Blue Chip Issue 88

BLUE
CHIP
0.5 CONTINUOUS
PROFESSIONAL DEVELOPMENT
THE OFFICIAL PUBLICATION OF THE FPI
Issue 88 • Aug/Sept/Oct 2023
www.bluechipdigital.co.za
0.5 CONTINUOUS
PROFESSIONAL DEVELOPMENT
01 CONTINUOUS
PROFESSIONAL DEVELOPMENT
01 CONTINUOUS
PROFESSIONAL DEVELOPMENT
1.5 CONTINUOUS
PROFESSIONAL DEVELOPMENT
1.5 CONTINUOUS
PROFESSIONAL DEVELOPMENT
02 CONTINUOUS
PROFESSIONAL DEVELOPMENT
02 CONTINUOUS
PROFESSIONAL DEVELOPMENT
GETTING IT RIGHT
Offshore investment
RETIREMENT PLANNING
Clients’ financial independence
How big is your shield
against AI?
The ABCs of COFI for FSPs
Anton Swanepoel explains the implications

BACK TO
THE FUTURE!
The 2023 FPI Professional's Convention will signify how far we have come in
a handful of years. Three years ago, there was a shared conviction that life’s
beacons had been snuffed and we were wrapped up in a world of uncertainty,
disbelief and a deep sense of underlying fear. We were amid the Covid lockdown,
our awareness dawning on the significance and consequence of connection.
The theme of this year’s FPI Professional's Convention is Back to the Future to remind
us of the importance of looking back to where we were before the crisis, while moving
forward into a future where change is a constant evolution of innovation and progress.
Our view of the future has transformed. We have witnessed the emergence of a digital
reality – a simulated experience that became real.
Andy Hart, founder of HUM, attests that the purpose of increasing the use of
technology is to free us up to devote more of our time to the real but difficult work our
clients require from us. By freeing up resources, we can become more human. He sees
our future as one in which we entrust technology with predictable tasks, allowing us to
maintain our focus on fostering human connections. He says that the need for genuine
human connection will always persist, and client-focused behavioural advisors are
ideally positioned to prosper in this next phase of the industry’s evolution (page 64).
Kim Potgieter refers to a Harvard study on happiness, in her article on page 62.
The research found that people more socially connected to family, friends and their
communities are happier, physically healthier and live longer than less well-connected
people. Fulfilling relationships protect our bodies and minds and positively impact our
wellbeing. On page 66, Paul Nixon, Momentum Investments, explains that while the
world is embroiled in technological progress, it is also shifting towards an “empathy
economy”. He says that the jobs that remain after machines have taken all the processdriven
tasks are likely to be the ones rooted in the humanities. The world is perhaps
looking towards psychology to solve the world’s problems. The value proposition
seems to be rooted in psychology. We understand that to affect behaviour change,
more information is not the answer because we have the knowledge. Changing
behaviour requires something deeper.
Anton Swanepoel, Trusted Advisors, says that nurturing certain habits can lay
the foundation of success and that according to Jack Canfield, American author,
“Successful people face facts squarely. They do the uncomfortable and take steps to
create their desired outcomes” (page 20).
On page 58, Rob Macdonald, Fundhouse, tells us about Don Phillips from Morningstar
who after 25 years in the investment industry, said he had learned that the “finance
business” is not about “money management” but rather “behaviour modification”.
Macdonald believes that acting as a client’s choice architect and behavioural coach
gives financial planners the best chance of becoming an effective investor manager.
People often fail to prioritise the human connections that contribute to happiness.
Helping clients invest in time, relationships and control impacts their financial health
and overall wellbeing.
It is time to go Back to the Future. Save the date: 14-15 November!
All the best
Alexis Knipe, Editor
blue-chip-journal
Blue Chip Journal – The official publication of FPI
Blue Chip is a quarterly journal for the financial planning industry and is the official publication of the Financial
Planning Institute of Southern Africa NPC (FPI), effective from the January 2020 edition. Blue Chip publishes
contributions from FPI and other leading industry figures, covering all aspects of the financial planning industry.
A total of 7 500 copies of the publication are distributed directly to every CERTIFIED FINANCIAL PLANNER®
(CFP®) in the country, while the monthly Blue Chip Digital e-newsletter reaches the full FPI membership base. FPI
members are able to earn three verifiable Continuous Professional Development (CPD) points
per edition of the print journal (four per year) under the category of Professional Reading.
Special advertising packages in Blue Chip are available to FPI Corporate Partners,
FPI Recognised Education Providers and FPI Approved Professional Practices.
ISSUE 88 |
AUG/SEP/OCT 2023
BLUE
CHIP
Publisher: Chris Whales
Editor: Alexis Knipe
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support this publication by their submission of articles and with their
advertising. All rights reserved.

CONTENTS
ISSUE
88
AUG/SEPT/OCT 2023
02
08
EDITOR’S NOTE
By Alexis Knipe
FPI KEEPS BUSY OVER WINTER
MONTHS
Message from FPI CEO
10
FPI UPDATE
The FPI Professional's Convention 2023
looks Back to the Future
12
16
ON THE MONEY
Milestones, news and snippets
TAKING THE PATH TO FINANCIAL
HEALTH
Column by Rob Macdonald, Head of Strategic
Advisory Services, Fundhouse
17
THE COMPLEXITIES FACING
INVESTORS (AND ASSET
MANAGERS)
Column by Florbela Yates, Head of Equilibrium
18
A COMPREHENSIVE GUIDE TO
RETIREMENT PLANNING IN
SOUTH AFRICA
Column by Kobus Kleyn, Tax and Fiduciary
Practitioner, Kainos Wealth
20
ESSENTIAL HABITS OF
HIGHLY SUCCESSFUL FSPS
UNDER COFI
By Anton Swanepoel, Founder, Trusted Advisor
23
INTRODUCING PURPOSE-DRIVEN
FINANCIAL COACHING
UFS School of Financial Law says that it’s time to
embrace a human approach to financial planning
24
THE A.R.T. OF SAVING WITH
MOMENTUM MONEY
Gone are the days when businesses could
create products and expect clients to mould
their lifestyles to them
26
LOOK BOTH WAYS BEFORE YOU
CROSS THE BRICS ROAD
By Fundhouse investment analyst, Stuart Copely
30
BIG TECH TURNAROUND:
WHAT’S BEHIND THE RECOVERY?
Kondi Nkosi, Country Head, Schroders, writes
about big tech’s resurgence
32
TOP FIVE INVESTMENT
MIGRATION PROGRAMMES
By Sarah Young, Investment Migration Manager,
Sable International
34
36
ROUND TABLE SERIES
Offshore investment
WHERE DO WE STAND NOW?
Hannes Viljoen, CEO, Kudala Wealth,
says we should not be surprised when
something unprecedented happens
38
ADDING VALUE, TIME
AND MONEY
Bovest Wealth Management speaks to
Blue Chip about the values that built
its success
40
42
YOUR WEALTH, OUR PRIORITY
By Bovest Wealth Management
A DFM CAN’T HELP WITH
YOUR HAIR BUT CAN HELP
WITH INVESTING
By Florbela Yates, Head of Equilibrium
43
HARNESSING THE POWER
OF DIGITAL SOLUTIONS IN
WEALTH MANAGEMENT
Hymne Landman, Head of Momentum
Wealth, says that SA’s financial
service industry is experiencing a
digital transformation
4 www.bluechipdigital.co.za

SAIPATM
Y OUR WEA L T H
Professional Accountant (SA) is not
just a professional designation.
IT’S A SEAL OF TRUST.
SAIPA members aim to
provide the highest level
of expertise and service
to clients and are bound by
the Institute’s Professional
Conduct Standards and Ethical
Pledge. They also act as trusted
business advisors, assisting and
driving businesses to not only
survive but thrive.
SAIPA – DEVELOPING FUTURE-READY PROFESSIONALS
www.saipa.co.za
info@saipa.co.za

CONTENTS
ISSUE
88
AUG/SEPT/OCT 2023
44
TAKING THE NEXT LOGICAL STEP –
INVESTING YOUR SAVINGS MONEY
Pierre Jean Marais, Retail Marketing,
Momentum Investments, tells you how to
invest your money smartly
45
ADD SOME “BMT” TO YOUR
CLIENTS’ RETIREMENT
PORTFOLIOS
Momentum Investments is making
investment personal
46
50
ROUND TABLE SERIES
Retirement planning
A CATALYST FOR POSITIVE
CHANGE
Blue Chip speaks to Institute of Retirement
Funds Africa chairperson, Geraldine Fowler
52
THE FUNDAMENTAL NEED
FOR HEALTH AND BEHAVIOUR
MODELLING IN RETIREMENT PLANNING
Cogence is a DFM seeking to enhance the
business of wealth creation in SA
54
TIME FOR SA CONSUMERS TO
TIGHTEN BELTS AND AVOID DEBT
NMG Benefits warns of a torrid time ahead for
SA consumers
55
MEDICAL AID 101
Gary Feldman, Executive Head of
Healthcare Consulting, NMG Benefits, says don’t
let the rising healthcare costs hold you back
56
RETIREMENT COACHING: ADDING
VALUE TO YOUR BUSINESS
Stephan le Roux, Financial Planning Coach, Old
Mutual Wealth, advises on how to bring your
clients’ desires into the light
58
THE REAL SIGNIFICANCE OF THE
NUMBER “93.6%” FOR FINANCIAL
PLANNERS
Rob Macdonald, Head of Strategic Advisory
Services, Fundhouse, asks if asset allocation is
the key determinant of investment returns
62
PRACTICAL CONVERSATIONS
FOR FINANCIAL HEALTH AND
WELLBEING
How to help your clients prioritise
purpose, connectedness and relationships,
by Kim Potgieter
64
THINK HARD
Andy Hart, Founder, HUM, speaks
about embracing technology and the
human connection
66
HOW BIG IS YOUR SHIELD
AGAINST AI?
Can AI help us to save in a way that a financial
advisor cannot? By Paul Nixon
68
LESSONS FROM COMRADES
MARATHON
Kathryn van Dongen, SA Managing Director,
PorfolioMetrix, compares the world of
financial advice to the marathon
70
THE BIG RISK THAT COULD PUT
INVESTMENT AND WEALTH
ADVISORS OUT OF BUSINESS
James Downie, Director of Due Diligence SA,
warns of the huge risky elephant in the room for
CAT I advisors
72
THE CASE FOR STRATEGIC
CORPORATE OUTSOURCING
Outsourcing is more of a strategic tool
than a cost-saving exercise, says Private
Client Holdings
74
HOW TO USE FINANCIAL
PRODUCTS TO ENHANCE
ESTATE PLANNING
Felicia Hlophe, legal advisor at Allan
Gray, summarises four key estate
planning principles
76
MEET THE MANAGERS
Event review
6 www.bluechipdigital.co.za

Back to The Future
Back to The Future
Sandton Convention Centre
14th & 15th

BLUE
CHIP
FPI UPDATES | CEO message
FPI keeps busy
over winter
months
Lelané Bezuidenhout, CFP®,
CEO, Financial Planning
Institute of Southern Africa
The CEO of Financial Planning Institute of
Southern Africa shares FPI’s latest news.
June, Youth Month, served to remind us of our
responsibility to support and nurture South Africa’s
youth. In 2021, the Financial Planning Institute
of Southern Africa officially launched the Young
Financial Planners Organisation (YFPO), a network of
younger members who not only learn from each other,
but also promote financial planning in their communities
and provide support and mentorship to young people
entering the financial planning profession.
Our special thanks to outgoing chair of the YFPO, Luke
Martins, and congratulations to incoming chairperson,
Gugu Sidaki, who is becoming widely known publicly as
a writer and broadcaster on personal finance matters.
For more information on the YFPO’s activities go to
https://fpi.co.za/membership/yfpo.
Gugu’s appointment brings us in a roundabout way
to August, Women’s Month. Here’s wishing all women in
financial planning a wonderful Women’s Month – let’s
continue to support, uplift and empower each other
in our personal and professional journeys through
wonderful initiatives such as the Women in Finance
Network and the LeanIn Circle.
Special congratulations, therefore, to three women
who have taken up non-executive directorships on the
FPI National Board: Olwethu Masanabo (re-elected), Jean
Cooper (newly elected) and Vuledzani Gloria Dangale
(appointed by the board).
We also congratulate Ronald Matande, who has been
confirmed as executive director focusing on operations.
Ronald has admirably filled the position held by David Kop,
who left the FPI at the end of last year, and the board had
no hesitation in making his position permanent.
To Sherwin Govender, the FPI’s retiring non-executive
director, we thank you for your dedication and commitment
to the FPI over the past four years.
Congratulations also goes to Johan Cloete and his team at
the Integrity Academy in Pretoria, which has been approved
as a recognised education provider. The Academy offers the
National Certificate: Wealth Management (NQF level 5) and
the Occupational Certificate: Financial Advisor (NQF level 6).
Candidates successfully completing these online courses are
exempted from having to write the Professional Competency
Examinations for the Registered Financial Practitioner
(RFP) and Financial Services Advisor (FSA) designations
8 www.bluechipdigital.co.za

From an FPI point of view, one
must remember that retirement
savings are there for a reason.
respectively. This brings our list of approved education
institutions meeting the FPI’s standards to 10.
The new Continuing Professional Development (CPD) cycle
began in June, with the following changes to our CPD policy:
CFP members’ requirements remain at 35 CPD hours
per cycle, but FSA members’ requirements have been
reduced to 25 hours and RFP members to 20 hours.
The requirement for members whose retirement status
has been approved by the FPI has been reduced to 15
hours. Of these, 10 hours can be claimed for mentoring
upcoming professionals.
In July, the FPI focused on producing a coordinated
response to National Treasury’s proposed two-pot retirement
fund draft regulations, which involved the Competency
Committee and its Advocacy Committee. In May, Treasury
and the South African Revenue Service released the revised
2023 Draft Revenue Laws Amendment Bill and 2023 Draft
Revenue Administration and Pension Laws Amendment Bill
for public comment. These bills aim to implement the first
phase of the two-pot retirement system – to be officially
known as the “component retirement system”. The deadline
for comment on the draft bills was 15 July.
The response involved a strategic Memorandum of
Understanding and partnership with the Institute of Retirement
Funds Africa (IRFA), whose member funds will be hard-pressed
to begin implementing the new system, especially if there is
no reprieve from Treasury on the implementation date of 1
March 2024. It’s important for the IRFA principal officers and
fund trustees to know that the members of their funds can
make use of the FPI network when it comes to advice on
the choices offered by the new two-pot system – for many
members, benefits counselling will not be enough.
From an FPI point of view, one must remember that
retirement savings are there for a reason. Fund members must
be aware that when part of their savings becomes available to
them under the new system, it doesn’t mean they have to take
it. We believe that consumers must obtain professional financial
advice because the decision they make will impact their longterm
investment strategy. Thank you for taking the time to read
this foreword. Until next time.
Blessings,
Lelané Bezuidenhout, CFP®, CEO,
Financial Planning Institute of Southern Africa
www.bluechipdigital.co.za
9

FPI Professional's Convention 2023 looks
Back to the Future
The FPI Professional's Convention this year will highlight
the importance of looking back at where we were
before the global lockdown in 2020, while moving
forward into a future filled with change, innovation
and growth – hence aptly themed BACK TO THE FUTURE.
The way we view the future has changed since we have been
experiencing a post-lockdown world. Things have become
fundamentally different as we have witnessed the birth of
a virtual world filled with automation, open AI and digital
evolution in the financial planning space.
Liberty, 2022’s headline sponsor of the event, will be
back again this year as the headline sponsor to bring you a
memorable Professional's Convention.
This 34th instalment of the Convention will be presented
both virtually and face-to-face at the Sandton Convention
Centre, Johannesburg on 14 and 15 November – giving the
face-to-face delegates the opportunity to network and catch
up on all the latest trends, while visiting the exhibitions and
gaining insight into collaboration breakaway events. Those
delegates who cannot be present in person will benefit from
the innovation of a virtual walk-through environment while
ensuring gamification lends to an entertaining experience.
The FPI’s impressive growth and undoubted relevance over
the years as well as the quality of our certification and practice
standards has ensured that the profession occupies its rightful
place in a world where financial wellness has never been more
important. As innovation in the space occurs, the latest global
trends will be highlighted as international speakers, who will be
presenting in-person, drive home topics of adaptation to ensure all
convention goers gain insight into must-have adoption practices.
The speaker programme will delve into relevant topics aimed
at empowering a forward-looking audience of dedicated financial
professionals, including:
• The new knowledge domain regarding the psychology of
financial planning
• How the future outlook of practice management and
technology has changed
• “People” aspects such as succession planning and
remuneration structures
• Cyber-security risks and social media strategies needed to
grow a financial planning business
In keeping with the tradition of hosting the best local and
international speakers on topics that add value to South Africa’s
financial planners sector, the 2023 speaker lineup includes:
Dante De Gori, CFP® is the CEO of the Financial Planning Standards
Board Ltd (FPSB). Prior to this, he served as CEO of the Financial
Planning Association of Australia (FPA). He is passionate about
advancing the profession of financial planning and supporting
CFP® professionals globally and will be sharing his thoughts on
the Future of Financial Planning.
10 www.bluechipdigital.co.za

Mandy Wiener is a prominent South African journalist and writer
who will be addressing the topic of hope and prosperity for South
Africa. She is the host of the Midday Report on Radio 702 and Cape
Talk and is a regular columnist for News24.
Dr Charles Chaffin covers a broad range of fields, from
educational and cognitive psychology to financial planning.
He is the author and lead editor of seven books on topics of
financial planning and cognitive psychology. Chaffin has been
developing and presenting new research that has direct impact
on the practice of financial planning.
within a financial services provider, specifically the operational
support needed and procedures underpinning the financial
planning advice process. Academically, Macdonald was
involved with the University of the Free State in drafting
material, setting examinations and lecturing for the Advanced
Diploma in Estate and Trust Administration.
At Convention 2023, members will also be able to attend
the FPI Awards Ceremony Gala Dinner on 15 November where
the 2023 FPI Financial Planner of the Year Award winner will
be crowned, as well as other awards such as Top Candidate of
the Year, FPI Professional Practice of the Year and It Starts with
Me awards.
The 2023 FPI Professionals Convention will be sponsored by:
Emma Sadleir is South Africa’s leading expert on social media
law. Her company, The Digital Law Company, specialises The FPI Professional's Convention is regarded as the most relevant and
in educating and advising corporates, employees, schools, biggest event in the calendar for financial professionals, considering its
parents, teachers and universities on the legal, disciplinary and hybrid nature that allows for both face-to-face and virtual attendance
reputational risks of social media. Sadlier and her team have for those who are not based in Gauteng to still be informed, gain insight
collectively addressed hundreds of blue-chip corporate clients and obtain Continuous Professional Development (CPD) hours, which
and over 200 000 learners across Africa and the UK through will amount to 12 CPD hours. The costs for The attending 2023 FPI Convention Professionals 2023 Conven
educational talks and presentations. She also teaches media law are R3 000 for members (virtual) and R3 773 for non-members (virtual),
to journalists and lawyers and lectures on personal reputation or R5 850 for members (face-to-face) and R7 000 for non-members
The 2023 FPI Professionals Convention will be sponsored by:
management on various MBA programmes.
(face-to-face).
For more information on the 2023 FPI Professional's Convention, email
Brent Lindeque is a South African entrepreneur, motivational us at events@fpi.co.za or call us on +27 (0)11 470 6000.
speaker and social media influencer. He gained international www.fpi.co.za
attention in 2014 when he posted a video online of himself The 2023 FPI Professionals Convention will be sponsored by:
taking part in the “NekNomination” drinking game,
The
but
2023
instead
FPI Professionals The Convention 2023 FPI will Professionals be sponsored Convention by: will be sponsored by:
of drinking alcohol, he did a good deed for someone in need. 2023 PROFESSIONAL CONVENTION SPONSORS
The video went viral and Lindeque used the attention to
launch the #ChangeOneThing movement, which encourages
people to make small positive changes in their lives that can
have a big impact on their communities and the world. The
success of #ChangeOneThing led to media attention from CNN,
BBC and Oprah magazine. In 2018, he was named one of the
top 100 most influential young South Africans by the Mail &
Guardian newspaper and in 2022 his platform was featured on
a list of world’s top 100 innovation success stories.
Lelané Bezuidenhout, CFP®, is the CEO of the FPI. She has
been involved in the financial services industry since 1999 and
started at a large life insurer. It is in her dealings with compliance
matters and consumer complaints that she took an interest in
financial planning from a standard setting point of view. Over
the years she studied as a working mom to become a CERTIFIED
FINANCIAL PLANNER®. Bezuidenhout joined the FPI in 2014.
In her current role as CEO, she continues to impact positively
on the lives of all in serving the FPI’s vision of “professional
financial planning and advice for all”.
BLUE
CHIP
The FPI Professionals Convention is regarded as the most relevant and biggest event in
Nici Macdonald, CFP® is the Head of Department: Certification
at the FPI. She has a strong legal background and is passionate
about the future of financial planning in South Africa.
Macdonald has extensive experience in practice management
for financial professionals, considering its hybrid nature that allows for both face-to-fa
11
attendance for those who are not based in Gauteng to still be informed, gain insight an
www.bluechipdigital.co.za
The FPI Professionals Convention is regarded as the The most FPI relevant Professionals and biggest Convention event in th
Continuous Professional Development (CPD) hours, which will amount to 12 CPD Hour
The FPI Professionals Convention for financial professionals, conside
The FPI Professionals
for
Convention
financial is regarded professionals, as the
is regarded
considering most relevant
as the most
its
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hybrid and
and
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event
allows event
in
for in
the
both the calendar
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face-to-face a

BLUE
CHIP
BLUE
CHIP
On the money
Making waves this quarter
A legend leaves, operations expand and become rich
A LEGEND LEAVES CAPITAL LEGACY
Capital Legacy COO, Brandon Garbutt,
has announced that he will be leaving
Capital Legacy at the end of the year.
Garbutt made the announcement to
Capital Legacy staff and management
in June, where the news was met with
much surprise and sadness.
On explaining his decision, Garbutt
said that it had not been an easy one
to make. “It’s been an unbelievable
journey of extremely hard work, late
nights, lots of travel, stresses, unmistakable successes and, of course,
fun,” he said. “At this time of my life, however, I feel that I have done
what I set out to do here and now it’s time for me to reassess my direction
and to focus on my family.” Speaking on the announcement, Capital Legacy
founder and CEO, Alex Simeonides, said that although the news had come
as a surprise to many, he and Brandon have been in discussions for some
time now.
“It takes a true leader to understand when it’s a good time to leave
a business,” said Simeonides. “In the eight years of working side-byside
with Brandon, we have both grown and learnt so much from each
other. It has been the most memorable era of my corporate life. He will
be truly missed.”
Garbutt has been instrumental in orchestrating a business engine
for the company, bringing new products to market and building great
management teams.
NMG expands operations in Namibian market
Advisory and intermediary firm NMG Consultants and Actuaries t/a
NMG Benefits has opened an office in Windhoek as it looks to offer a
range of retirement fund, investment and actuarial consulting services
to Namibian businesses, pension funds and medical aid funds.
The new office will allow NMG to enhance its service levels to its
existing Namibian clients, while actively looking to grow its client base
in the country, said Ernestu Augustus MD of NMG Consultants and
Actuaries Namibia.
“This expansion is a clear indication of
our growth trajectory as a business. We
expect it to open up several opportunities
for skilled people in the local market, as
we aim to provide high-quality strategic
advice around retirement, investments and
healthcare, with excellent service to back it
up,” said Augustus.
Ernestu Augustus, MD, NMG
Consultants and Actuaries
Namibia Fundhouse
BECOME RICH, STAY RICH
PJ and Geo Botha, financial experts and co-hosts of the popular kykNET
series, Welvaartskeppers, have just released their first book, Word Ryk, Bly
Ryk, which is now available online and in all major bookstores nationwide.
In this insightful book, they teach ordinary South Africans how to
make money in a challenging environment and make it grow. The
authors’ sound expert financial advice, aimed at cultivating good habits,
directs the reader’s focus on their journey to wealth.
Every household should invest in a book like this, which reinforces
that your self-esteem, humility and faith in yourself play a huge role in
your finances.
The Bothas believe that one of the biggest mistakes families make
regarding money is not talking about it. “By involving children in
financial matters from a young age and explaining to them how a
budget works, they learn how to deal with finances,” says PJ.
Geo agrees: “My dad involved us in conversations about money
from a young age, and it definitely had a huge impact on our lives.”
Topics like successful retirement, pensions, investments, trusts,
wills and determining the legacy you want to leave are also addressed
in this excellent publication.
Take control of your financial future and get yourself a copy of
Word Ryk, Bly Ryk.

BLUE
CHIP
On the money
Making waves this quarter
New Group CEO with investment qualities
NEW GROUP CEO FOR MOMENTUM METROPOLITAN
Momentum Metropolitan has appointed Jeanette Marais as Group CEO
effective 1 August 2023, making her the first female CEO of a large, listed
life insurance and asset management group in South Africa.
Marais joined Momentum Metropolitan as Deputy Group CEO in 2018,
and currently has executive oversight over a portfolio of businesses,
including Momentum Investments, Momentum Distribution Services,
Consult by Momentum and Momentum Money. Under her leadership,
Momentum Investments has grown its normalised headline earnings
from R271-million in the 2018 financial year (FY2018) to R940-million in
FY2022. Value of new business increased from R80-million to R346-million
over the last five years.
Marais says she considers it a privilege to be trusted by the Board and
the company’s senior leadership to take the reins: “This is full circle for
me. It was Momentum that provided the very first growth and leadership
opportunities in my career. I am honoured that I get the chance to give
back and lead this company that is so close to my heart.
“I am excited to work with the leadership team to further harness
the company’s strong brands and talented people, and to successfully
execute our growth plans,” she concludes.
INVESTMENT QUALITIES FOR TOUGH TIMES
With interest rates continuing to rise, persistent inflation and the
collapse of several mainstream financial institutions, it’s unsurprising
that negative economic sentiment has prevailed in 2023. Companies
that can grow their earnings regardless of the prevailing economic
conditions and exhibit a range of characteristics including:
Robust balance sheets. Although interest rates are now at their
highest level since 2007, companies with appropriate leverage and
strong balance sheets have been able to navigate the rising interest
rate environment and take advantage of market opportunities with
bolt-on acquisitions, further strengthening their earnings profiles.
Market leadership. In an inflationary environment, market
leaders are more easily able to pass on input cost increases to their
customers thereby maintaining profit margins.
Innovation. To survive, and indeed thrive over multiple decades
companies must innovate, particularly in times of change.
Strong track records. A company’s ability to reliably grow
dividends over time is a strong indicator of their ability to generate
cash flow and earnings through the economic cycle.
Diversification. The prospects of well-diversified companies are
not tied to the fortunes of a particular economy or dependent on
the success of one specific product.

BLUE
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On the money
Making waves this quarter
Advice for the young and for advisors
ADVICE FOR ADVISORS
In what is a first for the financial services industry in South Africa, a unique and innovative new independent consulting
firm has been launched which offers expert business guidance to financial institutions and advisors.
FI Consult assists businesses within the financial services sector to
unlock potential, pursue growth, streamline operations, identify
and pursue effective strategies, understand compliance, embrace
technological advancements, engage effectively with clients,
develop new business relationships as well as overcome challenges
and plateaus. This is according to co-founder Jason Bernic, CFP®,
executive coach and former international wealth manager with over
20 years of experience in the financial planning profession.
How FI Consult partners with financial advisors
Bernic explains that FI Consult partners with their clients within the
financial sector to identify issues and barriers to ongoing growth and
success, and then helps them to establish effective mechanisms and
strategies to overcome these and evolve the businesses.
“We work on and in our client’s business in a partnership role
that allows us to take them from where they are now to where they
want, and need, to be. Our process entails asking the right questions
to develop a blueprint of where a business currently is and then
understanding where the business wants to go. From there FI Consult
identifies the gaps within the organisation that are preventing it
from achieving its goals and provides a strategy on how to close
these gaps, overcome the barriers and move the business forward.”
Challenges and opportunities
David Kop, FI Consult co-founder, CFP® former director of the FPI
as well as a former para-planner with 25 years of experience in the
financial planning profession, explains that every business owner or
management team comes to an inflexion point where they need to
make decisions about that business’ future.
“The route can either be to grow, stagnate or become obsolete.
Many times, business owners and managers get overwhelmed at this
point as they are too immersed in daily operations. It helps to have
someone who can look from the outside and work on the business
from the inside. FI Consult helps business owners and management
remove any blind spots that may be stopping them from evolving
the business to where it needs to go,” says Kop.
Why FI Consult has been founded
“FI Consult is the only end-to-end consulting partner for financial
advisory businesses. We believe in an authentic approach to
supporting advice businesses to protect what they have built, while
at the same time, creating the next version of themselves.
No-one else in South Africa is supporting financial advisors in quite
the same way and we saw a definite need. Our approach is unique
and real, and we offer proven solutions and actual strategies that are
relevant, practical and executable.”
FI Consult’s services are retained on a month-to-month basis with
no contracts as well as no terms and conditions.
For more information on FI Consult and the services offered visit
www.ficonsult.co.za or email jason@ficonsult.co.za or
david@ficonsult.co.za.
Younger clients take a subscription-based approach
Clients in the wealth-building phase of their life (the 20s, 30s and 40s) are rejecting the traditional models,
wary of receiving conflicted advice and being sold unsuitable financial products. This new generation expects
and demands objective, all-inclusive expertise when it comes to financial advice and is increasingly looking to
subscription-based advisors to deliver on that.
An advisor, free of the need to push products, is better positioned to guide clients more holistically across
all life’s financial decisions, including goal setting and tracking, budgeting, managing debt, buying property,
starting a family, investing in education, planning for travel and retirement and, if needed, financial products.
The subscription-based approach is relatively new globally but has gained strong traction in markets like
the US and UK. In South Africa, adoption is also at an early stage but it is seeing strong growth due to interest
from younger clients and a small innovative community of financial advisors that have embraced the model.

BLUE
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COLUMN
Taking the path to financial health
Better done in partnership with a professional*.
Rob Macdonald, Head of
Strategic Advisory Services,
Fundhouse
Rob Macdonald has held
several senior positions in
the investment industry.
At Fundhouse, he acts as
a consultant and coach
to financial advisors and
develops and facilitates
training programmes in
behavioural coaching and
practice management. Before
joining the financial services
industry, Macdonald was
MBA director at the UCT
Graduate School of Business.
He is co-author of the book
Rethinking Leadership and has
consulted, written and spoken
widely on a range of topics.
Macdonald has a Master’s
degree in Management
Studies from Oxford University
and is a CFP® Professional.
I
had a meeting recently with an extremely
capable and experienced schoolteacher.
Inevitably our conversation turned to
matters financial, not always an easy topic
for schoolteachers, a notoriously underpaid
profession. This teacher said that he didn’t
know if he would have enough money by the
time he retired. I asked him if he knew how
much money he had in his retirement fund
at that point. He didn’t. He was living in hope
that he would have enough by the time his
days of earning a salary ended. But in case
he didn’t have enough, he was too scared to
look. After all, if he did look, it might require
him to take action. It might even require
change. A different job? A second career? A
side hustle? Much easier not to go there. No
surprise that he turned down my suggestion
to consult a financial planner.
But he is not alone. I have friends in betterpaying
professions than teaching, who after
30-year careers have not consulted a financial
planner. As a result, they have had varying
degrees of success in both life and money.
What is it that stops a person from consulting
a professional financial planner? Is it simply a
case of putting one’s head in the sand, or is
there something more? After all, if we look
at any successful sportsperson, they have
invariably not achieved their success on their
own, but with the help of a coach.
I don’t think I need to convince financial
planners that our money and our lives are
too important for us to try to go it alone.
Yes, there is much that people need to take
ownership of in both, but if you are wanting to
encourage clients to work with you, I believe
there is a a free lesson from the sports arena
which you could share with clients.
Nick Kyrgios, widely regarded as the most
talented male tennis player in the world,
has yet to win a Grand Slam. His best effort
has been playing against Novak Djokovic
in a Wimbledon final. The challenge that
Kyrgios faces is that he refuses to work with
a coach. He believes he knows better. And I’m
comfortable predicting that without a coach
he’ll never win a Grand Slam. None of us know
what we don’t know.
When talking with a client about their life
and money, I believe it’s critical to explore
with them their perspective on working with
a professional like yourself. There is no point
in continuing to invest in a client who will not
or cannot see the value of a financial advisor.
However, even if you start with the right level
of mutual understanding, you cannot take it
for granted.
Our money and our lives
are too important for us
to try to go it alone.
I believe it is the job of financial planning
professionals to build and continually
reinforce the client’s trust in them and the
process. This involves key personal skills:
being clear and confident in the value you
offer; recognising that sound advice lands
best on the back of connecting emotionally
with clients; being curious about their
lives; collaborating with them as they make
decisions; communicating consistently and
being courageous at critical times. It’s not just
the schoolteacher with his head in the sand
who needs a professional partner with these
skills. We all do.
*The ideas in this article are explored
more fully in my forthcoming book: The 7
Pillars of Financial Health – Partnering with
a Professional to Thrive, to be published this
September by Vindigo Press.
16 www.bluechipdigital.co.za

The complexities facing
investors (and asset managers)
Long gone are the days when asset managers became famous for managing
balanced funds comprising 60% equities and 40% fixed income.
Florbela Yates,
Head of Equilibrium
Florbela Yates is the head of
Equilibrium in the Momentum
Metropolitan group.
Equilibrium is an independent
discretionary fund manager
that partners with financial
advisors to help them enable
their advice outcomes.
Equilibrium brings balance to
an advice practice by delivering
services and investment
solutions to help clients achieve
their defined investment goals.
Nowadays asset managers managing
balanced funds need to have asset
allocation skills across multiple asset
classes, and both local and offshore.
Beating the peer-group over any period
requires an understanding of the peer-group
holdings, which can now range from 0% to 45%
outside of South Africa, include components of
passive investments as well as active, and even
have instances where the local asset manager
outsources components to other teams.
So how exactly do investors pick the most
suitable investment for their need? I believe that
there are three factors that investors and their
financial advisors need to consider.
The first is their investment time horizon.
If they are investing for a particular event (for
example to buy a house, pay for school fees or
to provide an income in retirement) then the
time horizon helps to determine how long
they have and how much they need to save
to get there. The second factor to consider is
risk. This is a complicated topic in that risk can
be broken down further into the ability to take
risk and the willingness to do so. An investor
who is worried about market volatility may be
defined as an investor with a low risk tolerance
(or willingness) but if he has insufficient capital
and a short time horizon, he may need to take
a bigger risk to grow his investment capital. In
defining risk, the investor and their financial
advisor needs to define what he sees as risk. Is
risk the ability to not fund a specific event or
is risk to that investor the possibility of losing
capital over a particular period?
The third factor is the actual benchmark or
outcome. Investors who can determine their
unique outcomes will be better placed to choose
an investment that specifically aims to achieve
those goals. For example, an investor drawing
an income, might want to ensure that they
don’t lose any capital over a rolling 12-month
period and that they are able to draw down 5%
of capital every year. And an investor investing
towards retirement may want maximum capital
growth and benchmark their investment against
inflation (CPI) to ensure that their capital is
growing in real terms. One of the main reasons
COLUMN
BLUE
CHIP
that Discretionary Fund Managers (DFMs) have
gained traction both locally and internationally
is their ability to understand the need for a
greater link between investor needs and asset
manager outcomes.
By appointing a DFM to build portfolios
that are linked to an investor outcome rather
than some arbitrary index or peer benchmark,
a DFM can better track how an investor’s
portfolio is performing to get them to their
desired outcome. This allows DFMs to construct
portfolios differently. They are not restrained to
selecting asset managers across the entire asset
class portfolio but can rather find specialists in
different asset classes. The DFM now becomes
responsible for determining the appropriate asset
class combination based on the particular investor
needs and can appoint underlying fund managers
who specialise in a particular asset class.
The DFM therefore requires the skill to evaluate
whether or not an asset manager has asset
allocation skills (and is able to take on a broader
investment horizon) or single asset class skills
as well as their ability to manage an asset class
holistically (locally and offshore). And it goes
further, to sourcing different investment strategies
from different domiciles around the world. This
evolution in portfolio management has led to
much greater complexity in portfolio construction
and management.
Some considerations include which asset
classes to source locally or offshore, which
should be actively managed or sourced passively
and which strategies (eg value, earnings
momentum, quality) should be sourced. In
addition, they need to determine the breadth
of the mandates to allocate to underlying
asset managers. While this trend has led to
portfolio benchmarks becoming much more
closely aligned to investor needs it’s a lot more
complex and requires investors and financial
advisors to select a partner that understands
the complexities and can help navigate both
risks and outcomes over the relevant time
horizons. Equilibrium has a proven track record
in running advice-led, investor-linked portfolios
for investors. For more information, please visit
www.eqinvest.co.za.
Equilibrium Investment Management (Pty) Ltd (Equilibrium) is an authorised financial services provider (FSP32726) and part of Momentum Metropolitan Holdings Limited and rated B-BBEE level 1.

BLUE
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COLUMN
A comprehensive guide to
retirement planning in South Africa
Let’s delve into the key components of retirement planning.
Kobus Kleyn, CFP®, Tax
and Fiduciary Practitioner,
Kainos Wealth
Kobus Kleyn has published
over 200 articles and authored
three books. He is a multiple
award-winning professional
and holds eight memberships
with professional associations.
His most recent awards were
lifetime achievements awards
from the FPI (Harry Brews), The
Million Dollar Round Table (Top
of the Table Life Membership)
and Liberty Group (Life
Membership) in 2021/22.
The concept of retirement has evolved
dramatically over the past few decades.
Traditionally, it signified the end of an
individual’s professional journey. However,
in today’s dynamic economic climate, retirement
is considered a new beginning – a golden period
to pursue new interests, travel or engage in social
activities. But to fully enjoy this period of life,
meticulous planning is vital. This is particularly true
in South Africa, where the financial landscape is as
diverse as the nation itself.
The importance of advisors’ diligence
When it comes to retirement planning, the role
of financial advisors is pivotal. Advisors with an
in-depth understanding of South Africa’s financial
market can provide personalised advice based on
an individual’s financial goals, risk tolerance and
investment horizon. However, their roles extend
beyond that – they need to conduct rigorous due
diligence on fund managers and fund selections
to ensure long-term growth efficiency. Advisors
must critically analyse the fund manager’s
experience, track record, investment philosophy,
risk management strategies and more. Moreover,
they should regularly review and rebalance the fund
selection to align with the investor’s changing needs
and market conditions.
The due diligence process is often complex and
time-consuming. An alternative to this is utilising
the expertise of Discretionary Fund Managers
(DFMs). DFMs not only help reduce the burden
of due diligence but also provide a more efficient
and focused investment management approach,
tailored to meet the specific needs and objectives
of each client.
Fund management
A well-diversified and balanced portfolio is the
cornerstone of successful retirement planning. This
means investing in a broad array of assets such as
equities, bonds, property and cash. A well-balanced
fund structure helps mitigate risk, smoothens
returns over time and allows portfolios to adjust
according to market volatility.
But here’s the catch: South African investors
must also consider investing within their mandate
limits. These mandates, set by the investor, limit the
fund manager’s ability to take undue risk and help
keep the portfolio aligned with the investor’s risk
tolerance and investment objectives.
Wills, estates and asset protection
Estate planning in South Africa includes the
creation of wills and the selection of assets that
fall outside the estate. This approach can result in
significant savings on estate duty and executor’s
fees and provides protection against creditors. Life
insurance policies and retirement annuities are two
such products that offer these benefits, ensuring
that your hard-earned wealth is protected and
passed on to your loved ones in the most efficient
manner possible.
Political analysis of South Africa
A sound understanding of the current political
situation in South Africa is crucial for retirement risk
planning. Political stability, regulatory frameworks,
economic potential political risks can greatly impact
your retirement savings and investment returns.
Offshore investment and tax considerations
Offshore investing, especially with the rise
of Regulation 28, which allows for up to 45%
offshore exposure, has become a key strategy for
South African investors. It provides diversification
benefits, potential for higher returns as well as
protection against local market volatility and
currency depreciation.
In addition to these benefits, the South African
Revenue Service (SARS) offers several tax deductions
that can help subsidise your retirement plans. For
instance, contributions to a retirement annuity are
tax-deductible within limits, providing an excellent
opportunity to grow your retirement savings while
saving on tax. Therefore, retirement planning is
a multifaceted process that requires a strategic
approach, extensive knowledge and regular review.
Leveraging the expertise of DFMs can streamline
the due diligence process and provide a tailored
investment management approach. Whether
it’s selecting the right fund manager, creating
a diversified portfolio, planning your estate, or
considering alternative residency and citizenship
programmes – every step demands due diligence.
Above all, understanding the political landscape
and making the most of offshore investment
opportunities and tax deductions can ensure a
secure and fulfilling retirement.

BLUE
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FINANCIAL PLANNING | Legislation
Essential habits of highly
successful FSPs under COFI
This article was inspired by legendary author, the late
Stephen R Covey, whose bestselling book, The Seven
Habits of Highly Effective People, impacted millions of
people around the world. Business owners, managers,
key individuals, compliance officers and supervisors will do
very well to consider the habits highlighted here. As a quick
reminder, Covey asserted that the following personal habits
would lay the foundation of success:
1. Be Proactive
2. Begin with the End in Mind
3. Put First Things First
4. Think Win-Win
5. Seek First to Understand, Then to Be Understood
6. Synergise
7. Sharpen the Saw
When I pondered on the impact that the Conduct of Financial
Institutions (COFI) Act, when promulgated, will have on financial
service providers (FSPs), I was reminded of the time when
the Financial Advisory and Intermediary Services Act (FAIS)
became effective on 30 September 2004.
I remembered that, as an industry, we were not fully
prepared for the impact that market conduct legislation
would have on FSPs. Some people may disagree with my
assessment, but even after almost 19 years, I have witnessed
how many FSPs, if not most, are still struggling to fully comply
with FAIS and its subordinate legislation.
Over the last few months, I have conducted a few informal
and even some formal surveys and found that more than
90% of leading firms in South Africa have not had the time
or capacity to read the FSR Act and the COFI Bill. If that is
any indication of leading FSPs in South Africa, I believe that
the figure will be much higher for average firms. I highlight
this statistic, not to judge, but to create awareness that the
majority of FSPs are still unaware of how COFI will affect their
businesses soon.
20 www.bluechipdigital.co.za

Diffusion of innovation theory (1962). Credit: EM Rogers
There are many valid mitigating factors that contribute
to the current level of unawareness, but with these statistics,
it seems that we are heading for a FAIS déjà vu. As the
promulgation of the COFI Act draws near and evaluating
how many FSPs will be ready for the implementation of the
COFI Act, I believe that we will see a similar curve to the one
above, with some minor adjustments.
For those who pride themselves on always being ahead
of the curve, I am confident that the following habits, in a
slightly different order than those proposed by Covey and
adding a few, will inspire you to stay at the cutting edge of
the industry under COFI:
1. Define reality and be proactive
The reality is that we are living in a world where legislation
is here to stay. As hard as it may seem, and I do not mean
any disrespect, either make peace with legislation and seek
proactive and innovative ways to incorporate it into your
business or I am afraid that the financial services industry
will no longer be for you.
In previous articles I have highlighted that FSPs find
themselves in extreme conditions, but in the words of
Epictetus, the Greek Stoic philosopher, “It’s not what
happens to you, but how you react to it that matters.”
According to Jack Canfield, American author, corporate
trainer and entrepreneur, “Successful people face facts
squarely. They do the uncomfortable and take steps to
create their desired outcomes”. The reality is that COFI is
upon us, and it will impact your business. Best be proactive
and start preparing for the next wave of regulatory reform.
2. Seek first to understand, then to be understood
Our industry is full of opinionated individuals, including
me. Looking back, I am often ashamed of how many times I
have been quick to express an opinion on a subject before
fully understanding the context and its fundamentals. For
any one of us to assume that COFI will simply be a “cut and
paste” of FAIS will be a “mother of a mistake”.
A word of caution: assumptions about COFI based on
uninformed opinions, regardless of decades of experience, may
be the downfall of many FSPs. One thing is for sure – it is simply
not going to be business as usual under COFI. Yes, there are
many principles in FAIS that will be incorporated in COFI, but it
will be necessary to reassess and stress-test your business and
your client engagement process before conducting business
under the new Act. My advice: seek first to truly understand the
fundamentals of COFI before expressing an uninformed opinion
and potentially leading your team in the wrong direction.
3. Begin with the end in mind
In my view, to establish and maintain a growing, profitable
and sustainable business must be the ultimate goal of any FSP.
Not only is financial soundness a regulatory requirement; your
clients, your staff, the South African economy and your family
depend on it. However, there are different ways to go about
it. If money, and not clients, is your primary focus, I am afraid
that your success may be short-lived.
According to business management gurus Peter F Drucker
and Brian Tracey, the purpose of a business is to create and keep
a customer. Therefore, all business activities should be centered
around this central purpose. On the positive side, COFI contains
multiple client-centred, best-practice business principles that
will help you to attract and retain clients, which have always
been fundamental to business success. If you begin with that
in mind, you will be off to a great start.
4. Create order in the chaos and cement the fundamentals
With all the political agendas, economic instability,
loadshedding and the ripple effects of Covid, only to name a
few disruptions that we must deal with daily, and with more
than 1 000 pages of legislation that FSPs will have to comply
with, it is easy to think that we are living in a very demanding
and even chaotic world. At least, this is how I feel many times. If
you can in any way relate, it will be extremely important for you
to create order in the chaos and to cement the fundamentals
of your business.
www.bluechipdigital.co.za
21

BLUE
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FINANCIAL PLANNING | Legislation
COFI will be implemented in different parts over the next
six to seven years, but like any building project that may take
months or even years to complete, a sound foundation is
essential. You can never build a great FSP business on a weak
foundation. For those who are interested in pursuing this habit
further, I published a free e-book titled, The fundamentals of
practice management for representatives on LinkedIn earlier
this year, which will provide you with more detail. These
fundamentals will be essential for your business success under
COFI and many of them can be implemented proactively, even
before the implementation of the new Act.
5. Put first things first (prioritise)
I passionately believe in the Pareto (80/20) principle, which
states that, for many outcomes, roughly 80% of consequences
come from 20% of causes (the “vital few”). After two decades of
studying market conduct legislation, at the risk of frustrating
the Regulator and some of the compliance officers, I have
concluded that not all regulations are equally important.
There are some provisions that are essential (the vital 20%)
that will meet the objectives of the legislation 90% of the time.
If ever there was a time for FSPs to identify the vital 20%
of COFI and to build a strategy around it, it is now. Practically,
COFI, read with the FSR Act and the conduct standards that
will follow, the volumes of legislation, FICA and POPIA are so
overwhelming, that FSPs will be left with no choice but to
prioritise the key provisions in COFI that will establish a sound
foundation for success in the future.
6. Synergise
Roughly 99% of advisors I speak to admit that the compliance
process and packs of documents that must be completed,
discussed, signed and uploaded for record-keeping purposes
lead to negative advisor and client experiences. There are
two vital components for creating a better advisor and client
experience, namely innovation and technology. A new way of
approaching compliance documentation with the vital 20% of
content that will ensure 90% of achieving the outcomes of COFI,
supported by technology, will enhance business efficiencies
and ultimately improve the advisor and client experience.
customer and marketplace change and that they know what
is expected of them.
The success of your business over the next few years will
depend on your representatives’ and employees’ ability to
adapt. In these challenging conditions it must be remembered
that overworked, anxious people have limited capacity to
absorb information about change, much less adapt to it or
implement it effectively.
I would be surprised if your workforce does not experience
high levels of stress, worry and possible burnout. Therefore,
your approach to COFI and your change management strategy
will be of fundamental importance in preparation for your FAIS
to COFI journey. Your approach and communication strategy
will offer a unique opportunity for you to establish new levels
of trust in your leadership with your team.
8. Implement
One does not need a Gallup survey to know that 100% of
businesses that fail to implement good strategies will not
prosper. If you know that you need to start preparing for COFI,
act on it. Be proactive. If you know that you need to seek to
understand more – start. Begin with the end in mind. The late
David Viscott, American psychiatrist, author, businessman and
media personality, asserted that, “If you have the courage to
begin, you have the courage to succeed.”
9. Sharpen the saw
As I mentioned before, COFI will be implemented in different
parts over the next six to seven years, which means that you will
have to stay on top of every change as and when they come.
The good news is that, if you proactively created order in the
chaos and laid a sound foundation for your business at the
outset, the phases that will follow will be easier to implement
to ensure a seamless transition from FAIS to COFI.
10. Create a culture of Kaizen
Kaizen is the Japanese word that means continual improvement.
The habit of creating and maintaining the culture of Kaizen
will ensure that you will continue to grow and increase the
profitability of your FSP.
7. Consider your approach to change management
With new legislation approaching, the first adjustment that
you will have to make is a personal mental one. As one of the
leaders in the business, you will have to guard your heart and
your mind, because the last thing that your representatives
and workforce need is a leader that communicates negativity.
Change management will once again be a core leadership
demand, and with COFI an increasingly vital one. A recent
Gallup Work Experience Communication Survey found that
employees who strongly agree that their leaders help them
see how changes made today will affect their organisation
in the future are significantly more likely to also strongly
agree that their company has the speed and agility to meet
22 www.bluechipdigital.co.za
Anton Swanepoel,
Founder, Trusted Advisors

CLIENT ENGAGEMENT | Coaching
BLUE
CHIP
Introducing
purpose-driven financial
coaching: embrace a
human approach to
financial planning
Are you ready to revolutionise your approach to financial planning? The world of finance has evolved, and it’s time
to shift from a numbers-focused and legal-centric mindset to a more comprehensive and sustainable approach.
At the UFS School of Financial Planning Law, we’ve
developed the Purpose-driven Financial Coaching and
Planning model, which integrates proven principles
from ontological coaching, the psychology of financial
planning and financial planning.
Our financial coaching and planning model considers the
unique individuals behind the numbers. We believe that to truly
support our clients, we need to first understand their personal
psychology – their values, fears, strengths and struggles. By
delving into the depths of who they are, we can create financial
plans that align with their aspirations, allowing them to live
meaningful lives throughout their journey.
Financial planning shouldn’t be a one-time event. It’s
an ongoing process that requires continuous support and
guidance. With our integrated approach, we help clients navigate
life’s challenges, make wise financial decisions and adapt to
unexpected life transitions. By treating financial planning as
a holistic journey, we ensure sustainable outcomes for our
clients and their loved ones, spanning multiple generations.
When you join our Purpose-driven Financial Coaching and
Planning programme, you’ll gain access to a comprehensive
framework that encompasses understanding clients, their
culture and the impact of their plans on others. We believe in
effective client engagement, considering their communication
preferences, knowledge, biases and tendencies towards specific
products and solutions. We aim to empower you as a financial
planner to become a thinking partner, guiding your clients
towards developing life plans that align with their financial
resources and personal values.
We go beyond compliance requirements to integrate the
psychology of financial planning into practice. The “know your
client” principle becomes a journey of exploration, understanding
who your clients are as human beings. By delving into these
details, you will be equipped to create tailored financial plans
that genuinely resonate with your clients’ unique needs. You
will learn how to take your discovery meeting to the next
level of client experience. Financial planning will become a
co-planning process that excites and engages your clients and
review meetings will become engaging future planning sessions
that excite both you and your clients, exploring and achieving
the aspirations they care about while providing peace of mind.
At the School of Financial Planning Law, we believe that
the quality of financial planning conversations is critical. As a
financial planner, you will be trained to become aware of the
psychological factors at play, supporting your clients in exploring
possibilities, prioritising goals and taking meaningful action.
By understanding their money persona, narrative and values,
you will be able to provide a holistic and tailored approach
beyond mere numbers.
Join us on this transformative journey towards Purposedriven
Financial Coaching and Planning. We offer a 12-week
online programme for an introduction to Financial Coaching
and an 11-month Advanced Financial Coaching short learning
programme. Our programmes are designed to equip you
with the skills and knowledge to adopt a human approach
to financial planning. In addition, they are credentialed as
learning programmes with Coaching and Mentors of South
Africa (COMENSA), ensuring the highest standard of education
and professional development.
It is time to embrace a more holistic and sustainable approach
to financial planning. Join us at the School of Financial Planning
Law and become a Purpose-driven Financial Coach. Together,
let’s empower individuals to live their best possible lives,
supported by a solid financial foundation.
www.bluechipdigital.co.za
23

BLUE
CHIP
FINANCIAL PLANNING | Saving
The A.R.T of saving with
Momentum Money
Gone are the days when businesses could
create products and expect clients to
mould their lifestyles to them.
Returns
Of course! We appreciate that access is not the only
factor that makes saving hard for many South Africans.
Penalizing clients for needing to access their money seemed
counterproductive. However, it is also essential to offer our
clients compelling returns on their savings without having
to do backflips. What if you could earn a high interest rate
no matter how much you choose to save? Giving clients the
freedom to save what they can, when they want to and spend
what they need, when needed.
Kapil Joshi, CEO, Momentum Money
Kapil Joshi, CEO, Momentum Money
We reflected on one of South Africa’s most significant
challenges and developed a solution inspired by
human insight. We refused to accept the notion
that saving is hard. So, we took a deep dive to
understand the factors that made saving hard and built an
innovative product that removes all the friction.
We remain committed to remove challenges hindering
financial inclusion through technological innovation coupled
with strategic collaborations to unleash the value of banking
and savings for everyone. Digital solutions such as Momentum
Money provide easy access to saving with banking capability
and potential to earn compelling interest rates. Our solution
is driven by three key motivators.
Access
After speaking to many of our clients, one of the leading frictions
to saving is access to their money. Nobody can anticipate what
tomorrow holds. Emergencies tend to arise when you least
expect them. Many savings products have notice periods and
penalize clients that want to access their money immediately.
What would stop you from saving if you had instant access to
your money?
Time
Firstly, time is your best friend when it comes to saving.
Momentum Money strips away all the admin, allowing you
to get started in a few simple steps, saving our clients time.
Time is money. Secondly, prime-linked interest rates are more
volatile over time. Our most significant innovation is providing
returns that stand the test of time by investing our clients’
funds in the Momentum Money Market Fund. One of South
Africa’s best-performing money market funds. This provides
more stability for our clients as they are not subjected to the
ebbs and flows of the ever-changing prime interest rate.
Lastly, knowing how fees eat away at returns over time, we
deliver compelling returns at the lowest cost. With Momentum
Money, you do not need to worry about paying monthly
account fees. We charge a minimal admin fee of between
1% and 1.4%. The higher your balance, the lower the fee.
As we continue to innovate, our greatest motivation is to
make saving easier for South Africans. Our vision is to become
our clients’ number one enabler of success. No matter what
success means to you. Whether it is being able to pay for your
kid’s tuition, a deposit towards your dream car, a weekend
getaway or simply having a few extra bucks for emergencies,
we aim to make that possible by removing the friction that
stands in the way.
To us, it is not just saving. It is an A.R.T. We look forward
to continuing painting the masterpiece that is Momentum
Money with you.
24 94 www.bluechipdigital.co.za

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BLUE
CHIP
INVESTMENT | Economy
Look both ways before you
cross the BRICS Road
The ongoing shift in economic and political influence from
the West, represented by the United States and the G7,
to the East, represented by China and the BRICS bloc
of nations, has been grabbing headlines over the past
few years. While this East versus West divide has seen periodic
flare-ups, such as the Trump-inspired trade wars in 2018, South
Africa has managed to stay out of the spotlight. Unfortunately,
this is no longer the case, with South Africa increasingly in global
news headlines due to its stance regarding the ongoing Russian
invasion of Ukraine.
In this commentary, we will evaluate why South Africa
increasingly finds itself in a compromised position, why it
matters, and what the consequences would be for investors of
a clear shift towards either the East or the West.
Setting the scene
To understand South Africa’s position in the current global
economy, it is important to identify the key players in this arena.
There are two primary groups, referred to as the “West” and
the “East”. The West typically includes countries with a history
of Western European cultural and political influence, such as
the United States, Canada, Australia, Western Europe and other
countries with similar worldviews and political systems. On the
other hand, the term East, as it is used today, refers to countries
with a history of influence from Eastern cultures, such as China,
India, Russia and Korea. These countries often have different
worldviews and political systems (capitalism vs communism).
Although the West has long operated collectively through
organisations like the G7 and NATO [1] , the East, under
China’s leadership, has gradually embraced a more cohesive
approach and established a distinct trade group in the past
decade. This cohesive entity, commonly referred to as BRICS,
is an abbreviation for Brazil, Russia, India, China and South
Africa. BRICS represents a formal alliance of four significant
emerging economies worldwide, in addition to South Africa,
encompassing nearly half of the global population and
approximately 30% of the global GDP. It is important to note
that BRICS does not imply an equivalence between the East
and the entire region, but rather reflects a specific grouping
within the East.
The origins of BRICs can be traced back to 2001 when the
acronym BRIC was first coined by Jim O’Neill, who was then
the chairman of Goldman Sachs Asset Management. The
BRIC countries recognised the need for a formal platform
to enhance their cooperation and coordination on issues of
mutual interest. As a result, the formalisation of BRIC took
26 www.bluechipdigital.co.za

INVESTMENT | Economy
BLUE
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the Cold War. This could potentially strain South Africa’s ability
to trade from this point forward.
South Africa is considered a small open economy, which
means that it relies heavily on international trade to support its
economy, rather than having a large enough internal market to be
self-sustaining. For comparison, only three regional economies,
namely the US, Europe and China, would meet the self-sustaining
criteria. Given South Africa’s reliance on trade, any restrictions
on it would have a severe impact on the economy. Fears about
potential sanctions are not unfounded, as recent cases involving
Russia, Turkey and Iran have seen their ability to trade curtailed
by the West through economic sanctions.
place on 16 June 2009, when the first BRIC summit was
held in Russia. South Africa is aligned to the East, having
formally joined BRIC (to make it BRICS) on 24 December
2010, becoming the fifth member of the association. The
decision to include South Africa was based on the country’s
strategic importance in Africa and its potential to contribute
to the growth and development of the BRIC economies.
Importantly, being part of BRICS does not preclude South
Africa from interacting with Western nations. During the
3rd BRICS Summit in 2011, the countries agreed to create
a new global governance model that reflects the changing
economic landscape of the world. They also agreed to
cooperate on a wide range of issues, including trade, finance,
energy and climate change. The 15th BRICS Summit is set to
take place in South Africa in August 2023.
Why does this all matter for South Africa?
While South Africa has been a member of BRICS since 2010, it
has so far been able to trade relatively freely, facing only two
minor disagreements with the US over agricultural exports in
2015 and aluminium tariffs in 2020. However, as the conflict
between China and the US has intensified, so the divide
between East and West has reached levels last seen during
Which trade agreements are at risk?
South Africa has several trade agreements, with the majority
being within Africa. However, there are a few that may be at
risk if South Africa takes an opposing stance to the West. These
agreements include the African Growth and Opportunity Act
(AGOA), which is a trade agreement between Sub-Saharan
countries and the US that allows for duty-free exports from
Africa to the US. South Africa exported roughly R41-billion
worth of goods to the US under this agreement in 2019 (this
represents around 20% of total US/South Africa trade volumes).
Additionally, there are three free trade agreements, between
South Africa and the European Union, Canada and Japan
respectively. Another agreement that could be affected is the
Trade and Investment Framework Agreements (TIFA), which is
a platform that facilitates bilateral trade discussions rather than
covering any actual trade.
It is important to note that there are no formal, binding free
trade agreements directly between the US and South Africa. The
primary risk from the US would therefore be sanctions, which
would restrict the flow of goods and reduce employment. Over
600 American businesses operate in South Africa, and many of
them use South Africa as a regional headquarters.
Who do we trade with?
South Africa’s largest bilateral trade [2] partner is China, with
over R555-billion of goods traded between the two countries
in 2022. This is almost double the size of the next largest
country, being the US. If we look at this information on a
broader regional level and focus on exports only, then Africa
accounts for around 25% of total exports. This, somewhat
surprisingly, makes them the largest single group destination
for our exports. Chart 1 shows the breakdown of trade for
some key partners (BRICS represented by China and India, G7
represented by the US, UK and EU) in 2022. While these pointin-time
values are interesting, the trend in trade values is far
more interesting as presented in Chart 2.
www.bluechipdigital.co.za
27

BLUE
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INVESTMENT | Economy
Chart R550 1: 000 Export 000 000 Values to Key Partners in 2022
2022 Exports to Key Partners
2022 Exports to Key Partners
R550 R500 000 000 000 000
R500 R450 000 000 000 000 000 000
R450
R400
000
000
000
000
000
000
R400
R350
000
000
000
000
000
000
R300 000 000 000
R350 000 000 000
R250 000 000 000
R300 000 000 000
R200 000 000 000
R250 000 000 000
R150 000 000 000
R200 000 000 000
R100 000 000 000
R150 000 000 000
R50 000 000 000
R100 000 000 000
R0
R50 000 000 000 China India US UK EU Africa
Mineral R0Products Products Iron & Steel Precious Metal Vehicles aircraft & vessels Vegetables Chemicals Other
China India US UK EU Africa
Mineral Products Products Iron & Steel Precious Metal Vehicles aircraft & vessels Vegetables Chemicals Other
Source: https://www.sars.gov.za/customs-and-excise/trade-statistics/reports/
Chart
Chart
2:
2:
Annual
Annual
Export
Export
Values
Values
for
for
Key
Key
Groups
Groups
Chart 2: Annual Export Values for Key Groups
Source: https://www.sars.gov.za/customs-and-excise/trade-statistics/reports/
South Africa Annual Export Values in Rand
South Africa Annual Export Values in Rand
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
G7 BRICS Africa
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
G7 BRICS Africa
2022
2022
700 000 000 000
600 000 000 000
700 000 000 000
500 000 000 000
600 000 000 000
400 000 000 000
500 000 000 000
300 000 000 000
400 000 000 000
200 000 000 000
300 000 000 000
100 000 000 000
200 000 000 000
-
100 000 000 000
-
Chart 2 provides total export values in rand to G7 nations as well
as Africa and the BRICS nations. We focus on exports as these
are at higher risk than imports if sanctions are implemented.
The trend is surprising with G7 growth far outstripping BRICS
growth despite the stronger ties engendered by the BRICS
collective. If we dig deeper, we find that much of the rise in
G7 export value has come from rising precious metals [3] prices
from 2019 to present rather than growth in volumes of exports.
With these rising prices precious metals now constitutes close
to 50% of export value to G7 nations, up from roughly 30% in
28 www.bluechipdigital.co.za

INVESTMENT | Economy
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In this increasingly polarised
world, we face headwinds
from both sides.
2010. The world is currently reliant on South Africa’s platinum
group metals production to supply them, especially given that
the other large global supplier is Russia. This reliance is not
necessarily enduring given the current drive to move towards
electric vehicles.
The trend demonstrated in Chart 2 suggests that a pro-
BRICS stance from South Africa is risky. If South Africa lost its
ability to export to G7 nations, it would require exports to
BRICS nations to more than double from their current levels
to retain the status quo level of total exports. The wild card in
this equation is Africa – if South Africa could improve its ability
to export into Africa, then this reduces reliance on both the
G7 and BRICS.
The wild card in this
equation is Africa.
How would a clear shift in alignment impact investors?
Currently South Africa sits in a proverbial “sweet spot”, with
both the Chinese-led BRICS grouping and the US-led G7 happy
to engage and trade with us as a strategic partner and potential
gateway to Africa. This position is becoming increasingly
tenuous, with Western leaders speaking out against South
Africa’s actions, with a particular focus on our interactions with,
and support of, Russia.
In this increasingly polarised world, we face headwinds
from both sides. On the one hand, to continue to align more
closely with BRICS, the country risks the cancellation of free
trade agreements and sanctions being employed. In 2016
Madagascar was suspended from AGOA; following this it is
estimated that its exports to the US declined by 42% and that
20 000 jobs were lost. If we simplistically apply this scenario to
South Africa, then this represents closer to R16-billion in lost
exports from this trade agreement alone. The number of lost
jobs would be far greater than 20 000 for South Africa.
If this was taken a step further and sanctions were put
in place, there is evidence from both Russia (in 2018 and
2022) and Iran (in 2019) that this would have far-reaching
consequences. This would have a negative impact on all asset
classes, particularly our government bonds and the rand.
The impact would not be felt equally, with those companies
whose revenue is more exposed to Western nations (car
exporters, precious metals miners) being heavily impacted
in the short term, while those with strong links to China
(processed steel and base metals producers) would likely be
better off. Ultimately, the hope would be that the demand for
products from Western nations would eventually be replaced
by that from the fast-growing East. This will take time to
manifest, and as we have seen with Russian oil, we would likely
have to sell goods below general market prices.
On the other hand, to stray too far from the prevailing BRICS
“kraal” could result in unilateral decisions by China and its
allies to alienate South Africa. This was done to Australia in the
mid-2010s during a trade dispute between the two nations.
This resulted in an estimated 40% decline in Australian exports
to China and an estimated R790-billion cost to the Australian
economy over a period of three years.
Given that China is currently our largest single-country
trade partner (comprising 65% of all exports to BRICS nations)
and that BRICS is expected to comprise more than 50% of
global GDP in the coming years, this severely curtails South
Africa’s future growth potential.
Neither of these outcomes is ideal, with severe impacts
on both the real and financial economy being potential
consequences. It is not out of the realm of possibilities for
South Africa to be replaced by Mexico as the supplier of cars
to Europe, or by Brazil as the supplier to China for its iron
ore needs. Therefore, it is concerning
that South Africa increasingly finds
itself in a conflicted position between
East and West. Changes in foreign
policy can have an outsized impact
on investment markets. South Africa
experienced the positive impact of this
post-apartheid when its investment
markets were essentially reopened to
the world.
Ultimately, South Africa’s relatively
narrow drivers of export trade leave
us vulnerable to global turf wars.
There is significant opportunity within
developing economies such as Africa and
China, and they are already among our
largest customers. However, the relative
stability and financial clout offered by
the G7 means they are a stable partner
we need to keep on side to ensure that
our economic growth path delivers on
its potential.
Stuart Copley, Investment
Analyst, Fundhouse
[1] The North Atlantic Treaty Organisation is a political and military alliance formed by North American and European countries to promote collective defense and security.
[2] Bilateral Trade is the sum of exports and imports.
[3] Gold and platinum group metals.
29

BLUE
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INVESTMENT | Technology
Big tech turnaround:
what’s behind the recovery?
After dominating stock market returns amid the Covid pandemic, the
household names of the US tech sector endured a miserable 2022.
In recent months the tables have turned once again – we look at why.
Big tech has enjoyed a resurgence this year. Seven large
US companies (Apple, Microsoft, Alphabet, Amazon,
Tesla, Netflix and Nvidia) have collectively returned
34% in the four months to 30 April 2023. Excluding
these stocks, the remainder of the MSCI USA index has
returned just 3%.
The big tech stocks were “pandemic winners” in 2020 and 2021
amid strong demand for their products. They then experienced
a difficult 2022 amid concerns over rising inflation and higher
interest rates. That’s because higher rates mean their future profits
and cash flows are worth less today.
Inflation is still elevated though, and rates have been rising so far
this year, so what’s behind the renewed rally for US big tech?
The better performance can to some extent be explained
by improving fundamentals, although it is a complex picture.
Companies like Microsoft and Nvidia are enjoying very strong
business trends. Those two companies are also thought likely to
be clear winners of the generative AI revolution. Apple has also
30 www.bluechipdigital.co.za

INVESTMENT | Technology
BLUE
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recently reported very resilient quarterly earnings, showing it is
proving more robust than other more commoditised companies
in the consumer electronics sector.
What’s more, following the pressures experienced last year,
some of the other members of this group – Amazon, Alphabet,
Meta and Netflix – have now discovered the merits of cost-cutting.
There is lot of potential to take out costs in those companies
following the huge hiring spree of the previous three years. This
could be either through headcount reductions or in some cases
by reducing the compensation paid to some of the expensive
talent they have as the labour market softens.
So, we can say that fundamentals have been improving with
regards to either the top line (ie sales/revenue) or bottom line
(ie improving operating efficiency/cost-cutting to enhance
profitability) for members of this big tech cohort. However, that’s
not necessarily the whole story.
Part of what’s going on in markets is a
growth rotation. The banking sector stress
we have seen this year has been a catalyst
for a rotation away from value parts of the
market and back into growth stocks.
That is because the bank stress
is contributing to tighter lending
conditions, alongside interest rate rises.
If the Federal Reserve were to pause its
rate hikes, that would reduce a headwind
for growth stocks like technology.
This rotation has been a lot more
pronounced in the US, which reinforces
the view that it may well be to do with
concerns over the economy and more
cyclical parts of the market.
Kondi Nkosi,
Country Head, Schroders
Important Information
For professional investors and advisors only. The material is not suitable for retail clients. We define “Professional Investors” as those who have the appropriate expertise and knowledge eg asset managers,
distributors and financial intermediaries. Any reference to sectors/countries/stocks/securities are for illustrative purposes only and not a recommendation to buy or sell any financial instrument/securities
or adopt any investment strategy. Reliance should not be placed on any views or information in the material when taking individual investment and/or strategic decisions. Past Performance is not a guide
to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange
rate changes may cause the value of investments to fall as well as rise. The views and opinions contained herein are those of the individuals to whom they are attributed and may not necessarily represent
views expressed or reflected in other Schroders communications, strategies or funds. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Issued in May
2023 by Schroders Investment Management Ltd registration number: 01893220 (Incorporated in England and Wales) which is authorised and regulated in the UK by the Financial Conduct Authority and an
authorised financial services.
www.bluechipdigital.co.za
31

BLUE
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INVESTMENT | Offshore
Top five investment
migration programmes
You’ve likely heard of “golden visas” – government
programmes that enable individuals to acquire
residency and/or citizenship of a country by making a
significant financial investment in that country. These
programmes are often sought after by South African High
Net Worths because they can lead to strong passports that
enable visa-free travel to many countries the “Green Mamba”
does not. This opens the world for both business and leisure.
However, different programmes offer different benefits.
Increasingly, we’re finding that many clients are no longer
seeking a Plan B that offers enhanced mobility, but
programmes that offer a secure future for their children, even
if that means relocation.
When considering which programme is best for your client,
the most important things to clarify up front are if they are
willing to relocate and if they’d like to include children in
their application. The age of the children is also important to
consider, as some programmes allow adult children so long as
they are still dependent on the main applicant, while others
would require an alternative plan for children.
We always do thorough due diligence before we present a
programme to a client, and these are some of the programmes
we’d currently recommend.
Ireland
Ireland is a fully committed member of the EU and boasts
the fastest-growing economy in the Eurozone. While the
Ireland Immigrant Investor Programme (IIP) has officially
closed, there is a narrow window to invest in an Approved
Fund until Q4 2023.
Through the IIP, Irish residency can be maintained
indefinitely, provided you visit Ireland once a year for at least
a day. If you wish to relocate to Ireland, you can gain citizenship
through naturalisation within five years. You can include your
spouse/civil partner and children under the age of 18 on your
application. Unmarried, dependent children between 18
and 24, who are enrolled in tertiary education, may also be
considered. They only have to prove dependency at the time
of submission of the application, so if your child is 23, about
to turn 24, you’ll still be able to include them.
32 www.bluechipdigital.co.za

INVESTMENT | Offshore
BLUE
CHIP
Greece
Greece’s Golden Visa grants a long-term residence permit
that will remain valid as long as you maintain ownership
of a qualifying property in Greece. There’s no requirement
to relocate and no annual minimum stay for the residence
permit. There is a route to citizenship through naturalisation,
but it does require a full relocation and a minimum of seven
years of residence in the country.
You can include children under the age of 21 on your
application, but they can only remain on the programme until
the age of 24. However, Greece is one of the few programmes
where you can include parents onto your application, with no
proof that they are financially dependent on you. So, if you
have older children, you can apply in their name and include
yourself as a dependent.
The Irish passport is the only passport that gives full access
to the EU and, with a common travel agreement, allows for
permanent residency in the UK.
Malta
Also in the EU, the Mediterranean island of Malta offers two
separate programmes – the Exceptional Services by Direct
Investment (ESDI) programme, for citizenship, and the Malta
Permanent Residence Programme (MPRP), for permanent
residency. Neither programme requires you to relocate.
For the citizenship programme, children must be under 29
at the time of application and be financially dependent on the
main applicant. With the residency programme, there is no age
cap on financially dependent, unmarried children. However, the
older the child gets, the more complicated proving financial
dependency becomes, so we recommend that all adult
dependents enrol in full-time education.
With both Maltese programmes, you can also include parents
and grandparents who are fully financially dependent on the
main applicant.
United States
The EB-5 is an immigrant visa and currently the quickest way
to obtain a US green card – applications take 24-36 months.
Permanent green card holders are allowed to live and work in
the US and have access to almost all the same benefits as US
citizens. You are not restricted to the state where you invest,
which opens up many opportunities.
You may include dependent children enrolled in full-time
education on your application. However, this is a better option
for young families as, once your child is 21, they are considered
adult and cannot be included.
Grenada
The Caribbean Island of Grenada
offers citizenship in just nine months
and applicants are not required to
relocate. In fact, they need not even
visit Grenada to obtain the passport
– which offers visa-free entry to over
140 countries, including the Schengen
area, the United Kingdom, Hong Kong,
Singapore, China and Russia.
Financially dependent children
under the age of 28 can be included
on the application, as can parents, and
grandparents so long as you can prove
they are financially dependent on the
main applicant. Single siblings with no
children may also be included.
Sarah Young, Investment
Migration Manager,
Sable International
www.bluechipdigital.co.za
33

BLUE
CHIP
ROUND TABLE SERIES | Offshore investing
Offshore investing:
getting it right
In an exclusive Blue Chip discussion, three of South Africa’s top investment professionals focus
on offshore investing and why it is important to engage with a financial advisor.
Part One deals with diversification and currency protection.
MODERATOR
EXPERT PANEL
Philip Robotham, Head of
Intermediary for SA, Schroders
Simon Adler, Fund Manager,
Schroders
Andrew Finlayson, Co-Founder,
Maven Wealth
DIVERSIFICATION
Philip Robotham (PR): How do you construct a portfolio
which is sufficiently diversified?
Simon Adler (SA): Diversification is the free lunch in investment
markets. It is critical because none of us know what the future
holds and so having a variety of assets is absolutely the way
to go. I co-manage two funds that are available in South Africa,
one of which is the Global Recovery Fund which is what’s called a
value fund. We invest on a long-term basis, and we try to buy the
lowest-priced assets available in the world. We spend our days
looking at the cheapest companies and determining whether
they are the right ones for portfolios. The long-term growth by
doing this is almost unparalleled. Value investing is a way of
growing your assets.
If you invested $10 000 in value shares in 1926, today
it would be worth over a billion dollars – unbelievable
long-term returns. What we offer our clients are value portfolios.
Notwithstanding difficult periods, over the long term they
generate great returns.
PR: Is there a demand from your clients asking specifically for
certain types of themes? Or is part of the role educating your
clients into what else is available offshore?
Andrew Finlayson (AF): I think it is the latter. There are a
lot of strong companies with very good management in
South Africa, but there are several spaces that are underrepresented.
An example is listed opportunities in the
technology space, and biotech is another. Even in banking,
which has very good management teams, there are only five
investable stocks across banking. Internationally there are
hundreds of opportunities to get into either in themes or
different sectors.
34 www.bluechipdigital.co.za

ROUND TABLE SERIES | Offshore investing
BLUE
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If you invested $10 000 in value
shares in 1926, today it would be
worth over a billion dollars.
In asset management, there are a limited number of
investable asset management sectors in South Africa where it’s
a much bigger theme internationally. South Africa has a very
strong mining sector and that’s where you deploy assets and
there are several other themes that you can invest in here, but
it’s just the breadth of opportunity that sits outside of South
Africa that one would want to access and then some specialist
themes within those.
PROTECTION AGAINST CURRENCY DEVALUATION
PR: To what extent is protection against currency devaluation
client-led?
AF: We, from a South African investor perspective investing
offshore, must consider two things: one is effectively the price
that you pay for the dollars or pounds that you buy when you
take those funds overseas and the second part is what you’re
buying on the other side.
And it is not necessarily a straightforward or linear relationship
because you do have times when the currency could be either
weaker or stronger and the asset prices or the assets that you
are buying internationally are either weaker or stronger. We find
that we have to have a filtered process that we consider a client’s
affairs through when we are making those decisions and again
it is nuanced.
You could have a client who has a one-off event who has
benefitted from a big transaction for say the sale of a business
in South Africa. They’ve gone ahead and got special permission
today for funds overseas over and above their annual amount
and that is a transaction that you’re looking to take funds
overseas and lock in, and there we would be looking to target
different rand/dollar exchange rates for example and trade at
those various levels as opposed to trying to take everything
out at once.
If you look at the rand/dollar on a purchasing power of parity
basis going back to, I think 1997, where inflation targeting was
introduced into South Africa for the first time, the rand/dollar is
currently at an extreme and probably two standard deviations
away from a long-term average. We’re not going to try to drop
the currency or time the market today versus tomorrow, but it
does give us an indication that at 18/50 where it’s been, it does
feel like the rand is a little bit too weak to be taking a whole
bunch of money overseas.
Similarly though, when you take the markets overseas
they’re now suddenly starting to represent better value. If you
think that the markets are down 10% and that presents a good
opportunity to enter the market, you may be happy to pay a
slightly higher price for dollars effectively to be able to access
those markets, but it is something where there is quite a lot of
nuance and where you have to take into account the price that
you’re paying on both assets effectively, the currency and the
asset that you’re buying.
PR: Simon, how much of the currency talk comes into your
conversations when you’re meeting these businesses and
putting reflective valuations on them?
SA: It varies. It depends on what type of business one is looking
at. If one is looking at a Japanese business that produces its own
goods, sells it domestically, the yen isn’t going to be a huge
influencer on its profits whereas if you’re looking at a business that
imports goods from China and sells them to America what the yen
is doing is critical to what profits that business is going to make.
Our view is that we must have a systematic but pragmatic
approach. We must understand the currency exposures of a
business, we must understand the balance sheet aspect so
if they’ve got profits in one currency and there are debts in
another currency, we need to understand the risks there. But I
totally agree with Andrew that the best way to think about it is
to consider the purchasing power of parity over long periods of
times – where are you versus those long-term averages.
Our view is to buy companies
with more than enough upside so
that if we get the currency right or
wrong it doesn’t really influence
the return we give to our clients.
We’re looking for substantial
upside in shares so if we’re saying
80/90% upside in a currency
reaches 5% or 10% against us
that’s unfortunate but it doesn’t
undermine the return we can get
from the investment materially.
That’s how we try and normalise
it but you have to understand that
on a case-by-case basis.
To watch the round table series in
full, visit www.bluechipdigital or
scan the QR code.
www.bluechipdigital.co.za
35

BLUE
CHIP
INVESTMENT | Economy
Where do we stand now?
Words like “unprecedented” seem to surface on a regular basis nowadays. The word “unprecedented”
means “never done or known before”. We do however know that things that never happened before
happen all the time. So, we should not be surprised when something unprecedented happens.
One aspect in financial markets that has never happened
before, that has just happened and is still in the process
of process of happening, is the pace of increase in the
United States Federal Funds Rate. The current pace at
which the Federal Reserve has increased rates is the fastest it has
been in history.
In March 2022, the Federal Funds Rate range was 0% to 0.25%.
In the first half of March, the first increase of 0.25% took place,
increasing the rate range to 0.25% and 0.50%. From here another
nine rate increases took place in rapid succession lifting the rate
range to its current level of 5% and 5.25%. We are standing at a
point in time where no-one has been ever before, and now we wait.
We now wait for how the economies and markets of the
world will react to the consequences of these rate hikes. But
why the wait?
Depending on the models referenced, it takes roughly
between 12 and 18 months for monetary policy decisions to
work their way through the economy. As an example of the
aftereffects, if you owe the bank money and rates start to
increase, the amount of money you must repay the bank also
increases. A small increase will infer that your household or
business will have to spend more to service the debt than the
month before, hence less will be available to save or spend. If
the increase in payment is relatively small the household or
business should be able to absorb this.
However, increase the rates and the cost of servicing the debt
at a pace never seen before and the possibility of not being able
to service the debt increases in line. Fourteen odd months ago
the bottom end of the Fed Funds Rate was 0.25%; today it is
standing at 5%, theoretically speaking a 2 000% increase.
As the saying goes, “What can go wrong?”
Quite a lot.
In the US, once again depending on the source referenced,
most home loans have a fixed rate with a period ranging up to 30
years. There is a high probability that if you took out a fixed-rate
loan, your monthly payments have stayed the same as rates have
increased over a relatively short period of time. Good for you. But
what happens when your fixed-rate period ends and the rate
on your home adjusts? For the sake of the thought experiment,
imagine your down payment on your home loan increases from
one month to the next by 2 000%! An instant increase, not a
gradual one.
As a caveat, we do not know what the home loan contracts
and terms and conditions look like for the 4 200 commercial
banks in the US. But the principle still holds: if one of your
biggest payments out of your monthly budget increases by a
considerable amount, you could be in trouble if you need to
refinance. (And if you are a home buyer for the first time, it is
now considerably more difficult to afford a home.) A Bankrate
Emergency Fund report, published in February this year, reported
that 57% of US adults are currently not able to afford a $1 000
emergency expense.
The consequences of the truly unprecedented interest rate
increases seen over the past 17 odd months are impossible
to predict, consequences which could be unprecedented.
But truly no-one knows. On the Federal Reserve website, the
organisation states, “The Federal Reserve Board employs just
over 400 PhD economists, who represent an exceptionally
diverse range of interests and specific areas of expertise.”
Last update: 10 August, 2022. If you consider that the Federal
36 www.bluechipdigital.co.za

BLUE
CHIP
INVESTMENT PORTFOLIO | Economy CONSTRUCTION
Can we once again invite
Goldilocks in for some
porridge after she has
wandered off for a while?
things like iPhones and increasing production capacity. If less
is spent, less is consumed and this is not advantageous for the
economy, in the US or anywhere else.
So, should we pack our bags and run for the proverbial hills?
In short, no. Because we do not know how this will play out. But
to construct a resilient portfolio we need to practice caution.
“You want to be structured to participate in the march of
mankind but to survive the dips along the way.”
– Matthew McLennan
What Mr McLennan is referring to is a general investment
and portfolio management principle that we all should adhere
to, always, not only when there are dark clouds on the horizon
that might, or might not, bring a heavy storm.
To just invest and forget is a beautiful, mathematically
proven strategy, taught in Investment Management 101, but
often ignored in Human Management 301. Homo sapiens
Reserve, on a regular So, will basis, the US misinterprets still be the largest the economy and over the the are next risk few averse I believe and if the answer probability is yes. of sticking to a longterm
wake investment up A unit plan trust is portfolio reduced has to the the obligation point of to failure provide by liquidity to un
future consequences decades? of Will their China actions, take their predictions crown? Will should Europe rather or Japan
be ignored. again? And will their respective markets follow? No-one knows, unexpected even holders market whenever conditions required. you If need I want to to re-think withdraw your my funds, I put in
The 2010s though were a many great has period an opinion. for stocks. Either Put way, another buy a low-cost way, index portfolio. that You redemption need to construct request and a have portfolio access that to my can funds survive a few days later (
Goldilocks was references in the House. the major There stock were markets low and interest economies rates and of the world. the dips An along most the cases). way. Hence, management of these funds needs to be don
low inflation. example, Money was the cheap, Vanguard basically Total World free. Index And with since a fee returns of only 0.08% Bond per giant in such Pimco a way has that an idea liquidity called is “strategic readily available. mediocrity”: An individual on th
on bonds and annum. income-based Buy and hold investments for as long as were possible. low, investors “You’re never other hand best has, in the with short the right run, financial but you coach, stick around the ability to take o
turned to the stock The market. overall asset Those allocation were the days and in it particular now seems. the allocation long enough illiquid to outlive positions. the competition and come out on top.”
Will we return to bonds to those is a bit days? trickier. Will inflation The average roll over, US 10-year interest bond While yield in Pimco is Structured referring notes to competition, that are designed you can to provide substitute a high probabili
rates be cut as 1980 we was come 11.43%, in for versus a soft the landing average on the yield Hudson in 2020 of this 0.89%. with the of objective coupon payments of your portfolio (quarterly, or that semi-annual of the client, or annual) an
River? Can we Remember once again if invite yields Goldilocks decrease, bond in for prices some porridge increase, so company this was or provide pension some fund downside you are managing. protection can be a great alternative
after she has a wandered phenomenal off for bond a while? bull market. I do not Could know, rates no-one go lower Never still? invest traditional in such bonds. a way Individuals that you have are carried the option out to when take advantage
does, but this Possibly. is not a portfolio Are rates management going to go consistently strategy. lower for those the next clouds the bring illiquidity a hailstorm! premium that most retail portfolio managers canno
The probability few decades? of Goldilocks Probably returning not. and staying for lunch Many a market Constructing commentator the is
and dinner after The breakfast allocation is low. to bonds Here is and why… bond alternatives versus professing equity that core we of should any strategy be ready is as
If you have depend given out on two free aspects money that for are a decade, intertwined. ie it Firstly, cost your investment there will be literally volatility the over centre the short of
very little to service period and your secondly, debt, and your possibly ability you to stomach have increased volatility. The term. longer They the are investment however stating process. the
your debt as it your didn’t time cost horizon, you much, the lower it would your be allocation foolish to think bonds should obvious be as The there next is always steps are volatility the
a 2 000% increase and the in lower the interest your volatility rate will absorption not affect threshold, you. When the higher over your the short satellites term. that This can is the provide nature
money is free, allocation people do to bonds foolish should things. be. A quality financial advisor should of markets. be exposure Client portfolios to some should totally be
It took the able Federal to assist Reserve here 17 with months ease. to hike the rate to the “ready” in that unique short-term assets. liabilities Think
current range of There 5% and are 5.25%. alternatives If we assume to traditional the Fed sovereign panics after bonds should in high-byield and corporate the rate retreats bonds. in Although let’s assume the eight probability months of default risk, cash is and economy, income innovation like investments and
infrastructure, able to be met the with green low
a hard landing
to 2.50% and higher 2.75%, than that their will still sovereign infer that counterparts, the rate is so higher too is by the expected that are little disruption rattled and by stock health market and
roughly 1 000% return. than If, what however, it was offshore almost two bonds years are ago, not expected and you to movements. provide wellness This will to help name your a few. clients
have much more an inflation-beating debt. Salaries have return increased, the medium absolutely, to perhaps but even to survive the a possible With the dip right along advice, the way.
not by the same long measure term, are as there interest other tools rate. a private investor can Long-term access investments you can build in something turn should Hannes Viljoen, CFA, CFP®,
In addition, that if provide individuals some and sort companies of downside need protection to spend with still a higher be invested truly special to participate and unique in the Hannes CEO and Viljoen, Head CFA, of Investments,
CFP®, CEO and
more on servicing probability their debt, than bonds they have to deliver less to inflation-beating spend other returns? march of mankind. to your personality. Head Kudala of Investments, Wealth Kudala Wealth
www.bluechipdigital.co.za www.bluechipdigital.co.za 37 35

BLUE
CHIP
PRACTICE MANAGEMENT | Wealth management
Adding value,
time and money
Integrity, knowledge, service and teamwork are the values that Bovest Wealth Management
stands for and on which its success is built. Blue Chip caught up with the company’s wealth
managers, PJ and Geo Botha.
Please provide a brief history of Bovest. How did it
come about?
Our father, Dr Riaan Botha, started the company back in
2008. He has got a Doctoral Degree in Political Science
but always had a keen interest in investments and after
upskilling himself with some JSE courses, he started
Bovest Wealth Management. The year 2008 was a very
challenging year on the markets following the financial
crisis in the US, but it’s through times like this that trust
and the correct advice really play a vital role in personal
financial planning.
Both of us first applied our trade outside of Bovest:
PJ completed his BCom Accounting Degree and after
obtaining his CA(SA) designation, he joined Bovest. Geo
completed his BCom and Honours in Internal Auditing
and obtained his CFP® designation while working in the
corporate world before joining Bovest in 2014.
Why would a client choose Bovest? What sets you apart?
For us, it’s personal: we started as a family company and
therefore Bovest will always be based on family values.
We treat our clients like family. Trust and transparency
are of the utmost importance and if it’s not in the best
interest of the client, we simply won’t do it. We are not
owned by outside shareholders who need to see a
certain increase in revenue and share price and while
doing so place aggressive sales targets on advisors.
PJ and Geo Botha, both directors and wealth managers at Bovest Wealth
Management, recently released their first book Word Ryk, Bly Ryk, which
is now available at all major bookstores and online.
What is Bovest’s financial planning philosophy?
Education and giving back to not only our clients, but
other South Africans too, is of utmost importance to
us. We want to educate our clients on the significance
of the choices they make and the reasons that we are
advising on the products we select. We also have an
entire “giving back” division in our company where we
assist those less fortunate.
38 www.bluechipdigital.co.za

PRACTICE MANAGEMENT | Wealth management
BLUE
CHIP
Our mission is to positively add value
to every single client we manage.
What services does Bovest offer?
Through the years we have compiled a team of specialists to
look after the holistic financial needs of our clients. We realise
that time is a very scarce commodity and we can save our
clients time by looking after their entire portfolio, including:
investment and tax planning, short-term insurance, risk cover
as well as medical aid and estate planning.
Even though we have contracts with all the main service
providers, we are proudly independent.
What is the practice’s vision and mission?
Our vision is to financially educate as many South Africans
as possible: we realise that not all people can become clients
and therefore embark on projects like our television show
on KykNet called Welvaartskeppers, our published books,
Welvaartskeppers and Word Ryk, Bly Ryk and our podcast, The
F word – Finance.
Our mission is to positively add value to every single client we
manage – not only in a financial sense, but life as a whole.
How have you integrated the FPI’s Code of Conduct into your
own practice?
Delivering advice of the highest standards is of utmost
importance to us and therefore compliance and adhering to the
FPI Code of Conduct is an integral part of our company. We have
appointed a quality control manager who scrutinises every
client portfolio and validates advice given by each advisor.
To what extent do you use technology in your practice?
We are a proudly completely paperless firm. We also welcome
virtual meetings and electronic signatures to be able to serve
clients all over the world.
Through social and mainstream media, we educate and
inform on a regular basis.
What do you think are the keys to being a successful financial
planning practice?
If your aim is to really act in the best interest of the client, you
are three quarters of the way there. You might give up some
revenue in the short term, but in the long term your reputation
and referrals will be what sets you apart.
Please tell us about South Africa’s equity market.
The South African equity markets is often misunderstood,
and people don’t realise that almost 60% of the JSE-listed
companies’ revenue is earned offshore. We make it our aim
to inform our clients of the global earners and duly-listed
companies on the JSE and how South African equity still has a
vital role to play in their portfolios.
Would you like to add anything?
Market returns are not in our control, but there are so many
other aspects that are, and we realise that if we foster the right
behaviour and decision-making while sticking to our long-term
objective, we will create long-term wealth for our clients.
www.bovest.co.za
www.bluechipdigital.co.za
39

BLUE
CHIP
PRACTICE MANAGEMENT | Profile
YOUR WEALTH:
OUR PRIORITY
No two people are the same, we all have different goals,
ideas and dreams. At Bovest, we believe that each
individual deserves a tailormade plan to assist them
on their road to financial freedom.
We want our clients to obtain true wealth. True wealth is
more than just money. It’s being able to live the life you want.
It’s making sure your next generation will have a legacy. It’s time
spent well. It’s confidence in your future.
Our vision is to ensure that we have a long-lasting relationship
with each of our clients and that they receive service, knowledge
and care of the highest standards. To not only impact their
financial situation but also their lives.
Bovest was founded on the principle to improve people’s
lives. We know that there is more to life than taking one rand
and growing it into two.
Time – the one commodity that is worth more than money.
We can always make more money, but time that has gone by, is
lost forever. At Bovest, we don’t only strive to manage and grow
your wealth in the best and most professional way, but we also
want to give you more time to pursue what you value most.
To achieve these objectives, we have built a team of specialists,
each with a dedicated field of expertise to give each client access
to a wealth of knowledge and to provide a single destination
to cater for our clients’ complete financial needs.
The wealth management industry has changed drastically in
recent years: information is abundantly available, technology
continues to evolve rapidly, governing regulations are getting
stricter and with the increased complexity of ever-expanding
investment and insurance products you need a team you can trust.
Integrity, knowledge, service and teamwork: these are the
values we stand for and on which Bovest and its success are built.
We know that these values are also important to our clients – to
secure their wealth and free up the scarce commodity of time.
PERSONAL EXPERIENCE
No two people are the same, we all have different goals, id
No two clients are the same. We believe in a tailormade financial
deserves a tailor made plan to assist them on their road to fin
plan for every client.
We want our clients to obtain true wealth. True wealth is mo
LONG-TERM APPROACH
sure your next generation will have a legacy. It’s time spent w
We strive to maintain long-term relationships with every client
and we know it can only exist when there is mutual respect
Our Vision is to ensure a long lasting relationship with every c
and trust.
standards. To not only contribute have an impact their financi
291 Sprite Avenue, Faerie Glen, Pretoria
43 Andringa Street, Eikestad Mall, Stellenbosch
+27 12 998 6428
admin@bovest.co.za
www.bovest.co.za
WHY: OUR STOR
INTEGRATED PLANNING
We have a team of highly qualified individuals, each with his
own area of expertise to provide a holistic service for our clients.
YOUR WEALTH : OUR PRIORITY
PROFESSIONAL PRACTICE
We strive to improve our service to ensure that we adhere to
the highest standards and the best practice in our industry.
40 www.bluechipdigital.co.za

Back to The Future
FPI Presents The 2023
Convention
Y
eas and dreams. At Bovest we therefore believe that each individual
ancial freedom.
re than just money. It’s being able to live the life you want. It’s making
ell. It’s confidence in your future.
lient and that they receive service, knowledge and care of the highest
al situation, but also to their lives as a whole.
Join the 2023 FPI Professional’s Convention, Back to The Future.
The FPI 2023 Convention will be hosted as a live face-to-face and a virtual event.
To register for the event, visit the FPI-Portal via the website. For any assistance, call us on
+27 (11) 470-6000, e-mail events@fpi.co.za or visit www.fpi.co.za
To obtain the 2023 FPI Professional’s Convention Sponsorship Prospectus visit the website
for more information.

BLUE
CHIP
INVESTMENT | DFM
A DFM can’t help you with your hair
but can help with investing
How many people do you know who cut their own
hair or service their own car? Very few people that I
know do this themselves. Instead, they tend to go to
a professional. But, for some reason many people still
believe that they are better at running their own investment
portfolios than a portfolio manager is.
I am always amazed to hear discussions about what
someone’s financial advisor suggested but how they chose
to put their investments elsewhere. The choice is often made
either due to the chosen fund having a well-known brand or
because someone else (ie not the professional advisor that they
have appointed) suggested it.
The other area of general confusion among investors is
where their money is invested. I often find myself explaining the
difference between an investment platform (more commonly
known as Linked Investment Service Providers or LISPs) and
an asset manager. The platform performs all the administrative
functions, including receiving the investment amounts, paying
them into the underlying unit trusts, tracking cashflows in and
out of the portfolios, calculating returns and providing quarterly
statements. Whereas the chosen portfolio or unit trust into
which the investor’s money is invested is the vehicle into which
their investment is held.
However, there is often confusion as to what the investor is
invested with. For example, if they have chosen the Momentum
Wealth platform as their “administrator” but invested in
the ABC Balanced Fund, then they are invested in the ABC
Balanced Fund and not a Momentum fund. Momentum Wealth
is the platform that facilitates their transactions and supplies
the investment statements. To say they are invested with
Momentum is a misnomer.
Momentum Wealth facilitates the investment, tracks
its performance and reports back to clients. But since the
statements are issued by the Momentum Wealth platform,
clients often perceive this to be their asset manager. To avoid
confusion, one would need to read through the investment
statement to see what underlying investments are and then
determine who the asset manager or managers are that you
are invested in.
When choosing a LISP platform, investors will be faced
with the decision around an open-architecture platform (ie an
independent platform that offers a wide range of underlying
funds) or a more closed-architecture platform (that restricts
the number of underlying funds you can invest in). The latter is
often associated with its own asset management business and
may provide better fees for access to its own group-managed
funds or place restrictions on which funds you can invest in.
For example, they may force you to use a money market unit
trust that is managed by an asset manager which forms part
of the same group.
While the open-architecture platforms are more flexible
and typically don’t have different fees just because they have
an asset manager in the group, investors should ultimately
ensure that the platform they chose is able to facilitate
investments into the most suitable funds for them and that
the platform has invested in technology that assists them
to provide accurate and regular information about their
underlying portfolios. Some of the criteria to consider in
selecting a platform are efficiency, service, pricing, reporting
and compliance monitoring.
On the other hand, when selecting an asset manager,
you may want to focus on a consistent performance track
record, what is the link between their benchmark and your
investment needs, as well as evidence of how the fund
performs in different markets.
With the increase in the number of unit trusts available and
the recent changes to Regulation 28 allowing asset managers
to invest 45% of their portfolio outside of South Africa, it’s
important that investors understand how this affects their
investment journey.
So, while it makes sense for you
to cut your hair at a hair salon or
barber and get your car serviced at
a mechanic, it also makes sense to
employ the services of a discretionary
fund manager (DFM).
A DFM has a good understanding
of the investment market and can
help investors and financial advisors to
navigate the level of complexity.
They can assist in deciphering risk,
investment time horizons and the
appropriate benchmark to help you
help your clients meet their individual
investment objectives.
A DFM can also help you navigate
the complexities around the local
and offshore investing options,
the differences between funds in a
particular peer group and show you
what to expect from different funds.
Visit eqinvest.co.za to find out how a
DFM can help your advice practice.
Florbela Yates, Head
of Equilibrium
Equilibrium Investment Management (Pty) Ltd (Equilibrium) is an authorised financial services provider (FSP32726) and part of Momentum
Metropolitan Holdings Limited and rated B-BBEE level 1.

FINANCIAL PLANNING | Retirement
BLUE
CHIP
Add some “BMT” to your clients’
retirement portfolios
In sport, certain players are described as individuals with big
match temperament or “BMT”. Players with BMT just seem to
have the ability to perform well in high-pressure situations,
when it is needed most, and their trophy rooms are stacked
with the evidence.
But when your clients are on the big stage, in this case
retirement, how does their living annuity perform when they
need it most?
In general, clients invested with an investment manager will
have exposure to asset classes such as cash, bonds, property and
equities, both locally and abroad. These asset classes create their
performance through beta (B), which is the return generated by
the market and sometimes through alpha (A), the performance
though superior stock selection.
Yet, these drivers of return, being alpha and beta, come
and go as no investment manager can always outperform or
guarantee to do it when clients need it most. So, if A and B can’t
always do it, what about using C?
Here, C refers to credits. And more specifically, to mortality
credits. A mortality credit is the benefit clients can get from a
life annuity because thousands of annuitants invest with the
same life insurer and their mortality risk is pooled.
This pooling is the foundation of how a life annuity is priced
so that the exact rand amount of income your client will receive
is quoted. It is because not all clients will get the same value
for money as they won’t all live to the same age. Some clients
live longer than expected and receive an income stream that,
when added together, could be six times or more than what
they originally invested. In these instances, the income can have
an implicit return or internal rate of return (IRR) of more than
14% (an IRR is the annual rate of growth that an investment is
expected to generate). On the other end, clients may receive
less than what was invested.
The reality is that life annuities will give a different return to
different people, but the return is the highest when it is needed
most, irrespective of how the future returns from markets turn
out to be.
The reason why I say, “when it is needed most,” is because
clients who live a prolonged life need a higher return on their
assets. A client that needs 9.6% to maintain their increasing
income need for 15 years will need 12.6% to maintain it for
35 years.
Clients who live longer in retirement are the ones who need
the high returns the most. This is exactly what a life annuity
offers. It offers a higher return the longer a client remains alive.
Calculations based on a R1-million life annuity for a male aged 65,
which pays an income of R8 005 every month escalating at 5% every
year. The return for periods shorter than 74 years are negative.
Source: Momentum Investments, date of quote June 2023.
This rate of return will vary on a case-to-case basis, but longterm
returns approaching 14% and even 14.5% are not out of
the ordinary when clients get the full benefit of mortality credits
by living to an advanced age.
Momentum Wealth has recently expanded the choice of
components that can be selected in our living annuity. We
now offer a Guaranteed Annuity Portfolio – a life annuity as a
component within our living annuity.
By using Momentum Wealth’s Guaranteed Annuity Portfolio
within a client’s living annuity, you can
provide a market-linked return as well
as a return that increases with the
client’s lifespan, thereby improving
their chances of a successful retirement
when they live to an advanced age.
Now, you don’t have to rely only
on alpha (A) or beta (B) any more, you
can trust that through C, ie mortality
credits, your clients who need it most
can have a successful retirement.
This is how Momentum Investments
is making investing personal: with us,
you can add some BMT to your clients’
retirement portfolios.
Martiens Barnard,
Marketing Actuary,
Momentum Investments
Momentum Wealth (Pty) Ltd (FSP 657) is an authorised financial services provider. Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services
and registered credit provider (FSP 6406). The Retirement Income Option and the Guaranteed Annuity Portfolio are life insurance products, underwritten by Momentum Metropolitan Life
Limited, a licensed life insurer under the Insurance Act and administered by Momentum Wealth (Pty) Ltd. The information in this article is for general information purposes and not intended
to be an invitation to invest, professional advice or financial services under the Financial Advisory and Intermediary Services Act, 2002. Momentum Investments does not make any express or
implied warranty about the accuracy of the information herein.

BLUE
CHIP
FINANCIAL PLANNING | Savings
Taking the logical next step –
invest your savings money
During these unpredictable times, it is now more vital than ever for people to take the first step in
changing their spending habits, and the next step to investing their money smartly.
There are still people who continue to embrace remote
work, which has led to decreased expenses on fuel,
takeaway coffee and meals at the office. Channelling
these modest amounts into investments for a variety
of needs, forming a habit of spending less and investing the
money not spent can gradually become an integral part of one’s
financial journey to success. Unfortunately, it seems as though
the skill of proper budgeting has been largely forgotten in
South Africa, with many opting for short-term credit instead of
stashing away money for the future.
Financial advisors have a significant role in guiding clients
who might be wary of saving and investing due to apprehensions
about schemes gone wrong they saw in the media or simply
because they do not know where to start. Financial advisors can
support clients in crafting a budget, making smarter financial
choices and efficiently allocating any newfound savings that
could be channelled towards suitable investments. Solid financial
advice is invaluable, as only a handful of individuals can express
their investment goals in monetary terms or determine how
much money they will need and by when.
Advisors can help clients put together plans for short-term
necessities such as emergency funds, medium-term needs like
buying a vehicle or securing a home deposit and long-term
objectives such as paying for their children’s tertiary education.
The most crucial long-term goal for most people is to provide
for financial independence which many people still refer to as
retirement. Even though it is possible for anyone to reach a
point of financial independence by properly planning for it, it
is disheartening that so few people can maintain their standard
of living once they stop working either by choice or because
of circumstances.
To guide clients on their financial journey, financial advisors
should discuss the different investment options, from starting
a basic investment through unit trusts to using products or
tax wrappers such as an endowment or a retirement annuity
to optimise the tax efficiency of their plan. Out of a diverse
range of investment choices, advisors can help clients choose
the most suitable strategies that align with their individual
needs and circumstances.
A popular choice for long-term investing remains a retirement
annuity because of its tax efficiency. For younger clients, this
approach fosters the habit of regularly investing money and
offers a tax-savvy way to do it. Every tax year a person can claim
a tax deduction for the money invested in a retirement fund.
To make the most of this deduction, clients can invest up to
27.5% of their taxable income or remuneration, whichever is
The deduction is limited to 27.5% of the greater of the amount
of remuneration for PAYE purposes or taxable income (both
excluding retirement fund lump sums and severance benefits).
The deduction is further limited to the lower of R350 000 or
27.5% of taxable income, before the inclusion of a taxable
capital gain.
higher, in a retirement fund. The maximum deduction a person can
claim in a tax year is R350 000.
An increasing number of people are also exploring tax-free investment
products, which present an excellent opportunity to supplement their
provision for future financial independence. Although clients don’t
get a tax deduction for money they invest in a tax-free investment,
they still enjoy tax-free growth. And they won’t pay any tax on the
proceeds when they decide to take money out of the investment.
Since the 2021 tax year, clients can invest up to R36 000 every tax
year in a tax-free investment, limited to R500 000 over their lifetime.
Before this change, the yearly limit was R33 000. Government may
adjust these limits from time to time.
It is essential for financial advisors
to assist clients in maximising their tax
incentives and consistently leveraging
them over time while also optimising
the tax efficiency of their overall
investment portfolio by blending
the use of the available investment
products or tax wrappers.
This tactic minimises the impact of
tax on financial plans and boosts the
growth potential of investments. By
providing personalised financial plans
and investment strategies, financial
advisors can enhance their clients’
chances of achieving their financial
goals on the journey to success.
Momentum Wealth offers a
comprehensive range of tax wrappers
that financial advisors can use to
help clients structure their personal
investment portfolios for optimal tax
efficiency and craft them to suit their
unique circumstances and goals. For
more on Momentum Wealth, visit
our website momentum.co.za.
Pierre Jean Marais, Retail Marketing,
Momentum Investments
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 Limited, an authorised financial services (FSP6406) and registered credit (NCRCP173) provider.

Harnessing the power
of digital solutions in
wealth management
Hymne Landman,
Head of Momentum Wealth
The financial services industry in South Africa is
experiencing a remarkable digital transformation,
with significant improvements in efficiency, client
engagement and service delivery. As a financial
advisor, it is imperative to stay ahead of the curve, leveraging
technology to provide personalised support to help clients
achieve their financial goals.
The integration of digital solutions in wealth and investment
management has emerged in response to heightened client
expectations, requirements of financial advisors, the need for
streamlined operations and the desire to remain competitive.
By adopting cutting-edge tools and online processes, financial
advisors can elevate their game, offering tailored services to
clients while adhering to industry regulations.
The adoption of digital solutions when engaging with
investment platforms also reduces the occurrence of human
errors, enhancing client experience and ensuring up-to-date
information. This not only saves time and effort but also
improves the overall quality of the services provided.
Digital solutions are increasingly transforming the way
investment platforms, together with financial advisors, interact
with clients. Transacting directly on investment platform systems
gives advisors and clients more control, faster processing
timelines and a more personalised experience so that financial
advisors can focus on what matters most: giving good financial
advice and creating value for their clients.
By using digital tools, financial advisors can also expand
their reach beyond geographic boundaries, attracting clients
from across South Africa and beyond. By leveraging technology,
advisors can better address the evolving needs of their clients,
building stronger relationships and driving client satisfaction.
The advent of big data is also affecting the financial
services industry, providing financial advisors with access to a
wealth of data that can be utilised to gain insights into client
behaviour, preferences and investing patterns. By leveraging
data analytics tools and Artificial Intelligence (AI), advisors can
identify trends and make data-driven decisions that benefit
their clients.
Predictive analytics enables financial advisors to anticipate
potential risks and opportunities, so that they can make
proactive recommendations that can improve clients’ financial
outcomes. This data-driven approach to wealth and investment
management empowers advisors to provide tailored advice
and personalised coaching, helping clients on their journey
to success.
Both psychology, or our inherent personality traits, and
technology (machine learning) can provide guardrails for
clients when they need them most as well as in-the-moment
financial education to help them bridge their intention (staying
invested) with their actions (avoiding regular switching in and
out of funds), for example. This is one example of how predictive
analytics is critical in managing or eliminating the investor
behaviour tax for both the advisors as well as their clients.
The integration of technology and digital solutions in
financial advisory and wealth management practices is vital
to providing personalised client engagement. By embracing
these advancements, financial advisors can streamline their
operations, enhance client engagement, and harness the
power of data analytics to create tailored solutions that can
help clients achieve their financial goals.
An example of the quick uptake of online engagement is
the functionality to do fee and benefit proposals (quotes)
for our annuity products and the Linked Endowment Growth
Option that we made available on our online quote, called
Wealth Quote. Within the first week of us communicating with
financial advisors, more than 1 500 quotes for annuity products
were generated online.
We also saw a significant increase in the number of transactions
on the Momentum Wealth platform being done digitally where
financial advisors use the various digital solutions which we
made available rather than using paper and email processes.
We processed a total of 73 810 digital transactions in the last
year with minimal manual intervention required.
As the financial services industry continues to evolve, it is
crucial to remain agile and adaptable, embracing new tools
and online solutions, and developing the skills and expertise
needed to maximise the benefits of technology. By staying
ahead of the curve, financial advisors, financial planners and
wealth managers will be well-positioned to lead their clients
on a successful journey to a secure financial future.
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 Limited, an authorised financial services (FSP6406) and registered credit (NCRCP173) provider.
www.bluechipdigital.co.za
45

BLUE
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ROUND TABLE SERIES | Retirement Planning
RETIREMENT PLANNING:
GUIDING CLIENTS TO
FINANCIAL INDEPENDENCE
An exclusive Blue Chip discussion with three of South Africa’s top investment professionals
focused on retirement planning and guiding clients to financial independence. Part one.
EXPERT PANEL
Fareeya Adam, Head of Product
Solutions, Momentum Investments
Fareeya Adam has been with Momentum
Investments for more than 16 years.
She started at Momentum straight after
university and has spent most of her time
in product development roles, with a
stint in the valuations team. Adam’s team
is responsible for product development
and management for discretionary
and retirement solutions, traditional
life annuities as well as structured and
international products. Adam has a BCom
Honours in actuarial science (University
of Pretoria) and is a qualified actuary
through the Institute of Actuaries (UK).
46 www.bluechipdigital.co.za
Tom Brukman, CFP®, Director,
Chartered Wealth Solutions
Western Cape
Tom Brukman is a financial planning
specialist and director of Chartered
Wealth Solutions Western Cape. Brukman
believes that helping his clients plan for
their futures plays a valuable role in their
lives. He focuses on consistently trying
to balance “return of investment” with
“return on life”. Brukman says that he
feels fortunate for the years that he has
specialised in dealing with families who
face major transitions such as retirement.
Wouter Fourie, CFP®, CEO, Ascor®
Independent Wealth Managers
Wouter Fourie is an Advanced
Postgraduate Qualified Financial
Planner and a Professional Accountant
(SA) with postgraduate qualifications
in advanced taxation. Fourie won the
2015/16 FPI Financial Planner of the
Year and was named by International
Adviser as one of the 100 most
influential individuals in the financial
planning industry globally. In 2018,
he co-authored The Ultimate Guide to
Retirement in South Africa with Bruce
Cameron and Secure your Retirement
in 2020. The third edition of The
Ultimate Guide to Retirement in South
Africa, sponsored by Alexforbes and
recognised by the FPI for verifiable
CPD points, has just been published.

ROUND TABLE SERIES | Retirement Planning
BLUE
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You need to
understand
what your own
basket is and how
inflation is going
to link to that.
MODERATOR
IAN JONES (IJ): When a client asks you how much is enough, where do you start?
WOUTER FOURIE (WF): There is a simple answer to the question and that is as
much as possible. Retirement planning is different for everyone depending on
their age of retirement, whether they have dependants and their lifestyle. It’s
a very personal question and it is always difficult to give a simple answer to it.
That’s why clients need the assistance of a financial planner to sit with them and
work out their budget.
Each one of us has different lifestyle needs and important information like
inflation and expected lifetime need to be factored into your budget numbers.
So the easy answer is as much as possible and the difficult answer is that you
need to sit down with the client and work through their personal budgets to
understand exactly what their needs are and how escalations would influence
the drawdown on their portfolios.
To give guidance in terms of planning, you need about R1-million to provide you
with R4 000 per month income. This is not a calculated amount but at least it gives
you a guidance number to work from.
IJ: And Tom, your thoughts on the same question but if you could also touch on
the 4% rule. (South Africans seem more conservative – we look at the 5% rule as
the maximum amount of potted retirement to withdraw.) Is this a concept that
you consider when dealing with your clients?
TOM BRUKMAN (TB): I agree with Wouter. It is a very individual question and it is
difficult to give a blanket answer. The 4% or 5% rule has been thrown around for
decades and is interesting because it is so blanket and covers many factors.
The factors around the growth in an investment do not really, in my view and
where I sit as financial planner, get to the core of giving the person the confidence
and security they are looking for in knowing that they can retire successfully or the
way they want to.
Spend time to look at the picture of what that retirement looks like. I think that’s
important. That picture then helps you advise on the factors most important to the
person – what’s going to make a difference and how they’re going to plan to get
to that successful retirement.
The maths is there but as we have seen in the last few years, the maths gets
skewed in extreme times and so if you can just keep people focused on the picture
and the context around that picture, I think they have a far more secure and better
chance of reaching that successful retirement period in their life.
Ian Jones, CEO, Fundhouse
Ian Jones has been with Fundhouse for
10 years. He is a qualified actuary who
started in the investment industry in
2001. Jones has extensive experience in
fund research, portfolio construction as
well as the broader asset management
and financial advisory industries, globally.
IJ: Fareeya, what factors do you consider when you propose a retirement solution
to your clients?
FAREEYA ADAM (FA): We have started to think more practically around how clients
can approach retirement and then we apply rules of thumb. One concept gaining
traction over time is to start by having a reasonable estimation of what you think
your living and your life expenses in retirement are going to be.
We think of life expenses as those expenses that you must cover; these
expenses are for the things that you cannot do without; your medical aid, place
to live, grocery and electricity bills every month. Then there’s the living expenses
where you have a little bit more flexibility. This will start to give people a range
of what their expenses are likely to look like in retirement and then you can more
easily apply the rules.
Another rule of thumb that floats around is the rule of 300 that says if you have
your monthly expenses, you can multiply the total figure by 300 and that should
give you enough to cover 25 years’ worth of expenses.
www.bluechipdigital.co.za
47

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ROUND TABLE SERIES | Retirement Planning
The higher income earners may be experiencing something
similar. There are certain things like insurance that increase at
a lower rate. At the same time, medical inflation is expected
to be 2% to 3% higher than inflation.
Everyone needs to understand what their own basket
is and how inflation is going to affect it. This need must
then translate into a retirement solution and an investment
strategy that gives a client the best chance of achieving
their preferred lifestyle.
As Tom and Wouter mentioned, it is very personal because you
don’t know how long you’re going to live, and you don’t know what
the effects of inflation are, but this at least starts to give you some
guidelines around what you should be targeting.
IJ: When people look at inflation, they consider the CPI basket
which sits on average at 5.5%. How do you think about inflation
when you are talking to clients approaching or in retirement?
FA: CPI rates are based on a basket that is not necessarily relevant;
if you look at the cost of food, for example, it is much higher than
that. What we see is that lower income earners feel a much higher
level of inflation because their basket is made up of more of those
items that are inflating higher.
IJ: Wouter, Fareeya raised an interesting point in that we
have seen, with rates going up, life annuities becoming a
more popular option for certain clients and advisors. What
are your thoughts on using life annuities or blending them
with living annuities?
WF: It is important to understand where annuities fit in
financial planning: the two-thirds that is withdrawn from a
pension at retirement is used to buy a compulsory annuity.
The compulsory annuity gives you the option of two types of
annuities, the one is what we call a life annuity and the other
is a living annuity.
Over the past few years, the industry has used living
annuities on a huge scale. I think it is because the rates that
were offered by life annuities were never very competitive but
over the last year, we have seen a change in the environment
where bond rates started spiking and inflation rates have
picked up, so life annuity rates are becoming very attractive.
In our own business, we converted a large portion of our
living annuities into life annuities and new hybrid annuities
are available where you can have a combination of the two in
your portfolio.
This provides a client with certainty. It provides a client with
certainty of income, certainty of escalation rates and it also
addresses that important aspect called longevity. It provides
an income for life as none of us have the benefit of predicting
our own life or date of death. The life and hybrid products
are a good way of combining certainty into portfolios now
especially with the higher rates that are available.
TB: The advent of the hybrid model has really been huge and
we look at it very closely for our clients because our clients
convert their whole living annuity, or at retirement stage,
their compulsory annuity, into a life annuity. It may give them
certainty, but a lot of them want a legacy and for their living
annuity to be passed on to their children.
The hybrid annuity addresses concerns around certainty,
longevity and legacy. They are a great addition to the
48 www.bluechipdigital.co.za

ROUND TABLE SERIES | Retirement Planning
BLUE
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The hybrid annuity addresses concerns
around certainty, longevity and legacy.
industry, solving the issue around taking risk and spreading
it between the client, us and the life company doing the life
annuity side.
IJ: Are hybrids being used more broadly in your business?
FA: At the start of Covid-19, guaranteed life annuities really
started to pick up. As an industry, we saw that the amount of
money flowing into life annuities doubled and year-on-year that
trend continues to increase.
People are starting to appreciate their guaranteed nature and
the passing-off of inflation, investment and longevity risk to an
insurer rather than keeping all the risk themselves.
Wouter mentioned the returns on life annuities. In the
current environment, you can lock into between 9% and 12%
per year at the level of income that you are guaranteed to receive
depending on your type of income.
There are lots of options in terms of ensuring that you
get an income for yourself or your partner and locking into
increases talks quite nicely to the CPI risk we mentioned
previously. CPI annuities tend to be a little more expensive
but fixed increases, where you lock into an income that
increases by for example, 5% every year, can provide
valuable security.
And I agree 100% with Tom and Wouter that the advent
of the hybrid annuity is special because previously we saw a
situation in the market where the choice was between a living
annuity and taking on all the risk or a life annuity where clients
did not keep any of the upside potential.
Now we are starting to blend these in a way that makes
sense for each individual client, and I think it is quite powerful.
The hybrid annuities are being offered now at Momentum
Investments – including to existing living annuity clients.
IJ: Fareeya, please discuss the use of retirement annuities,
tax-free investments and endowments and how they can
benefit an individual. Let’s use a high-net-worth individual
who is saving towards retirement and has a higher tax rate
as an example.
FA: Retirement annuities are a good tax-efficient vehicle
for all tax brackets because there is a tax deductibility on
contributions. All the growth inside of the retirement annuity
is tax free.
If you consider that you invest for about 20 to 30 years in both
the pre-retirement and the post-retirement periods, the benefit
can be substantial. When you convert the money to an income
at retirement, you pay tax at your marginal tax rate.
Another one that I think is very interesting is the tax-free
investment, also referred to as the tax-free savings account. It
is limited, so the total yearly contribution in a tax year may not
exceed R36 000, while the total lifetime contribution may not
exceed R500 000. However, the tax-free nature of the investment
growth is not limited in total. The longer you stay invested, the
more you can benefit.
This makes it very suitable for retirement provision. If you
withdraw from a tax-free investment, you cannot put that money
back in to the investment. Once you have used your R36 000 per
year it is gone so ideally you shouldn’t be withdrawing from it.
You should deposit it into a tax-free investment and leave it for
the longer term.
The tax rate for endowments is 30% but here is where it is
suitable for a high-net-worth individual because the maximum
tax rate on individuals is 45%, which is quite a big saving that
you make.
The first five years of an endowment are restricted but thereafter
there is flexibility in accessing the money or adding more money
when you need to and so definitely for high-net-worth individuals,
the endowment should be considered as an opportunity.
IJ: If a 35-year-old family member approached you for your
pearl of wisdom regarding retirement, what would you advise
them in terms of the next 30 years as they approach retirement?
WF: Number one, start with the end in mind. I would also add that
steady plodding not hasty speculation brings prosperity.
TB: Empower yourself now, empower yourself and be proactive.
No-one is going to hand you a detailed, bespoke financial life
plan without you taking the steps to understand what the plan
means for yourself. Speak to people, read and engage with
a professional that makes you feel comfortable that they are
going to help you.
If you empower yourself, you
become aware. You can make
the decisions now and over time
they will provide the life, the
independence or whatever your
objective is. So, start now and
empower yourself.
FA: There will come a point
in your life where you will be
responsible for paying yourself
a salary so start to plan for that
today and plan consistently until
the day comes.
Scan the QR code to watch the
full Retirement Planning Round
Table online.
www.bluechipdigital.co.za
49

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FINANCIAL PLANNING | Retirement
A CATALYST FOR POSITIVE CHANGE
The Institute of Retirement Funds Africa is an association that represents and promotes the
interests of the retirement industry in South Africa and across the continent to the ultimate
benefit of the members of retirement funds. Blue Chip spoke to chairperson, Geraldine Fowler.
Geraldine, please tell us about your career trajectory.
Having been involved in the retirement sector for over 28 years,
I have always been aware of the role the sector plays in societal
prosperity and transformation. I am passionate about gender
equity, impact investment and socio-economic contribution;
all areas where active involvement by the sector make a huge
difference. Thus the privilege of leading the country’s foremost
industry body is a role I accepted with gratitude and pride.
Please provide a brief history of the Institute of Retirement
Funds Africa (IRFA).
IRFA was established in 1987, succeeding its predecessor, the
Association of Pension and Provident Funds, which was founded
in 1947. As such, and in terms of its governing statement, it has
a long history of “protecting, promoting and advancing the
interests of pension, provident, retirement annuity and similar
funds, their trustees, members and persons associated with such
funds in Southern Africa”.
IRFA’s activities are undertaken by a number of standing
committees who meet on a regular basis to find innovative
ways of overcoming problems in our industry, to promote
communication and provide ongoing advocacy for the sector.
Both committee and board members serve on a voluntary
basis and are drawn from leading thought leaders and subject
matter experts in the industry.
What is IRFA’s vision and mission?
Our vision is to be the leading catalyst for positive change in the
retirement sector across Africa, fostering a future where every
individual enjoys a secure and prosperous retirement.
Our mission is to represent and promote the interests of the
retirement industry in South Africa and the African continent,
advocating for favourable policies, providing comprehensive
training programmes, fostering collaboration among industry
professionals and championing sustainable development goals
(SDGs) for a better world through the retirement sector.
What are IRFA’s objectives?
The essential mandate of any industry body is to provide its
members and the sector it serves with the knowledge and
resources needed to make informed decisions for the benefit of
all constituents. Nowhere is this as important as in the financial and
retirement sector where these decisions impact on society at large.
Our broad-based goals include:
• Making a positive impact on fund governance
• Enhancing fiduciary responsibility and board accountability
• Promoting the best practices in member service, education,
benchmarking and compliance
• Ensuring investment in our future
• Vigorous engagement
• Building a sustainable social legacy
• To become “the” voice in the industry
• Championing equity and respect for diversity
• Staff, member and association growth
• Supporting ESG
• Focused and measurable action
IRFA has developed its organisational profile and chosen specific
SDGs to create a compelling narrative that elicits connection
and collaboration with and from its stakeholders. These SDGs
have been chosen to:
• Create a compelling narrative
• IRFA aims to communicate its purpose, values and impact in
an engaging manner, enabling the audience to understand the
significance of IRFA’s work and motivate it to become part of
our mission
• Evoke an emotional response and connection
• Address key challenges
The selected SDGs reflect the critical challenges faced by the
retirement sector and society as a whole. By championing
these goals, IRFA acknowledges the importance of addressing
issues such as poverty in old age, gender inequality in pension
systems, access to quality education for sector professionals
and the overall wellbeing of retirees. This demonstrates
IRFA’s understanding of the complex issues at hand and its
determination to make a tangible difference. As a responsible
and forward-thinking entity and by aligning with globally
recognised goals, IRFA will showcase its commitment to
contributing to broader sustainable development efforts.
Would you like to add anything?
I certainly would, an invitation to both individuals and organisations
to join IRFA's community and become part of a collective effort to
shape a better future for retirement funds, members and society at
large, thereby harnessing the power of unity,
collaboration and collective impact.
BIOGRAPHY
Geraldine Fowler is also the
founding Director and CEO of GQM
Fund Administrators. She has held
senior positions with Private Fund
Administration and Consulting Houses.
She holds academic qualifications in
insurance, business studies, financial
planning and writing.
Geraldine Fowler,
President and Executive
Board Member, IRFA

BLUE
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FINANCIAL PLANNING | Retirement
The fundamental need for
health and behaviour modelling
in retirement planning
In 2022, Discovery Group announced the launch of Cogence, a discretionary fund manager
seeking to significantly enhance the business of wealth creation in South Africa.
Uniquely, Cogence combines the investment
expertise of BlackRock, one of the world’s leading
asset managers, with personalised health data
from Discovery, which operates the world’s largest
behavioural change programme.
It offers model portfolio solutions built upon BlackRock’s
asset allocation views and integrates Vitality’s data and analytics,
all supported by industry-leading portfolio analytics and risk
management technology, Aladdin Wealth.
Through this merging of technology and investment
expertise, Cogence is not only the first truly global
discretionary fund manager (DFM) in South Africa, but the
first DFM globally to add a layer of personalised health and
longevity insight to essentially map out every aspect of an
individual’s financial plan. These metrics consider how long
you will live, how healthy you will be, how much money you
need and, importantly, they support financial advisors in
making recommendations to their clients.
It’s an innovative solution designed to help tackle one of
the greatest socio-economic challenges in our society. It is well
known that South Africa has a well-documented and alarming
retirement savings shortfall. More than 90% of people are
unable to afford retirement, meaning that they rely on their
families, communities or the state to survive.
With this gap having remained stubbornly persistent, it is
evident that change is required to help people achieve financial
health during their life after work. But, what does physical
health have to do with financial wellbeing in retirement?
Adrian Gore, CEO, Discovery
A multi-dimensional approach to retirement
It goes without saying that the better the growth of an
investment portfolio, the better the financial outcome for the
individual investor at retirement. But returns are less than half
the picture. “Simply put, the fact is we try to save money to make
sure that at retirement, we have enough compared to our preretirement
savings,” says Discovery CEO Adrian Gore.
52 www.bluechipdigital.co.za

www.cogence.co.za
“In calculating the replacement ratio, we need to consider
the amount of money you have saved, its investment growth,
divided by life expectancy. That determines what you have per
year or per month to live on,” he explains. Gore illustrates this
point by describing how a mere 1% retardation of expected
investment returns reduced a 40-year-old saver’s replacement
ratio at a retirement age of 65 years from roughly 80% to 60%.
A replacement ratio is a basic measure of retirement-income
adequacy equivalent to the ratio of pension entitlement to
lifetime gross earnings.
A 2020 study1 reported the replacement ratio in South Africa
for individuals with “average” earnings to be just 19% – well
below the mean of 59% for OECD countries. In its calculation,
the same study considered pension income to last earnings for
full career workers and assuming individual earnings grow in
line with average earnings but did note considerable differences
between pension systems globally.
This dramatic swing in the adequacy of retirement savings
due to a small change in expected returns, demonstrates a
high degree of elasticity – the extent to which changes in one
Source: Discovery internal analysis (June 2022).
It’s an innovative solution
designed to help tackle one of
the greatest socio-economic
challenges in our society.
variable will cause changes in another. However, “the real
point here is that replacement ratios are often more elastic
to these behavioural and longevity risks, than investment
returns,” says Gore.
By the same analysis of elasticity, a 20% reduction of a
40-year-old’s contribution rate could see her replacement
ratio drop from 70% to around 50% at retirement, while living
beyond 75 can dramatically reduce the amount of money
available for each extra year. (See the illustration on the left.)
Gore contends that in traditional models for retirement
advice, what is often underappreciated are these behavioural
risks – how much you save – and longevity risks – how your
physical condition and behaviours impact how long you will
live, and how much of that time you are expected to be healthy.
With this in mind, “Guiding people, nudging them and
incentivising them to make sure that they understand these
aspects is just as important as chasing investment returns,”
says Gore. A multi-dimensional approach to retirement
savings extends beyond concerns about costs and returns to
consider behavioural and demographic factors that are critical
in achieving an optimal retirement outcome.
These might include failing to anticipate the impact of
living for longer, and the associated medical costs, as well
as behavioural issues such as saving too little and too late,
withdrawing from those savings early or withdrawing too
much in retirement.
The first DFM offering holistic health and behavioural insights
Supported by Aladdin Wealth, BlackRock’s industry-leading
investment and risk technology platform, and Vitality
insights and data, Cogence is the world’s first discretionary
fund manager that fully models retirement solutions, taking
health experience into account. In so doing, Cogence moves
beyond the conventional approach of considering primarily
investment outcomes – finding the best returns – to factor for
issues relating to behaviour and longevity.
“With lifespans extending, clients need the financial means
to retire comfortably and withdraw income at a sustainable
income level; and most importantly, also the good health to
ensure they can enjoy it,” Gore concludes.
Cogence (Pty) Ltd - Registration 2009/011658/07. An authorised financial services provider.
[1] Credit Suisse Research Institute, “Rethinking Retirement.” Davos Edition (2020).
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INVESTMENT | Economy
Time for SA consumers to
tighten belts and avoid debt
The recent increase in the repo rate, combined with steep increases in fuel and energy prices, points to a torrid
ime ahead for South African consumers – but the short-term discomfort should pay off in the long term,
says employee benefits advisor firm NMG Benefits.
It sounds counter-intuitive to ordinary
consumers struggling to balance
their budgets, but the recent series
of increases in the repo rate are
designed to keep inflation at bay in the
broader economy, says NMG’s Head of
Investments, Raazia Ganie.
While consumers will be constrained
for now, the longer-term effect is that
they end up spending less. In theory,
this means demand for goods goes
down and prices are brought back in
line in response to supply and demand
principles. Now, however, external
Raazia Ganie, Head of factors like the Russia/Ukraine war mean
Investments, NMG Benefits the normal tools that the central bank
uses to manage inflation – in the form of
monetary policies – may not be as effective.
One of the immediate effects of the cycle of increasing
interest rates is that households that have debt will now have
higher debt repayments to make. This raises the risk that highly
indebted consumers will start defaulting on their debts. The
flip side is that those who have excess funds will save more, as
they will earn more interest on their savings.
“Right now, our advice to all consumers is that they
should aim to pay off their debts as quickly as possible – and
where they are in difficulty, they should seek help and debt
counselling immediately. They should also avoid taking on new
debt, or even worse, taking on additional debt to pay off debt,
as this will lead to a slippery slope which will be hard to recover
from,” says Ganie.
The current economic climate is particularly worrying for
those nearing retirement. The five years before and after
retirement are often referred to as the “fragile decade”, as
any economic setbacks could have a significant impact on
a consumer’s retirement funds and their ability to make up
for any market losses in their portfolios. If they have already
started drawing on their retirement funds, the withdrawals
and the tough market could deplete their funds account faster
than planned.
“If you are approaching or already in retirement, this may
be a good time to reach out to your financial advisor to revisit
and reassess your retirement plan,” advised Ganie. “Those
who are five years or more from retirement should remain
invested but consult their advisors to get a holistic view of
their commitments and assets and work out the best strategy
for their circumstances. This is not the time for hasty decisions:
knee-jerk reactions during times of market turmoil usually lead
to sub-optimal outcomes.”
One bright spot in the turmoil is that retirement funds
are now compelled to allow members to leave their assets in
the fund after they retire or resign. This offers members who
have the means to do so the opportunity to benefit from the
lower institutional fees offered by retirement funds while their
investments recover from the current volatility.
The increased interest rates will also hit local businesses
hard, as they could find it harder to obtain or service loans,
which could limit their growth. As is the case with consumers,
though, businesses with excess cash will benefit from putting
their money in higher yielding investments.
For investors, the effects of the interest rate hikes vary.
Most investors will have diversified holdings of instruments
across multiple asset classes such as equities, bonds cash and
property – all of which would react differently to the interest
rate changes.
“Markets are volatile now, with the Ukraine conflict, global
interest rate hikes and higher inflation causing uncertainty.
During times of market turbulence, it is best to stay the course
and not make any impulsive changes due to market movements.
Your professional portfolio managers will continue to evaluate
the opportunities on your behalf and make changes as these
become available,” says Ganie.
Banks are generally among the businesses which benefit
the most from higher interest rates, while companies investing
in luxury goods may struggle as consumers cut back on
discretionary spending. Goods with inelastic demand, usually
staples, will continue to see regular demand levels, says Ganie.
“However, this is under normal circumstances. Right now,
the world is essentially being held to ransom for food and
energy. Essential inputs into many staple foods have seen
significant price increases, which are being passed on to
consumers. This becomes a vicious cycle as consumers are
already highly indebted and struggling to keep their heads
above water,” concludes Ganie. “Hopefully, as the situation in
Ukraine normalises, we will see relief for consumers, but when
this may occur remains highly uncertain.”
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FINANCIAL PLANNING | Benefits
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Medical aid 101: don’t let the rising
healthcare costs hold you back
If you’re one of the 16 out of 100 South Africans who have medical aid, you’ll know that the cost of private healthcare
is rising fast. That’s why it is critical to understand the benefits you are entitled to, says Gary Feldman,
Executive Head of Healthcare Consulting at NMG Benefits.
Here are the 11 essential factors that every member of a medical
aid should know:
Benefits are reviewed and updated annually
Find out when your medical aid updates its benefits and revises
its premiums and review them to ensure that you’re not caught
off-guard when it comes to claiming. Your medical scheme
should send you an updated benefit schedule as soon as changes
are implemented.
Know how above-threshold benefits work
An above-threshold benefit is like a safety net. Once you deplete
your medical savings account, you enter the self-payment gap,
where you are liable for the costs of medical care out of your own
pocket. Once you have reached the end of the self-payment gap,
your above-threshold benefit kicks in. “You must submit every
healthcare invoice to your medical scheme so they can keep track
of when you reach the above-threshold benefit,” says Feldman.
Key things to look out for that differ between medical schemes
and plans: doctors and providers may only be paid at medical aid
rates; medication may only be covered if you opt for generics
and medication on the medical aid’s formulary; there may be
sub-limits on benefits like optometry or dentistry; there may be
co-payments that cannot be claimed from the above-threshold
benefit and be aware of the services, treatments and medicines
that are commonly excluded.
Know the late-joiner penalties and waiting periods
Medical schemes can apply late-joiner penalties if the member joins
after the age of 35 or if they haven’t belonged to a medical aid for a
specified period of time. There are also waiting periods for existing
conditions. These penalties and waiting periods are not standard,
so talk to a broker to see which medical scheme will best suit your
and your family’s needs.
If you’re healthy, look at a medical savings account
In a scheme with a medical savings account, any remaining funds
must be carried over into the new year. This means you can build
your up medical savings account if you are in good health and don’t
claim often. If you have a traditional medical aid, nothing is carried
over. So, choose carefully between a traditional medical aid or a
new-generation product that includes a savings account.
Your savings account money belongs to you
Wherever possible, the money in your savings account must
be transferred to your new medical aid. If you move from a
new-generation product to a hospital, traditional or network plan,
the balance in your savings account must be paid out to you.
Know the difference between medical aid and health insurance
With medical aids getting increasingly more expensive, many
people are opting for health insurance instead. These two
products are not the same. The benefits you get from a medical
scheme are more comprehensive, as they must cover a specified
list of prescribed minimum benefits. Medical aid contributions
qualify for a tax credit, while health insurance premiums don’t
qualify for a tax credit, says Feldman.
Know your prescribed minimum benefits
Take the time to study your benefit schedule if you have a condition
that is covered by the prescribed minimum benefits. You may find
that certain blood tests or consultations, for example, are covered.
Many people under-utilise these important benefits, says Feldman.
Know your scheme’s exclusions and limits
An exclusion is a medical procedure that is not covered by medical
aid, such as self-inflicted injuries or cosmetic surgery. Limits are also
applied to benefits such as dentistry and optometry. Review your
exclusions and limits in against your own overall personal health
status and needs.
Network plans offer cost-effective options
Some of the more cost-effective medical schemes have a predefined
list of doctors and hospitals that members must use. If you use a
provider outside of this list, you will be liable for the costs. Find out
when you are allowed to go outside the network, so that you don’t
incur unnecessary costs.
Gap cover protects your cashflow
Medical aid rates can be lower than the rates
that specialists charge. Gap cover is a short-term
insurance product that covers the costs of certain
unforeseen hospital procedures. “It is a real value-add
and is cost-effective – especially considering the
peace of mind you it will give you,” says Feldman.
Get free advice from medical aid brokers
If you join a broker-recommended medical aid, you
won’t pay for advice. This is because the medical aid
pays the broker a regulated commission. Brokers
know the products well and can help you choose the
best plan for your unique health needs.
Gary Feldman,
Executive Head of
Healthcare Consulting,
NMG Benefits

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CLIENT ENGAGEMENT | Coaching
Retirement coaching:
adding value to your practice
When the prospect of full-time retirement looms, your clients will suddenly have many
hours of free time to do all those things that they dreamed of during their working life.
For some the abrupt transition from a fast-paced life
to retirement can be very overwhelming. Although
they can plan for a specific retirement date, it’s not
always in your clients’ control when they must leave
the workforce. Most people plan to relax more and spend
more time on things they truly want to do. Unfortunately,
for many retirees, this turns out to be a daunting and even
frightening transition.
We are often so focused on the financial aspect of retirement
that we neglect the numerous other effects and stresses, both
emotional and psychological, as well as the health challenges
of this new chapter. Financial security does not necessarily lead
to happiness in retirement, as money does not always give
meaning to clients’ lives. It is important to assist them to live
their best possible lives in retirement. This can only be done
by changing the way they think and prepare for retirement.
Many retirees without a clear plan for retirement feel depressed
because they are losing their identity and sense of purpose. A
retirement coach can help them find a new identity and navigate
their golden years. People are often defined by what they do and
when that is no longer there, they suddenly experience a lack of
purpose. There are also relationship shifts at home and social
structure changes. Therefore, they often feel a sense of mortality
and lack clarity and focus.
So, how can we help our clients manage their retirement as well
as other life transitions with ease?
• Help clients map their money to their goals.
• Distinguish between expenses and goals.
• Clients can relate more to the life they want during retirement
than to the actual amount they need. Their dreams, goals and
aspirations give meaning to their lives and a sense of purpose.
We need to help clients unpack them in detail.
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A retirement coach can help
them find a new identity and
navigate their golden years.
Stephan le Roux, CFP®,
Financial Planning Coach,
Old Mutual Wealth
• Through coaching, we can help clients explore and bring
their desires into the light. Plan for the person and not just the
financial aspect.
• Understand the client’s values and guiding principles and
what drives them. Help them reconnect with their core
values and develop an action plan to foster behaviour that
supports them.
• Retirement often magnifies problems we already face, like an
unhealthy lifestyle or bad habits. Help your clients to facilitate
lifestyle changes and habits.
People do not normally find happiness in material things.
We find happiness in close relationships, engaging work and
meaningful experiences. Coaching can help clients explore
these different elements in their lives and help them find
clarity and focus.
Coaching will show your clients how to embrace this next
stage of life. With your guidance, they can achieve their full
potential and find fulfilment. Retirement coaching focuses on
the challenges and opportunities of retirement. It helps clients to
find a sense of purpose and identify what is important to them.
It also helps them to understand the importance of planning for
the mental, social, physical and spiritual aspects of retirement
and how each area is integrated into the financial aspects. With
a sense of purpose in retirement, people can live longer, happier
and more enjoyable lives. By having meaningful conversations
with your clients, you can add even greater value and shift the
focus from just the financial aspect of retirement to unlocking
their full potential. Partner with a qualified coach to help in your
practice or choose to add coaching to the services you offer your
clients. The coaching journey will give your clients direction and
help them in finding their vision and purpose in retirement.
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INVESTMENT | Behavioural finance
The real significance of the number
“93.6%” for financial planners
Asset allocation – the key determinant of investment returns?
In 1986 Brinson, Hood and Beebower (BHB) shook the
financial advice and investment industries to their roots
with its finding that a portfolio’s asset allocation had the
greatest impact on the variability of returns of a portfolio.
BHB studied the performance of 91 large US pension plans over
the 1974-1983 period and concluded that “investment policy
dominates investment strategy (market timing and security
selection), explaining an average 93.6% of the variation in
total plan returns”. Suddenly the notion of a great “stock pick”
was questioned. If true, all the talking heads on Bloomberg TV
and CNBC would have less to talk about. After all, does it really
matter what happened to Apple’s share price yesterday when
all you should worry about is whether you have an appropriate
exposure to equities?
The controversial nature of the findings of the BHB research
led to Brinson, Singer and Beebower (BSB) redoing the study
in 1991 to test the veracity of their initial findings. With the
wisdom of hindsight, we may not be surprised that the 1991
study reaffirmed the 1986 study, although this time the number
was down to 91%. Still a hefty indicator of what’s important
when putting a client’s investment portfolio together. This
did not appease critics of the 93.6% thesis. In 1997, William W
Jahnke wrote what the Journal of Financial Planning described
on the 25th anniversary of the publication as “without question,
the most controversial article ever to appear in the journal”.
In the article entitled, “The Asset Allocation Hoax”, Jahnke
raised concerns that the BHB study focused only on the
variability of returns, and measured quarterly returns, rather
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Some biases which may seem negative,
can have positive influences.
than focusing on full-term actual returns. He also raised other
methodological issues, such as the sample was only institutional
investors and they measured variability rather than standard
deviation and did not take costs into account. But arguably
his biggest gripe was that the study undermined the value of
tactical asset allocation and implied a fixed asset allocation
would see investors through to their goals.
Despite Jahnke’s concerns, he concludes his article by
saying: “There is little doubt that asset allocation is an
important determinant of portfolio performance. However,
such agreement does not settle the issue of how to do it. What
are the appropriate asset classes? Should asset class weights be
fixed or dynamic? How should asset allocation be determined?
What about the cost of implementation?” Some might say his
response is a storm in a teacup because these are obviously key
questions to consider when putting client portfolios together.
The more important question to consider for financial planners,
is what is the real significance of the 93.6% thesis? The answer
to this question may not be what you think, but first a little
more context.
Investment returns – more dependent on investor behaviour?
Since 1984, independent investment research firm Dalbar
Inc. has published its annual Quantitative Analysis of Investor
Behaviour report, which studies the returns that investors get
versus the returns of their investments. The study consistently
finds investor returns are materially lower than their investments.
The gap between the two is often referred to as the investor
“behaviour penalty” which according to the 2022 Dalbar study,
was 3.5% per annum over the last 30 years. In the short term,
the gap can be higher, as in 2021 when the number was closer
to 10%. No surprise given the uncertainty and stress that many
clients experienced during the Covid pandemic.
The 2022 edition of the Dalbar report concludes that
investment results are more dependent on investor behaviour
than fund performance. This is not a new conclusion. The 2015
report made the same point and observed that this is the case
“no matter what the state of the mutual fund industry, boom or
bust”. It went on to note that: “After decades of analysing investor
behaviour in good times and in bad times and after enormous
efforts by thousands of industry experts to educate millions of
investors… imprudent action continues to be widespread.”
Investor education – what stops it from working?
This begs the question, why does behaviour not improve with
financial education? One reason behaviour doesn’t improve
is because the focus of the education is so often on the
investments, not on the investor. Unfortunately, learning about
how an equity is valued or what a unit trust is, or telling us that
we should buy low and sell high doesn’t influence behaviour.
It assumes that as human beings we make decisions with our
heads. That we are cognitive and rational beings. This is not the
case. We do have cognitive influences on our decision-making,
but not always in the way that one would expect. Daniel
Kahneman highlights in his book Thinking Fast and Slow that
even cognitive-based decisions can be flawed. We also have
emotional influences on our decision-making; the impact of
greed and fear on investor behaviour is well documented. The
cognitive and emotional mistakes we make are compounded
by the fact that we are social beings, and as a result are
unduly influenced by those around us. Hence, the widespread
phenomenon of herding in investment markets.
The industry has spent a vast amount of money and time
trying to educate clients both locally and globally; we now
have insights into human behaviour to the extent that we
can discern the minutiae between the hundreds of cognitive,
emotional and social biases we all fall foul of. In addition,
two Nobel Prizes for Economics have been awarded in the
first 20 years of the 21st century for the advanced work done
by specialists in Behavioural Economics. Despite all this, the
Dalbar study repeatedly shows how investors make the same
mistakes repeatedly, and in so doing, undermine their longterm
financial outcomes.
Investor behaviour – what does influence it?
Given the multiple influences on our behaviour when it comes
to investments, simply being educated about investments,
and asking us to behave well doesn’t work. The key is to find
ways to influence the person and their relationship with their
investments. A classic behavioural example of what it means
to not rely on education to shift behaviour, but to focus on the
relationship a person has with a problem was highlighted by
the story of Schiphol Airport in Amsterdam and its attempts
to solve the problem of too much spillage at the urinals in the
men’s toilets. Initially, attempts were made to solve this problem
through the display of posters requesting users of the urinals
to be aware of the problem, asking them not to perpetuate it,
given the health risks it posed. These attempts at education
failed. Cognitively the users of the toilets understood the
problem, but this understanding did not lead to a behaviour shift.
The problem was eventually solved when a real-life image of a fly
was painted onto each urinal bowl. The men now had a target to
aim at which nudged their behaviour into the right direction. The
spillage problem was solved virtually overnight. The men did not
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INVESTMENT | Behavioural finance
have to think about the education they had received about the
problem, they had been nudged into an instinctive action which
solved the problem.
In a sense the investment industry has faced the Schiphol
problem for some time. It has tried to use education without
great success but has also used nudges that have proven more
effective. One of the most effective nudges that is used to
influence investor behaviour is automatic contributions to a
savings or investment vehicle, like a retirement fund. Investors
don’t have to consciously think about investing, or consider
the merits of doing it, it happens automatically once they are
enrolled in such a savings or investment programme.
This brings us back to asset allocation. A client’s strategic
asset allocation is a nudge. It’s the fly in the client’s investment
strategy if you will. But nudges are not failsafe. In the past I have
worked with colleagues who resigned to enable them to access
a portion of their company retirement fund savings. Human
beings are resourceful. They will find ways to do things even if
they are not in their own best interests. So, it’s not always easy
to implement a nudge with clients. Sometimes you must accept
that they will be at the vagaries of the cognitive, emotional and
social forces at play which impact their financial and investment
decision-making. The reality is that there are literally hundreds
of human biases that emerge from these forces, and they don’t
only influence our decision-making around money, but in all
spheres of life.
As a result, we have seen a proliferation of tools and
techniques to help financial planners identify client biases and
counteract them in some way. There may be some merit to this
but given the number of biases we can fall foul of it is risky
to think that you as a financial planner will be able to analyse
whatever biases clients present to you and find ways to shift
their behaviour through this knowledge. It is also important
to say that some biases which may seem negative can have
positive influences. For example, the status quo bias explains
why human beings struggle so much with change because we
tend to prefer to keep things the way they are. This bias has a
positive spinoff, as it enables automatic enrolment in savings
plans to work, because once enrolled, thanks to the status quo
bias, we stay enrolled.
The 93.6% thesis – how can it help us solve the problem of
investor behaviour?
Behavourial economist Meir Statman commented on the BHB
findings by saying, “Good strategic asset allocation is like
tailoring a well-fitting suit. Good tactical asset allocation and
security selection is like weaving the suit’s fabric at a low cost.
Both are important but they are distinct. High-quality fabric
woven at a low cost provides little comfort when it drapes a size
40 body in a size 46 suit.”
If you have ever had a suit or any outfit made, you will know
that after the initial measurements, style and fabric selection,
a few more visits to the tailor are likely before you are happy
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with the fit. Seldom does an off-the-shelf suit fit without
alteration, and even one made from bespoke measurements
requires the same.
During my one and only experience of this process, I was
not interested in how the alterations were being made, what
stitches or cuts were being done, I just wanted a suit that
was comfortable to wear. When we were doing the fitting, the
tailor’s focus was always on me, getting me to look into the
mirror as well as repeatedly asking me how the suit fit “feels”.
Statman observes from the BHB research that, “Financial
advisors are tailors more than they are weavers; they are
investor managers more than they are investment managers.”
If a financial planner is a client’s tailor, then the strategic
asset allocation and by extension the client’s full financial plan
needs to fit not only the client’s wallet but their life as well.
Holding up a mirror for a client and helping them determine
how they feel about the fit of their life and money is, as
Statman says, the work of the investor manager. The skillset
of such a professional is different from, and dare I say, far
more complicated than the work of the investment manager.
Cutting, trimming and sewing an inanimate object is far easier
than trying to help someone make decisions who can’t simply
look into the mirror and know the answer, but still has to deal
with the cognitive, emotional and social influences that come
with being human.
The challenge, Statman points out, is that “investors see
more value in weaving than in tailoring. They are more willing
to pay for investment management, with its focus on beating
the market, than for investor management, with its focus on
the examination of financial resources and goals, diagnosis of
deficiencies, and financial education and care.” A challenge
that many financial planners face is themselves believing in the
value of investor management. To this end, I think Statman’s
analogy of the tailor and weaver does not do justice to the
complexity and value of the role of the financial planner.
Being an investor manager – what does it involve?
The tailor role mirrors the non-negotiable technical role that
every financial planner must play. Nobody wants to visit a
doctor who is not clinically qualified. But in addition to the
mantle of the tailor, I believe the financial planner plays three
critical roles. As a client’s thinking partner, you help them to
decide what outfit they actually want or need. The client may
arrive thinking they need a suit but after working with you as
their thinking partner they may realise they need a shirt and
a pair of trousers instead.
The second role of the financial planner is as choice
architect, helping the client decide what type of shirt, what
type of trousers? And once that decision is made, the outfit can
be tailored and fitted. But it is in this process that the financial
planner plays the third role of behavioural coach, ensuring that
once the client agrees that the outfit fits, that they continue to
wear it and don’t discard it without good cause.
The third role ensures that clients don’t change their suits
for the wrong reason. The suit might not feel like it fits as well
because the client has put on weight, not because there is a
problem with the suit, which may be what the client thinks.
Here the work of the financial planner is far more challenging,
as to appease a client it would be much easier to just change
their suit. But this would not be fulfilling one’s duties as an
investor manager and would not be helping us to break the
pattern of behaviour that the Dalbar research consistently
reveals. Vanguard estimates behavourial coaching is worth
1.5% pa of alpha to a client’s portfolio. Arguably the value-add
of behavioural coaching is wherever the Dalbar investor
“behaviour penalty” sits; currently the long-term average is
at 3.5% pa.
Acting as a client’s thinking partner, choice architect and
behavioural coach, and developing the skills to play these
roles effectively, I believe gives financial planners the best
chance of fulfilling the 93.6% mandate, which is to be an
effective investor manager. Tailors just want their clients to
look good, sometimes for just
one occasion. Financial planners
have a far more important and far
more difficult role to perform;
their clients need outfits that fit
them for life.
After 25 years in the investment
industry, Don Phillips, director of
fund research at Morningstar,
said the number one lesson
he had learned was that the
“finance business” is not about
“money management” but rather
“behaviour modification”. It’s no
surprise then, that Meir Statman
suggests the real significance of
the BHB research is that it clarifies
for us that 93.6% of financial
planning is about the behavioural Rob Macdonald, Head of Strategic
management of clients.
Advisory Services, Fundhouse
References
Brinson, Gary, Hood, Randolph and Beebower, Gilbert; “The Determinants of Portfolio Performance”; Financial Analysts Journal, July-August 1986, pp. 39-44.
Brinson, Gary, Singer, Brian and Beebower, Gilbert; “The Determinants of Portfolio Performance II: An Update”; Financial Analysts Journal, 47, 3 (1991), pp. 40-48.
Dalbar’s 21st Annual Quantitative Analysis of Investor Behaviour 2015 Advisor Edition.
Dalbar’s 28th Annual Quantitative Analysis of Investor Behaviour 2022 Report.
Don Phillips, Reflections on Fund Management: “Five Lessons from 25 Years”, Presentation at the Business & Wealth Management Forum, Chicago, 15 October 2011.
Jahnke, William; “The Asset Allocation Hoax”; Journal of Financial Planning, February 1997, pp. 109-113.
Statman, Meir; “The 93.6% Question of Financial Advisors”; The Journal of Investing, 2000 pp. 16-20.
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CLIENT ENGAGEMENT | Behavioural finance
Practical conversations for
financial health and wellbeing
How to help your clients prioritise purpose, connectedness and relationships.
A
client recently shared with me that his 80-year-old
parents have decided to separate. They moved to
a new country away from their children 10 years
ago and have not built meaningful relationships or
integrated into social circles. While this decision will strain
their finances, the emotional trauma and lack of support are
exceptionally challenging. Being deprived of meaningful
relationships, along with the possibility of losing your home,
can significantly impact your wellbeing and longevity.
In the 14 years I have helped clients approaching or in
retirement, I have seen many people retiring from who they
were instead of to a life filled with connection, engagement and
purpose. Retirement should be a time of fulfilment and joy, yet
many people struggle through this transition. Partly because
retirement marks a major life adjustment, but also because
people often fail to prioritise the relationships and connections
that contribute to happiness.
In Rob Macdonald’s article in the previous edition of Blue Chip,
he explains why helping our clients invest in time, relationships
and control can impact their financial health and overall wellbeing.
The reference to the Harvard Study of Adult Development, one
of the most comprehensive longitudinal studies in history on
happiness, is noteworthy. The message is clear: good relationships
keep us happier and healthier. People more socially connected
to family, friends and their communities are happier, physically
healthier and live longer than less well-connected people. Close
and fulfilling relationships protect our bodies and minds and
positively impact our health and happiness.
The study also notes that doing work that brings meaning
and purpose (doing something you love) drives wellbeing and
joy. Often, the most rewarding part is the connections and
friendships people find at work. It’s about feeling in control
and doing something you care about with people you feel
connected to.
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The message is clear: good relationships
keep us happier and healthier.
Circumstances change as people get older. Our clients
may lose some of their connections and people they love;
children may leave home to pursue their dreams; clients may
downscale and move home, cities or countries; and what-ifs
and unexpected events may create curveballs in their planning.
The key is to help clients focus on things they can control and
prioritise their happiness index.
Conversations to guide your clients
Building on Rob Macdonald’s suggestions to help clients gain
clarity on their future lives and invest in social connections
and relationships, these practical conversation topics
may facilitate these discussions and guide clients to live
connected, purposeful and fulfilling lives with relationships
at the core.
The Midlife Couples Check-in Questionnaire
Encourage clients in partnerships to think and talk about the
health status of their relationship. These questions can easily
be adapted for singles:
Do you still want to be together?
Do you still have anything in common?
How can you ensure that you have a healthy and fulfilling
relationship in your next chapter?
Do you have the same goals?
Do you both want to stop working at the same time?
What are your priorities for the next 50 years?
Where will you live?
Do you both have the same view on looking after your elderly parents?
How important is it to each of you to leave money in your will for
your children? Would you rather spend it while you’re still alive?
Are there any items on your wish list? How will you navigate if your
dreams are different?
Write down your ideal day. Compare yours with your partner’s.
One of my clients was blindsided by her husband asking for
a divorce after 30 years of marriage. She suddenly found
herself single in her late 50s and facing an uncertain future.
Fortunately, her finances were sound, but throughout her
married life she spent all her time nurturing others and
forgot what brought her joy. Her priority now is resetting and
restarting to build new friendships and social connections
and find a renewed purpose.
What are you retiring to?
Encourage clients to find significance in how they will spend
their time in retirement. Having a sense of purpose and
being equipped emotionally is one step closer to wellbeing
and happiness. The concept of retiring “to” and not “from” is
fundamental to how I approach retirement conversations with
my clients. Often, if people operate from a push-factor position
rather than a pull-factor, their actions are generally reactive and
they don’t find happiness easily.
Just recently, I worked with a client who hastily took early
retirement when the opportunity arose. After the initial
excitement wore off, she experienced overwhelming regret
and loss. She never considered or planned what she would do
with her time now.
Challenge clients to reflect and visualise what would
motivate them and bring them joy before retiring. Then guide
them to plan purposefully towards a significant life.
Staying connected and engaged
One exercise we use to prepare clients for the emotional impact
of ageing is the Wheel of Balance®. This exercise asks clients to
evaluate their satisfaction in different areas of life, including
health, family, work, personal growth, relationships, giving
back, purpose and money. By identifying areas that may need
attention, clients can take proactive steps to maintain balance
and fulfilment in retirement.
Where will you live?
Many clients are tempted to move from their current cities, often
to smaller towns or coastal destinations. Unless they know the
area extremely well, they could be setting themselves up to
spend their second chapter in a
place without social connectivity.
Caution your clients when
it comes to abandoning their
social networks for a view of the
sea or moving countries to be
with their children. Guide them
on the advantages of staying
connected to people they love
and the pitfalls of choosing
social isolation and loneliness.
Retirement can be a time of
fulfilment and joy, but it requires
careful planning.
Guiding your clients through
these conversations can assist
them transition with a sense of
contribution, meaning, significance
and connectedness.
Kim Potgieter CFP®, Director,
Chartered Wealth Solutions, ICF
Professional Certified Coach, New
Money Story® Mentor Coach,
Certified Dare to Lead Facilitator
www.bluechipdigital.co.za
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PRACTICE MANAGEMENT | Technology
Think hard
Embracing technology and the human connection in the financial advising landscape.
Andy Hart, Founder, HUM
As financial advisors, we find ourselves in the unenviable
position of selling the invisible. This concept is not
exclusive to our esteemed profession but is a common
thread in today’s service economy in which professionals
earn their livelihoods through providing intangible services.
I often jest with my fellow financial advisors that we don’t
“work hard”, but rather we “think hard”. We don’t work with our
hands but deal in information, which is virtual and intangible.
Given this reality, it becomes crucial for us to maximise our
effectiveness and efficiency through systemisation, automation
and outsourcing to technology and to humans. While others
may attempt to succeed through brute force, the adage “work
smart, not hard” is a mindset that will need to be adopted in
the next wave of technological advancement, which is already
upon us.
More tools, more time
As the chief puppet masters of our lives and businesses, we are
responsible for making strategic decisions and orchestrating
the harmonious collaboration of our teams. In the current
environment, this team includes both human and tech elements.
Throughout my career, I have always embraced technological
advancements and sought out best-of-breed solutions.
Given recent developments, our tech teams have gained
unprecedented strength and power thanks to the advent of
Artificial Intelligence (AI). Once the domain of only the most
tech-savvy, AI has become more accessible and is finding
fascinating applications across various industries, including
ours. Indeed, it’s likely already being incorporated into many
of the tech tools you already use and pay for.
The rise of AI represents a significant leap forward in the
world of technology. Even if you haven't given AI much thought,
rest assured that this technology is contemplating how it can
perform tasks better than you, replace you or collaborate with
you. The way I see it, you use it or get left behind.
As advisors, we have an opportunity to explore the various
features and capabilities of AI that can enhance our clients’
experience, increase our firm’s efficiency and streamline our
processes. It is up to us to determine how this technological
advancement will either aid or hinder our progress, and to truly
benefit from AI, we must strive to maintain control over the
technology rather than allow it to control us.
More time, more human
While many speculate that ours is one of the professions that
will become redundant, I firmly believe that human connection
will remain an integral aspect of our profession.
As my own life becomes increasingly hectic, I am reminded
of how fortunate my clients are to have someone in their corner
who will immediately immerse themselves in their lives as soon
as they contact me.
The need for genuine human connection will always persist,
and client-focused behavioural advisors are ideally positioned
to thrive in this next phase of our industry’s evolution.
The aim of increasing the use of technology in our
businesses, therefore, is not to work less. On the contrary, it is
to free us up to devote more of our time to the real but difficult
work our clients require from us. By freeing up resources, we
can become more human, not less.
More human, more impact
I see our future as one in which we entrust technology with
repetitive, mundane and predictable tasks, allowing us to
maintain our focus on fostering human connections. While
technology has been around us for a long time, it’s paramount
that we wrestle and engage with the new generation of
generative AI now available to us. Technological advancements
are not new; they have been a constant in our world. However,
those who adapt to and embrace these changes, as always, will
be the ultimate victors.
By freeing ourselves up to have more time to devote to
being human, we create the opportunity to create more impact
in more lives. It’s clear to me that the best way to create more
impact is to focus on “thinking hard” and becoming better at
modifying client behaviour. This is my North Star, and if this
doesn’t excite you, I can’t relate to you.
And so, I encourage you to harness the power of technology
to work diligently in the background while we devote ourselves
to thinking hard and piecing it all together, always driven by
the desire to secure the best outcomes for our clients. By
combining the strengths of technology and the power of
human connection, we can continue to thrive in the everevolving
landscape of financial advising.
Andy Hart, a UK-based financial advisor is founder of Humans
Under Management, a conference that focuses on the human
side of financial advice. Andy will be speaking at the Humans
Under Management South Africa conference on 19 September
2023 in Cape Town. You can get more information about the
event and buy tickets at:
www.humansundermanagement.com/southafrica2023
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PRACTICE MANAGEMENT | Technology
How big is your
shield against AI?
On a CNBC Africa “Power Lunch” discussion earlier
this year my fellow panelists were not convinced
when I made a statement that financial advice is
a profession that offers a natural shield against
Artificial Intelligence (AI). The reason I made the statement is
that while the world is embroiled in technological progress,
it is simultaneously shifting towards an “empathy economy”.
In his book, The Behavioural Business, Richard Chataway talks
about the scars left by the industrial revolution. The five-day
workweek and concept of “time poverty” for example. What
use is earning a massive paycheck if it deprives us of memory
dividends or experiences with friends and loved ones? Recent
experiments trialing a four-day workweek are testament to
this migration in mindset. The jobs that remain after machines
have taken all the process-driven jobs are likely to be the ones
rooted in the humanities. The world is perhaps simultaneously
looking towards psychology to solve the world’s problems and
away from economics.
More evidence here was provided by a colleague recently
who visited the dietician with his wife. The first consult had little
to do with blood types or calorie counting. The value proposition
was rooted in psychology. What is your relationship with food?
When and why do you eat what you do? We’re understanding
more and more that to affect behaviour change, more
information is not the answer because we have the knowledge.
Changing behaviour requires something deeper.
The question perhaps is not whether AI can replace financial
advisors, but will it or in what circumstances will it? This was
perhaps the disconnect between me and the panelists in the
AI discussion. AI can indeed already provide financial advice
that is alarmingly technically sound at a fraction of the cost.
First mover JP Morgan has already invested here by filing for a
patent on “IndexGPT” using the same generative pre-trained
transformer (GPT) technology from ChatGPT (the chatbot
equivalent). IndexGPT will pick suitable securities for client
needs without paying any advice fee.
One of the obvious issues is whether we will trust what AI
recommends. A recent video gone viral of a “reckless robotaxi”
shows that the Gell-Mann Amnesia Effect is likely at play.
This term was coined by author Michael Crichton to describe
how we are sceptical about the news when we understand
the subject but trust the information source blindly when we
do not. In an AI context, we appear to instinctively distrust AI
that drives because most of the working population drive. A
few AI malfunctions make headline news. Over a million cases
of human driver errors don’t. If we’re overconfident about
investing we’re likely to ignore the AI just as we might ignore
an advisor, but for those who don’t understand investments we
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Can AI help us save in a way
that a financial advisor cannot?
may be more likely to adopt AI-generated investment advice,
initially. Our inherent negativity bias will likely continue to pose
a challenge in sticking to the AI-based advice after a negative
experience in the same way thousands of clients called their
advisors to change their investment plan when markets crashed
during Covid-19. Behaviour once invested is unlikely to change.
The second issue circles us back neatly to the empathy
economy. Imagine it’s 5am on a cold winter’s morning. Your
alarm goes off that signals it’s time to hit the road for a 10km
run. Is AI going to get you to the road? Unlikely. Now assume
that your best mate will be waiting for you at the starting line.
You’ve both committed to the run. Not pitching up is letting
someone down. Using these tips and tricks in psychology will be
far more useful in getting you to the road. Behavioural scientist
Katy Milkman recommends this as one technique to change
behaviour in creating and maintaining better healthy habits.
Other techniques like making the behaviour very convenient
(putting your running clothes out the night before) and
temptation bundling like allowing yourself your favourite
podcast only while on the treadmill are other examples. Once
you’re there, your devices, apps and badges are going to
do wonders in keeping you committed and tracking your
progress, but getting you to the road is a different story.
Can AI help us save in a way that a financial advisor cannot?
Undoubtedly. AI can learn from our financial behaviour,
identify our blind spots and, most importantly, provide just-intime
financial education to help change that behaviour. When
that impulse purchase is in our shopping carts we can get
an accurate trade-off in the moment
of what the purchase is costing our
future selves. But it isn’t nearly as good
at getting us to the road as a human
being can be.
In this way the financial advisor
becomes more important in the
empathy economy to use principles of
psychology that will help us bridge the
intention-action gap. To delve deeper
into our relationship with money
in much the same way the modern
dietician explores our relationship with
food. These are the shields that the
modern financial advisor is building
against AI.
Paul Nixon, Head of
Behavioural Finance,
Momentum Investments
www.bluechipdigital.co.za
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INVESTMENT | Fund management
Lessons from the
Comrades Marathon
Next year, my father, Barry Holland, is poised to take part
in his 50th consecutive Comrades ultra-marathon. I
am struck by the invaluable lessons in his athletic
achievements and the striking parallels they provide
to the world of financial advice and investing.
Firstly, the spirit of unity is at the core of the Comrades
Marathon, a fitting name for a race renowned for its tales of
camaraderie. Seasoned runners can attest to times when the
motivation from their peers was the driving force that got them
to the finish line. Similarly, in the financial advice profession, a
cohesive community can significantly impact success. The recent
PortfolioMetrix LEAD Symposium for our advisor partners was
an epitome of collaborative power, where top advisors from
South Africa and Ireland converged. They exchanged insights
on various topics including advising global citizens, internal
succession planning, evaluating advice practices and the
application of Artificial Intelligence in financial planning. The
community fostered at this event proved how collaboration,
just like in the Comrades race, provides advisors a platform for
growth, inspiration, and mutual support.
Consistency is another critical lesson from marathon running
that is equally vital in investing. The top Comrades runners
maintain consistent splits (the average time taken to complete
each kilometre of the race) regardless of course undulations,
weather conditions, fatigue and even psychological challenges.
This year’s winner, Tete Dijana, demonstrated this with his
considerably more consistent and less volatile performance
compared to the last finisher.
The graph below provides a compelling representation of
this principle. It depicts the splits for all the finishers – men
represented in blue and women in orange – across the first and
second halves of the race. The most consistent runners, illustrated
by the left-most dots in the circled area, correlate strongly with
those who had the most success.
A similar principle can be observed in South African funds
in the ASISA multi-asset high equity category since 2000.
A hypothetical fund manager that consistently produced
mid-second quartile performance would not only healthily
outperform their peers but would do so in a far more palatable
manner for investors. By avoiding more erratic results (often
Graph: Mark Dowdeswell

INVESTMENT | Fund management
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Portfolios, akin to vehicles,
should be built to navigate
any obstacle consistently.
due to taking concentrated bets or outsized portfolio positions
that are not commensurate with the probability of success),
investors are more likely to stay the course and remain invested.
Consistency is therefore pivotal in reducing impulsive investor
decision-making and its adverse effects.
Finally, the ability to prepare for unpredictability is a crucial
takeaway from completing the gruelling 90km Comrades
course. Training regimens that include running on tired legs
Barry Holland completing his 49th consecutive
Comrades Marathon. Photo: Peter De Groot
Average Manager Top of 4th Quartile 1st / 4th Alternating Mid-2nd Quartile
2500
2000
1500
1000
500
0
1999 Dec
2000 Jun
2000 Dec
2001 Jun
2001 Dec
2002 Jun
2002 Dec
2003 Jun
2003 Dec
2004 Jun
2004 Dec
2005 Jun
2005 Dec
2006 Jun
2006 Dec
2007 Jun
2007 Dec
2008 Jun
2008 Dec
2009 Jun
2009 Dec
2010 Jun
2010 Dec
2011 Jun
2011 Dec
2012 Jun
2012 Dec
2013 Jun
2013 Dec
2014 Jun
2014 Dec
2015 Jun
2015 Dec
2016 Jun
2016 Dec
2017 Jun
2017 Dec
2018 Jun
2018 Dec
2019 Jun
2019 Dec
2020 Jun
2020 Dec
2021 Jun
2021 Dec
2022 Jun
2022 Dec
Source: PortfolioMetrix, FinXL. As of 2023/03/31, since 1999/12/31, in ZAR using monthly data.
and back-to-back long runs help athletes prepare for the
myriad of conditions they may encounter. This adaptability
is essential in investing, where attempting to predict market
events is an exercise in futility. It’s more effective to construct
portfolios capable of withstanding diverse and unexpected
market conditions. Portfolios, akin to vehicles, should be built
to navigate any obstacle consistently, rather than excelling at
overcoming one specific challenge. Financial advisors have
the difficult task of helping clients to plan for and deal with
the unexpected, and client portfolios should be constructed
to handle circumstances that may be foreseeable but can’t be
reliably predicted. The Comrades ultra-marathon offers lessons
applicable to wealth management and investing. By fostering a
sense of community, prioritising
consistent portfolio performance
and preparing for unpredictable
markets, financial advisors can lead
the profession in delivering more
reliable outcomes for their clients.
As I gear up to join my father
in his 50th Comrades Marathon, I
invite you to join us on the road,
and in exploring the parallels
between the Ultimate Human
Race and the pursuit of wealth
management excellence.
Kathryn van Dongen,
SA Managing Director,
PortfolioMetrix
www.bluechipdigital.co.za
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INVESTMENT | Due diligence
The big risk that could put investment
and wealth advisors out of business
There is a huge risky elephant in the room that South African Category I investment advisors and
wealth managers may not even know is there!
FAIS Category I advisors are recommending that their
clients invest in asset managers’ portfolios at every
meeting, but how much do they really know about those
portfolios and the people and companies managing
them? Have they built a comprehensive due diligence library,
at least of the managers they favour, if not of the whole industry?
Why should advisors go to the trouble and expense of
demonstrating they have researched their proposed asset
managers thoroughly? Because it exemplifies their standards
of stewardship over their clients’ capital and sets them apart
from their competition.
Many advisors assume that the presence of a manager’s
portfolio on a particular investment platform ensures that the
platform has conducted a full due diligence on that portfolio.
This is fundamentally not so. Platforms may ask for far less
than a complete due diligence questionnaire. Often, too,
the platforms are ensuring they do not offer too many of the
same sort of portfolio. And few platforms conduct ongoing
due diligence to ensure the Category II fund manager is
adhering to basic compliance. The collapse of Third Circle in
2015 was witness to how a co-brander had failed to monitor
the compliance of a Category II manager under its auspices.
If anything goes wrong with a portfolio recommended
by a Category I advisor, it will be no defence at all to say the
portfolio was deemed sound because it was on any platform or
co-branded by another Category II manager. The Durr vs ABSA
case is a must-read for any advisor as it drew the line where
the level of knowledge should be when advising someone on
their investments.
The first question to ask is, “What level of skill and knowledge
should an advisor demonstrate?” If the advisor holds himself or
herself out to be able to advise a client on their investments, he or
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James Downie, Director, Due Diligence SA
she should possess and exhibit skill and knowledge according to
the standard of expert they hold themselves out to be or that the
client expects, regardless of whether the advisor does possess the
skill and knowledge. The second question is, “What is the standard
for judging the advisor?”
The Durr case concluded that an advisor offering expertise is
held to a higher standard.
Durr came before FAIS which codified many of the
requirements of advisors. The FAIS Act, in the General Code
of Conduct, demands that advisors “must at all times render
financial services honestly, fairly, with due skill, care and
diligence, and in the interests of clients and the integrity of the
financial services industry” [emphasis added]. The due skill and
diligence expected of an investment advisor is surely greater
than what the investor could expect to glean from a factsheet.
These days, the Internet can readily provide factsheets and
lists of managers on platforms so what else are the advisors
offering? They should be familiar with the portfolio managers,
their philosophies and processes, their succession plans, their
research capabilities, their variable pricing structures, their
professional indemnity and fidelity insurances, their dealing
policies not to mention FIC compliance and many other facets.
Typically, though, advisors may rely on backward-looking
factsheets (now called minimum disclosure documents
or MDDs) and a brochure from the platform they use for
investment administration. This is woefully inadequate, and it
is only a matter of time before advisors join the lengthening
list of those who did not act “with due skill, care and diligence”.
The higher standard expected, thanks to Durr, requires that
the advisor can point to substantial research performed on the
asset managers recommended with a library of information to
back it up.
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PRACTICE MANAGEMENT | Outsourcing
The case for strategic
corporate outsourcing
The 1990s saw organisations starting to outsource business activities,
such as accounting, HR, data processing, security and maintenance
to cut costs. Today, outsourcing is seen as a far more strategic
tool than merely a cost-saving exercise. By Sue Beaumont
Andrew Ratcliffe CFP®,
Director,
Private Client Holdings
According to Globe [1] Newswire, the global business
process outsourcing market is currently valued at
USD245.9-billion and is expected to further grow to
USD544.8-billion by 2032.
Today, it is common practice for companies, regardless of
their size or the industry in which they operate, to outsource
non-core functions, allowing them to focus on their niche areas
to deliver better results for their clients. While outsourcing can
result in improved productivity, cost savings, time savings and
better use of resources, it also provides companies with the
opportunity to tap into vast wells of expertise outside of their
industry. According to Forbes magazine [2] , one of the most
powerful business tools and operational strategies that can
help leaders focus their time, resources and manpower on the
valuable tasks that hold up the core of the business and drive
profits, is outsourcing.
Private Client Holdings, a multi-family office based in Cape
Town, recently launched their Corporate Stewardship offering to
support organisations across their wealth management needs,
from long-term planning to routine transactions, administration
and reporting. While the company has offered employee benefit,
healthcare and integrated payroll services for more than two
decades, their new Corporate Stewardship offering incorporates
a more strategic wealth management capability to enable clients
to achieve positive cash flow management and efficient working
capital to drive continued growth and their bottom line.
“One of our objectives is to strategically allocate an
organisation’s financial resources to maximise value and take
ownership of non-core functions so they can pursue their
business goals,” says Andrew Ratcliffe, a director at Private
Client Holdings and part of the team spearheading their new
offering. A key element of their suite of solutions is outsourced
treasury.“We develop a comprehensive cash management
solution for an organisation and deliver superior returns by
effectively managing their available cash, using it as an asset
to generate additional income,” says Ratcliffe. The company
partners with private banks to invest and transact on behalf
of their clients.
“We ensure that working capital is available for the company’s
immediate needs without compromising the organisation’s
financial strength or efficiency,” adds Ratcliffe. The company’s Forex
capability enables organisations to conduct foreign exchange
transactions easily, quickly and at highly competitive rates.
The Corporate Stewardship solution also includes a corporate
business advisory where, together with business partners,
Private Client provides funding for growth by unlocking working
capital tied up in stock and debtors to provide asset finance for
productive, income-generating assets. Its corporate goals-based
asset management capability offers a bespoke wealth planning
and investment management service to ensure an organisation
reaches its long-term financial objectives.
Ratcliffe believes that choosing the right outsource partner
is vital. “When outsourcing any business function, the quality of
the partner you choose is paramount to a successful relationship
and outsourcing experience. An outsource partner must have
the appropriate expertise, experience, track record and security
integrity to deliver on their promise,” says Ratcliffe. Today,
partnering with a reliable outsource service provider has the
potential to transform the way you do business, enabling you to
adapt faster, manage resources more efficiently and maximise
productivity. It also, importantly, enables you to identify
opportunities and possibilities and avoid the pitfalls and hidden
risks that lie on the road to maximising revenue.
“With the PCH Corporate Stewardship offering, you can
consider us your personal Chief Financial Officer, a trusted
partner nurturing your organisation so it can thrive and prosper,”
says Ratcliffe.
Contact Andrew Ratcliffe, andrew@privateclient.co.za, to see
how Private Client Holdings’ innovative approach to Corporate
Stewardship can help grow your organisation’s long-term wealth.
[1] Business Process Outsourcing Market is Slated to be Worth (globenewswire.com)
[2] The Future of Outsourcing—And How To Outsource The Right Way (forbes.com)
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FINANCIAL PLANNING | Estate planning
How to use financial products
to enhance estate planning
Felicia Hlophe, legal advisor at Allan Gray, summarises four key estate planning principles and
explains how some financial products can be used to provide a better outcome for beneficiaries.
An estate consists of the assets and liabilities that
an individual accumulates during their lifetime and
leaves behind at death. An individual should create
and manage an estate plan to preserve, grow and
protect their assets during their lifetime and ensure that those
assets are transferred to successive generations. An estate
plan should be structured according to each person’s unique
circumstances, goals and wishes and should be reviewed
regularly to take personal and legislative changes into account.
Principle 1. It is recommended that every individual has a last
will and testament
As with an estate plan, a will should be reviewed and updated to
take account of any life changes. Individuals with foreign assets
should also consider a foreign will. As each country has its own
set of laws regarding succession and the drafting of wills, it is
recommended that assistance be obtained from a professional
in the foreign jurisdiction, such as a lawyer, to ensure that the
foreign will is legally compliant. Where there is no valid last
will and testament, the estate is dealt with in accordance with
the Intestate Succession Act. When this occurs, the deceased’s
assets may accordingly be dealt with in a manner that is not in
accordance with their intentions.
In terms of the Intestate Succession Act, the estate must be
divided between the deceased’s spouse and direct descendants,
whereby the surviving spouse inherits the greater of R250 000
or a child’s share. A child’s share is determined by dividing the
total value of the estate by the number of children plus the
surviving spouse. If the deceased was married in community
of property, one half of the estate goes to the surviving spouse
and the other half devolves according to the rules of intestate
succession. If there is no surviving spouse or descendant,
the estate is divided between the deceased’s parents and/or
siblings. In the absence of parents and siblings, the estate is
divided between their nearest blood relatives.
A will should provide for the nomination of an executor to
prevent a delay in winding up the estate. It is recommended
that the will states that the executor be granted the power of
assumption which will entitle them to appoint another executor
should the need arise. According to the Administration of Estates
Act’s tariff, an executor is entitled to a fee of 3.5% on the gross
value of the assets in the estate and 6% on income accrued and
collected after the death of the deceased. However, executor fees
may be negotiated and set out in the will.
Another consideration is to nominate a legal guardian to
take care of any minor children if both parents pass away and
to provide for a testamentary trust for the administration of
their inheritance. This is important because assets left directly
to minor children who do not have a legal guardian may have to
be transferred to the government’s Guardian’s Fund. The Fund
will administer these assets until those children turn the age
of 18.
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Principle 2. Think carefully about financial products, estate
duty and executor fees
The Estate Duty Act (“EDA”) provides that if the deceased was
ordinarily resident in South Africa at the time of their death,
their worldwide assets will be included for the purposes of
calculating estate duty. Estate duty is levied at a rate of 20% of
the dutiable amount of an estate up to R30-million and at 25%
of the dutiable amount of the estate above R30-million. The
value of the estate therefore needs to be estimated for estate
duty purposes.
The dutiable value of a deceased estate is calculated by
adding the value of the deceased’s property, deducting
allowable expenses and then deducting the Section 4A rebate.
The Estate Duty Act provides all individuals with an abatement
of R3.5-million which is deducted from the net value of the
estate for estate duty purposes. At this point, the estate is taxed.
However, not all assets are estate dutiable.
The death benefits in a retirement fund are not considered
property in a deceased estate. In addition, unless the death
benefit is paid to the estate, which is not very common,
the executor does not administer these assets, as they are
distributed to the deceased’s financial dependants and/or
nominees in accordance with Section 37C of the Pension
Funds Act. Retirement products, can therefore be used to
reduce estate duty and executor fees. However, any excess
contributions that were made by the deceased to a retirement
annuity fund, that were not deducted at the time of death for
income tax, will be subject to estate duty.
Other financial products also provide some relief from estate
duty. The following products are excluded for the purposes of
calculating estate duty:
• The proceeds of living annuity policies
• Buy and sell policies that would be paid to a business
partner for the purpose of funding the purchase of shares
from the deceased
• Key person policies
• Policies that are ceded to a spouse or child in terms of an
antenuptial contract
To the extent that proceeds are paid to nominated beneficiaries,
no executor fees are payable either.
There are also discretionary investment vehicles known as
“policy wrappers” where no executor fees would be payable
if there are nominated beneficiaries on these investments.
For example, tax-free investments and endowments allow
for beneficiary nominations where proceeds are payable to
beneficiaries. Estate duty would still be payable with respect
to both products; however, in terms of section 4(q) of the EDA,
estate duty would not be payable should the surviving spouse
be the nominated beneficiary. To the extent that estate duty
is payable, the executor may recover such estate duty from
the beneficiaries.
Principle 3. Account for beneficiaries’ liquidity needs
The process of winding up an estate can be lengthy and can put
beneficiaries in a difficult financial situation if they do not have
the means to cover their living expenses. There are various
ways to ensure that cash will be available to beneficiaries while
an estate is being wound up.
Taking out life insurance cover is a good way to provide
loved ones with access to money and ensure that there is
sufficient liquidity in an estate to pay for the estate duty liability
and executor fees, and settle any outstanding mortgage bonds
and other debts.
A living annuity can be used to effectively provide an
income for beneficiaries. On the death of the policyholder,
the proceeds are, at the election of the beneficiaries, paid as
a lump sum and/or as an annuity, if they continue with the
policy in their own names. Although estate duty is not payable
on the value of the living annuity, the beneficiaries may be
liable for income tax on the annuity income should they wish
to continue the policy in their own names.
“Policy wrappers” that allow for beneficiary nominations can
also assist with ensuring that the proceeds are not tied up in
the estate, pending the completion of the winding-up process.
The proceeds are available for payment to beneficiaries at
their election. Some “policy wrappers” allow for a beneficiary
for ownership to be nominated.
In other words, this beneficiary would take ownership of
the policy on death. The beneficiary nominated for ownership
would have the option to continue with the deceased’s policy
in their own name or have the policy proceeds paid out. If the
beneficiary decides to have the policy paid out, the proceeds
will be received net of 12% capital gains tax, which will be
deducted within the policy. Where the beneficiary elects to
continue with the policy in their own name, it will be a capital
gains tax roll-over event.
Principle 4. Ensure that all estate planning documents are
reviewed regularly
It is important to ensure that both the will and the beneficiary
nominations on an individual’s financial
products are up to date to avoid assets and
proceeds being paid to the individual’s
estate instead of the intended beneficiaries.
Many other aspects of a comprehensive
estate plan have been omitted, such as the
use of discretionary unit trust investments
during an individual’s lifetime, trusts,
retirement and disability planning and
offshore planning. Creating an estate plan
can involve a high degree of complexity,
and it is recommended that professional
advice be sought before making any longterm
decisions.
Felicia Hlophe, Legal
Advisor, Allan Gray
www.bluechipdigital.co.za
75

BLUE
CHIP
FINANCIAL PLANNING | Event
Meet the Managers
A leading investment industry event for financial advisors.
After an absence of two years, due to Covid restrictions,
the Meet the Managers event returned as an in-person
event in Cape Town and Johannesburg in the middle
of June. During the past two years, the event was
held virtually and had record numbers of advisors attending
to access the latest insights from fund managers on varying
domestic and international strategies across all asset classes.
In 2023, 36 different fund managers, ranging from small
boutiques to global behemoths, all shared their views on the
state of financial markets spanning all jurisdictions and varying
strategies – from hedge funds to fixed income strategies.
Advisors really enjoy the event as they can select various
sessions, covering all relevant strategies and gain a broad
range of insights in one day – and earn CPD points in doing
so. This ensures that they are fully up to date with investment
markets and different investment strategies to advise their
clients appropriately.
With global inflation still a major concern, high interest rates
and geopolitical uncertainties prevailing across many fronts,
the world of investing has become an extremely complex
matter. Investment returns in 2023 have been concentrated
around “the magnificent seven” where names such as Apple,
Microsoft, Alphabet, Amazon, Nvidia, Tesla and Meta Platforms
have all showed exceptional returns on the back of the Artificial
Intelligence phenomena. Many South African investment
managers have also struggled with the new Regulation 28
rules where up to 45% of the portfolio can now be held in
offshore shares. The South African stock market has been
lacklustre relative to its global peers, but with many fund
managers believing that there is exceptional value to be held
in select local shares.
Fund managers that presented at the event included 1nvest,
10XInvestments, Allan Gray, Amplify, Ashburton Investments,
Camissa Asset Management, Clearance Capital, ClucasGray
Asset Management, Cogence, Flagship Asset Management,
Foord, Glacier Invest, Laurium Capital, Marriott Investment
Managers, Matrix Fund Managers, Melville Douglas, Merchant
West Investments, Mi-Plan Investments, Momentum Investments,
Nedgroup Investments, Old Mutual Investment Group, Peregrine
Capital, PortfolioMetrix, Prescient China, Prescient Investment
Management, PSG Asset Management, Rezco Asset Management,
Sarasin and Partners LLP, Sasfin Asset Managers, Schroders,
Stanlib, Steyn Capital Management, Stonehage Flemming,
Sygnia Limited and Truffle Asset Management.
Over 1 300 financial advisors attended the event in-person
with a further 700 registering to view the digital content as
all speaker presentations were recorded. The Collaborative
Exchange, organisers of the event (as well as many other leading
investment conferences), has been experimenting in 2023 with
running both in-person and digital events to see the trends
after Covid. Research done by Collaborative Exchange suggests
that in-person conferences have made a huge comeback as
digital fatigue has set in among the industry. However, there
are many complexities (and costs) of running events in-person
and digitally and many of the large investment companies are
no longer offering the digital option.
76 www.bluechipdigital.co.za

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sheets and investment commentary.
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3. Fund manager presentations from the various events hosted by The Collaborative
Exchange.
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