you have a solid foundation, you can build or rebuild<br />

anything on it. If you have a weak foundation, I am afraid you<br />

will find yourself in serious trouble at some point. I believe that<br />

COFI will force everyone back to the proverbial drawing board.<br />

The illustration below will provide a helpful point of reference as<br />

it provides an executive summary of all the key building blocks<br />

of your business that are necessary to be successful – under<br />

any laws.<br />

COFI will force you to take a step back and re-evaluate your<br />

current business philosophy, culture and processes. It is not<br />

simply going to be business as usual. My advice: Prepare to<br />

succeed under COFI. <br />

The fundamentals of practice management for representatives.<br />

Credit: Anton Swanepoel<br />

40 www.bluechipdigital.co.za


“As dealing with change becomes a regular activity, leading it becomes a<br />

skill to hone, an internal capacity to master.” – Arnaud Henneville<br />

INVESTMENT | Multi-asset funds<br />

BLUE<br />

CHIP<br />

One thing we can all be certain of is change and<br />

investing is no different. Managing this flux, and<br />

dealing with risk in a portfolio is a differentiating<br />

tactical factor among institutional money managers.<br />

Large, sophisticated, offshore institutional money managers, like<br />

endowment funds, have been using multi-asset or multi-strategy<br />

mandates as the core building blocks in their portfolios to address<br />

these challenges of change.<br />

The three key reasons for this are: firstly, there is better<br />

mandate flexibility across asset classes; secondly, leaving the<br />

asset allocation decisions to professional money managers<br />

operating in the financial markets at the “coalface”; and lastly,<br />

asset allocation switches taking place within a multi-asset fund<br />

also saves clients unnecessary costs which are associated with<br />

their capital being switched from one fund to another when an<br />

asset allocation change is affected.<br />

Adopting this strategy to manage change has seen both<br />

the multi-asset equity and multi-asset income categories grow<br />

to become the largest ASISA product categories in the local<br />

market. These categories are also the most diversified, allowing<br />

a very broad range of instrument exposures, both locally and<br />

offshore. In the multi-asset equity space these include equities,<br />

fixed income, property, commodities, cash and portfolio hedges,<br />

while in multi-asset income it includes a broad range of fixedinterest<br />

instruments with varying interest rate risks.<br />

Visio Fund Management was<br />

founded in 2003 as a multi-asset<br />

fund manager. The team is adept<br />

at handling change and managing<br />

multi-asset funds. Visio’s success<br />

has been recognised by the firm<br />

having been awarded Citywire’s<br />

“Best Mixed-assets Aggressive<br />

Manager” for performance over<br />

the last three years. The team’s<br />

key operating tenets since<br />

inception have been, “Keep it<br />

simple”, “Capital preservation is<br />

key” and “Be good citizens”. These<br />

solid strategies can be applied to<br />

any scenario to bring change.<br />

Speak to us. We love what we do,<br />

and we’d like to do it for you. <br />

www.visiofund.co.za<br />

Craig French, Product Specialist,<br />

Visio Fund Management

BLUE<br />

CHIP<br />

INVESTMENT | Economy<br />

Gas can<br />

stabilise the<br />

national<br />

economy<br />

Petroleum Agency South<br />

Africa is granting licences<br />

to explore for gas, a fuel<br />

that can assist the transition<br />

to a net-zero economy.<br />

South Africa is a net importer of fuel and the country’s<br />

refining capacity has been reduced in recent years.<br />

To counter this trend, exploration has been on an<br />

upward trajectory. Partly this is explained by growing<br />

certainty in the regulatory environment and by the good work<br />

done by Petroleum Agency South Africa (PASA), the agency which<br />

evaluates, promotes and regulates oil and gas production in the<br />

country. This has seen increased interest in South Africa’s potential<br />

as a destination for investment dollars.<br />

Underpinning PASA’s strategy is the need to ensure that all<br />

prospecting and mining leases are for the long-term economic<br />

benefit of South Africa. This applies to every kind of licence issued<br />

by the agency, be it in old technologies or new.<br />

Can the economy grow by exploiting the country’s natural<br />

resources while at the same time transitioning to a greener future?<br />

PASA CEO Dr Phindile Masangane insists that it’s an economic<br />

imperative for South Africa to do just that.<br />

Dr Masangane points out that with South Africa’s excellent<br />

solar resources it makes sense to localise the solar value chain to<br />

boost manufacturing but the country should not ignore what it<br />

has. “At the same time, we know that the gas value chain is well<br />

established in the country, so let’s also capitalise on that.”<br />

The multiple uses of gas could play a major role in helping<br />

South Africa transition away from fossil fuels while at the same time<br />

boosting economic growth. “We need gas not just in electricity<br />

and transport,” noted Dr Masangane, “but importantly for South<br />

Africa, which is in desperate need of an economic turnaround, is<br />

for us to use this gas for our manufacturing industry.”<br />

Referencing a section on gas in a report on energy in Africa<br />

by the International Energy Agency, Dr Masangane says, “Most<br />

of what Africa produces is actually exported out of the continent.”<br />

The report notes that Africa accounts for less than 3% of the<br />

world’s energy-related carbon dioxide emissions. Says Dr Masangane,<br />

“This report calls for us as Africa to extract the gas and produce it<br />

and use it not just to power the continent but to reindustrialise the<br />

continent and industrialise in the case of nations that are still to go<br />

through that stage.”<br />

Another benefit of the IEA report is that it demystifies some ideas<br />

about gas that are not based on science. Says Masangane, “I think<br />

there is a misconception – sometimes I think it is deliberate – that the<br />

use of oil and gas is not consistent with the decarbonisation strategy.<br />

The report unpacks that.”<br />

Many of the 600-million African citizens who are without<br />

electricity use distinctly environmentally-unfriendly methods to<br />

cook. Masangane notes, “If they were to use gas, whether it is LPG<br />

or natural gas or another form of gas for cooking, that in itself is<br />

decarbonisation because then you arrest the negative impact of<br />

deforestation.” She describes as a “false<br />

narrative” the idea that the use of oil and<br />

gas cannot be part of a decarbonisation<br />

strategy and is pleased that the IEA report<br />

puts that argument to rest.<br />

National government’s policy is<br />

to diversify the country’s energy mix<br />

which is currently coal-dominated to<br />

a lower-carbon future by introducing<br />

proportionately higher renewable-energy<br />

resources such as wind and solar, into<br />

the energy mix as well as gas-to-power.<br />

Gas burns with less than half the CO2<br />

emissions from coal and additionally has<br />

no SOx emissions.<br />

42<br />

www.bluechipdigital.co.za<br />

PASA CEO Dr Phindile Masangane

INVESTMENT | Economy<br />

BLUE<br />

CHIP<br />

Gas is therefore a suitable transition fuel towards a lower-carbon<br />

economy for South Africa especially since gas-to-power technologies<br />

are flexible and would therefore complement the intermittent<br />

renewable energy being added to the national grid.<br />

Exploration in South Africa<br />

In 2022 TotalEnergies and its partners submitted a production plan to<br />

PASA for their recent discoveries off the coast of Mossel Bay, an event<br />

which coincided with the beginning of commercial operations of<br />

Tetra4’s natural gas project in the north-eastern Free State. These two<br />

events prove that investors can see that the South African resources<br />

equation adds up to an investable proposition.<br />

Both of these projects came about through the licensing authority<br />

of Petroleum Agency South Africa (PASA), reporting to the Minister of<br />

Mineral Resources and Energy (DMRE). PASA regulates and monitors<br />

exploration and production activities and is the custodian of the<br />

national exploration and production database for petroleum. Its role<br />

was statutorily endorsed in June 2004 in terms of the Mineral and<br />

Petroleum Resources Development Act of 2002.<br />

In terms of strategy, the agency actively seeks out technically<br />

competent and financially sound clients to whom it markets<br />

acreage, while ensuring that all prospecting and mining leases are<br />

for the long-term economic benefit of South Africa. As custodian,<br />

PASA ensures that companies applying for gas rights are vetted to<br />

make sure they are financially qualified and technically capable,<br />

as well having a good track record in terms of environmental<br />

responsibility. Oil and gas exploration requires enormous capital<br />

outlay and can represent a risk to workers, communities and<br />

the environment. Applicants are therefore required to prove<br />

their capabilities and safety record and must carry insurance for<br />

environmental rehabilitation.<br />

Environmental issues are increasingly playing a big part<br />

in discussions about how best to utilise South Africa’s natural<br />

resources. As part of an attempt to engage in a broader<br />

discussion on policy issues, a joint colloquium was held in<br />

2022 on the subject of how to balance South Africa’s energy<br />

needs with the country’s climate change commitments. The<br />

colloquium, and several online events which prepared for and<br />

anticipated the main event, was jointly hosted by the DMRE, the<br />

Department of Forestry, Fisheries and the Environment (DFFE)<br />

and PASA.<br />

As part of a drive to create certainty for investors, a new bill<br />

has been introduced to replace old legislation. The Upstream<br />

Petroleum Resources Development (UPRD) Bill provides for<br />

greater certainty in terms of security of tenure by combining the<br />

rights for the exploration, development and production phase<br />

under one permit.<br />

The draft bill was first published in June 2021 and discussions<br />

with industry stakeholders are ongoing. Organisations such<br />

as the South African Oil and Gas Alliance (SAOGA) will be<br />

coordinating responses to present to parliament. Objectives of<br />

the bill include:<br />

• expanding black participation<br />

• promoting local employment and skills development<br />

• creating an enabling environment to accelerate exploration<br />

and production of South Africa’s petroleum resources.<br />

Revised draft regulations related to hydraulic fracking in<br />

the gas-rich Karoo region were published by the DFFE in July<br />

2022 for public comment. Fracking is a drilling technique that is<br />

widely used in other jurisdictions such as the United States, but<br />

environmental concerns have been raised. Dr Masangane told<br />

Bloomberg in an interview that groundwater and geological<br />

studies are being conducted in the biodiversity-rich areas of the<br />

Karoo and that once regulations have been finalised, seismic<br />

activity will be undertaken to establish which blocks to license. <br />

petroleumagencysa.com Petroleum Agency SA @sa_petroleum Petroleum Agency of South Africa @petroleumagency

BLUE<br />

CHIP<br />

PRACTICE MANAGEMENT | Client services<br />

Lower-income clients<br />

and why your practice needs them<br />

The risks and opportunity cost of not equally servicing clients across income levels – and how to get it right.<br />

Advisors need many clients to reach their growth and<br />

income goals. But the greater the number of clients<br />

added to your investment book, the harder it is to treat<br />

all clients equally and fairly – and the harder it is to<br />

nurture what may turn into longer-term relationships with smaller<br />

clients whose wealth could grow in future.<br />

The risks of service inequality<br />

For most advisors there simply isn’t enough time and motivation to<br />

treat a low-income client the same way as a high-net-worth client.<br />

And this service imbalance comes at a cost to your business.<br />

If clients are not treated fairly, they may simply up and leave for<br />

another advisory, or worse, take their grievance to the Financial<br />

Advisory and Intermediary Services (FAIS) Act Ombudsman,<br />

appointed by the Financial Sector Conduct Authority (FSCA).<br />

Lodging a complaint with the FAIS Ombudsman is a fast and<br />

simple process for an unhappy client. After attempting to resolve<br />

the complaint directly with the advisor, if the client is still unhappy,<br />

they need only fill out and submit an online form and their<br />

complaint will be lodged for assessment by the FAIS Ombudsman.<br />

If a matter is determined to be valid, an advisor could face<br />

substantial fines or risk their operating licence being revoked.<br />

Even if the case is unsuccessful, there could be significant<br />

brand damage done as claims are posted on the Ombudsman<br />

website and sometimes even picked up by media publications<br />

with a broad reach, further damaging the advisor’s brand and<br />

company image.<br />

In addition to client complaints, service and reporting<br />

requirements are increasingly becoming a regulated aspect<br />

of business with the entrenching of Treating Customers Fairly<br />

protocols as well as the long-awaited Retail Distribution Review<br />

(RDR). These current and incoming compliance hurdles will increase<br />

the amount of productive time spent on fulfilling regulatory<br />

requirements in your practice.<br />

Lastly, there is an opportunity cost of not seeking out lowincome<br />

new business or adequately servicing existing lowerincome<br />

clients. Due to time and capacity constraints, advisors<br />

tend to provide better levels of service to higher-income clients.<br />

As most of these wealthier clients are closer to or past retirement,<br />

this concentration creates longevity risk for an advisor’s book.<br />

Leveraging technology<br />

Making use of third-party systems that enable all clients to receive<br />

the same level of service has an up-scaling effect for advisory<br />

practices. Reporting is a critical client servicing touchpoint for<br />

wealth management practices, and a vast amount of time is<br />

spent collating and creating bespoke reports for clients on a<br />

quarterly or monthly basis. The quality, depth and frequency of<br />

these reports very often differ for lower-income clients and their<br />

wealthier counterparts.<br />

Wealth management analytics provider, Seed Analytics,<br />

significantly reduces your time spent on regular client reporting<br />

and communication, which opens capacity for more business. The<br />

system seamlessly aggregates investment data across more than<br />

60 platforms to create monthly or quarterly investment reports for<br />

all your clients on your book – regardless of their level of wealth.<br />

The aggregated information generated in the report is taken<br />

through various validation checks, including fidelity and integrity<br />

checks, which ensures better quality and accuracy. Reports can<br />

be white labelled for your advisory practice to ensure that your<br />

brand is top of mind.<br />

In addition to bridging the gap in terms of the depth or<br />

frequency of reporting across a broad spectrum of clients,<br />

smart tech, such as Seed Analytics, also provides much-needed<br />

business intelligence. Using data to provide a holistic view of your<br />

client base, the technology allows you to identify key risk and<br />

opportunities within the book –<br />

and gives you the power to make<br />

informed decisions around these.<br />

Reaching a larger audience<br />

Big institutions can write large<br />

amounts of business through<br />

extensive, linked brokerages<br />

and advisors. They do this by<br />

using standard systems to reach<br />

their large audience. With the<br />

proper selection of technology,<br />

this is a world any advisor can<br />

build for themselves. <br />

https://www.seedanalytics.info/<br />

Andries de Jongh, Sales and Key<br />

Account Manager, Seed Analytics<br />

44 www.bluechipdigital.co.za

BLUE<br />

CHIP<br />


How we approach<br />

investments<br />

And the rationale for using a DFM.<br />

Maslow’s hierarchy of needs is a theory of psychology<br />

explaining human motivation based on the pursuit<br />

of different levels of needs. The theory states that<br />

human beings are motivated to fulfil their needs in<br />

a hierarchical order. This order begins with the most basic needs<br />

before moving on to more advanced ones. What this theory omits,<br />

in my personal view, is that each of these physiological needs can<br />

only be satisfied through financial means.<br />

For “wealthy” people, the financial means are readily available<br />

and sustainable (ie wealthy people are not required to perform any<br />

income-generating activity, such as trading their skill, time or both<br />

to have continuous access to financial means beyond productive<br />

years). But for others, in the majority, these financial means are not<br />

available, or where they are, they are not sustainable.<br />

Paying for a sustainable supply of food, rather than taking<br />

the trouble to build the necessary skills and take on the risk of<br />

producing these food items, has its appeal. In the same way,<br />

access to sustainable financial means that would outlive you<br />

without the need to perform any income-generating activity also<br />

has appeal. Investors are required to save and invest to achieve<br />

this ideal.<br />

The point here being that without the financial means, we<br />

cannot pay for these basic needs to be satisfied. For those that<br />

have found a way to generate enough money to pay for these<br />

needs, the solution is often not sustainable.<br />

And in the absence of the required sustainability, investors<br />

should consider efficient solutions to build the required financial<br />

means to be sustainable.<br />

Some have addressed these challenges by getting others to<br />

resolve them on their behalf for a fee. It is this backdrop that<br />

influenced me about being such a person that people would wish<br />

to delegate their problem to, for a fee.<br />

46<br />



BLUE<br />

CHIP<br />

When it comes to investing, it is my passion not only to<br />

understand the technical analysis of data and the applied process<br />

of forecasting, but also the odds of positive outcomes or returns<br />

from investing. This led me to broaden my skillset beyond the<br />

classroom setting and to apply it to real live portfolios.<br />

Calculating probability ratios is therefore a skill that I have come<br />

to appreciate and am able to apply. But helping people to identify<br />

the problem of diminishing marginal returns, risk required versus<br />

risk appetite in pursuit of building an asset base (financial means)<br />

that will be used to replace their current efforts of generating<br />

income is the real driver behind my career choice.<br />

My investment philosophy is taking a disciplined methodology<br />

approach across a range of different styles and objectives. As an<br />

advisor, I believe that my role is not to avoid risk, but rather to<br />

understand the relationship between risk and reward and to manage<br />

risk(s) appropriately, relative to the objectives of the portfolio.<br />

I used to personally select investment collective schemes (eg<br />

unit trusts) and construct individual portfolios for each client<br />

with an emphasis on identifying and controlling risk. I avoided<br />

speculation. My investment process involves understanding the<br />

specific objectives and risk aversions of each individual client<br />

(investor risk appetite) and ensures that my client portfolios are<br />

appropriately diversified. Before the use of discretionary fund<br />

managers (DFMs), tailored portfolios of funds were constructed to<br />

meet specific client objectives and then managed on an ongoing<br />

basis. The overall investment and fund selection process was a<br />

top-down approach using tactical asset allocation.<br />

The overriding premise behind this approach was that asset<br />

allocation is of crucial importance if the investment objectives<br />

are to be achieved and that these asset allocation decisions<br />

were determined by the current macro-economic environment<br />

(domestically or offshore). The second-tier fund selection process<br />

focuses on investing in the best-performing qualified funds that<br />

meet the objectives of the asset allocation process. Determining<br />

the best investment selection is based on both qualitative and<br />

quantitative analysis.<br />

All this made implementing my financial advice particularly<br />

onerous, and the requirement to stay abreast of these fund<br />

management options took a lot of my time away from my main<br />

role as an advisor: to provide good, independent financial planning<br />

advice to clients. To solve this problem, we have engaged with a<br />

DFM to assist us in advising on our clients’ investments.<br />

Our DFM is an established industry expert in the field of<br />

fund research and investments and offers a customised service<br />

which allowed us to implement our advice in the most efficient<br />

way possible. This benefits our clients directly and provides an<br />

additional level of comfort with respect<br />

to the quality and suitability of our<br />

investment options.<br />

To this end, together with our DFM,<br />

we have developed a customised<br />

range of “model portfolios” that<br />

represent the best investment view<br />

and the most appropriate way to<br />

implement our financial planning<br />

advice. These portfolios target a range<br />

of client outcomes and are reviewed<br />

and managed on an ongoing basis<br />

by the DFM and us at Emphasis<br />

Wealth Advisory. The portfolios consist<br />

of a range of leading funds which<br />

collectively deliver our investment<br />

solutions. This is based on the DFM’s<br />

extensive and independent research<br />

process and portfolio construction<br />

expertise, which is matched with our<br />

investment philosophy and compatible<br />

with our investment processes. <br />

Dez Tswaile, Founder and<br />

Managing Director, Emphasis<br />

Wealth Advisory<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />


What does the crystal<br />

ball show for 2023?<br />

At the start of every year, many clients want to know what the future of investing is, where they<br />

should invest, what the best investment opportunities are, and if their capital will be protected.<br />

The first question is easy to answer. The basic definition<br />

of investing is where one party is providing capital<br />

to another in exchange for some sort of return on the<br />

capital provided. Based on this definition, the essence of<br />

investing will be no different in the future than in the past.<br />

However, it would be naive to assume that investment<br />

opportunities and market dynamics will remain the same in<br />

the future. In the last decade, for example, we had growth in<br />

technology shares, growth in infrastructure investing and the<br />

emergence of cryptocurrencies. Certain investment opportunities<br />

may also fall out of favour. A recent example is mortgage-backed<br />

securities, which all but disappeared after the 2008 global<br />

financial crisis. Market conditions will definitely not stay the same<br />

and we can already see the shift from the last decade’s ultraaccommodating<br />

monetary policies toward a normalisation of<br />

global interest rates.<br />

The way we invest will most likely also change. The shift<br />

from the open outcry system on trading floors to electronic<br />

trading to online trading over the last 30 years has not only<br />

drastically impacted the way we invest, but also who can<br />

invest. Today almost anybody can trade from anywhere in<br />

the world, which has drastically changed the demographics<br />

of market participants.<br />

As we move to the more difficult question of where to<br />

invest, we first need to look to the past for some lessons. Going<br />

only a year back and assuming we have no knowledge about<br />

2022, we were all sitting with a Covid hangover, but we were<br />

mostly optimistic about the future given that most lockdowns<br />

were lifted, and global economic activity was almost back at<br />

full capacity. We were told the structural reforms in China were<br />

necessary and most of it was priced in the market. Inflation was<br />

starting to rise, but we were also told not to fear since it should<br />

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be temporary given that supply chain disruptions and pent-up<br />

demand would be resolved soon.<br />

How wrong were we?<br />

The first blow to our optimism was the discovery of the new<br />

Omicron variant by South African scientists in November 2021.<br />

We were looking forward to the first festive season with no Covid<br />

restrictions since 2019, but unfortunately global governments<br />

“punished” South Africa by re-enforcing travel restrictions on us.<br />

The year 2022 continued to deliver hits with a dramatic fall<br />

in the “untouchable” global tech share prices in January, the<br />

Russian invasion of Ukraine, exacerbating the already elevated<br />

global inflation risk, the persistent higher than expected<br />

global inflation and commensurate normalisation of global<br />

interest rates. At the time of writing (early November), we saw a<br />

spectacular sell-off in global equities and property. Not even the<br />

traditional safe haven asset classes were spared. US treasuries<br />

saw a record-breaking sell-off on the back of inflation fears and<br />

higher bond yields.<br />

Initially, South African asset classes were spared the brunt of<br />

the global turmoil, with gold and resource shares supporting<br />

our market. South African bonds, already trading at very<br />

attractive yields as we went into 2022, were not spared the<br />

volatility in global fixed interest instruments, but at the time<br />

of writing, were still one of the safer asset classes to invest in.<br />

The strengthening dollar did cushion South African investors<br />

against the worst of the storm raging in the global markets.<br />

Why partner with a DFM?<br />

It is understandable that clients expect some guidance on<br />

which markets, and maybe specific shares, would provide<br />

the best or safest returns for 2023. I always get nervous when<br />

financial advisors ask me what the “best” place to invest their<br />

clients’ money would be. At Equilibrium, we believe that the<br />

“best” investment for a client is the one that best matches<br />

their financial needs and goals, allowing for their unique time<br />

horizon, return requirements and risk objectives.<br />

We recognise that each person’s financial needs are unique.<br />

More importantly, we recognise that most of the time these<br />

financial needs are independent of the performance of markets<br />

and state of the economy.<br />

Partnering with a discretionary fund manager (DFM), like<br />

Equilibrium, will ensure that the appropriate risk/return profile<br />

for an investor’s unique financial needs is achieved on the<br />

underlying investments. Equilibrium does this by blending<br />

different asset classes, investment strategies and fund managers<br />

in proportions that speak to the investors’ unique time horizon<br />

and risk tolerances to achieve the optimal return.<br />

South Africa has world class investment managers who are<br />

specialists. However, this specialisation seldomly speaks to the<br />

investors’ unique financial needs. Certain asset classes and/or<br />

investment strategies perform differently in various market and<br />

economic conditions. Where advisors partner with a DFM, the<br />

DFM bridges the gap between investors’ unique financial needs<br />

and the specialist skills of investment managers.<br />

What lies ahead for 2023?<br />

Many of our clients ask me what my crystal ball shows as the best<br />

place to invest their money. Strange how clear that crystal ball<br />

is when we are optimistic about economic growth and markets,<br />

and how dull and uninspiring it is when there are concerns<br />

about markets. The year 2022 might have been different to what<br />

we expected. And I am sure 2023 will be no different. Global<br />

economic recovery seems to be at risk on the back of interest rate<br />

normalisation, inflation remains stubbornly high and the Russia/<br />

Ukraine conflict is continuing for much longer than expected.<br />

Volatility in global and local markets persists with markets taking<br />

guidance from press releases.<br />

After the significant sell-off in most global asset classes,<br />

these asset classes are starting to look attractive, but the main<br />

drivers behind global markets for the foreseeable future are<br />

going to be whether inflation will be reined in, the interest rate<br />

decisions of central banks and the impact on economic growth.<br />

The rand remains a big risk for foreign investments, particularly<br />

if it strengthens. Most commentators on the local currency are<br />

of the view that it is oversold and strengthening could erode the<br />

potential returns of global asset classes.<br />

On the local side we see value everywhere. Our bonds are<br />

some of the most attractively priced bonds in the world while<br />

our equity market is very profitable at the moment. This makes<br />

these two asset classes very attractive on a relative basis.<br />

Unfortunately, we do foresee economic growth, which typically<br />

supports the equity market, to remain subdued for 2023.<br />

Our economists and strategists believe that global inflation<br />

should start to taper off towards the middle of 2023 with<br />

a commensurate easing of interest<br />

rates. This should support global<br />

economic growth and markets to be<br />

more optimistic. South African markets<br />

(especially bonds) stand to be big<br />

winners when this shift happens and<br />

foreigners return to riskier markets.<br />

This year may bring us as many<br />

surprises as 2022 did. At this stage it<br />

is important to remind your clients to<br />

stick with their financial plan tailored<br />

to their needs. Your clients’ financial<br />

needs are unique and more importantly,<br />

not dependent on the performance of<br />

markets and economies. Changing an<br />

investment strategy based on hope and<br />

fears is very dangerous and may move<br />

your portfolio away from sound financial<br />

planning principles to speculation. <br />

Bennie Crous,<br />

Senior Portfolio Manager,<br />

Equilibrium<br />

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

Limited, rated B-BBEE level 1.<br />

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PRACTICE MANAGEMENT | Technology<br />

The changing world of<br />

work and its impact on<br />

client engagement<br />

Technology is the lifeblood of the new world of work, affecting how we work and what work we do.<br />

The Covid pandemic has accelerated changes in how we<br />

work in financial planning. Before Covid, meeting clients<br />

on Zoom was the exception. Now many clients (and<br />

financial planners) prefer it. Apps, paperless processes and<br />

automated workflows are here to stay.<br />

In response to the changing world of work and the impact of<br />

technology on our lives, in 2018 the World Economic Forum (WEF)<br />

produced The Future of Jobs report. The report considers what work<br />

roles are likely to become redundant, which would remain stable,<br />

and new roles that will emerge. The WEF believes financial advisors<br />

fulfil stable roles and won’t be consigned to the waste dump. I<br />

am sure this is a relief to many financial planners, given the rise of<br />

automated advice and the role of technology in facilitating financial<br />

services generally.<br />

If financial advisors still have a role to play in people’s lives, it<br />

begs the question, what is that role and how will it impact on client<br />

engagement in the context of rising dependence on technology?<br />

Our tendency, when trying to understand the impact of change, is<br />

to focus and even try to predict the potential changes that lie ahead.<br />

Founder of Amazon Jeff Bezos says that he often gets asked the<br />

question: “What’s going to change in the next 10 years?” He says this<br />

is the wrong question to ask. If you’re trying to cope with change,<br />

a better question he suggests is: “What’s not going to change in<br />

the next 10 years?” In the case of Amazon, he believes that in 10<br />

years’ time, people will still want good-quality products delivered<br />

to their home or work at reasonable prices. This is not going to<br />

change, no matter what else changes in the world.<br />

As we think of the changing world of work and its impact on<br />

client engagement, the challenge is to think about what is not<br />

going to change in financial planning in the next 10 years.<br />

What’s not going to change?<br />

One thing that won’t change in the future is financial planning<br />

clients will be human. If we take Bezos’ advice, understanding<br />

what won’t change about humans will help us prepare for the<br />

change we face. The 2022 PWC report on global work gives us an<br />

insight into what is important to people in the changing world of<br />

work and shows its impact on employee motivation.<br />

The report predicts that one in five employees are likely to<br />

resign in the next 12 months, the top three drivers of which are:<br />

Pay – “being fairly rewarded financially”; Purpose – “I find my job<br />

fulfilling”; and Authenticity – “I can truly be myself”. The report<br />

also highlights the threat of technology. A staggering 30% of<br />

respondents are concerned that technology will replace their<br />

roles, while 39% feel that they are not getting sufficient training<br />

in digital and technology skills from their employer.<br />

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PRACTICE MANAGEMENT | Technology<br />

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Daniel H. Pink suggests in his book Drive: The Surprising<br />

Truth About What Motivates Us, that there are three things that<br />

motivate people at work. The first is Autonom: people want to<br />

have a sense that they oversee their own destiny. They want<br />

to believe that they are in control of the work they do. But to<br />

have this autonomy, it’s important that people have the second<br />

element, the necessary Mastery to do their work. Doing work<br />

that one feels ill-equipped to do is a guaranteed demotivator.<br />

The third element, Purpose, feeling your work makes a difference<br />

in the world, Pink argues is a significant motivation to work.<br />

Technological change combined with the Covid pandemic<br />

magnified and legitimised Pink’s three motivational factors.<br />

It seems that where Purpose is clear and Mastery is in place,<br />

greater Autonomy is a boost, not a hindrance to productivity.<br />

During the pandemic, employees around the world, despite<br />

working remotely, still delivered on what was required of them.<br />

A MAP for client engagement<br />

It turns out that the unchanging nature of employee motivation<br />

has parallels with what constitutes financial health. If we accept<br />

that the purpose of financial planning is to help clients achieve<br />

and maintain financial health, arguably this purpose is unlikely<br />

to change any time soon. And what constitutes financial health<br />

is also unlikely to change. People are after all people.<br />

Sarah Newcomb, director of financial psychology at<br />

Morningstar, in an article entitled “Where More is Less:<br />

Rethinking Financial Health”, reports that a Morningstar study<br />

found that there are two key elements to financial health. The<br />

first is economic stability. They found that people with a full<br />

“financial life plan” saved on average 20 times more money than<br />

those with time horizons of less than a year. Even looking ahead<br />

just a few years had a fourfold increase in savings.<br />

The second element is emotional wellbeing. The study found<br />

that across all income groups, “people who feel empowered in<br />

their financial lives experienced more joy, peace, satisfaction<br />

and pride in their financial lives”. They found that the impact on<br />

the emotional wellbeing of clients’ feelings of empowerment<br />

was more than twice the impact of income. The study did not<br />

measure how much control a person had in their financial lives,<br />

but how much control they believed they had. “It is the feeling of<br />

power, not necessarily the exercise of it,” that Morningstar found<br />

was linked to emotional wellbeing.<br />

The research suggests that to help clients achieve financial<br />

health, financial planners ideally will do two things with their<br />

clients. First, get them to look as far as possible into the future,<br />

ideally building a full financial life plan; and second, ensure that<br />

clients have at least the perception that they are in control of<br />

their finances.<br />

How can we apply Pink’s insights around motivation to<br />

financial health? I believe the three key concepts he has identified<br />

offers a foundation for a financial planner’s approach to client<br />

engagement. A client who is clear on Purpose, why they are<br />

saving money, is likely to be able to articulate their future more<br />

clearly and be motivated to work towards that future. A client<br />

with Autonomy will be motivated to make decisions about their<br />

life and money, and in so doing feel like they have control over<br />

their life and money. This power will be enhanced by Mastery,<br />

developing skill and knowledge when it comes to their life and<br />

money. Juggling the order of the three words, Mastery, Autonomy,<br />

Purpose, offers a MAP to apply to your engagement with clients.<br />

How can you do this practically?<br />

How can financial planners apply the MAP?<br />

Firstly, it’s important to accept that clients are the expert in their<br />

own lives, only they can know what they want their life to look<br />

like. But most clients need help to do this. A prerequisite then<br />

for financial planners in the future will be to develop intra- and<br />

inter-personal skills to help clients articulate a purpose for their<br />

lives and their money.<br />

Secondly, in helping clients articulate their purpose, financial<br />

planners will do well to recognise and facilitate the client’s<br />

need for autonomy. This can be done through self-awareness<br />

(knowing when not to give advice that might undermine the<br />

client’s autonomy); and skillful conversation, enabling clients to<br />

make their own decisions, rather than just taking advice. But it<br />

can also be done through harnessing technology. For example,<br />

automated advice tools are already showing us that there is an<br />

appetite for clients to use technology to work out what they may<br />

need to save or invest for specific goals. Financial planners can<br />

provide clients with such tools that recognise and support this<br />

need for autonomy.<br />

Thirdly, as clients use these tools, whether they be for<br />

budgeting, savings, cashflow forecasts or another purpose,<br />

they will grow their own sense of mastery<br />

over their financial life. They will do this<br />

with the comfort that they still have the<br />

financial planner, the expert, to consult and<br />

ultimately guide and advise them.<br />

Technology and the world of work<br />

continue to change, but applying Pink’s<br />

MAP concepts to client engagement, in<br />

an informed and skillful way, I believe will<br />

help human financial planners remain<br />

relevant and important in helping people<br />

achieve financial health, in the next 10<br />

years and beyond. <br />


Daniel H. Pink, “Drive: The Surprising Truth About What Motivates Us”, Penguin USA, 2009<br />

PWC 2022 Global Workforce Hopes and Fears Survey<br />

Sarah Newcomb, “When More is Less: Rethinking Financial Health”, Morningstar Behavioural Science Research, 2016<br />

World Economic Forum, “The Future of Jobs Report”, 2018<br />

Rob Macdonald, Head of<br />

Strategic Advisory Services,<br />

Fundhouse<br />

www.bluechipdigital.co.za<br />


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CLIENT ENGAGEMENT | Behavioural finance<br />

The impact of mental health<br />

on financial planning<br />

How prepared are you to deal with this?<br />

The link between mental health and financial health is increasingly evident.<br />

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CLIENT ENGAGEMENT | Behavioural finance<br />

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The financial planning profession is evolving. Financial<br />

advice is not what it used to be or no longer sufficient.<br />

Expectations of respected financial planners continue<br />

to rise, beyond the previous shift from selling to<br />

advising in the Sixties, the introduction of the steadfast sixstep<br />

financial planning process in the Nineties, and now<br />

towards an increasingly broader, and client-centred, offering1.<br />

The impact of behavioural finance, over the last 20 years<br />

especially, has meant that financial planners are not only<br />

expected to track and tweak financial behaviour, but to skillfully<br />

shift the client’s relationship with themselves and their money,<br />

to modify behaviour fruitfully. As Michael Kitces reminds us,<br />

“Giving advice to clients is a terrible way to help them change<br />

their behaviour” and that developing “more therapeutic skills”2<br />

may be the antidote to hackneyed advice.<br />

These developments explain the burgeoning influence of<br />

behavioural coaching on the profession, now surely recognised<br />

as fundamental to a financial planner’s value proposition. And<br />

as financial planning practices continue to advance, particularly<br />

post-pandemic, we start to realise the importance of mental<br />

health and wellbeing on clients’ financial health.<br />

The realm of mental health is now a domain that financial<br />

planners require cognisance of, at the very least. Sooner than<br />

one thinks, it will be vital for planners to have a recognised level<br />

of skill in navigating mental health issues.<br />

There may be some disagreement or denialism among<br />

practitioners as to their roles and responsibilities, but the link<br />

between money, emotions and mental health is well known<br />

and more prevalent than ever. So much so that forwardthinking<br />

countries have necessitated institutions dedicated<br />

to understanding and dealing with this challenge, such as<br />

the UK’s Money and Mental Health Policy Institute launched<br />

in 2016.<br />

One undeniable fact, central to financial planning, is the link<br />

between mental health, poor decision-making and financial<br />

difficulties. In short, worrying about money can affect your<br />

mental health and a mental health condition can affect the way<br />

you manage your money. This creates a “vicious cycle”3. More<br />

specifically, “common symptoms of mental health problems,<br />

like increased impulsivity, low motivation, unreliable memory<br />

and difficulties concentrating can make managing money<br />

significantly harder”4.<br />

What could this mean for financial planners today, and their<br />

continued professional development?<br />

Firstly, an awareness of the key themes within mental<br />

health is fundamental.<br />

The stigma of mental health, in all its forms, is a destructive<br />

force, a barrier to the acknowledgement of personal struggle<br />

and therefore a chokepoint to receiving the correct help<br />

timeously. Encouragingly, attitudes towards mental illness are<br />

shifting, again thanks in part to the pandemic. Covid’s silver<br />

lining is surely that society has been forced to acknowledge<br />

its humanity, its vulnerabilities, and this has counterbalanced<br />

the stigma of having and talking about mental health concerns.<br />

Planners who are aware of the damaging effects of discrimination<br />

and judgement can show compassion and make a significant<br />

difference in the lives of their clients.<br />

As financial planners are on the frontline, at times being<br />

the first person a client confides in, they play a part in making<br />

mental health services accessible, another current theme. Most<br />

people don’t seek help, and advisors can play a “gateway” role,<br />

ideally providing clients with a pathway to support. This includes<br />

having a trusted set of mental health professionals on hand,<br />

acknowledging when the conversation has moved beyond the<br />

scope of one’s expertise or comfort levels and knowing how to<br />

refer appropriately.<br />

Secondly, advisors will need to build appropriate and advanced<br />

interpersonal skills.<br />

Learning, and especially practising, one’s capacity for deep<br />

listening and generative questioning are fundamental facets of<br />

advancing one’s skills. There are some simple, game-changing<br />

techniques planners could employ immediately, and which also<br />

allow room for continuous improvement. Better use of silence,<br />

being curious, collaborative, authentic and confident are all potent<br />

capabilities. Several good coaching programmes, specifically<br />

geared for financial planners, cover these and other essentials.<br />

Thirdly, for those committed to integrating this approach into their<br />

practices, a level of intrapersonal development will be required.<br />

Intrapersonal development is personal “work” that includes<br />

self-care, maintaining emotional wellbeing and the ability<br />

to self-regulate, to name a few. Self-regulation, the ability<br />

to understand and manage one’s internal states (sensations,<br />

feelings and thoughts), is vital when listening to a client. This<br />

may involve dealing with one’s own frustration or doubt,<br />

common concerns among planners faced with unfamiliar<br />

situations and awkward conversations.<br />

Some planners who fully embrace<br />

and develop inner maturity with this<br />

approach may eventually be confronted<br />

with the most uncomfortable of inner<br />

conversations, ones in which they will<br />

need to demonstrate courage. And that is,<br />

the question of their own mental health<br />

and wellbeing, and how it relates directly<br />

to their ability to serve clients.<br />

In summary, I invite you to be aware of<br />

current mental health matters, continue<br />

to upskill in the service of your clients,<br />

and take great care of yourself and your<br />

own mental wellbeing. I believe that<br />

doing so will put you in a great position<br />

to invest in the wellbeing of others,<br />

particularly your clients. <br />

Roland Cox, Executive<br />

Coach, Aspiral Coaching<br />

and Leadership<br />

1 Lawson, Derek R., and Bradley T. Klontz. 2017. “Integrating Behavioral Finance, Financial Psychology, and Financial Therapy into the 6-Step Financial Planning Process.” Journal of Financial Planning 30 (7): 48-55.<br />

2 Kitces, Nerd’s Eye View https://www.kitces.com/blog/kristy-archuleta-kansas-state-university-of-georgia-podcast-financial-therapy-association-counseling-communication/<br />

3 https://www.mentalhealthandmoneyadvice.org/en/managing-money/how-are-mental-health-and-money-worries-linked/money-worries-and-mental-health/<br />

4 Money & Mental Health Policy Institute (UK) https://committees.parliament.uk/writtenevidence/5460/pdf/

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CLIENT ENGAGEMENT | Behavioural finance<br />

Personality and triggers<br />

How adapting the way you communicate with your clients can improve long-term outcomes.<br />

Being an effective behavioural coach for your clients is not<br />

as simple as following a “one-size-fits-all” approach. People<br />

are different, with different views, ways of thinking and<br />

personal preferences. Therefore, the ability to communicate<br />

effectively requires a deeper understanding of each client’s<br />

personality and triggers.<br />

This is particularly true in volatile markets. Distinguishing<br />

between the lower composure or “jumpy” clients and the higher<br />

composure or calmer clients enables you to identify clients who<br />

are more likely to be emotionally distracted by what is happening<br />

around them (low composure/jumpy group), and those who<br />

are not even noticing the investment opportunities the market<br />

volatility is offering (high composure/calm group).<br />

The Nedgroup Investments behavioural study, which was the<br />

largest survey of its kind ever undertaken in Africa, revealed six<br />

personality archetypes that people tend to cluster around. These<br />

six personality groups can be separated into two broader groups<br />

according to their level of composure – measured as someone’s<br />

tendency to be emotionally engaged with the short term.<br />

These two broad groups have very different needs and<br />

preferences in terms of who is in control of investment decisions.<br />

“Jumpy” clients will need help staying invested during turbulent<br />

times and want to feel that you (their financial planner) are in control<br />

and most importantly, calm and confident. Calm clients can benefit<br />

from rebalancing during market weakness, as they can more easily<br />

stomach buying growth assets in a falling market. They, however,<br />

54 www.bluechipdigital.co.za

The six personality archetypes and the two broader groups they are separated into.<br />

want to feel that they are in control of making their own decisions,<br />

using you (the financial planner) as their sounding board.<br />

• Communicate the importance of using an advisor as an expert<br />

“sounding board” and to execute decisions effectively.<br />

Credit: Nedbank<br />

The key to communicating with “jumpy” clients<br />

When it comes to engaging with clients who fall into the lowcomposure<br />

group of personalities (sensitive, skittish, stressed),<br />

there are a few practical tools that can make all the difference:<br />

• First of all, it’s crucial as the financial planner or advisor to model<br />

a sense of calm and not feed into the client’s anxiety or unease.<br />

• Keep information presented to them simple and use infographicstyle<br />

material rather than overwhelming graphs and charts. We<br />

use a collection of engaging, simple sketches by Carl Richards<br />

which illustrate the true value an advisor can play here.<br />

• Avoid showing them new graphs and charts at this stage as they<br />

are likely to find it overwhelming. Unless you have shown the<br />

client a particular chart at the inception of your relationship, it is<br />

probably best to wait until markets are more stable to introduce<br />

new information.<br />

The key to communicating with “calm” clients<br />

Clients who have the highest composure will likely only feel<br />

comfortable with a decision if they feel that they have done all the<br />

research themselves. If you want to support their decision-making<br />

process, it needs to be done subtly, by improving the decisionmaking<br />

environment, rather than being prescriptive or reducing<br />

their freedom to choose. Anything that feels like intervention or<br />

assistance risks alienating them.<br />

Practically, when communicating with this group of clients the<br />

below guidelines may be useful:<br />

• Empower the client to make informed decisions. Nedgroup<br />

Investments has tools on its website like The Big Picture App to<br />

allow the client to explore all the possible options. For clients at<br />

or close to retirement, platforms such as MRS will also be very<br />

useful here.<br />

Knowing which personality group your client(s) fall into<br />

Identifying a low-composure client or a high-composure client can<br />

be as simple as asking them how they feel about a story about<br />

a client whose portfolio dropped from R1-million to R600k in<br />

less than three months during the 2020 Covid-19 crisis. A lowcomposure<br />

client will show (extreme) discomfort, while a highcomposure<br />

client will appear relatively unaffected and may simply<br />

respond with a “that’s markets for you!”. <br />

The Nedgroup Investments Financial Personality Survey,<br />

conducted in partnership with Oxford Risk, assessed over 3 000<br />

South African investors and advisors against 12 defined personality<br />

traits that have been known to affect behaviour. One of the key<br />

findings in the South African study was that there are multiple<br />

dimensions to risk attributes when it comes to investing for South<br />

African investors.<br />

Amy Jansen, Head of Behavioural Solutions, Nedgroup Investments,<br />

and Seugnet de Villiers, Investment Analyst, Nedgroup<br />

Investments MultiManager<br />

www.bluechipdigital.co.za<br />


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PRACTICE MANAGEMENT | Technology<br />

State of the advice<br />

tech landscape<br />

Insights into financial advisors’ relationships with tech from<br />

the 2022 Linktank Advice Technology survey.<br />

According to Linktank’s latest advice technology<br />

survey, financial advisors’ greatest challenges are still<br />

topped by integration options, the industry remains<br />

frustratingly paper-based, and there’s an unbudging<br />

gap in the perception of value vs cost of technology.<br />

The end-2022 edition of the annual survey, which measures<br />

gaps and trends in the technology-enablement space from the<br />

perspective of financial advice businesses, attracted respondents<br />

primarily from the life/risk and wealth management community<br />

but generally spanned the entire advice industry and thus offers<br />

some interesting insights.<br />

Despite the flurry of progress towards greater digitisation<br />

during the Covid years, almost three-quarters of survey respondents<br />

still indicate an intention to revisit their technology strategy as a<br />

key objective over the next one to three years. This is followed by<br />

the closely-related goal of addressing operational inefficiencies.<br />

These objectives significantly outweigh the importance of efforts<br />

like succession planning, which usually tops the list, and points<br />

to the stubborn challenges of appropriate selection, comparison,<br />

implementation as well as adoption of technology solutions.<br />

Defining and executing a forward-thinking technology<br />

strategy that’s aligned with business growth and client servicing<br />

objectives can cost a few cents, though. Yet almost three-quarters<br />

of respondents say they currently invest less than 20% of their<br />

1-3 year strategic objectives<br />

Revisit the business' technology strategy<br />

Address growth vs operational drag issues<br />

Implement succession planning initiatives<br />

Significantly increase or decrease team size<br />

Obtain a business valuation, purchase, or sell a business<br />

One-to-three-year strategic objectives.<br />

revenue into technology (and more than half of those spend less<br />

than 10%). On the other side of the fence, local industry technology<br />

providers estimate an Independent Financial Advisor (IFA)<br />

expenditure tolerance of around 10% to 15% of revenue and those<br />

prepared to voice their thoughts on an appropriate investment<br />

generally peg it at 20% or more.<br />

The desire for personalised service, greater value and more<br />

innovation, particularly regarding integration options, seems to<br />

remain somewhat stymied by the general appetite for outlay and,<br />

56 www.bluechipdigital.co.za

PRACTICE MANAGEMENT | Technology<br />

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indeed, the continued perception of technology as an expense<br />

rather than an investment.<br />

greatest technology challenges<br />

current investment (% of revenue over 3-5 yrs)<br />

anticipated investment (next 3-5 years)<br />

Lack of int egrat ion opt ions<br />

< 10%<br />

Balancing cost and value<br />

10 - 20%<br />

20 - 30%<br />

Lack of time or skills to implement<br />

> 30%<br />

Le ss Sam e Mor e<br />

Finding, compa ring, or se lect ing soft ware<br />

Current and anticipated investment.<br />

Complexity of digitising business processes<br />

Most advice businesses realistically anticipate increasing their<br />

investment over the coming few years, however. The most likely<br />

places for those tech budgets to be utilised are, predictably, wealth<br />

or risk planning tools and, of course, client relationship and practice<br />

management solutions. The emergence of behavioural finance tools<br />

in third place on the “most valuable” list is a bit of a surprise this year,<br />

though, particularly since there hasn’t been evidence of significantly<br />

increased expenditure in this segment of the software market yet.<br />

perception of most valuable tools to invest in<br />

Calc ula tors and tools for advisors<br />

CRM or practice management<br />

Behavioural finance / risk profiling<br />

Docs management / sharing<br />

Revenue administration<br />

Client engagem ent / serv ice portals<br />

Aggregation / consolidated reporting<br />

Management info / business intelligence<br />

Quoting / quote comparison<br />

Marketing / social media<br />

KYC automation<br />

Robo platforms<br />

Perception of the most valuable tools to invest in.<br />

Other factors are likely to play a big role in value perception, too,<br />

as highlighted by advisors’ greatest challenges with technology.<br />

Entirely consistent with previous years’ survey findings, businesses<br />

of all shapes and sizes still find it immensely difficult to deal with<br />

the user-side complexities of applying technology to their business<br />

needs, much less to a defined strategic growth plan.<br />

Topping the frustration list, as usual, is integration. In practice,<br />

this typically means that businesses are making use of multiple<br />

solutions that overlap in functionality but don’t “talk” to each other,<br />

necessitating the duplicated manual maintenance of similar data<br />

across multiple interfaces. It’s very rare, in fact, for an IFA business<br />

Access to adequate training and support<br />

Cumbersome or inadequate functionality<br />

Staying ahead, or fear of missing out<br />

Transitioning from a paper-based environment<br />

Greatest technology challenges.<br />

to employ the use of a single piece of software to meet the<br />

entirety of its operational, planning and servicing needs, so the<br />

frustration with doubling up on data collection and maintenance<br />

is entirely understandable.<br />

The problem extends beyond the integration of internally<br />

selected systems, though, and into the product provider and<br />

platform space, where data provision for reporting purposes may<br />

have improved significantly over the past decade but further<br />

high-value capabilities, such as straight-through processing,<br />

remain just about impossible for independent practices to<br />

strive towards if they interact with multiple product providers.<br />

The coming years will make for an interesting assessment of<br />

just how much IFAs will re-frame their support of platforms or<br />

product providers in the context of whether they help or hinder<br />

practices’ ability to get ahead from an independent technologybased<br />

client-servicing perspective.<br />

The industry application programming interface (API)<br />

landscape has unquestionably improved over the past few<br />

years, as many tech providers have recognised the need to<br />

offer standard, no-code integration options as a matter of<br />

necessity rather than just a competitive edge. More than half<br />

of independent technology providers on the market offer open<br />

APIs and only about 10% say they don’t offer any API, closed<br />

or otherwise.<br />

Niche and purpose-specific solution providers are, more than<br />

ever, actively seeking out integration partners to make their<br />

users’ lives easier and to complement their own solutions, while<br />

multi-purpose software providers generally base their response<br />

on user demand.<br />

www.bluechipdigital.co.za<br />


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PRACTICE MANAGEMENT | Technology<br />

tech providers’ approach to integration options<br />

Pref er to encour age e xclusive use of own sol ut ions<br />

Actively seek out and execute integrations valuable to users<br />

Consider inte gr ation opt ions base d on demand<br />

The emergence of behavioural<br />

finance tools in third place<br />

on the “most valuable” list is a<br />

bit of a surprise this year.<br />

Tech providers’ approach to integration options.<br />

In the latter scenario, it’s realistically up to users to initiate<br />

integration discussions and, in many cases, this also equates to<br />

cost and effort commitments that most IFAs simply don’t have the<br />

inclination to get into.<br />

Some unfair expectations of the term “integration” persist,<br />

though, and it sometimes emerges as a bit of a magical catch-all<br />

prospect, making it difficult for tech providers to meet<br />

expectations. Many of the prerequisite issues that need to be<br />

addressed to make integration a successful experience still nag<br />

at our heels. More rudimentary problems, like transition from<br />

paper or manual business processes, are still prevalent as more<br />

than half of advisors indicate a low level of digitisation and<br />

fewer than 15% say they’ve mostly or completely converted<br />

from paper-based environments.<br />

than ever for businesses to map out a durable, adaptable<br />

technology strategy that enhances and supports a client<br />

servicing and operational model. <br />

average user ratings (of multi-function solutions with broad feature ranges vs purpose-specific solutions with narrow feature ranges)<br />

Features, functionality,<br />

or "usability"<br />

Average user ratings.<br />

Ease of implementation<br />

and adoption<br />

Return on investment or<br />

val ue f or m oney<br />

Inte gr ation options (data<br />

or other system s)<br />

Support and training<br />

Innova tion and fut ure -<br />

focus<br />

Specif ic f eature r ange 4,1 3,9 4,0 3,3 4,1 4,0<br />

Broad feature range 3,5 3,3 3,3 3,1 3,5 3,3<br />

process systemisation<br />

digitisation (transition from paper)<br />

Low<br />

Low<br />

Mid<br />

Mid<br />

High<br />

High<br />

Process systemisation vs digitisation.<br />

Even against a backdrop of sluggish digitisation, difficulty<br />

in selection and implementation and a value perception gap,<br />

advisors have been generous in their experience ratings of the<br />

tools they’re familiar with. Breaking these solutions into two<br />

rough categories – those that offer broader feature ranges (like<br />

all-in-one CRM and planning tools) and those that offer narrower,<br />

more specific features (like revenue administration or behavioural<br />

finance tools) – it’s clear that purpose-specific solutions still<br />

attract the most love at an average of just under four stars out of<br />

a possible five compared to an average of 3.3 stars for one-stopshop<br />

offerings.<br />

Never have advisors had so many options to choose from,<br />

within either all-in-one or best-of-breed model approaches.<br />

Therein lies part of the complexity, though, so it’s more important<br />

Jen McKay, Director, Linktank<br />

58 www.bluechipdigital.co.za

FINANCIAL PLANNING | Education<br />

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Financial planning<br />

candidates rank top five<br />

It was recently announced that the top five CERTIFIED FINANCIAL PLANNER® Professional Competency<br />

Examination candidates (for the June 2022 examinations) are alumni of the School of Financial Planning<br />

Law at the University of the Free State.<br />

By Leonie Bolleurs<br />


candidate with a Postgraduate Diploma in Financial<br />

Planning or a BCom (Honours) in Financial Planning must,<br />

among others, pass the Professional Competency<br />

Examination (PCE) of FPI.<br />

On the right trajectory<br />

According to Henda Kleingeld, Programme Director of the<br />

Postgraduate Diploma in Financial Planning in the Faculty of Law’s<br />

School of Financial Planning Law (SFPL), they are incredibly proud<br />

of the candidates.<br />

“Being rated as the top five PCE candidates indicates that we are<br />

on the right trajectory with the outcomes and assessments for our<br />

diplomas. If the top five PCE candidates are alumni of the SFPL – we<br />

are doing something right. We have made many changes in our<br />

approach to financial education, and it seems like it is paying off.<br />

“We now need to ensure that we provide our students with<br />

the proper academic background and support to continue to<br />

excel. This will seal our status as the oldest and one of the leading<br />

educational providers of financial planning education in the<br />

country,” Kleingeld adds.<br />

Confidence in the qualification<br />

The PCE sets candidates on the path towards becoming CFPs®. The<br />

online exam consists of two case studies that test the candidates’<br />

financial planning skills, knowledge and competent performance<br />

in the defined competency areas for financial professionals.<br />

In its PCE policy, FPI states that there are six financial planning<br />

components: financial management, asset management, risk<br />

management, tax planning, retirement planning and estate<br />

planning. It strives to prepare PCEs that will provide candidates<br />

with the opportunity to demonstrate core or professional<br />

competence at a standard appropriate for entry into the financial<br />

planning profession.<br />

According to FPI, the CFP® designation – an internationally<br />

recognised standard for financial planning professionals – gives<br />

consumers confidence that the financial planner they are dealing<br />

with is suitably qualified to provide advice and information and<br />

gives the assurance that they remain up to date with developments<br />

in the industry.<br />

First academic institution to offer diploma<br />

Kleingeld says the SFPL was the first academic institution in South<br />

Africa to offer the Postgraduate Diploma in Financial Planning<br />

and financial education has been its focus and passion over the<br />

past 20 years. “Keeping up with industry<br />

trends is very important to us. Our team<br />

of academics and industry experts assists<br />

us with maintaining a balance between<br />

the academic requirements and how<br />

they are translated into the workplace,”<br />

she explains.<br />

Kleingeld is of the opinion that<br />

the graduates who have passed their<br />

qualifications are doing exceptionally<br />

well in the industry, with many prominent<br />

industry leaders being alumni of the UFS<br />

SFPL. “The school has a reputation in the<br />

industry as being forward thinking and<br />

innovative. We keep our fingers on the<br />

pulse of industry developments, which<br />

get incorporated into our curriculum.” <br />

www.bluechipdigital.co.za<br />

Henda Kleingeld, Programme<br />

Director: Postgraduate Diploma<br />

in Financial Planning, UFS<br />


BLUE<br />

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CLIENT ENGAGEMENT | Communication<br />

Conversations about<br />

life and money<br />

Lessons we’ve learned.<br />

One year while at university my parents planned our<br />

annual trip to the bush. As they drove a sedan and<br />

a hatchback they thought it would be a treat to rent<br />

a high-clearance SUV for the week, making for great<br />

game viewing. I am a “car nerd” while my folks really don’t care<br />

for cars, so they asked me to make the booking. After some<br />

consideration I arranged a Toyota Fortuner. When it arrived, I<br />

wasn’t home, and my mother received the vehicle. She rung me<br />

rather disappointed: the rental wasn’t much higher than their<br />

own cars. Perplexed I rushed home.<br />

Upon arriving home, I found in my parents’ driveway not a<br />

Toyota Fortuner but a Porsche Cayenne. My mother (a capable,<br />

knowledgeable and world-wise woman) had received the keys<br />

and simply not realised the difference. What she saw was a<br />

vehicle that did not match her expectations at all: something<br />

low and sleek without the high-ride height and big, open<br />

windows she wanted.<br />

When clients meet with us they are on a journey. They come to<br />

us because they want advice on the best route(s) to travel and the<br />

best (investment) vehicle(s) for their circumstances. Much as my<br />

parents trusted me as someone who knows cars to select the best<br />

vehicle for their goals and budget.<br />

I would suggest that there are two aspects to a client’s<br />

investment “vehicle”:<br />

• The “engine”. This is what happens “under the hood” like process,<br />

blending, research, asset allocation and manager selection.<br />

• The “experience” of driving the vehicle. Tax, liquidity, income,<br />

volatility and returns.<br />

My mother didn’t want to know about the Fortuner’s engine or<br />

how it worked. Her expectation was that it worked: she wanted<br />

– expected really – performance and reliability. She didn’t need<br />

me to unpack with her how that was generated, she just wanted<br />

to trust that I had selected an engine which could deliver it.<br />

Similarly, many of our clients are not particularly interested in<br />

“how the engine works” – they want to know that it works: that<br />

it will perform reliably.<br />

This isn’t true of all clients and for some it adds value to discuss the<br />

investment engine. Those clients are “welcomed into the workshop”<br />

to see our investment process and “get their hands dirty” working<br />

through the mechanics of it. My partners and I enjoy – thrive on – the<br />

technical investment elements (much as, when younger, I thrived on<br />

learning about cars). We enjoy sharing this, but we are cautious to<br />

only get technical to the extent that it adds value for a client.<br />

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CLIENT ENGAGEMENT | Communication<br />

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What is obvious to us is not necessarily obvious to the client.<br />

When my mother received the Porsche keys, she simply did not<br />

realise they weren’t labelled Toyota. Similarly, we as planners<br />

might think some things are obvious when in fact they are not.<br />

Think of the difference between total investment charge (TIC)<br />

and effective annual cost (EAC); strategic and tactical asset<br />

allocation; passive and active; growth or value style investing.<br />

What is important to us is not necessarily important to the<br />

client. As planners, we may be proud to know that in our client’s<br />

living annuity they own our best offshore equity managers on<br />

asset swap at no extra fee… but the retired couple may simply<br />

want to know that their portfolio will give them a healthy balance<br />

so no single event can jeopardise their retirement income and<br />

that it will grow sufficiently to protect them and their income<br />

from inflation. How we “built the engine” may not be important<br />

to them.<br />

As planners, beware of getting in the way. My partners and I<br />

stress that we must be careful not to impose our biases on the<br />

client. When I called Avis to query the Porsche they were puzzled<br />

at our disappointment. They thought the Cayenne was an upgrade:<br />

a better car for the same price. Because they didn’t understand<br />

what we wanted from our journey, they gave us their “best view”,<br />

not something best suited to our goals.<br />

Now here is the interesting part: the above is what we expect<br />

of ourselves as planners and as a firm.<br />

Irrespective of their interest in the engine, all clients will<br />

experience the drive. For example: how and when tax is paid;<br />

liquidity restrictions on the investment; performance, volatility<br />

and so forth. A conversation about the drive which sets the right<br />

expectations is crucial. I will return to this shortly.<br />

How do we tie this metaphor together? At Omega Capital we<br />

call our conversation one about a client’s life and money.<br />

The investment vehicle falls in the “money” side of the conversation.<br />

We would suggest that a range of high-quality investment vehicles<br />

that a client can rely on to perform is… table stakes. It is the minimum<br />

a quality planning firm should bring to the table.<br />

Then there is the “life” side of the conversation: our client’s<br />

journey. What are their goals, fears, aspirations? Who are the<br />

people on this journey with them? What is difficult for them to<br />

action or even to talk about? What compromises are they willing<br />

to make in balancing life and money goals? What are the hard<br />

questions we, as their advice partner, need to ask? Or the tough<br />

things we need to coach them towards?<br />

Who is most competent to speak to that? Our client. So, we<br />

try to “shut up and listen”.<br />

Against that framework, as planners, we feel the following is<br />

important to be aware of:<br />

What about our clients?<br />

Using our metaphor there are a few crucial things. As I mentioned<br />

above, we may not discuss “the engine” but we absolutely discuss<br />

“the experience” of the drive.<br />

A client must know what to expect from their vehicle. What<br />

can the volatility be; what time horizon are they investing for (and<br />

assessing the investment over) and what are realistically possible<br />

returns over shorter and longer periods. If we get the expectation<br />

wrong – the relationship fails and likely also the plan.<br />

A client must know how to “drive” their vehicle(s). What<br />

contributions did we plan for over time? Or,<br />

inversely, how much can a retired client draw<br />

from the portfolio? Critically, will they remain<br />

invested when the journey gets challenging –<br />

as it will at some point(s) along the way.<br />

The best plan can be destroyed by an<br />

investor’s bad behaviour.<br />

In closing, after a conversation with us<br />

about life and money where a client has<br />

made decisions and executed them, what<br />

would we want them to “drive out” with? We<br />

expect that they would know:<br />

• Where they are going: their plan.<br />

• What ride to expect: volatility, time horizon.<br />

• How to “drive” their investment: drawdown,<br />

contribution, staying invested.<br />

• Lastly, to the extent it adds value for them:<br />

how the engine works. <br />

Johannes Landman,<br />

Financial Planner and<br />

Partner, Omega Capital<br />

www.bluechipdigital.co.za<br />


BLUE<br />

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CLIENT ENGAGEMENT | Financial literacy<br />

Accessible money<br />

conversations in<br />

isiXhosa: YES PLEASE!<br />

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CLIENT ENGAGEMENT | Financial literacy<br />

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Ihave had the pleasure of interacting with many people who<br />

do not speak indigenous South African languages socially<br />

throughout my career. What always intrigues me about<br />

these interactions is that topics such as inheritance or the<br />

latest cryptocurrency are often part of the conversations in the<br />

most casual social settings like braais for speakers of English and<br />

Afrikaans. I found this quite fascinating because these kinds of<br />

discussions rarely come up in social settings or media channels<br />

that cater to or appeal to speakers of African languages.<br />

These are some of the realisations that propelled me to create<br />

my podcast, Epokothweni with Babalwa Nonkenge, and to the<br />

best of my knowledge Epokothweni is the first platform of its<br />

kind which produces personal finance content in an indigenous<br />

South African language in podcast format. I believe that the lack<br />

of such content is directly linked to the high rates of financial<br />

illiteracy among South Africans.<br />

The word epokothweni is derived from an expression in<br />

isiXhosa – “ukungena epokothweni” which directly translated<br />

means to “enter into someone’s pocket”. This is a euphemism<br />

for overstepping boundaries; doing or saying something that<br />

is not socially or culturally acceptable. In some African cultural<br />

settings, the pocket has always been a realm of mystery where<br />

no-one else besides the owner purportedly knows what is going<br />

on inside it. Anecdotal evidence suggests that the subject of<br />

money seems to be one that no-one was consciously taught<br />

in homes or schools – meaning that one can surmise that most<br />

adults just wing it and hope for the best.<br />

The taboo regarding money matters creates a secrecy and<br />

fear of saying something as simple as, “I don’t understand, please<br />

help me.” The area of personal finances is one full of English<br />

jargon and terminology which is difficult to understand even<br />

for degreed individuals. The issue is further compounded in the<br />

case of individuals who have little or no schooling and yet they<br />

enter into financial commitments on a daily basis.<br />

Epokothweni bridges this gap in that it gives individuals<br />

access to content for free, in their own time and as they wish.<br />

They interact with the podcast via social media. Since inception<br />

in June 2021, each of our episodes is informed by the north<br />

star which is to give dignity to the speakers of indigenous<br />

languages by producing accessible conversations in the second<br />

most spoken language in South African homes. The podcast is<br />

available via all major podcast platforms and can be accessed<br />

via virtually all smart phones regardless of location.<br />

Epokothweni with Babalwa Nonkenge<br />

Website: www.epokothweni.co.za<br />

Social media handles: @Epokothweni<br />

Email: Babalwa@epokothweni.co.za<br />

WhatsApp line: 0726507641<br />

Anecdotal evidence suggests that<br />

the subject of money seems to be<br />

one that no-one was consciously<br />

taught in homes or schools.<br />

The podcast has grown to be a space for conversation and<br />

cocreation, a step taken deliberately – because the style is<br />

conversational and borrows from the storytelling technique which<br />

is quite an entrenched knowledge-sharing education and oral<br />

history method for most African language speakers. Cocreation is<br />

a very important aspect of what we do. We do not merely translate<br />

from English as this would be a limitation because some of the<br />

terminology does not exist in indigenous African languages. We<br />

also use the phrase “financial stewardship” to describe the work<br />

we do via the podcast as this demonstrates the idea that one can<br />

be a good steward of their money whether they make R1 000 per<br />

month or R1 000 000 per month.<br />

In the early days of the podcast, we spent quite a bit of time<br />

educating listeners about what a podcast is and how to subscribe to<br />

one because our audiences simply didn’t know what a podcast was<br />

– historically relying mainly on radio and television for information.<br />

Currently, the podcast enjoys support from Nguni language<br />

speakers as far afield as Germany, UAE, Kenya and the US. In<br />

June 2022, the podcast was awarded the Pan South African<br />

Language Board award for multi-lingualism in the Business and<br />

Technology category. We have been asked by various corporates<br />

to provide financial wellness coaching to individuals and groups<br />

(in English). We have also produced and published some pieces<br />

of commissioned content by two prominent financial services<br />

providers. In future, we hope to build life stage applications and<br />

to design courses that individuals and groups can purchase and<br />

consume in their own time.<br />

The appeal of Epokothweni has<br />

extended beyond those who are mother<br />

tongue speakers of IsiXhosa (our main<br />

language of delivery). The feedback<br />

we are getting points to the fact that<br />

our growth is being spurred on by our<br />

simplicity of delivery and empathy in our<br />

approach to conversations as part of the<br />

success formula for the podcast.<br />

One of our dreams is to offer the<br />

material in more African languages, and<br />

to this end we are always on the lookout<br />

for opportunities to collaborate with likeminded<br />

professionals within the financial<br />

services sector. <br />

Babalwa Nonkenge,<br />

Personal Finance Expert,<br />

Entrepreneur and<br />

Award-Winning Podcaster<br />

www.bluechipdigital.co.za<br />


BLUE<br />

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CLIENT ENGAGEMENT | Customer care<br />

Financial abuse:<br />

how can you identify<br />

it and help your<br />

clients deal with it?<br />

Would you know how to spot the signs of financial abuse?<br />

How difficult could it be to identify when a client’s spending<br />

habits change drastically or if there was a fraudulent or unknown<br />

transaction of large value on an investment or savings account? I<br />

thought I would be able to identify the signs… but I was wrong. I<br />

failed to spot the signs that my client was a victim of financial abuse.<br />

I underestimated how easily this can happen. For this client,<br />

her “loving” partner managed to convince her to purchase a<br />

business property in his name. She agreed to withdraw her unit<br />

trust investments to fund this transaction, while he was in the<br />

process of getting together liquid funds to repay her. Ultimately,<br />

he sold the property without her consent and failed to repay<br />

her. As she was also a victim of physical abuse, it became near<br />

impossible for her to recover her funds.<br />

The reality is that a lot of the victims of economic or financial<br />

abuse might not even realise what is happening, until it is too<br />

late. In 2022, I received my Financial Abuse Specialist (FAS)<br />

designation after completing the required course through<br />

UK-based Standards International, to better understand this<br />

world and avoid the scenario I mentioned earlier.<br />

“He was just a bit controlling.” “He took care of all my finances<br />

without me asking.” “I was not allowed to view my own bank and<br />

investment statements.” “He would have inherited the money in any<br />

case.” These are all phrases that I’ve heard in our meeting spaces.<br />

Financial and economic abusers are not always men but in<br />

our unequal society, the reality is that women and elderly people<br />

are softer targets. The statistics are alarmingly high related to<br />

child maintenance defaults and failure to pay even the smallest<br />

amount towards the wellbeing of their children. At the root of<br />

this sits controlling and coercive behaviour, a desperate attempt<br />

to still control your ex-partner through the only mechanism<br />

available: money.<br />

During a financial planning process with new clients, we talk<br />

about their financial history and what might stand out for them as<br />

memorable moments where money was involved. One new client<br />

shared with me the story of her ex-husband selling her paid-off<br />

car, taking the full proceeds to purchase his own sports car, all<br />

without her consent or knowledge. Only after we discussed what<br />

financial and economic abuse is, could she label these actions and<br />

understand how it impacted not only her relationship with money<br />

but also her future romantic relationships.<br />

How do we define financial abuse and how does it differ from<br />

economic abuse?<br />

Financial abuse is the illegal or unauthorised use of a person’s<br />

property, money, pension or other valuables. This includes changing<br />

the person’s will to name the abuser as heir, often fraudulently<br />

obtaining a Power of Attorney, followed by deprivation of money<br />

64 www.bluechipdigital.co.za

CLIENT ENGAGEMENT | Customer care<br />

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The reality is that a lot of the<br />

victims of economic or financial<br />

abuse might not even realise what<br />

is happening, until it is too late.<br />

or other property or by eviction from their home. It often also<br />

applies in cases of elder abuse or domestic violence.<br />

Economic abuse is slightly wider as it is a form of abuse when<br />

one partner has control over another partner’s access to economic<br />

resources, for example prohibiting one from working or earning<br />

their own income. At the root of this abuse is controlling and<br />

coercive behaviour.<br />

This type of abuse is often the precursor to physical abuse and<br />

should be seen as a major red flag. Amanda Cassar, co-founder of<br />

the Financial Abuse Specialist (FAS) designation together with<br />

Michelle Hoskin, shares as part of the learning material a case study<br />

in which there was even an attempted murder by the abuser.<br />

What can you do to help clients who are victims of abuse?<br />

Now that we know who is at risk, as well as the potential signs of<br />

abuse, it is important to consider what can we do to assist victims<br />

of financial abuse. Here are four basic tips:<br />

1. Make sure that you have a “trusted contact” listed for<br />

your clients. The Security and Exchanges Commission<br />

in America has made it a legal requirement to note an<br />

emergency contact on your investment accounts and I<br />

believe that this would be good practice for all clients.<br />

Make sure that your client agrees to when you might<br />

need to reach out to the trusted contact.<br />

2. If you suspect someone might be suffering from financial<br />

or economic abuse, do not accuse the abuser directly.<br />

This may put the victim at risk unintentionally. Share with<br />

the suspected victim stories and resources that might<br />

motivate them to take action when they are ready.<br />

3. Share an abuse survival kit with them. This includes a tick<br />

box of items that they should get together before they<br />

take action on moving themself and their family to safety.<br />

This includes items like a separate bank account with an<br />

amount of cash, copies of important documents, copies<br />

of prescription scripts and a spare cell<br />

phone with a SIM card.<br />

4. Share contact details of helplines and<br />

institutions like People Opposed to<br />

Woman Abuse (POWA), Halt Elder<br />

Abuse Line (HEAL) or Families South<br />

Africa (FAMSA) who would be able to<br />

assist with the necessary support.<br />

I hope that we will continue to serve our<br />

clients in the best way possible, by listening<br />

to their needs and creating a safe space for<br />

them to share whatever might be happening<br />

in their lives. <br />

Louis van der Merwe,<br />

Certified Financial Planner®<br />

and Coach<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />



FPI Approved Professional Practice: Integral Wealth Management<br />

Integral Wealth Management provides financial planning services and offers a full range of<br />

investment products and platforms. Director, Michael Frantzeskou, CFP®, speaks to <strong>Blue</strong> <strong>Chip</strong><br />

about the high standards Integral Wealth upholds as an FPI Approved Professional Practice.<br />

66 www.bluechipdigital.co.za


BLUE<br />

CHIP<br />

Please provide a brief history of Integral Wealth Management.<br />

How did it come about?<br />

Providing independent advice and putting our clients first are the<br />

guiding principles that drove us to start Integral Wealth. Three of<br />

us worked together at a listed company and we knew that if we<br />

put our clients first in all that we did, we would have a successful<br />

business. We opened our doors in May 2016, and fortunately our<br />

strategy has worked – we grow through referrals from our existing<br />

clients. We are based in Johannesburg and have clients all over<br />

South Africa and many who have emigrated.<br />

Why would a client choose Integral Wealth Management? What<br />

sets you apart?<br />

We pride ourselves on our culture of transparency and integrity.<br />

We believe that our clients’ financial wellbeing must always come<br />

first. This reputation has stood us in good stead, cementing strong<br />

and trusting relationships which have contributed to our growth.<br />

We do not have minimum client portfolio sizes or any other<br />

strict criteria that determine which new clients we take on. Anyone<br />

who wants to work with a financial planner and who is committed<br />

to their own financial future is welcome to become a client.<br />

We operate as a team, meaning that we are all able to assist each<br />

other with product and market knowledge, providing a think-tank<br />

for complex client solutions and assisting with client servicing in<br />

the event of someone being ill or on leave.<br />

Although small, our robust and skilled team believe strongly in<br />

sharing knowledge and continuous professional development is at<br />

the forefront of our business model. We believe that in upskilling<br />

ourselves and keeping up to date with industry trends, we are best<br />

positioned to provide effective client solutions.<br />

We work hard to retain existing clients through high levels of<br />

service. We conduct annual reviews at minimum as a standard<br />

practice and interact with our clients using a variety of channels<br />

such as email, monthly newsletters, face-to-face or virtual meetings,<br />

telephone and WhatsApp.<br />

We treat our clients the way<br />

we like to be treated.<br />

What is the company’s financial planning philosophy?<br />

We believe that each client deserves a financial plan that is<br />

personalised and actively managed to enable them to live the life<br />

they deserve. We do this through the following:<br />

• Organisation. Bringing order to our client’s financial life.<br />

• Accountability. Helping them follow through with their<br />

commitments.<br />

• Objectivity. Delivering insight from the outside to avoid<br />

emotional decisions.<br />

• Proactivity. Anticipating life’s transitions and being prepared<br />

for them.<br />

• Education. Exploring and bestowing knowledge to empower<br />

client success.<br />

• Partnership. Partnering to achieve the best life possible.<br />

What services does Integral Wealth Management offer? How<br />

do you charge for your services?<br />

We provide financial planning and wealth management services<br />

to individuals and corporates and offer a full range of investment<br />

products and platforms, as well as life assurance and medical<br />

aid. Each plan is tailored to a client’s unique requirements, and<br />

we adhere to the highest level of ethics and integrity in all our<br />

client and product provider relationships.<br />

We pride ourselves on providing independent financial advice<br />

that is client-focused, and appropriate based on each client’s<br />

personal requirements and situation. If we cannot add any value,<br />

we would prefer to steer a client in the right direction rather than<br />

earn fees without adding value.<br />

We have contracts with most investment and life firms in South<br />

Africa, and contracts with a few offshore service providers. We<br />

also provide advice on medical aids, wills and trusts as part of our<br />

service, but we do not establish or manage trusts or draft wills.<br />

Our planners are all salaried employees who do not earn<br />

commission based on sales. Staff are remunerated by way of profit<br />

share annually, encouraging everyone to have a vested interest in<br />

the success of the business.<br />

What is the practice’s vision and mission?<br />

Our ethos as a business is to always put our clients and their best<br />

interests first, and all our planners and assistants have a track<br />

record of delivering on that promise. Part of this ethos is ensuring<br />

that the following criteria are met:<br />

• Client-centric<br />

• Value for money<br />

• No client is too small<br />

• Full transparency and disclosure<br />

• Honesty, integrity, ethics and professionalism<br />

• Compliance is embedded in our culture<br />

• Work as a team and value our staff<br />

• Owner-managed and independent<br />

Please detail how you have integrated the FPI’s Code of Conduct<br />

into your practice.<br />

We follow the six-step financial planning process, treating all<br />

clients with the same care and diligence. We do not turn away any<br />

client and do pro bono work for low-income earners introduced<br />

by existing clients.<br />

We have employed interns and trained them in all aspects of<br />

our business, offering them permanent employment at the end<br />

of their internship. We encouraged them to study towards the<br />

Post-Graduate Diploma in Financial Planning and to become<br />

CFPs®. It is our intention that our two current interns will<br />

progress to become independent financial planners with us,<br />

and we plan to repeat this process soon. We require all new<br />

planners to be CERTIFIED FINANCIAL PLANNERS®, or to be<br />

studying towards the designation when they join us. We believe<br />

the biggest contribution we can make to transformation of our<br />

industry is through training and giving people the opportunity<br />

to grow themselves.<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />


Empathy is critical to success.<br />

Our remuneration model is designed to incentivise the<br />

correct behaviour. We have no cut-off dates to achieve<br />

targets or sell more. We sell advice, not products, and clients<br />

who receive good advice tend to be long-term clients. It is<br />

much cheaper to look after the clients we have than it is to<br />

start working with a new client, so we treasure the clients<br />

we have.<br />

We believe that by working as a team we are also putting<br />

clients first – there is always someone to deal with their query,<br />

and the attention they receive is personal as everyone is<br />

trained and willing to assist.<br />

Our MD sits on the FPI Technical Committee and has been<br />

involved in various FPI Committees over the past 20 years.<br />

We have also participated in industry events like Leaderex, at<br />

the FPI stand, and have written commentaries for <strong>Blue</strong> <strong>Chip</strong><br />

in the past.<br />

To what extent do you use technology in your practice?<br />

We have always invested in technology as we believe it<br />

enables our staff and our business to perform optimally and<br />

proficiently. We utilise a Dutch system called iManage for<br />

all storage, which is encrypted cloud-based storage used<br />

mainly by banks and legal firms. Diligent recordkeeping<br />

and protection of data is key to our business processes.<br />

We also subscribe to value-adding services like Asset Map<br />

and Commspace.<br />

We have an outsourcing arrangement with an IT firm that<br />

provides live service support and checks the health of our<br />

network and equipment on a regular basis.<br />

Our IT systems enable all staff to work in the same way<br />

whether they are in the office or at home or travelling<br />

anywhere in the world. There was no disruption to business<br />

in 2020 when we were forced into lockdown during the<br />

Covid pandemic.<br />

What do you think are the keys to being a successful financial<br />

planning practice?<br />

We treat our clients the way we like to be treated. Empathy<br />

is critical to success. Behavioural finance has been the fastestgrowing<br />

area of financial planning education and training of<br />

late, and Covid taught us the importance of understanding the<br />

underlying issues that drive financial behaviour. We try to have<br />

the difficult conversations with clients early on and encourage<br />

them to commit to their own plans.<br />

Our business has a combination of structure and flexibility –<br />

structure around our procedures and how we work, and flexibility<br />

around the solutions we can offer clients – tailored to their likes and<br />

dislikes, so no one-size-fits-all.<br />

What are the biggest challenges you currently face as a practice?<br />

We are fortunate in that we have a good spread of clients and are not<br />

dependent on a few to sustain us, and we have committed and loyal<br />

staff. As we are still relatively young (six years old), our biggest challenge<br />

is going to be managing our growth and balancing that with finding the<br />

right staff to look after our client base. Regulation keeps changing which<br />

keeps the industry professional, and offshore investing becomes a larger<br />

part of our focus as the world becomes a smaller place and emigration<br />

increases. There are no givens in our planning for the future.<br />

How has being an FPI Approved Professional Practice benefited you?<br />

The experience of going through the FPI audit highlighted areas<br />

where our business could improve, which was helpful to us and<br />

strengthened us.<br />

It has been a difficult period to measure benefits, due to Covid,<br />

but when we applied, we were confident that if we wanted to be<br />

at the top of our field, we wanted to align with the best, and meet<br />

the highest standards, and that drove us to become an approved<br />

professional practice.<br />

What advice would you give another practice considering applying<br />

to be an FPI approved practice?<br />

Don’t hesitate on this. The application and approval process are a great<br />

eye-opener. The designation has significant meaning in the industry<br />

and to our clients.<br />

Would you like to add anything?<br />

We have spoken about the challenges<br />

we face as a business, but not about<br />

the challenges to our industry. It is<br />

widely recognised that transformation<br />

has been slow, and we welcome the<br />

internship programmes run by FPI<br />

and ASISA, which specifically target<br />

our industry. We encourage other<br />

financial planning companies to<br />

appoint newly-qualified graduates –<br />

it is a wonderful way to train young<br />

people and enhance the profession. <br />

The prestigious Approved Professional Practice accreditation is the result of a stringent<br />

audit by FPI to ensure that a business adheres to the highest standards of knowledge,<br />

expertise and ethical conduct.<br />

Michael Frantzeskou, CFP®,<br />

Director and Financial Planner,<br />

Integral Wealth Management<br />

68 www.bluechipdigital.co.za

BLUE<br />

CHIP<br />

FINANCIAL PLANNING | Estate planning<br />

Preserving wealth while<br />

keeping up with global trends<br />

Andrew Ratcliffe is a director at Private Client Holdings<br />

(PCH), a multi-family office based in Cape Town that<br />

has been managing high-net-worth individuals’ (HNWI)<br />

wealth for more than 30 years. “While South Africa has its<br />

challenges and the global and local economic and political woes<br />

of 2022 have certainly kept us on our toes, the country still has<br />

a middle-income class that is steadily moving towards high-networth.<br />

Preserving wealth, not only in South Africa, but across the<br />

continent is key to the growth of our economies, even as times<br />

and trends change,” says Ratcliffe.<br />

PCH continuously follows and embraces emerging trends and<br />

the impact they have on driving wealth creation, investment and<br />

growth. “Immigration and semi-gration are two rapidly growing<br />

trends in South Africa,” says Ratcliffe. “While semi-gration is where<br />

families choose to relocate within a country, such as families<br />

moving down to the Western Cape from Gauteng, many families<br />

are leaving South Africa in search of more tax-friendly jurisdictions,<br />

opportunities as well as popular residency and citizenship<br />

programmes. The money goes where the opportunities are and<br />

the families often follow.” PCH’s tax consulting and fiduciary<br />

arms provide ongoing advice to their clients to ensure that they<br />

understand the complexities of immigration and how to manage<br />

their affairs when moving jurisdictions.<br />

Another emerging trend is that of digital currencies and<br />

alternative asset classes. According to the 2022 UBS Global Family<br />

Office Report1, 28% of family offices are investing in decentralised<br />

payments or technologies by way of private equity, while 26% of<br />

family offices are currently investing or considering investing in<br />

cryptocurrencies. “Embracing technology is just as fundamental<br />

now to our advice,” says Ratcliffe. “There is a myriad of other<br />

options now available, which are becoming more mainstream<br />

however, there must be a good reason to have these as an asset<br />

class in one’s portfolio.”<br />

Ratcliffe is also seeing a demand for doing the right thing.<br />

“Our clients’ values feed into our ethos and advisory process,<br />

with a shift towards ESG and being mindful of issues like climate<br />

change.” To implement ESG strategies, the company works with<br />

the best fund managers in the market, from a global context,<br />

who are skilled in constructing portfolios suited to individual<br />

and family needs.<br />

According to the same UBS survey, family offices think sustainable<br />

investments will continue to at least match broader market returns<br />

over the next five years. A total of 41% said they were actively<br />

allocating more to companies/sectors that are focused on directly<br />

impacting real world issues (e.g. lowering carbon emissions,<br />

renewable energy, etc).<br />

Despite the noise in the system, PCH continues to adhere to<br />

its goals-based approach to wealth management and more than<br />

ever to focus on its responsibility of being<br />

in the “trust” business. “Wealth management<br />

and wealth preservation requires a lot of<br />

attention, focus, empathy, care and listening.<br />

A lot of what we do is like being a counsellor<br />

and a coach, listening carefully to the needs,<br />

wants, fears and dreams of our clients. We’re<br />

in the trust business,” says Ratcliffe. This<br />

trust extends to their relationships with<br />

independent financial advisors who they<br />

partner with to navigate complex wealth<br />

management strategies, with demanding<br />

fiduciary and tax structuring requirements. <br />

If you’re looking for this kind of partnership,<br />

contact Andrew Ratcliffe, CFP® on<br />

andrew@privateclient.co.za or visit<br />

www.privateclient.co.za.<br />

Andrew Ratcliffe, CFP®, Director,<br />

Private Client Holdings<br />

1The 2022 UBS Evidence Lab Global Family Office Report includes insights from 221 single family offices that collectively oversee wealth of US$493-billion and have average assets under<br />

management of US$2.2-billion. A total of 16% of the survey sample were from the Middle East and Africa.<br />

70 www.bluechipdigital.co.za


The licenses we hold with the Financial Sector Conduct Authority (FSCA) are: Private Client Holdings – FSP 613,<br />

Private Client Portfolios – FSP 399 78 and Private Client Wealth Management – FSP 399 79.<br />


The value of<br />

a professional<br />

designation<br />

Trust forms the core of the relationship between a<br />

financial professional and their client. The client trusts<br />

the financial professional not only with their finances,<br />

but also with their long-term goals and objectives. There<br />

is a fiduciary duty on the financial professional to always act in<br />

the best interest of the client and put the needs of the client first.<br />

The financial advice industry has suffered from bad press in<br />

the past, due to unscrupulous advisors not acting in the best<br />

interest of the client, but rather acting in their own best interest<br />

to the detriment of the client. Unfortunately, these bad practices<br />

have tainted the view of the industry despite the majority of<br />

financial planners whose businesses revolve around their client,<br />

their needs and objectives.<br />

A professional designation is an indication to clients that the<br />

financial planner or advisor you are dealing with has distinguished<br />

themselves not only in terms of qualifications and experience, but<br />

also holds themselves to a set of ethical standards governed by<br />

a body of their peers.<br />

The Australian Council of Professionals describes a profession<br />

as: “a disciplined group of individuals who adhere to ethical<br />

standards and who hold themselves out, and are accepted<br />

by the public, as possessing special knowledge and skills in a<br />

72 www.bluechipdigital.co.za

widely recognised body of learning derived<br />

from research, education and training at a<br />

high level, and who are prepared to apply<br />

this knowledge and exercise these skills<br />

in the interest of others. It is inherent in<br />

the definition of a profession that a code<br />

of ethics governs the activities of each<br />

profession. Such codes require behaviour<br />

and practice beyond the personal moral<br />

obligations of an individual. They define<br />

and demand high standards of behaviour<br />

in respect to the services provided to the<br />

public and in dealing with professional<br />

colleagues. Often these codes are enforced<br />

by the profession and are acknowledged<br />

and accepted by the community.”<br />

How did the financial planning profession<br />

evolve in South Africa? In 1981, a group of<br />

advisors in the life insurance and pension<br />

fund industry founded the Institute of Life<br />

and Pension Advisors (ILPA) to professionalise<br />

the industry which, at that time, did not<br />

have as many regulatory guidelines to<br />

protect consumers as it does today. In 1998,<br />

this Institute became one of the founding<br />

members of the Financial Planning Standards<br />

Board (FPSB), which owns the CERTIFIED<br />

FINANCIAL PLANNER® mark outside of the<br />

US. In 2000, this organisation changed its<br />

name to Financial Planning Institute of<br />

Southern Africa (FPI).<br />

FPI is a professional body recognised by<br />

the South African Qualifications Authority<br />

and has three designations registered with<br />

this Authority. The certification standards that<br />

apply to all three professional designations<br />

are based on four Es: Education, Experience,<br />

Examination and Ethics.<br />

The internationally recognised CERTIFIED FINANCIAL<br />

PLANNER® designation is based on international standards for<br />

financial planning as set by FPSB. These standards are localised<br />

by the FPI to ensure that they cater for the uniquely South African<br />

environment. All prospective CFP® members must meet the<br />

certification requirements before they apply for membership. This<br />

designation is underpinned by a formal qualification in financial<br />

planning, at a postgraduate degree level.<br />


FINANCIAL PRACTITIONER designations are available to those<br />

financial advisors in the industry who have a graduate degree<br />

or diploma in financial planning or related fields and meet the<br />

additional certification requirements as set by FPI.<br />

Why are these designations valuable?<br />

Being a professional member of FPI distinguishes you from<br />

the crowd. It reflects your commitment to becoming and<br />

remaining a professional in the broader financial services<br />

industry. An increasing number of financial institutions are<br />

seeking to employ representatives and key individuals that<br />

are professional members in good standing at FPI. Being an<br />

FPI professional member means that you already meet the<br />

competency (Education and Experience) and CPD standards of<br />

the FSCA. You furthermore adhere to the FPI Code of Ethics and<br />

Practice Standards and are subjected to peer review should you<br />

step over the line in terms of the mentioned code.<br />

Being a professional<br />

member of FPI distinguishes<br />

you from the crowd.<br />

All of this assists the financial institution to continue to comply<br />

with the fit and proper requirements as contained in BN 194 of 2017.<br />

Being a professional member in good standing with FPI means that<br />

you meet our ethical, competency and CPD standards.<br />

Consumer trust is also very important when it comes to business<br />

retention. A happy consumer is someone that stays with you as<br />

they trust you. Having a professional designation showcases that<br />

you are committed to the principles of FPI which are:<br />

• Client first<br />

• Integrity<br />

• Objectivity<br />

• Fairness<br />

• Competence<br />

• Confidentiality<br />

• Diligence<br />

• Professionalism<br />

To circle back to the value of a professional designation<br />

The value can be summarised in a few key words: employability,<br />

competency, professionalism, consumer loyalty and trust.<br />

Consumers trust competent professionals and financial firms<br />

employ competent financial advisors and financial planners that<br />

are going to grow with the practice or corporation.<br />

Still not a member of FPI but really want to become a member?<br />

Visit www.fpi.co.za and apply for membership today. Alternatively<br />

contact us on (011) 470-6000 or membership@fpi.co.za. <br />

www.bluechipdigital.co.za<br />



IS NOW<br />

The FPI Financial Planner<br />

of the Year competition<br />

is composed of very<br />

stringent tasks faced by<br />

the finalists in all three<br />

rounds. Only applicants<br />

demonstrating their<br />

talents and abilities to<br />

the highest degree made<br />

it through the rounds.<br />

Here is a roundup of<br />

the winners of the FPI<br />

Financial Planner of the<br />

Year 2022 competition.<br />

A huge congratulations to the 2022 Financial Planner of the Year,<br />

Palesa Dube, CFP®.<br />

The FPI Financial Planner of the Year is judged by independent<br />

judges including academics, industry experts, FPI senior<br />

management and board members. Congratulations to the top<br />

three finalists, Philippus Hendrik Spies CFP®, Palesa Dube, CFP®<br />

and Tom Brukman, CFP®.<br />

Lelané Bezuidenhout, CFP®, and Philippus Hendrik Spies, CFP®.<br />

Lelané Bezuidenhout, CFP®, and Palesa Dube, CFP®.<br />

74<br />


Find out about the<br />

Young Financial Planners<br />


Lelané Bezuidenhout, CFP®, and Tom Brukman, CFP®. Lelané Bezuidenhout, CFP®, with Palesa Dube, CFP®, FPI 2022<br />

Financial Planner of the Year and Ryan McCaughey, CFP®, FPI<br />

2021 Financial Planner of the Year.<br />

The Top Candidate Award, presented by Nici Macdonald, CFP®,<br />

FPI head of department for certification and standards, which<br />

goes to the candidate whose performance surpassed all the<br />

others in the FPI’s CFP® Professional Competency Examination<br />

went to Bryan Nicol, CFP®.<br />

The It Starts With Me Award which recognises a CERTIFIED<br />

FINANCIAL PLANNER® professional for their unyielding dedication<br />

to promoting the CFP® certification, went to Ricardo Teixeira, CFP®.<br />

The Diversity and Inclusion Award, presented by the FPI’s HOD<br />

for policy and engagement, David Kop, CFP®, which speaks to the<br />

efforts of the individual exhibiting tireless endeavour to foster<br />

diversity in the financial planning profession, went to Mona<br />

Manzambi, CFP®.<br />

The Harry Brews Award, presented by the FPI chairperson, Kirsty Scully, which honours an extraordinary individual for undying<br />

and dedicated service to both the FPI and the financial planning profession in general, was awarded to Noel Maye, MBA. Maye is<br />

the outgoing CEO of the Financial Planning Standards Board and is recognised for his unwavering support to the financial planning<br />

profession and his tireless dedication to growing the profession from only a few territories to over 27 today with over 203 000 CFP®<br />

professionals worldwide.

WE LOOK<br />

FORWARD,<br />


WHO TO BACK.<br />

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Your capital is at risk with investing.<br />

Marketing material for investment professionals and advisers only. <strong>Issue</strong>d by<br />

Schroder Investment Management Ltd, an authorised financial services provider<br />

FSP No: 48998, registration number 01893220. (Incorporated in England and Wales).

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